Dear Debt, I’ve Moved On

Today’s dear debt letter comes from Andrew! Andrew is a 28-year-old from Canada who recently started his own blog debtman.org to inspire others. He’s a new blogger, so let’s show him some love.

Dear Debt,

We met when I was the tender age of 19. You said, “I’ll get you through University.” I said, “Thanks, let’s be friends!” Quickly, our relationship turned from friendly to irresponsible…

Who had $55,000 worth of non-mortgage debt by the time they were 25? This guy right here.  What did that $55,000 represent?

1. Student loans: $30,000 ($17,500 @ 5.25%; 12,500 @ 3%)
2. Credit card: $5,000 (11%)
3. Car loan: $20,000 (5.5%)

I graduated university at 25, and had 6 months until I had to start making payments on my student loans. Like most recent university grads, I thought that I would graduate, find a great paying job immediately (our instructors led us to believe so, so why wouldn’t we think otherwise? (Shakes head)), and the payments would be easily met.

That obviously wasn’t the case. I graduated university, and couldn’t find a permanent position for 4 months. Luckily, I found a temporary position, which lasted 3 months, and paid well enough to pay off my credit card, while paying my monthly expenses, within those 3 months of working for that company.

Continuing with my naivety at the time, I purchased a lightly used car (price tag: $20,000) while working for that company. Yes, that’s right: I purchased a $20,000 car while knowing that my contract was over within 90 days. Looking back now, I think what an idiot I was. At the time, I thought I was playing the car dealership knowing that I was out of a job soon, but really they were playing me with a 5.5% interest loan.

Within that 1 month off, after my contract ended, I found a permanent position. Starting salary: $40,000. You would think I would be happy with that offer, but truth be told, I was annoyed. One of my instructors said I would easily earn $70,000 when I got my first job, so was this a reflection of me?

Of course not; it was a unionized position with a salary scale. Also, I quickly learned that what instructors tell you in class is not always the journey for everyone. Within those 3 years, I was promoted, and doubled my salary.  Like I said, not everyone has the same journey. So, do what works for yours.

During that time, my net income averaged $3,000/month, and my expenses averaged $1,800. My company put 15% of my pre-tax income into a pension plan automatically. With the extra $1,200 I had each month, I didn’t do what was expected of me… pay off the loans.

Instead, I did what I felt was right for my journey, and put it in a tax-free savings account (TFSA).  This gave me a sense of security, while only paying the minimums on my loans. I also put all of my tax refunds in my TFSA. Once I had accumulated enough to pay off the car loan, I paid it off. Then, I moved on to saving again, and once I had enough for the student loan with the 5.25% interest rate, I paid that off in one swoop.

And, lastly, I did it one last time for the student loan at 3%, for a final KO*. I expected to feel this amazing high, while the clouds in the sky opened up saying, “Congratulations, you’re debt free!” Instead, I sat there looking at the student loan provider’s website, wondering when the balance would get updated. It took close to 2 weeks, so it didn’t really feel over, until it was over. I eventually saw the $0 balance, and the smile was there: I did it.

It’s almost been a year since that smile, and I can tell you it only gets better from there.  My final words: Keep your focus, because the end result is abso-fucking-lutely worth it!** Debt, we are no longer friends, and I can’t say I miss you. 

*I know this cost me more in interest than if I had paid off the loan with larger payments, but I did what made me sleep better at night.

**Bonus points if you know where that word is from. 

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Melanie

Melanie Lockert is the founder of the blog and author of the book, Dear Debt. Through her blog, she chronicled her journey out of $81,000 in student loan debt. She is also the co-founder of the Lola Retreat, which helps bold women face their fears, own their dreams and figure out a plan to be in control of their finances. She is passionate about empowering women, helping others get out of debt, and focuses on the intersection of debt and mental health. Every September she organizes a Suicide Prevention Awareness Blog Tour, to help share resources for those struggling with debt and suicide. In addition to her love of personal finance, art and music, she is also a karaoke master and a cat mom to Miles and Thelonious.

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