Working Towards A Debt Free Lifestyle In 8 Steps

Debt Free Lifestyle Start Today wm

Working towards a debt free lifestyle is possible, that is if you really want it bad enough. I’m sure you all know that the 8 steps are only stepping-stones, meaning one step leads to another. Perhaps you may learn that our steps differ from what your ideal steps are but learn to create your own. You may only need 1 step but the first step may be the most important of all. You can make that happen.

There may be some of you who didn’t start saving early like we did but that doesn’t mean you can’t follow the road to debt freedom. Start today. If you take a sincere interest in wanting to learn how to pay off all your debt and start saving for all the things you’ve wished for in your life, it can happen. Sometimes we have to make sacrifices to get ahead especially if you are in a relationship.

Getting rid of our mortgage was one of our top goals when we bought our home so instead of investing in renovations like we wanted to with the extra money saved, we backed away from them. We didn’t invest all of our savings into our home down-payment because we wanted to do major renovations but that all quickly changed.

One thing I’ve learned as a homeowner is that sometimes things don’t always goes as planned, you might have to skip a step which you can later return to. One of my biggest challenges was establishing myself in Canada and building credit as a permanent resident. I had alot on my plate so some things had to be put on hold.

It was more important for us to reduce personal debt which was our mortgage then to think about what we needed to modernize around the house. Of course yearly maintenance was always completed it was more about living the debt free lifestyle that meant more to us than a new kitchen or $10,000 spent on new hardwood floors.

This is not all-inclusive but a personal insight which helped bring us to our almost free, debt free status today. I’ve also learned along the way that in order to make it to the debt free lifestyle we had to get past the obstacles that so many face. I’ve detailed below 8 steps that we’ve encountered or met along the way.

Marriage and Debt

When most people get married they take on each others debt, the “what’s yours is mine and what’s mine is yours” is a saying we all know too well.

There was no “my debt” when we got married it became “our debt” and yes we did have debt in the form of vehicle payments on a 0% interest vehicle over 60 months and everyday living expenses including rent. I paid cash for my vehicle but I also had to save money to pay for my education which was not in the initial plans. So where I had no debt she compromised by paying the bills so we could get ahead.

How I Earned Extra Money

I would earn extra cash by repairing our friends kitchen by adding a back-splash to their new modern home. I didn’t charge them an outrageous fee because I wanted to help them out like he was helping me. I made $100 cash and he took me out for Chinese lunch where we laughed and had a couple of beers.

Another time I helped a friend who wanted me to fix her dishwasher connection and install her kitchen worktop which she had pre-cut from Home Depot. I did all of that for $15o because I knew that she was a single homeowner and didn’t have lots of  spare money to splash around. No, I’m not assuming either, she told me so in conversation. It was more important for her to use her savings to buy a town-house instead of renting.

I also took the liberty of joining focus groups in our city that paid cash for my opinion. It was the easiest extra money I’ve ever made. There’s nothing like talking about coffee, road salt, cigarettes and I can’t remember how many other topics earning anywhere from $50- $100 for less than an hour plus they fed me dinner.

I did whatever it took to earn money so I didn’t have to pull from the savings that we worked so hard to build since we were in our twenties. There are so many ways to make extra money to pay off bills and even if you can’t leave home you might be able to offer your services as a tutor or babysit from home to help out a parent who is in need.

Not My Debt

If you open your bills and prance around with your fingers in your ears, turning a blind eye and rhyming off the, “it’s not my debt la la” tune like a child, get over it. Stop dissing the debt and saying it’s not yours, I didn’t create it so I’m not paying it. If it’s in your name you are likely responsible for the money owed so waste no time, find out who you owe money to and start paying the money.

If you are in the middle of a legal battle then consult your lawyer to get professional advice instead of leaving the debt unpaid month after month. The last thing you need is a red mark on your credit report that may follow you for years. Not all debt is created equal but unfortunately some people pay the price and have to learn from their mistakes.

A friend of ours who is now divorced had a credit card in her name while married. Her ex-husband charged all sorts of purchases made online to that card but she was still responsible for it when they split. He had no money so she was forced to pay for it or risk a bad mark on her credit.

