In May 2007 I graduated with a BBA and $25,000 in government student loans (aka OSAP). While my parents helped me out to the tune of $4,000/year while in school, I paid for the majority of my education, including living expenses, tuition, books, etc. Each year probably cost around $16,000. I also bought my mom’s car while in school, and I went to Europe for six weeks. These were busy, expensive, productive years.
Prior to starting university I worked full time for one year, so I had saved about a year’s worth of costs. In third and fourth year I worked part-time at my school’s career centre, so that helped pay the bills. I also worked full-time and part-time every summer.
Even with all my income, I racked up $25,000 in debt. Looking back, I can see that I could be very frivolous with my money. If I wanted something, I bought it. (I’m still working on not giving in to my impulses when shopping.) I went out to restaurants and bars fairly often. I drove over an hour to visit a now ex bf almost weekly. And I did all of these things without a financial plan. I would get my OSAP every term, put the money in my bank account, and spend.
Once I finished school, however, I was very serious about paying down my debt. I was lucky enough to be welcomed home, so it was back to my childhood room. I didn’t have to pay rent, and I had already purchased my mom’s car. My expenses were minimal – a cell phone, car insurance, gym membership, transit passes, for a total of maybe $600/month – plus any entertainment costs. Overall, I had it pretty easy.
I found work by August 2007, and my entry salary was 40K. I set my minimum payments to $1,000/month, and I usually put down an extra $500 to $1,000 on my loan. Because I had so few other expenses, I could afford to really pay down this debt quickly. My interest rate was based on prime, and I think it started around 8% and went down from there. I do remember that when my loan first went into repayment, I was paying around $8/day in interest. I kept thinking, I can see a movie every other day for that!
Using this plan, my debt was paid off by December 31, 2008. It took me 20 months and $2,087.16 in interest costs. Taking into account all the things I did with my loan, I consider that a bargain.
Even though I paid off a great deal of money relatively quickly, I didn’t have any other financial accomplishments during this period. I had no savings, since I put everything towards the loan, and I had zero RRSPs (although I did start paying into the pension plan at work in April 2008). So what did I do with the rest of my money? Looking back at my 2008 spreadsheet, I bought TONS of clothes, to the tune of $5,200. Sure, I probably needed some for work. But did I need five thousand dollars worth of clothes? No way. I don’t even know what I bought for all that money. I know that at the time, I certainly didn’t feel like I had a $5K wardrobe.
It’s been a little over two years since I paid down this debt. I live in downtown Toronto in a condo that I purchased in March 2009 with the help of my parents. I’ve managed to overcome some of my bad spending habits, like buying excessive amounts of clothes. This is something that has changed fairly recently, because I realized that I wasn’t saving enough for emergencies and for the future. It was really difficult at first – I love shopping and I love new clothes – but after a few weeks, it wasn’t so bad. Reading other people’s blogs are a great inspiration (check out my blogroll for some suggestions), and now I’ve started this blog as a way to contribute to and learn from the PF blogging community.
I know I have a long way to go. I don’t know if I’ll ever track every single dollar I spend, but I do want to be aware of where my money is going. I love looking at my savings account and watching it grow, so for now, that’s what I’m going to focus on. I’m sure I’ll learn more about myself and about how to manage money along the way.
Do you have a debt story you’d like to share?