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Financial milestone: consumer-debt free!

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June 23rd, 2018 marked the day I officially became consumer-debt free.

I am not completely debt-free though. The only debt I have left is my mortgage. I am not too concerned about this one.

Being consumer-debt free feels pretty good so far, but it was not the big celebration I thought either.

I HAD BEEN UP AND DOWN THE DEBT ROLLER-COASTER

I started repaying my debt in late 2010. Back then, it was just a little over 20K, 12K being student loans. The rest was credit cards and line of credit debt.

At the same time, I was also building my emergency fund and modestly saving for retirement. I felt it was important to do so, given where I was in my life at the time.

Personal finances are just that…personal.

THEN CAME THE FIRST CONDO AND THE CAR

Fast forward to 2013, my debt level was steadily decreasing and my savings steadily increasing. My income was also good.

After careful considerations and calculations, I decided to become a homeowner.

The down-payment and closing costs put a serious dent in my savings, and because I moved to suburbia-where public transit was more limited- I bought a car, adding 16K to my overall debt.

But, I was able to handle all my obligations….thanks to my income and low interest rates.

THEN CAME THE SPECIAL ASSESSMENT

For those new to the blog, the first condo I bought was in a problematic building. Said building needed a lot of repairs and the corporation didn’t have any money to do them.

So, I found myself on the hook for another 6K of debt. I didn’t have enough savings back then. This happened 8 months after I bought the condo.

It was my lowest financial point. I felt like I would never get out of debt, never save enough money and would never able to do the things I wanted and live the life I had envisioned.

THE BEGINNING OF THE END

In 2016, I decided to sell my first condo. Although some major repairs had been completed, the building still had issues and I didn’t see myself constantly paying for levies.

Thanks to an over-heated market, I sold at over-asking.

The proceeds of the sale allowed me to buy my second condo and pay-off my “consolidated consolidation-loan”. I felt more elated paying this sucker off, than paying my car off.

I realize it is probably due to my suffering from debt fatigue, after 7.5 years of continous consumer-debt repayment. It is also perhaps because I don’t have anything to show for that consolidation loan, except my Diploma.

LOOKING BACK AND FORWARD

With more perspective and a better grasp of personal finances, I certainly could have proceeded differently. That being written, it is a little too late to think about how things could have been. The past has come and gone.

I actually don’t regret what happened to me financially-speaking. I really learned and grew during these challenges.

I know I won’t make the same mistakes again with my money. I may make other ones, however.

 

 

The importance of the emergency fund

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I have heard a lot of names for the Emergency fund: Back-up fund, F-U fund, Opportunity fund, Rainy-Day fund…whatever you want to call it, it is just semantics.

The purpose of said funds is the same: to have some cash in hand when s**t happens. And yes, s**t will occasionally happen, no matter how much we pretend it won’t.

I have written about having an emergency fund before. My views on this matter haven’t changed. With this post, I want to go from theory – i.e. having an emergency fund- to practice -i.e. dealing with an emergency-.

ENTER MY DRIVING WOES

It all started in 2014. That year, I was involved in a minor collision for which I was found 100% responsible. I had to pay a deductible when getting my car fixed. At the time it was $300, no big deal for my wallet.

In British Columbia, it is possible for the at-fault driver to reimburse the insurer for the repair costs to both vehicles, provided there is no injury claim. Doing so also “protects” the insurance premiums of the at-fault driver from increasing.

In my case, the other driver claimed injuries so I could not do this and was assessed a premium surchage over a 3-year period. In any case, I wouldn’t have been able to repay , as I simply didn’t have the extra money back then.

DRIVING WOES-TAKE 2

Fast forward to 2017, I hadn’t had any at-fault accident since then, when I was involved in another minor fender-bender for which I was also found 100% responsible!

My deductible was $ 500 this time, again no big deal for my wallet. However, because of the 2014 accident, I was looking at a hefty premium surchage. The only way for me to avoid this was to pay for the repair costs on both vehicles, AND that the other driver did not claim injuries.

THE CASE FOR THE EMERGENCY FUND

I was extremely lucky that the other driver did not sustain injuries. I was also lucky the collision was minor. The total extra costs came at just over $ 2 800.00, which I was able to repay and this is what I actually did.

All in all, the total amount I forked up-front for my driving mishaps was $ 3 600.00. The upcoming surchage I was looking at was 3 times that amount!

I might be Captain Obvious here, but I am glad  my emergency fund was here to get me out of the hole I had dug for myself! If I hadn’t had one, it would have cost me an extra  $10 000, on top of the regular premiums. That would have been a big chunk of dough!

CONCLUSION

I have yet to hear anyone -including myself- wishing they didn’t have an emergency fund when s**t hit the fan.

Much has been written and said about the good, old emergency fund. There is no question pretty much anyone needs one, including those with a hefty saving rate and those financially independent. A portion of assets should be designated as emergency fund.

Whether one needs $ 10 000, 3 or 6 months of expenses and whether said monies should be held in a plain savings account are discussions for another post.

In the meantime, and in light of these car events, I may need to devote some money for driving lessons….and that is also a discussion for another post!