Paying Off Student Debt

Student debt, so many people of all age groups are faced with paying back student loans in the form of OSAP or a credit line from the bank. Many students also have credit cards that are maxed out and soon realize after the fun is over in University and College that they are now in the “real world”.

You might not have been the person who was partying every night of the week but you still have debt. School isn’t cheap and it’s not getting any cheaper which really is depressing for many students. If you want to pay off your student loans fast then forget about all the fashion and eating out every night of the week, focus on your personal finances.

Sure you can balance life with a budget but if you’re just adding more debt on top of debt it may prove difficult when you want to move forward with the next stages of your life. If you’ve moved back home with mom and dad don’t get too relaxed unless you plan to stay at home until you get married.

Even then you still leave home with debt if you haven’t taken the opportunity your parents are giving you living at home with a little to no rent to pay it all off. They are doing this to help you, they understand what it’s like out there.

When I went back to school as an adult for the second time we had to buckle down on all the spending. I had already saved to pay for University once and I had to do it again. We lived pretty frugal during those years before we bought our house.

It was in line with our goals and we never felt like we were giving anything up, we were gaining, if anything at all. Our lives were put on hold while I was learning and costing us more money than anticipated.

No one likes to hear it or face it but debt doesn’t just go away and as a student you may not have bought a house  yet or even a car. Never-mind if you want a big wedding with all the bells and whistles followed by starting a family. Debt may be your worst enemy.

Owe You Money

Who owes you money? Don’t be shy to ask if someone owes you money especially if it’s friends or family. We had loaned a family member over $30,000 dollars and you can bet we won’t be forgetting about it. The money has been paid back but there are people out there that loan out $5 here and $10 there to friends who say they will pay you back and don’t. Letting them get away with that is not good enough especially if you wouldn’t do the same.

The person is not learning responsibility for their actions and needs to be called on it. My wife had a friend who would always borrow smokes from her. She would tell her that she’d “pay her back” well that never came and my wife wouldn’t say anything because she knew she was struggling for money.

The thing is, maybe she was but my wife wasn’t helping by allowing her to think she can get things for free and not pay for them. If you truly want to help someone and don’t expect the money back then agree to it from the start. Simply say, “hey no worries, it’s OK”.

There is no reason you can’t help someone out but you also can’t be dishing out cash to everyone. It’s the same with your child. If you offer your teen $5 to mow the lawn for example ( I know not all parents pay for chores and that’s fine) and he/she agrees but asks for an advance on the money and you give it.

The problem is the teen mowed the lawn, not the next day or the next week, not ever, the father did. The teen didn’t learn a lesson at all. What he/she learned is that mom and dad are soft and I can get away with things if I need to and someone else can do the work. This lesson may also carry on with this teen into his adult life.

If you keep passing out cash like you have endless amounts of it then you will soon see your savings dwindle or not grow as much as they could. It may not seem like much but small amounts add up quickly, don’t believe me, if you have debt than you should. It’s true!

I Owe Money

Who do I owe money to? If you owe money to anyone you’ve got debt. As far as I’m concerned there is no good debt. If you owe money you should pay it back in a reasonable amount of time. What’s reasonable depends on how much interest you are willing to pay and how much money you can earn through investing. Not everyone shares the same values when it comes to money and investing so make your own informed decisions.

Figuring out who you own money to should be a priority when working towards a debt free lifestyle. You need to know all these important details and have them easily available for review. I can’t tell you how many people I’ve talked to that have no idea who they owe money to.

I bet if I asked someone who owed them money they could rhyme names faster you can shake a stick at. That’s how well you should know your finances, inside out. If you owe money it should be a priority to pay off your debts. Don’t pretend like they aren’t there or that they will go away on their own.

If you think paying the minimum payments on all of your debts is putting a dent in them you may be surprised to find out that’s not always the case. When Tony came to me and said that he paid off over $100,000 in debt I knew anything was possible. It does take more than money it takes courage and a desire to want the debt free lifestyle.

If you aren’t making enough money than maybe you should look into what options are available to you in order to earn more or simply spend less. Remember Katrina, she’s in a better place with her finances now because she created a business to earn extra money with her passion and skills to pay off her debts. She knows what she wants and is working towards a debt free lifestyle.

