$31,500 in debt

I’ve thought about writing this post for a long time. I didn’t want to write about it until I got out beneath the predicament I put myself in. $31, 500 is a lot of money. At least to me it is. Paying it back has been much less enjoyable than spending it. How did all of this happen? Great question but first, let’s look at all the things I could have bought with that money.

A 2013 BMW X6 

Super Bowl tickets, flights, accommodation, food and wildness.

I could have eaten at Heston Blumenthal’s Fat Duck restaurant in Melbourne 45 times.

I also could have invested that money and be on my way to some solid passive income cash.

How did this happen?

Short answer: not living within my means.

Yes, part of it was going to school and education but that wasn’t the death blow. The onus is on me and not taking responsibility for small debts that ultimately turned into big debts. I can remember at one point thinking that I should take care of my $10,000 student loan by the end of the year. This was around 2009. While making just under $2500 a month renting cars at Enterprise and living with my cousin, there wasn’t a whole lot left over. At least that’s what I thought. I also thought that, yes I owe this money but I’m cleaning cars in a suit so I deserve to have fun on the weekend to unwind. While I wasn’t earning that much money, even if I was, I doubt I would have paid much off it off. I would have found new and more exciting ways to spend that money.

“Interest on debts grow without rain.”

-Yiddish Proverb

I can’t blame my family. From the time I was young, my dad pestered and encouraged me to save my money and not waste it. He even gave me a $1 a day interest on $200 I had just to drive home the point of investing and thinking long term. After his financial decisions led to a decline in his net worth, I think I started to believe that even if I had money and invested it, it could all just evaporate so why not enjoy it while I have it?

$10, 000 turned into $12, 000, $12, 000 into $15,000, until one day after adding up all my debts, my number was $31, 500. This number is engrained into my soul. It has taken just under two years, moving to China, learning about money and a certain portion of newly found discipline to get out of this pickle.

I think I also learned how common debt is and the reluctance as a society we have in discussing it. While people online are more comfortable sharing their stories, I have had very few conversations with friends about their indebtedness, if any. It’s embarrassing to tell people you can’t go out on a Friday night because you can’t afford it. It isn’t cool to stay in all weekend and not have any stories to tell Monday morning.

After starting to get this area of my life under control, I realized how big of an emotional impact being in debt had on my mind and heart. It isn’t a good feeling knowing someone could give me $10,000 and it would only erase a third of what I owe. It is a feeling of helplessness at getting a paycheck of $1200 and not being able to afford a decent lifestyle, let alone make any progress with saving. Being in debt takes away a little bit of pleasure from each purchase. Yeah, that burger and beer tasted great but deep down, I knew I shouldn’t be ordering it and that I couldn’t afford it. I don’t think it was due to laziness or lack of hard work. Working 49 hours at Enterprise or working at a restaurant clearing tables and pouring people water isn’t exactly easy or rewarding work. At least I had the good fortune of even having a job and a place to stay. Many people all over the world are born into situations that are almost impossible to get out of. I was shocked to learn about the caste system in India where people are born into poverty and are only allowed to keep jobs that are ‘beneath’ the rest of the population.

https://news.nationalgeographic.com/news/2003/06/indias-untouchables-face-violence-discrimination/

“Debt is normal. Be weird.”

Dave Ramsey

Lessons learned about getting back in the black:

-It needs to be a priority. If you haven’t decided that getting a handle on your debt is at the top of your priority list, you will have a tough time no matter how much money you make.

-You need a list of everything you owe.

Loans: _____

Credit Cards: _______

Friends or family: ______

You need to know the total you are working with so you can start to make a dent.

-You need a job.  At my lowest, I had returned from Colombia, had gone to a job fair, didn’t get a job and was in terrible financial shape. Applying online to jobs abroad and being offered a high school teaching job in China turned things around.

-Knowing how much you earn and how much you spend a month. Take a week and write down everything you spend. It sounds hard but it isn’t. Use your phone, write everything down when you spend it or review at the end of the day. 

“Rather go to bed supperless, than rise in debt.”

-Benjamin Franklin

It really shouldn’t take that long. You can use these apps to help:

You Need a Budget (YNAB) https://www.youneedabudget.com/

Mint: https://www.mint.com/

-Strategy that works to attack different debts?

I definitely did this envelope system for about a year. It works. It is a bit of a challenge here with every store and utility using a phone as a wallet but using cash helped a ton. 

https://www.daveramsey.com/blog/get-out-of-debt-with-the-debt-snowball-plan

Pay off your smallest debts first to get some momentum and confidence. Once your smallest debt is paid off, move on to the next smallest until you are ready to face your own personal Everest.

-Have someone to keep you accountable. I would say this was one of if not the biggest turning points in my attitude towards my financial situation.

I had just come back from Colombia when I had a very frank discussion with someone who is close to me and that I trust. I told this person how much I owed and my current job situation which was unemployed. This person cares a lot about me and calmly told me in a very honest and non-condescending tone that I was a poor marriage prospect. She was right. I had negative amounts of money, no cash flow and no plan to get out. The trend was more that I would reach -$50,000 than I was to get back to $0 in the foreseeable future. I think it was the best thing anyone could have told me. I think about it often. I didn’t want to be in a serious relationship until I was making progress in getting my financial life in order. People fight about sex and money. I doubt my wife will fight about the former so I thought I better start working on the ladder.

