A Snapshot at Our Debt (Almost Half Gone!)

wpid-20150318_101631.jpgThough I do my monthly debt repayment updates, it’s been a while since we looked at our overall debt. Given that I’m currently sitting under a massive amount of snow (see picture), and avoiding my income tax, I decided to write this instead. Back in October I decided I wanted to payoff $70,000 in 36 months (of remaining $81,500), something we’re still working towards. I have ambitions of knocking off a few months so this is a ”worst case scenario” plan.

To remind people…

Our highest non-mortgage debt, back in  winter of 2010/11, was at around $135,000. This included traditional student loans, student lines of credit, some credit cards (used for tuition…) and a vehicle.

Given that the interest rate is so low on our debts (all under 5%) even making minimum payments had an effect and we were able to pay off thousands with little to no effort. It wasn’t enough though. We were still going to be in debt for 10-15 more years if we didn’t ramp up our efforts.

During my maternity leave in 2012, we decided that we finally needed to quit making minimum payments (as we were since January 2010) and get real. We cut our expenses, made many budgets, consolidated some debt and came up with a plan. We wanted to live our life with our daughter and that life didn’t include any debt. Given that I was on maternity leave until end of May of 2013, and needed to make up a bit of lost income when I did go back to work (ie deal with some expenses that came up while off that we couldn’t afford at the time and added daycare costs) our efforts didn’t truly start in full swing until end of 2013/beginning of 2014.

As of today, our total non-mortgage debt is sitting at $72,756.98.

In just a few months our debt will be more than half gone. Half of $135, 000 is a lot of money! It will have taken us five years to pay off the first half and only 2.5 years to pay off the remaining half. It’s amazing what you can put your mind to when you really want. It’s also amazing to me to think that if we had put this much effort in from the very beginning I wouldn’t be writing this right now as we’d likely be debt free.

Mike and I have learned a lot on this financial journey and continue to learn every day. The last five years have flown by so I know the next 2.5, though I feel like may go on forever, will also go fast. Maria turns three in less than three months and that scares me. I’m excited that by the time she starts her education we will have finally paid our (post secondary) off. It’s not been easy but it’s been so worth it!

How To Avoid Being House Poor

I love real estate. Though sometimes I wish I was still a renter, for the most part I enjoy owning a home (or mortgage at this point). Though we currently own a home, have careers, a kid and all those other ”grown up things” I don’t feel settled in my life yet I think part of it is because I know, in the not too distant future, we will be moving.

This home was always our starter home. We bought knowing within a 10 year max window we’d sell and settle into what would likely be our forever (or at least super long-term) home. I remember meeting with our mortgage broker the first time and having him spit out the number we could ”afford”, I was blown away. Even with, at the time, close to $100,000 worth of debt we were told we could look at homes more than 5x our combined gross income, and this is how people get in trouble.

Being ”house poor” insinuates you can have the home you want and basically afford nothing else in life, which, isn’t any fun at all. What’s the fun of owning a super nice home with a kick-ass kitchen with no money to entertain in it? And while it may be nice that you own a pool, it’s the last pool you’ll ever swim in because you can’t afford a Rec membership or any trips. Being house poor is NO fun which is why we knew we needed to avoid it at all costs.

Don’t Spend Your Max Budget

One thing is for sure, had we purchased at the max budget we’d be in a lot of trouble right now. There would be NO money to pay this debt off and we’d be cranky miserable people sitting in our unfurnished house with no friends left to have fun with. It would suck. When our debt is paid off, our max budget will mean our mortgage payment is four times what it currently is, if we let this happen we’d put the rest of our lives, and retirement in serious jeopardy.

Be Realistic About How Much House You ”Need”

I feel like I’m constantly cleaning, something Mike and I manage between us but I can’t imagine adding another 1,500 sqft to this to clean. I don’t need a lot of space, I need functionality and well-laid out floor plan to make my life easier but I don’t need to double the square footage of my current home when we do move. Especially since having a kid my list of wants and needs has drastically changed.