Budget Plan and Invest It Wisely

If only, have you ever said that to yourself you wished you had done something sooner? It happens whether it’s buying a house when the interest rates are low and houses are relatively decent priced, investing in stocks and other investment, applying for a job or even taking care of your personal finances with a budget. Whatever you choose to do with your money make informed decisions that you can live with.

I won’t go into great detail here but if you’ve never budgeted before It’s safe to say that you aren’t too familiar where to begin or you know how you just need a push to start. You can read my budgeting series which I wrote where you will see the Canadian Budget Binder budget sample that we use for our own family budget. That budget didn’t happen over night it took over a year of practice, making changes and we continue to do that month after month.

We started our budget by creating a sample budget, not one but two budget samples so we could evaluate what a budget would look like with our current net income and another sample budget only using one income. You don’t have to go all fancy with a budget unless you want to but we kept it simple.The reason for the second sample was to investigate how our lives would potentially be affected in the event that one of us was no longer here or we lost a job or could no longer work.

Getting started with the budget was one of our priorities and still is today. Saving almost $185,000  to pay down our mortgage since 2009 was given a kick-start simply by focusing on where our money was going. No, we did not save that much in a few short years with a budget but a combination of everything we’ve talked about in this post has helped us to build up our savings.

Budgeting isn’t for everyone and many people I know are successful in their lives without using one and that’s great. Decide what works best for you.

Spend Less Than You Earn

If you follow my blog you’ve probably got my quote engrained in your head by now as it’s at the bottom of just about every post. “It’s Not About How Much Money You Make , It’s How You Save It”. I do that on purpose because the more you see something the more it might sink in. We are all creatures of habit and unless we choose to make changes we will continue to do what we are used to.

You can be frugal and still enjoy your life and for some living a minimalist life seems like the better way to go. If buying new clothes is important to you pick a few up quality pieces that you can mix and match. If you get your clothes at second-hand shops that’s great as well. There are endless ways to save, you just need to know where to find them.

Some great posts about minimalist lifestyles have popped up in the personal finance scene such as Michelle from Making Sense of Cents who shares tips on spring cleaning your wardrobe and well on her way with her extraordinary extra income.

Jordan at My Alternate Life took on the minimalist challenge  back in 2012 when her and her fiancée moved from an apartment to their new home. She vowed to de-clutter and get rid of the crap they were collecting for years.

Sometimes having too much stuff or clutter in your environment tends to swallow you up. We opt to not buy more than we need in our house and keep “stuff” to a minimum. We also get rid of what we no longer use if we haven’t used it in 6 months to a year because we likely won’t if we haven’t by then.

I’ve saved my money since I was young and bought my first house at 21 years old. If I can do it anyone can. I still had lots of friends and enjoyed spending time with them. As an adult I still do the same but I know I don’t have to be flash with the cash to enjoy myself.

“I Am A Saver” is a stark reminder for me because I learned that I don’t want to pay for mistakes that I could have easily avoided. If you want to live a debt free lifestyle like we are today, let go of the negative mindset and just get on with it. It’s going to take time, but that’s all we have is time, just balance it with some fun. Stop dreaming about how to live a debt free life, start living it today.

What ways do you work towards living a debt free lifestyle? If you don’t want to be debt free what are your reasons?

 

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PF Weekly Reading List #16- I Give Up……………

Change Yourself I Give Up

What? I give up… it’s probably one of the hardest things I would have to decide to do or anyone for that matter. A part of us shatters when we are forced to make the decision to give something up in order to get out of a financial mess that we created or for reasons beyond our control.

When times are tough and it’s hard to make ends meet or we simply are drowning in debt we have to give something up. Sure we may NOT have to give something up and could keep juggling money from credit card to credit card or consolidating debt in order to ease the pain but is that enough? If you answered “that’s all we have left to do” the you need to find a way because you can’t live your life like that. It won’t last forever, the walls will crumble down on you eventually.

