Today I’m sharing how I paid off my debt in one year. There are lots of creative strategies to reduce debt and the way I did it won’t necessarily work for everyone, but I thought I’d share it in hopes it inspires anyone who needs a nudge to take action or reach out for help on tackling debt.
Quick backstory: how I got into debt
Throughout my mid 20s and early 30s I got into (and out of) debt a few times. I racked up my credit card to $10K+ balances a couple of times, and also ended up with a balance on my line of credit (LOC) of about the same. How did I get into debt? Well, I didn’t have a shopping addiction per se, but I did have a bit of an addiction to personal growth and development! To be fair, most of the debt I accummulated was in the pursuit of building a business; unfortunately, that business never quite managed to flourish financially so I had to figure out other ways to pay off the debt.
The reason paying my debt off became such a priority is because my partner and I were talking about starting a family and I was not comfortable with the idea of getting pregnant while carrying as much debt as I had. I also did not want my financial burdens to fall into his lap to pay. The desire to have a child became my strong ‘why’ for prioritizing debt repayment.
DID YOU KNOW? Canada’s household debt is some of the highest in the world
In 1980, the ratio of household debt to personal disposable income was 66%; that ratio recently passed the 150% figure (Statistics Canada 2011). This means that, in aggregate, households owed more than $1.50 for every dollar of disposable income. More recent estimates put household debt at 185% of income. Debt is a serious issue and one of the things I am passionate about helping Canadian indiviuals and families to tackle so that they can have more ease and less stress, and ultimately be able to build a secure and exciting financial future.
Needless to say, if you are currently in debt, you are among the majority of Canadians.
So what are the options for paying off or otherwise dealing with our debt?
First I’ll share how I paid off my debt in one year, then I’ll share 4 different strategies to handle debt in my next blog post
Here is what I did to pay off $16K in debt in one year:
- Step 1: Increased my income. I took on full time work to supplement my income which was low at the time (and the reason I had gotten into debt in the first place was simply not enough cashflow coming in). This also meant that I would be eligible for an EI maternity leave if I got pregnant.
- Step 2: Shopped around & found a credit card that was offering a 0% balance transfer for 10 months. The transfer fee was modest.
- Step 3. I transferred the balance from my main credit card over to the new card; it had a balance of $7K & I had 10 months to pay, so I needed to pay $700/month.
- Step 4: Borrowed money from my partner. I owed about $9K on my line of credit with interest at 7-8%. My partner had a healthy savings account so he suggested he pay off the LOC and I repay the savings account monthly until we recouped the $9K. To pay this off in a year I needed to pay $750 per month.
- Step 5: For the next year, I kept expenses low and put $1450 per month towards debt. That didn’t leave any room for savings or other big purchases, but it was 2020, so we weren’t doing much anyway. AND, we got pregnant in Spring of 2020 so I spent most of the year lazing around, reading books and napping anyway 😉
- Step 6: Our baby boy arrived Nov 29, 2020 and I made my last debt payment in Dec and was completely debt free!
⠀⠀⠀⠀⠀⠀⠀⠀⠀
The lessons for me in this experience were:
- Detaching from any self-judgement about the numbers (how much debt I had, or what my cashflow had been)
- Recognizing that I had to increase my cashflow to make it work
- Being okay with receiving financial help, especially when it made so much sense to save on interest. I had to let go of my pride and independence and surrender to the help being offered by my partner.
- The power of priorities: since I wanted so badly to start a family without debt, paying this off truly became my priority and made it easy!
Key takeaways from my story that might help you on your journey to being debt-free
It is SO MUCH EASIER to pay off debt when you minimize (or eliminate) the interest! It means that every dollar of every payment you make is actually going towards what you owe, rather than just servicing the cost of interest to your lender. As I learned, there are creative ways to minimize interest! Whether it is through a balance transfer situation or just calling your credit card company or bank and ASKING for a lower interest rate. Don’t just assume you have to keep paying whatever rate you’re paying.
Having a partner or supporter is essential in creating a debt repayment strategy and sticking with it. In my case, I was able to use my romantic partner as that person. My debt repayment journey happened before I found myself getting trained/licensed and working in financial services, but if I was doing it all over again I would likely seek professional help and guidance. Sometimes money conversations are tough with a spouse and that’s where a third party can step in and be a helpful resource.
If you are eager to pay off debt, I’m always happy to chat and can offer guidance, support and accountability. As well as tangible solutions depending on your specific situation. Feel free to reach out for a judgement-free chat!
Was this blog post helpful? I’d love to hear your comments or feedback below!