Do a Mock Budget

Before you buy that house, do up a budget that includes various mortgage payments to see how it will affect everything else. This will give you a better idea of how your life will look depending on the size of the mortgage payment. If you really want that larger home, you may need to cut back on other things. Doing up a mock budget will show  you everything laid out.

Save a Larger Downpayment

Especially when it comes to your first home, it can be tough to wait but the fact remains that the larger the downpayment the more affordable your home becomes so sometimes a few months can make a big difference.

Owning a home can be a lot of fun but if you let your home own you, you’ll quickly start resenting it. It will likely be the largest debt you ever take on so make sure you’re able to afford the payments with the lifestyle you want.

February Debt Repayment and Life Updates

I just realized that it’s the second week of March and I forgot to do this….

Considering it’s the shortest month of the year it was, without a doubt, the longest month I have experienced, possibly ever. We were having a pretty amazing winter until the first week of February. I’m not normally one to complain about the weather but my God Mother Nature- give it up! She’s been a nasty woman the last month for us. It hasn’t been the total amount of snow, rather the ice. Our driveway and walkway to the house is under a solid 8″ of rock solid ice. The last three days have been a bit warmer so things are looking up (though I’m refusing to look at the forecast for the weekend (SNOW!))

In February I had a talk with the office manager at our second location and I’ve signed up to work five days per week more frequently which means more money for us! I’m only doing two per month (and now have added daycare costs for these days) but I’m happy to report that between my raise at the end of the year last year and me working two more days per week I have managed to increase my net income by almost $500 per month from my job alone.

In terms of debt repayment, February was pretty straight forward, we managed to put $2,025 towards debt repayment and $550 towards our various savings goals (having a heat pump installed being the biggest one, adding a little more to ER fund and a top secret savings goal I can’t yet discuss ;)) I’m hoping to do a post with our current debts soon, there are two loans I don’t have access to online though and finding time to call (and be put on hold for 6 hours) is tough but its been a few months since I’ve done an exact check-in. Our next loan to be paid off is 68% paid off and will be paid off in full by October (though hoping for sooner ;)) I can’t wait!!

I had to laugh because next week I budgeted having the oil changed, and winter tires changed over and balanced, given the weather this past month all I can say is hahahahahhaaha. I’ll have these tires on until July I think!

How did everyone else do in February? Who’s done with winter?

5 Reasons Your Peers Are More Successful Than You

I think there has been a point in all of our lives that we’ve compared ourselves to our peers at least once. Good or bad we do it. It’s a way that we measure our lives, and though we shouldn’t, we try to define our success and failures against theirs. Successful people are vital to have in your lives. They can fuel you and I believe that surrounding yourself with positive and high-achieving people can have a positive effect in your own life.

There are common reasons to why some people seem to be able to do it all and have it all. My experience is that most of the successful peers in my life genuinely deserve it. They work hard and reap the benefits of doing so. Here are five things your peers are likely more successful than you:

They use their time incredibly wisely

When I say no minute is wasted I mean it. I think we’d all be surprised how much time we waste in a day. When I committed to losing weight and specifically doing my family in weekly FitBit challenges I couldn’t fathom where the time would come from for me to walk and get on the treadmill as much as I knew would be required. I was busy enough with full-time work/mom/wife/house/blog/freelance work and now needed 30-60 minutes per day taken away from something to do this. I did it though and it was easier than I thought. Though I consider myself an incredibly busy person I wasn’t using every minute of my day to max efficiency and now I’m much closer to that. Limit unnecessary social media. Turn off distractions. Make lists and actually do them rather than thinking about doing them. Just get it done.

They don’t care what you think

Caring what other people think about you is exhausting and time consuming in so many ways. Successful people do what needs to be done and don’t really care if you like them or not. I’m not suggesting all successful people are heartless a-holes but they certainly aren’t wasting time logging into Facebook to update their status in hopes to gain a few ”Likes”. The most successful people let their work do all the talking and they don’t need to boast in any way. They are confident in their lives and they don’t need your validation.