For some credit cards and consolidating debt over and over seems like the right thing to do but for others its way out in left field. For those that would do just about anything to get out of debt they would rather ‘give up’ something than to incur more debt along the way. It’s no secret that Canadians are sinking in mounds of debt we read about it all the time and for many reasons, job loss, work injury, illness, divorce the list could go on and on.

Never Give Up On Yourself

There are also many people who are in these situations that have come out on top because they didn’t give up on themselves. When I hear people say they can’t, I don’t know how, there is no way, it’s impossible. That’s giving up on you, don’t do that. We all have to grieve what life hands us if it’s not what we anticipated or dreamed of and for many it’s been a rotten life but we don’t have to continue down that path. Believe. If you have a crappy job for example make the most of it by finding ways to improve your skills to better your career with another employer. Think positive.

There comes a point though when we need to put all that behind us, move forward and figure out what we are going to do to make the money stretch or work harder for us.

I Give Up…

I was reading an article yesterday which was about asking Canadians what they would “give up” for $250 in extra savings every month. My mind drew a blank as I simply had no idea what I would give up if debt was taking over my life. A survey by ING direct provided information that many Canadians don’t think they are saving enough money each month.

I agree though that with simple planning and budgeting there is light at the end of the tunnel no matter what your income is.  If you don’t make enough to cover the bills the options may be  clear to you 1- make more money 2- give something up. If there’s nothing left to give then you may need to make extra money, some how, some way. The other options may be to move somewhere cheaper, move where the job opportunity takes you or start-up your own business and work for yourself.

Our friend Katrina did just that, a single mom with 2 kids who works full-time and needed more money, so she started her landscaping business to bring in more money. A friend of mine who is on disability has to be one of the smartest guys I know and also has a small side hustle. He can’t work so the family cuts down on all the expenses to fit the budget. It’s hard for him to watch his wife go work every day while he stays home to clean and cook. He said to me that “I have to do what I have to do for my family”.

If that means he gets clothes from a second-hand store or has to cut down on the groceries with no chips and snacks then they will do it. The kids don’t complain and know that their parents are doing what they have to so they don’t lose their house or their car gets taken away.

“We don’t want to be those people on that television show “Til Debt Do Us Part”  as a couple at their wits end. We want to fight the battle and never let it get that far”.

They doesn’t spend more than they earn and he also doesn’t complain about his disability to anyone. He makes his life work “for him” even though he says parts of his life gave up on him. He makes extra money refinishing items he finds for free and sells them to keep himself motivated and to feel like he is giving back.

He says ” the worst thing you can do is feel sorry for yourself, that doesn’t pay the bills”. He searches online for freebies and sells them for more money. He told me there is always a way to make more money if you set your mind to it. The best part is he’s always smiling.

Get Rid Of Debt

I know many of my fans who read Tony’s debt story on the blog yesterday about how he is pulling his family out of $100,000 in debt, it gave them some hope. It really made me realize that sometimes in life we have to give things up to solve a problem. I’m sure Tony would agree that he would do whatever it takes to get his family above water even giving up stuff for a short period until they are at a happy place with their finances.

It’s harsh to say sometimes but when you’ve already spent money that you don’t have you may just have to suck it up and do without until you can get out of a mess. Some Canadians say they would give up social media for $250 extra each month to put towards their debts.

With all the available credit surrounding us like a drug it’s hard to say, No I’m on a budget or no, I need to get out of debt first before we go on a trip and blow more money that we don’t have.

Is it that sense of entitlement that creeps in here for some people?

It may make us feel better to have some liquid cash set aside in emergency savings which I think we all should have so we don’t turn to more credit when in dire need but how many actually use that emergency savings for the said purpose, an emergency.

Nearly three-quarters of Canadians say they would give up social media for three months in exchange for the chance to set aside that extra money, according to a survey released this week by ING Direct.

We Give Up ..

I was thinking about this most of the day wondering if I could give up social media and the reality is , no I can’t. Well, I could but it wouldn’t be my first pick to knock off put it that way. If I had no other choice, you bet I would, there’s always the library.

Last year I gave up smoking which was likely the hardest things I’ve ever had to do. If you are addicted to smoking, drugs or alcohol you know that you don’t really give it up for the money first you give it up to live first, so that didn’t count for me.

