Financial milestone: consumer-debt free!

Image result for debt free images

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.

 

 

Financial milestone: consolidation loan fully paid-off!

Image result for paying off debt

Yesterday, I made a lump-sum payment of a little over $ 8 000, effectively putting my consolidation loan to its final resting place.

Beyond the excitement of being finally rid of this loan, I felt a huge relief and also like a weight had been lifted off my shoulders.

until i saw the balance at zero, I hadn’t realized how much this loan was weighing me down

I initially took out this loan in 2011 to consolidate my student loans, a pretty much maxed-out line of credit and a couple of credit cards. At the time, the total amount was about $ 25 000, with almost half of it in student loans.

If you are wondering how I got to be $ 25 000 in debt, please read my story.

Fast forward to 2014, the loan was down to $ 13 000.00. Clearly, consolidating worked for me.

Unfortunately, I had bought a condo in a building that was not in great shape and I found myself faced with a special assessment of $ 6 000.00 for repairs.

Alas, I did not have that money saved. I had bought the property the year before, and my savings were at around $ 2 000.00. So, I went back to the bank and consolidated again.

I was back to being $ 19 000.00 in debt

It was crushing, and not just financially. I started suffering from debt fatigue. I felt like I would never get out of debt. This loan and the payment amount associated with it started becoming a permanent part of my identity.

then, i decided to fight back

After all, I had dug the financial hole I was in, and it was my responsibility to climb out of it.

I decided to throw in an extra $100 per month towards the “beast”, on top of the bi-weekly payments I had to make.

I had calculated I would pay off this loan 9 months ahead of schedule by doing this.

i lucked out with the sale of my condo

Yes, the very same condo that got me further into debt got me out of it. Ironic, I know. I sold the property last year, at over-asking price. Initially, I hadn’t planned on selling just yet. You can find the details here and here.

So why had this loan not been paid off earlier, you are probably wondering. Because I also had other competing priorities, like a lot of people.

I repaid the amount I had taken out of my savings for the deposit on the purchase of my second condo. Then, I bumped up my emergency fund, which was, for me, a necessity.

The lack of emergency fund is what got me into debt in the first place. I don’t want to be in that situation again.

My parents also came to visit me, and yes, I used some of the proceeds to enjoy my time with them. I don’t regret doing that for one bit!

Last but not least, I initially wanted to pay-off my car loan instead, as the amount was slightly lower and I would have owned my car outright.

I debated quite a bit and it took time to reach this decision. I am glad I did. The consolidation loan amount was for a longer period and a higher interest rate. I also had it for too long.

i saved $ 2 000.00 in interests

My bank periodically sent me information about my loan agreement. If I had let this loan run its full course, I would have paid an extra $ 2 000.00.

i now have more options, and it is freeing

It is really liberating not to have that bi-weekly payment above my head anymore. I am now on to tackling my car payment and increasing my retirement savings.

2018 will be the year of becoming debt-free!

Financial set-backs and debt fatigue

I have been hit in the pocketbook a couple of times recently, just when I thought I finally had my debt under control.

Three months ago, our strata had a special general meeting to review the condition of our building envelope. Some repairs are definitely necessary. The -heated- debate was on how much owners should be paying. We had the “choice” between $ 5 000 and $ 10 000 per unit. “Luckily”, $ 5 000 was chosen.

Nevertheless, I do not have that money on hand, as I am still paying off around 12K of debt.

Then, in September, I got involved in a minor car collision for which I was found 100% at fault. In British Columbia, the Provincial Government administers vehicle insurance and the premiums are pretty hefty, as there is no competition.

To protect my premium and driver’s record, I was given the option to pay for all repairs on the 2 cars. Otherwise, I will face a $ 5 000 increase in my premium over the next three years. I haven’t been communicated the total cost of the repairs yet, but either way I have to pay!

The measly $ 2 000 I have in my emergency fund are just not going to cut it….If I had been able to put the amount allocated to my debt repayment over the last 3 years into a savings account, I would be more than able to pay for both.

I definitely feel trapped by my debt right now. I have also been suffering from debt fatigue. It feels endless and like I will never get out of it.

I also realized my debt is preventing me from doing many other things now, such as renovating my condo, taking classes and traveling.

Lately, I have been considering a change of career. It would take me back to self-employment but might also mean a pay-cut, at least at the beginning. It would also require me to take classes.

The issue is that paying for my bills and servicing my debt both require a solid paycheque. I simply don’t have enough savings to make-up for a pay-cut, or for no pay.

I will have to proceed step-by-step with my goals and it will probably take me more time to reach some of them.