They prioritize

Everything. Their day, their friends and family members, their extracurricular activities. They have to. When you stay as busy as very successful people (and I’m not suggesting it’s not all work and no play), you need to form a hierarchy with everything you do. No success was built by logging into Instagram before emptying your inbox at work and no happy successful family man ever puts a friend over their child’s needs.

They don’t compare success stories

Success is such an individual and personally defined term. My level of success can’t be compared to anyone else because it’s a personal motive. They day I realized there was no way I was going to be one of those people who paid off $150k in 12 months, and that I would have to forge my own personal debt-freedom path, was they day my life got much easier. I stopped comparing myself and started putting this time and energy into actually implementing the necessary steps required to get the results I needed.

They are surrounded my like-minded individuals

Most really successful people have a network and support system in place (most, not all). It doesn’t mean your mom and dad are on the phone to congratulate you on your endeavors, it can be an online community to cheer you on- most successes are not made without some support and continued encouragement and challenges (which supports growth).

Success is never just given to someone. True success takes a lot of hard work and my experience is that most people don’t come close to putting in the required effort for the results they desire. Do it though and reap the rewards.

Is Earning Six Figures Worth the Loneliness?

wpid-img_20141018_174316.jpgIt’s funny, before we had any kids I wanted a house full of them. Not that I necessarily wanted to carry and care for a bunch of kids, but as an adult I wish I had more siblings. I have a non-existent family (Mike’s family MORE than makes up for my tiny family) so when we started our family I thought I’d want a bunch of kids. Then I actually had one and drastically changed my mind.

Don’t get me wrong, it has nothing to do with her. She’s great (though every parenting book should warn you about the experiences between the ages of 2.5-3.5, UGH). I’m surprisingly content with my life though. I enjoy my little trio immensely and for a long time couldn’t even fathom adding another person to our lives. Though there would be a lot I’d miss about not having another child, I accepted that being happy as a trio was enough for me, no more babies.

I wish I could remember where I first read the stat that children with no siblings are more likely to earn a six-figure paycheque (than those with siblings), but I don’t. Choosing to not have another child would provide us with many opportunities for both my husband and I, as well for her. If Maria was our only child she would have many more opportunities than if we had even one more kid and it makes me think hard about our decision to have, or not to have, more kids.

If Maria remains an only child I can see how the road would be paved that she could out herself on a path towards earning herself a six-income career. Private school, fully funded post secondary, regular international travel experiences, more extra curricular opportunities. All of these things would be building the foundation to a life full of success and aspiration (though no guarantee) and while I honestly do want the world for my child, she probably won’t get all of these things. At the end of the day the relationship Mike and I have with our siblings is irreplaceable and I can’t imagine not having it, or not providing that relationship for Maria.

This isn’t a pregnancy announcement (Hello- debt goals!) but rather me stating I’d rather have a life rich in other non-monetary ways.  Though I want her to strive for amazing things in life, to reach a figure-pointed income for herself is not one of them.

Don’t get me wrong, I want her to be the best she can be at everything she does, and if she manages to land a job that earns her a significant income, that’s great! But if she doesn’t have anyone to share her life with, will it be worth it? While you can have support, love and friendship with people who aren’t your siblings, I have a goal as a parent to raise her- and future kid(s)- to always love and support each other. I truly believe that when nurtured properly, a good sibling relationship is irreplaceable. When you have nothing else in life you will always have your sibling and that is worth more than any amount of money to me.

 

(Just so you don’t think I’m making this stuff up here’s a link to a related article

The Best Things About Being in Debt

Debt gets a negative rap all the time, and rightfully so, no one should go out and actually thrive for a life in debt but I feel like weren’t meant to learn from it. When looked at differently, being in debt magnifies ones life and if you actually look through the glass to analyze what your life in debt is like, it’s not always bad.