When it came down to the nitty-gritty If we had to give up something in our budget to save extra money we’d likely give up cable. We don’t watch much television as it is and it’s costing us around $60 a month. If we were that hell-bent on watching a TV program we could likely watch it on the computer or pretty Smart TV that we own.

That wasn’t enough though and we needed to think of more things we would give up. This reminds me of the time Mrs.CBB and I sat to do our first budget and decided to make 2 budgets. One budget was for the present and the other was just in case one of us lost our job, got injured at work or something drastic happened that we would have to survive on one income. We designed the second budget with all the things we would have to give up in order to survive and not dig ourselves into debt.

On an “I” note, I would also say bye-bye to my weekly allowance which I really only use for beer and the occasional coffee when I’m out on the road and my travel mug is empty. If I had debt that I “REALLY” wanted to get rid of I’d suck it up and scrap the allowance. Other parts of our budget we would smash is the cell phone, eating out, major renovations etc.

I’m sure we could pick it apart but the main thing is we are willing to give something up in order to have a better nights sleep and money peace in our relationship.

Love and Money

Many people ask us how we can be so happy all the time and it’s because we are so in love with each other. It’s also because we chose to give up stuff along the way together while living our life the way we want to. We plan and budget our money in order to live this life of  debt freedom at a young age.  It’s been a bumpy ride with lots of falls but we got right back up again. We will continue our budgeting journey because it has worked for us and it makes us happy.

Like Tony, his family has had to give things up and make choices they may not have wanted to but they did and they too are pushing forward, not living in the past, not complaining of how life dealt them a crap deck of cards. Living a frugal life while you are financially under construction and not giving up while you give up something is a better wau to build your castle than to build nothing at all.

We all deserve happiness, but sometimes we have to create that happiness on our own by giving up something to get something.

What would you give up for extra money in your budget to pay down debt?


Personal Finance Weekly Reading List

PF WEEKLY READING LIST

Here is this weeks reading list which includes some of the best blog posts from many blogs that I interact and comment on and who also have a common interest in CBB. I hope you all enjoy this weeks round-up. There are a few more than normal that I really enjoyed so I hope you enjoy them as well! -Mr.CBB

Mr.CBB's Olive Bread

Recipes/Frugal Blog Posts of the Week

I made more Olive Bread yesterday although I made it with white flour. I honestly thought they were turning into the bread blobs as they wouldn’t stop rising. We were thinking about a plan B just in case they fell off the baking stone. I made two giant loaves of bread and they are much bigger than the photo shares with you. Just check it out above, can’t wait to get into these this weekend with our friends!

Top Recipe: Three Ingredient Banana Chocolate Chip Cookies – Coking Whims (check out how easy it is to make these cookies)

Inspirational or Funniest Post of the Week

Inspirational: Making Sense of Cents- “My Dad Was Awesome” Michelle share a short story about her dad and why he is so awesome. Truly inspirational and another reason to enjoy life to the fullest with those you love. Funniest: Budget and The Beach : Do I Need An Emergency Fund: One Cats Dilemma  Tonya shares a guest post by  her feline friend Pepe the cat. Smart, funny and just all around an important message for all pet owners to read.

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My Debt Story: How I Paid Off $100,000 In Debt (And How You Can Too)

debt

I’m not done paying off all my debts yet, but I recently hit the century mark and wanted to share with you all how I did it. I have paid off $100,000 in debt in 17 months, and am a few months away from being debt free for the first time in 20 years.

My Debt Story

I am a musician (a trombone player) who found myself making quite a bit of money doing something I love. I read all the time about people who make a lot of money but hate their jobs; that was not me, which made my predicament a bit tricky.

When I got into debt and spent more than I earned, I would justify it by saying to myself that I would work forever. It still got old, and I still got tired of being in debt.

Even though I love the work I do, my debt left me “trapped” in certain areas of life. Sometimes I would rather stay home with my kids than play a concert…I did not have the latitude to say “no”, since I needed the money. My debt pay-off has really allowed me to follow my passions, and only my passions.

