Whether you need to get out of debt quickly or are serious about saving money, we know the feeling all too well.
A few short years ago, my (now) husband and I were living paycheck to paycheck and drowning in debt. We were at the point that we would stay awake at night stressing how we were going to get ourselves out of the mess we were facing.
Mentally, it felt hopeless but it turned out to be our biggest learning lesson to date.
Most people are quick to judge and tell you the obvious “just stop spending!” Of course, we did realize that some of our purchases were “wants” and not “needs” but the big expenses didn’t come from being irresponsible.
We had some unexpected situations in life. I went to school and worked in a field that didn’t provide medical benefits. A couple years later I was diagnosed with two diseases. Medication, deductibles, MSP (our government medical plan), a lot went on the VISA.
In 2013 our rental home caught fire due to an electrical issue in the wall and we were instantly homeless. We hadn’t purchased renters insurance and lost almost every physical item we owned. Emotionally, we lost a pet and were devastated. We were learning lessons the hard way.
There is more to debt than just frivolous overspending, although, we admit we had a bit of that too. It took a moment to look in the mirror to see that my unnecessary purchases were actually to impress people I barely knew (hello social media) and we needed a new plan of action. It was time to make a change and get on track.
I’m relieved to let you know it took time but we did it!
I know that crushing feeling of debt. It’s embarrassing and draining but there is a way out.
Years later, we still stick to our same plan! We were already used to the way we were living and wanted to start saving for a house. It’s a lot of little changes (and consistency) that when added up are life changing.
I’m happy to share exactly what we did and are still actively doing to this day. There’s light at the end of the tunnel and you will see it too.
STEPS TO CRUSH YOUR DEBT
1. ⇒ CALL YOUR BANK
As soon you’re finished reading this, swallow your pride and call your bank immediately. It’s time for you to consolidate your credit cards/any debt owing.
If you’re thinking about it daily you’re only prolonging your results by telling yourself you can do it alone. I’m not talking about consolidating like those ads we all hear on the radio. If you do something like that you can’t use your credit cards while you’re paying them off. That was unrealistic for us. We still needed one (booking flights, hotels, amazon, netflix, etc)!
The bank does want to see you succeed. They will consolidate your debt at a very low interest rate and schedule a payment plan that works with your budget. You can have payments come out bi-weekly but we chose one larger monthly sum and scheduled it the day after we received our paycheck where we had the least amount of bills coming out.
You can negotiate how long (3-8 years) you have to pay it off and then YOU’RE DONE! There’s no repercussions and we learned it’s actually great for your credit rating. We watched monthly as our balance decreased and we both admit, it didn’t feel that hard.
It felt the exact same as when we had a car payment with one exception: we were getting ourselves out of debt, not sinking into more.
2. ⇒ BUDGET
According to Practical Money Skills, 53% of Canadian households don’t follow any kind of budget tracking.
If you don’t have a budget, you don’t have a plan.
You need to know exactly where your money is going every month because “winging it” isn’t working.
If you’re old school like I am, I prefer putting pen to paper but there are electronic versions as well. It doesn’t matter what method you prefer, the important part is sticking to it.
How much should you be budgeting?
Your bills are already in motion so start the first month analyzing where your money is going. By the end of the month you’ll see where you can be saving.
We focus on how much is being spent on housing, bills and groceries (Vancouver area isn’t a cheap place to live) and try to keep those costs as low as we possibly can! Do you NEED 5g of data on your cell per month? There’s wifi everywhere.
Look where you can cut back on your essential items.
While we were paying off debt we didn’t save any money and put anything we could towards it.
We focused on eliminating our debt quickly so we could pay as little interest as possible.
Now, we save half the money we used to put towards debt and the other half we allow ourselves to enjoy (clothing, dates, activities). After spending a lot of time going through numerous budgets, I decided to customize my own and I’m happy to share it with you.
Enter your e-mail address and name below and I will send it to you for FREE.
3. ⇒ HONEST COMMUNICATION
It’s time to start communicating honestly. We set up a limit. If either of us were going to make a purchase over $100, we had to talk to the other BEFORE we did. Of course, that excluded things like groceries or bill payments.
I’ve had a few people say “wow, that’s so controlling.” We feel the absolute opposite.
It was actually the accountability both of us needed. There were a few instances where I had to justify my “why” and when I heard my own explanation I realized (because I was in denial for quite awhile) that I was buying things impulsively.
Communication continues to keep us on the same page at all times. We are in it together and never feel alone in our finances. We make the sacrifices and reward ourselves as a team.
4. ⇒ SET A REWARD
Speaking of rewards, saving isn’t all about sacrifice. We knew we were going to tally our credit card up quickly if we denied all of our “wants” so we used a reward system to keep us motivated.
In the beginning it was as simple as a pair of Lululemon pants for me and a PlayStation game for Logan.
We found we had much more motivation and it left us feeling accomplished. Finally, we stopped feeling like we were missing out on life.
We started paying off debt faster and changed our goals. For every $7500 we knocked off our debt, we went on vacation.
It started as small weekend trips away (thank God for Airbnb) and it was enough for us to do something we love – travel. Once we could see the end of the tunnel, we went to Europe for our Honeymoon. It was amazing (and paid off before we left).
A few years prior, I wouldn’t have believed we could do it. Start with small things and I promise if you stick to it you will do big things!
These are just some of the top ways we got on top of our debt. We also changed our lifestyle and started prioritizing our wants and needs. We now can breathe and save money without living paycheck to paycheck.
Want to know:
- How we effortlessly save cash
- Afford to travel
- What brands we switched that save thousands per year
- How we make money on the side online
Have you struggled with debt? Do you have any extra suggestions and tips? Leave me a comment below or email me directly at firstname.lastname@example.org
I love this topic and am always searching for great ways to eliminate debt and save money!