I believe everything in life happens for a reason. Interpret this however you want but I truly believe in my heart and soul that nothing is put on us that we can’t handle. Though it may take years to understand, it will all make sense in the end. With this in mind, I’ve opened my eyes to see my debt-ridden world through a different set of eyes, what am I supposed to be learning about all this? Here are the best things my debt has taught me:

I’m capable of some pretty amazing things. If someone had told me I was able to accomplish what Mike and I actually have since starting this journey, I would have laughed at you. In the last two years we’ve paid off almost $40,000 worth of the debt we carried around for the previous four years. Come 2017 all of the $143,000 worth of debt will be gone. To do this we’ve made big life changes and decisions, we both hold down two jobs (we all know how time consuming blogging and freelancing is!), and we have an amazing life with our friends and family. We seriously kick ass.

I need my husband more than ever. I never ask for help. It’s a flaw I recognize in myself, I’m stubborn and until I’m at my breaking point I won’t ask anyone for help, him included. Throughout this journey though there have been times I’ve needed help with money management (my household job) and he’s delivered tenfold. The debt repayment journey has brought us together in ways other life journeys simple can’t. Money is an intimate subject for anyone, throw in a massive debt and a marriage and it can be tough.

I’ve learned I don’t need money. Ok, I need money to live obviously, but I don’t need money to have fun. We have had some amazing adventures for free or cheap that I don’t think I would have otherwise experienced if we weren’t forced into ”cheap fun”.

I can’t live without an emergency fund. The whole concept of having money in a bank account while we were in debt just didn’t make sense to me for a long time. It wasn’t until someone pointed out that if (and when) the shit hit the fan that we’d be into more debt if we didn’t have one, that we started saving one. I don’t know if we would have learned this lesson if not for the debt and my blogging ventures.

I’m learning invaluable lessons. If I wasn’t in debt I don’t know that I would appreciate money as much as I do. I’ve learned so much about money management in the last few years, because I’ve had to if I want to pay this debt off, and these lessons will be with me forever. I will also teach my daughter all the lessons we’ve learned in hopes she can avoid these mistakes.

A debt free life is worth working for. Being in debt has taught me exactly how I don’t want my life to be and for this lesson I’m thankful for it (debt). I can say we have lived through some of the toughest days we will ever experience as a married couple. Weathering this together means we really do appreciate the life we are building for our family. All too often people just wish for more, more, more but we won’t be them. We’ve lived the lowest we likely ever will (and our ”lowest” is still pretty damn good, don’t get me wrong), but it’s maintained our priorities in life. We have a realistic outlook on the life we’re building.

What has debt taught you?

Should You Have a Separate Bank Account to Budget for Your Kids?

wpid-img_20141116_133130.jpgA few weeks ago a fellow blogger, Mr. Canadian Budget Binder, did a post talking about how having a child changed their budget. One thing he mentioned was that he opened a bank account for their son where all money given to him (government funding and gifts) goes into. It’s a simple concept that I hadn’t thought of doing before.

We have a registered investment savings account for our daughter’s post secondary education (RESP) that we deposit into each month and when money is given to her as a gift, we also add to this account. I hadn’t ever considered opening a simple bank account for her though but I really like the idea. It’s a way of separating her needs from ours and thinking about it for the last few weeks, I think I will open both a chequing and savings account for her (us) to use, just for her needs.

This can be anything from new seasonal wardrobe (kids grow fast and there’s no way we’ll be able to use the same seasonal wardrobe from one season to the next!) or her dance class registration this fall. It’s a way of budgeting her life with our money. I find it’s easy to sort of forget about this sort of thing, like the fact that we need new shoes for her in a few weeks when (and IF) the snow starts melting here. With this account I can go out and buy them without impeding on our day-to-day budget.

I like the idea of her (us) having a separate savings account too for her to have access to for something other than post secondary purposes. A patient of mine was recently telling me about her daughter doing a 12 week exchange to France for her grade 10 semester. The kid was super excited as was mom because she already had the cash for her to go.