Here is how I paid off the debt, and steps you can take to do the same:

Stop Borrowing

Hey, it’s easier said than done. As obvious as this step is, you have gotten into debt by spending more than you earn, which is a habit. You can’t break the habit, but you can build newer, better habits on top of it. The first step on the path to debt freedom is to stop using credit. Cut up your cards. Stop borrowing money.

Many of my friends will disagree with me, but here’s my opinion on credit cards:

  • Credit cards are not your safety net.
  • Credit cards are not to be used for convenience.
  • Using credit cards for cash-back bonuses usually doesn’t work out (you spend more than you would normally using a card…period).

Listen to me: You don’t need credit cards. If you absolutely must have one, wait until you are completely out of debt. At this point in my life, I am pretty sure I could use one responsibly, but I choose not to do so.

After you get rid of the credit cards, call every company that you have recurring payment with and cancel the payments. Do not have recurring payments come out of your credit cards. Stop using them altogether.

Don’t cancel your credit cards. In fact, call them all up and negotiate a better interest rate. Most of them will oblige!

Establish An Emergency Fund


If you don’t have emergency savings before you begin paying down debt, you’ll never be able to cope with unexpected expenses. Again, credit cards are not to be used for emergencies; only cash.

How To Start An Emergency Fund?

Ideally, you should save $1,000 as quickly as possible to start before throwing money at debt. If your expenses are low, you may be able to get by with a $500 savings plan. This money is for emergencies only. It’s to be used when the car breaks down or the plumbing bursts.

Keep this money liquid, but not immediately accessible.

Attack Existing Debt Ruthlessly 


Go at your debt with reckless abandon. You are going to throw every cent you can at it, as often as you can.

You will hear people always tell you to pay your high interest debts first. Obviously, this makes the most sense mathematically. We all know the math, but paying off debt is a behaviour modification issue.

I used the debt snowball method to solve the behaviour issue.

What Is A Debt Snowball?

Here’s the short version of how the debt snowball method works:

  • List your debts from lowest balance to highest.
  • Designate a certain amount of money to pay toward debts each month.
  • Pay the minimum payment on all debts except for the one with the lowest balance.
  • Throw every other penny you possibly can at the debt with the lowest balance.
  • When that debt is gone, do not alter the monthly amount used to pay debts, but throw all you can at the debt with the next-lowest balance.

I love the debt snowball. Until I discovered it, I thought I’d never get out of debt. Though it still takes time to pay off your debts, you begin to see results almost immediately, especially if you have some credit cards with low balances.

A third method to approach debt elimination is to first target the debts that cause you the greatest headache. Do you have a loan from a family member or a friend? Do you hate the fact that you borrowed money for new car tires? Whichever loan bugs you most, pay it off first.

Regardless which method you choose for attacking your debt, put as much money as possible toward this goal. Apply raises and windfalls (like income tax refunds) directly to your bills. Sure, you’d rather spend that birthday cheque for a nice dinner out, but you need to use it to get the debt off your back.

Other Suggestions To Pay Down Debt

To begin, curb your spending. Develop frugal habits. Mr. CBB has also shared some excellent tips for frugal living and how to budget  that you can learn from and apply to help you slice debt and win the battle. I finally realized that frugal living is not being “cheap”.

Frugality and thrift used to be core values in our society, but we lost touch with these ideals during the age of easy credit. Find ways to stretch your dollars and you are on your way toward being thrifty.

While you learn to spend less, do what you can to increase your income. If possible, sell some of the stuff you bought when you got into debt. Use eBay, Kijiji or Craigslist or Amazon to get some cash from the things you own. Consider taking an extra job or working longer hours.

Best Personal Finance Books

Finally, go to your local public library and borrow Dave Ramsey’s “The Total Money Makeover”. This is a wonderful guide to getting out of debt and developing good money habits. This book, and others like “Your Money or Your Life” were paramount in helping me change my views on money.

The most important thing is to start now. Don’t procrastinate any longer; start tackling your debt now. Have patience at the beginning and don’t get discouraged. Your efforts may seem small and insignificant, but in time, it really adds up. If you’re willing to stay the course, you’ll have your debt paid off sooner than you ever thought you could.

I wish I’d started paying off debt sooner. Maybe if I had, I wouldn’t have been in debt for 20 years!