“When a man is in love or in debt, someone else has the advantage.”

-Bill Balance

Being a good marriage prospect doesn’t mean that you need to be wealthy or have money be your top priority. I think it just means living within your means, making progress towards certain financial goals and showing restraint when faced with certain financial decisions. If I can’t be responsible with money, what else may I not be responsible with? If I can’t be counted on to help pay for a wedding, pay my share of the rent or be able to pay for clothes or food for our future kids, why should she risk her future? While I may not be the best marriage prospect, I sure think my stock has risen since February 2017.

What did I miss out on these last two years while paying back these debts?

I can’t think of that many things. A few trips to play in lacrosse tournaments in Thailand and Hong Kong come to mind. New basketball shoes, a laptop, some clothes and maybe a concert or two would make the top 10. While paying this off, I still went to Cambodia, Thailand (twice) Vietnam, New York, New Hampshire, Portland, Hong Kong (a few times), Seoul, and Toronto (4 times and one summer off). I still ate out, partied and bought a tailored suit in Vietnam.

I wasn’t living like a pauper and I certainly could have gotten out of debt sooner but I still wanted to live my life.

Resources to help you learn more about personal finance.

A few sites and books helped me more than others. This was my initial intro into learning about personal finance:

I Will Teach You To Be Rich

Here is one of the more popular bloggers that has a massive following:

https://www.mrmoneymustache.com/2013/02/22/getting-rich-from-zero-to-hero-in-one-blog-post/

“Never spend your money before you have it.” Thomas Jefferson

Other articles, sites and books I used

http://www.youngadultmoney.com/2015/12/28/100-goals-to-focus-on-for-a-successful-year/

https://www.iwillteachyoutoberich.com/guides/ultimate-guide-to-personal-finance/part-0/?ref=sidebar

https://www.thesimpledollar.com/little-steps-100-great-tips-for-saving-money-for-those-just-getting-started/

http://manvsdebt.com/42-ways-to-radically-simplify-your-financial-life/

Rich Dad Poor Dad summary

https://www.youtube.com/watch?v=wuSgn85I1fQ

Dave Ramsey knows what’s up. Watch any of these videos.

https://www.youtube.com/channel/UC7eBNeDW1GQf2NJQ6G6gAxw

Credit scores

So basically, credit scores are a way of telling a lender the amount of risk they are taking by giving you money and a history of your financial life.

Scale is from 300-900. 300 being the worst, 900 being the best. The average Canadian credit score is around 650. At my worst financial point, I was at 706. I am now right around 795. There is also a trend in personal finance to have your score at 0 meaning you don't use credit at all and use cash for all minor and major purchases. 

Credit score involves your history, how much you have and use and your ability to pay on time. Luckily, I don’t remember missing any payments and what really saved me was having more than one member of my family lend me money to stop the devastating interest that credit cards impose on your life. I certainly didn’t get out of this situation by myself and thank everyone who helped in any way they could.

Other money tips:

Don’t drink or have a girlfriend and you should be out of debt by next month.

Stats:

According to CBC News, The average Canadian now owes $22,081 in consumer debt, a figure that doesn't include any mortgages, debt monitoring firm Equifax says.

https://www.cbc.ca/news/business/equifax-debt-loads-1.3884993

Global puts the number closer to $8, 000

https://globalnews.ca/news/3933617/average-canadian-consumer-debt-ipsos-poll/

CNBC puts average American credit card debt around $6000

https://www.cnbc.com/2018/01/23/credit-card-debt-hits-record-high.html

Global debt clock:

https://www.economist.com/content/global_debt_clock

Closing thoughts:

I think and talk about money too much. Just ask my students. I tell them weekly and before every test to live within their means, the power of compound interest and to save their money (they aren’t listening if you are wondering). Yes money is important. Yes you need it to live and enjoy life but it isn’t life. Playing with your nieces and nephews is living and free. Taking walks, reading, conversing and learning can all be done free of charge. Thinking about your future is essential and making decisions that is looking out for you today and you 4 years from now is important but it’s crucial not to make money the end game. More money doesn’t necessarily mean more happiness. This study suggests that after $75,000, money has very little impact on our overall happiness.

http://time.com/money/5157625/ideal-income-study/

If you saw a woman with a net worth of 31 million walking down the street and the man behind her worth $300, 000, do you think you could tell who was happier just by looking at them? No, no you could not. 

“When you get in debt you become a slave.”

 Andrew Jackson

Live within your means. Make more money. Have an emergency fund. Start saving for your retirement today. Automate your finances. Have friends and partners who share your outlook about money. Compound interest. Buy assets not liabilities. Help others. 

I wish you good luck on your financial journey. If your envelopes runnith over, I’m happy for you. Having your financial life figured out is a big relief that saves time and energy for other priorities. If you are struggling a little, I hope this post has given you some hope and some steps to move forward. I’m always up to talk about money on Facebook or even more popular, email. Save your pennies.

“In the long run we shall have to pay our debts at a time that may be very inconvenient for our survival.”