Since each child was born, she and her husband have been putting $10 per pay into a savings account incase any special opportunity came up. The rules were that it had to be something really special and something they really wanted to do, like this 12 week exchange trip experience. Their older son chose private cello lessons with an internationally known cellist. I love this idea. She said if the kids hadn’t had an opportunity it would have still be given to them to use for post secondary or alike.

Kids are so irregular with their needs having separate banking for them will be the answer for us I think. Her allowance will eventually come out of the chequing account too, and when she’s old enough, she can start to help manage them. It’s so easy to forget about all of their needs: shoes, new snowsuit, mittens ripped, dance class, wanting to try an art class…whatever it is, by us opening these accounts, trying to figure out where the cash will come from will be one less thing to think about!

Do you have separate accounts for your kids?

If You Can’t Find Balance Between Debt Repayment and Life, You Need to Earn More

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Taken on one of our weekends away this past summer

Recently, I received a really nice e-mail from a reader telling me about their success and failures with attempting to pay their debt off and how they can relate to our story. They mentioned the struggle with accepting that ”every penny” has to do towards debt and it was starting to frustrate them. In my response, I told them if they continued with the mindset that every penny goes towards debt, they’ll burn out and that they need to refocus their efforts.

Not everyone will have the same needs but the fact remains that just because we have debt doesn’t mean we don’t have other needs that are required to be met, you just need to be realistic about them. While Mike and I have put a lot on hold while we work on this debt (moving, vacations, retirement savings mostly) our lives haven’t stopped entirely. If you strap yourself too tight you’ll eventually feel the pinch and break free, going a little crazy in the process. You need to have a realistic balance.

Yes, a majority of what you earn over and above necessities should go towards your debt-free goals but that doesn’t imply that you can’t put money towards other things too.

Mike and I have monthly goals to meet for our debt-free date but we haven’t totally sucked the fun out of our lives. We have managed some (realistic) family trips, a few cheap weekends away, some nice dinners out and though details can’t be shared yet, I’m trying to plan a pretty big surprise for Mike’s 30th a year from now. First and foremost our debt payoff goal is met every month, then we prioritize the rest of our lives, which for us is family time.

If you can’t find balance between debt repayment and life, you need to earn more, it’s just that simple. While paying off debt is priority, so is your mental health. Putting too many constraints on your life will not only block the ability to learn lessons from your debt repayment journey it will stress you out. You will resent your debt and negative thoughts will enter. I know all this because I’ve been there.

I’ve attempted to live on totally unrealistic budgets which every month sets me up for failure and in turn I don’t reach my goals. Since establishing a real life budget that works, including a balance between our lofty debt free goals and our life, I’m happy. I have room for a little error. I can live.

To do this I had to earn more money, it took me a while to figure this all out but in the end it’s what it came down to. I’m eternally grateful that I have the ability to make more money and maintain this life but I’m not going to pretend for one second that it’s easy. I don’t want to work as much as I do but I have to. I know it won’t be forever and that’s enough to keep me going. Every month I’m one step closer to the life I really want. Until then I watch my pennies closely but that doesn’t mean they all go towards debt.

How did you manage your debt repayment goals and other life activities?

If You Want to Pay Off Debt, You Need To Get Uncomfortable

If you live your life constantly going the same things, it stands to reason your life will always be the same. If you’re in debt and want to get out, doing the same the doing you’re doing now, won’t work.

I know part of the reason it took us so long to ‘get real’ about our debt is because I wasn’t looking forward to doing the things I knew I would need to do to make it happen. I knew it would be uncomfortable and quite frankly, I wasn’t ready to leave my comfort zone. It took me a while to realize that the biggest results in life happen while working outside of ones comfort zone and leaving it is crucial to getting results.

The first step for us, and arguable the most uncomfortable, was actually accepting we had an issue that needed to be dealt with. We needed to sit down together and face the numbers, come up with a plan and execute it. Together being the operative word. Though we had been together for many years we had never had an in-depth conversation about our detailed financial goals. They were always very vague like ”be debt free”, ”travel” but we hadn’t ever figured out what we had to actually do to accomplish these goals.