Contribution Post By:  Tony is a trombone player who has performed with major symphony orchestra, on Broadway in NYC, and in recordings and movie soundtracks.  He blogs about simplifying your life through downsizing and becoming financially fit. Find out more at We Only Do This Once.

Editors Note: I’ve had people email me in the past sharing their debt stories and wanting help asking me “how long will it take to pay off my debt”? There is no quick fix to getting rid of debt but like Tony shares it’s a process, a life long process that won’t happen over night. Even if you are a student paying off student loan debt do it as soon as possible instead of waiting or putting it off and potentially feeling trapped.

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What My Life Is Like With Terrible Credit

Final Notice Credit

photo credit freedigitalphotos.net/Stuart Miles

I am a person living with debt that I can’t pay and terrible creditI am a single mother of a now 17-year-old son soon to be 18. Over the years there was never enough money and debt just seemed to keep piling up and I wasn’t sure what to do about it. I needed the car to get my son to daycare, then me to work. It  seemed every time I turned around there was a repair that needed to be made on it. My one credit card with the highest balance which is now in collections was typically used for repairs to my vehicle at the time.

I was working full-time to pay some of the mechanic’s bills as well as to keep paying my everyday bills and putting food on the table which was hardly enough. That meant that the repair bills often ended up on the credit card. I eventually refrained from using that credit card because the balance was just too high but luckily had a low-interest rate of only 10%. What’s worse is the car had to be junked as it was no longer in a state of repair. I haven’t had a vehicle since that time in 2001.

Employment Status

I lost my full-time job of 10 years in 2006 but I was lucky to find another job within weeks of this happening.  One year later that job was gone when the company started lay-offs (they eventually went bankrupt 2 years later). Before I lost that job, I was going to consolidate my other 2 credit cards (each had balances of about $2,000 on them) with the one I was no longer using but had the better interest rate. My plan was then to direct as much money to it as I could each month so that within 5 years I’d have it paid off.

But then when I lost that job, I didn’t feel comfortable doing that. I managed to hold on through my Employment Insurance (EI) which was for 40 weeks, but when I hadn’t found any work during that time period and my EI ran out. I then had to apply for and go on social assistance. At that point I was barely getting enough to pay the bills to keep a roof over our heads and put food on the table, it was the credit cards that suffered.

At first I was directing about $25 to the 3 credit cards but since it wasn’t putting a dent in the debt and often was leaving me short come month-end, I stopped that. The other 2 credit cards are now also in collections. I have one credit card in good standing however, I have not used it in a year and do not intend on using it. My attitude towards credit cards has changed dramatically these past 5 years.

Social Assistance

I was on social assistance for nearly 3 years. At one point while on social assistance I wasn’t allowed to job search because of a medical issue. Once I was given the go ahead I looked for work again. In May 2010 I finally found part-time employment at Wal-Mart. From May 2010 until November 2011 my wages were topped up by social assistance. However, the 2-3 months where I really could have used the money from Ontario Works (OW) I didn’t qualify because of my reported employment income when it was highest at work due to increased hours because of the Christmas season. So, January through March I struggled financially.

Then OW decided that my child support should not have been directed to them so they turned it back over to me. Adding that into my work income that they use in their calculations (OW using 50 cents of every dollar earned from employment) it no longer was worth staying with OW because I would have been lucky to get anything from them except for maybe one to two months a year. I decided to have them close my file.

Living Pay Cheque to Pay Cheque

I basically live pay cheque to pay cheque while working retail January through to March (April, May), my hours are reduced to the minimum. I’m part-time so right now I’m getting only 12 hours per week. The problem is that with everyone in the same position any available shifts that come up are quickly grabbed and no one is giving up shifts unless necessary. The only time I saw hours upwards to 37 per week was the week before Easter, the week before school started, during the anniversary sale, and then the month of December. When I need to buy something that’s not in my budget, I have to figure out what can be cut that month. My bills (other than the credit card debt) are paid each month.