Finding out I was pregnant was the push we needed. Suddenly our lives were drastically changed and we needed to make changes now. There’s no way I could afford to stay on maternity leave living the way we were.

I won’t lie, it sucked. I hated making some of the changes we were now required to do if we wanted me to stay home and be with our daughter for the planned 12 month maternity leave. Pushing ourselves to the max limit of our comfort zone was exactly what we needed though. Being forced to live the way we did for the year ($220/month grocery budget for example), was hard. Uncomfortable is an understatement but we learned so much from the experience.

I know with real effort we can live on less than $300 per month for groceries (for 2.5 people). Living in the area that we do I consider this a huge feat. Though I have increase this budget a bit since returning to work, I learned what we can do when needed. You don’t know what you’re capable of until you try. The other thing we needed to do was make more money somehow.

For a few different reasons I opted to return to work four days per week post maternity leave. Our lives now revolve around me having Monday off but if I was going to cut one day per week from our income, we needed to make up the shortfall somehow if we wanted to reach our goals. Mike and I opted to do this through our online ventures and me working more when I’m at work. My day per-maternity leave included an hour long break in the day. I chose t eliminate the hour break and stick with 30 minutes only- adding two additional hours per week to my pay cheque.

Another aspect of being uncomfortable is putting parts of our lives on hold. We really want to travel. There is nothing we could use more right now that a vacation- an honest to God break with relaxation but we simply can’t take the time off work nor can we afford to drop $2,000+ on a vacation right now.  I know it is coming but for now we need to wait, I know it will be worth it.

Shaking up your routine and making the unconformable changes that are necessary to become debt free aren’t fun but so worth it when the day comes and your balancing owing is at zero.

What was the most uncomfortable aspect of your debt-free journey?

Frugal Fitness: FitBit Edition

wpid-screenshot_2015-02-12-23-28-16-1.pngI mentioned last week that a few family members received FitBits for Christmas and I also (finally) jumped on the bandwagon I had been thinking about for a while, and got one too. I do well with competition and was intrigued when I saw my sister-in-law spend an entire Friday night on my treadmill in an attempt to beat her aunt in a work-week challenge. I wanted in on it!

After I decided that I would be buying one I had to decide which one of the FitBit line was for me.

I immediately ruled out anything I had to wear on my wrist. I have a hard time wearing a watch so I knew permanent wearing something would drive me crazy. This narrowed my options down to the FitBit One, for $99 and the FitBit Zip for $59.

The One has the advantage of containing a rechargeable battery, a screen that you can see your stats, clips onto clothing, measures steps/kCals burned/distance/floors climbed and sleep patterns.

The Zip is similar to the One except that it is a little smaller, comes in multiple colors (if that’s your thing), runs on watch battery and does not measure floors climbed or sleep patterns. Since none of these ”extra” things (sleep and floors climbed) interested  me, I opted for the cheapest option at $59 and bought the Zip.

I knew I wouldn’t be able to stand sleeping with something ”on” me so that feature was irrelevant to me. Also, I have a 2.5 year old daughter, I know my sleep is total crap, I don’t need to be reminded. I also don’t really care about floors climbed, though it would be sort of cool to see how many floors I climb in a day I’m not curious enough to pay the extra $40. I wanted the basic features of the glorified pedometer that needed to compete!

I knew I was going to have fun with this little device but I had no idea how powerful it would be. I’m not exaggerating when I say it rules my life. I wake up, get dressed and immediately clip it on me (you can wear it where ever you want, I like the middle of my bra since it’s totally discrete and more out-of-the-way than my pants). I must get my step count it every day. Maybe it’s my type-A personality but I can’t stand going to bed knowing I haven’t met my goals for the day. Huge bonus being since starting this fitness challenge I’ve lost almost six pounds.

Though I think I would do well without any competition, it definitely helps (and is crazy motivating) to have ”friends” who are participating in challenges against each other. I keeps me moving for sure!

If you’re looking for a little motivation to move I can’t say enough good about the FitBit, at less than $100 it’s much cheaper than a gym membership too :)