Terrible Credit and Potential Bankruptcy

I’m at the point where I feel I need to speak with a trustee in bankruptcy. The total of the debt between the 3 cards in collections is around $32,000. That’s more than I made when I was working full-time and my work income these past few years has been no more than $12,000 give or take. It’ll never get paid off and this year I lose the child tax benefit as my son will be turning 18. That is going to remove close to $400 from my monthly “income“.

When the debts were still with the credit card companies I tried many times to get them to cut me some slack based on my situation. For a couple of years the credit card with my bank at the time was understanding and allowed me to pay what I could. Then that credit card company started demanding payment for the balance just as the other two were already doing (those 2 just weren’t cooperative) and eventually all 3 turned them over to collection agencies (which have changed so many times I’m no longer clear which one is with who).

If my son decides he’s not going to continue his education the child support of $344 will also end. That means that ANYTHING I can save each month has to be put aside to cover my expenses when those months come around where my work income is less than $500 per month. I’m lucky right now my rent is subsidized but that won’t last forever and then I’ll be in big trouble.

Job Search

Meanwhile, I continue to search for full-time employment or part-time if I can find something that works around my current job schedule. Despite responding to job postings and sending out resumes I rarely get called for interviews. I really believe it’s because of my age and even though my résumé is modified they can still guess roughly how old I am from the information that is provided. I’ve talked to others I’ve worked with before who have lost their jobs and they are finding it tough to secure employment as well.

My résumé has been prepared twice now by professionals and after the changes I’ve received a couple of opportunities but nothing that has offered me full-time employment. I’ve done plenty of reading online regarding resumes/cover letters and taken out books from the library in hopes of making sure I have a top-notch resume and interview skills, but with no luck. It doesn’t help that my experience and skill level with certain computer software is not high which most of the jobs in my field require or desire in a job role. I simply can’t afford to take computer classes and the self-study I do just doesn’t seem to be enough.

How I Manage My Money

I know my schedule about 2-3 weeks ahead of time so I can figure out close to what I’ll earn. I guesstimate what my monthly income will be then subtract the fixed expenses I have to pay each month. The remaining money is what I have to work with for groceries, miscellaneous, clothing etc. I avoid paying full price for anything if it can be helped. I complete most of my shopping at work since I have my employee discount so I price match whenever possible to help save money on groceries.

If my pantry is getting low on an item but I can’t find a good price for it when I look at all the weekly flyers I’ll put off purchasing it until I can get it at a good price. I use coupons as much as I can matching them up with the weekly flyers to try and get more bang for the buck. I check my bank account before I go shopping to determine what has yet to come out of the bank and what is in there so I have an idea what I have to spend on that week’s groceries.

Update on managing money since submitting her post

I’m budgeting now and planning my weekly shopping around the flyer inserts. I use coupons more than I ever have and I no longer rush into buying something. My hours at work have increased to about 20 per week as more people are giving up shifts which I can pick up. I’m also going to open a savings account and at least 10% of each pay I’ll direct to that account. If there is any money left at the end of the month after paying all the categories in my budget the money will go into emergency savings for when it is needed.

Where Do I Go From Here?

I’ve lived without a credit card for over a year now and should I choose to get one in the future the first one would be a secured credit card with a low credit limit to start rebuilding credit. Since I’ve been fine paying debit or cash all these months I’d use the credit card but then make the payment to it immediately (as we suggest to customers when we motivate them to apply for the Walmart credit card) so I’d earn the reward dollars and not carry a balance.

Looking back now over 5 years having been without full-time employment, 3 of those years were with no employment whatsoever and with losing 2 sources of income this year I’m at wit’s end. I have come to the point that I do feel bankruptcy is the only way to go in order to start my financial life over. I have talked to two co-workers who have gone the bankruptcy route and they are advising me I should look into my options. Neither of them were in as much of a bind as I am (and both are married and have a spouse’s income to fall back on), yet they felt bankruptcy was best for them rather than a consumer proposal.

I kept thinking things would improve if I knew back in 2008 what I know now. I believe I would have considered my options in regards to bankruptcy the moment I had to go on social assistance. At least I wouldn’t have stressed about the debt all these years. The past few years, I feel like I’ve existed, and have not been living.

March Post Update

Since I wrote to you in February, I did meet with a trustee in bankruptcy. The trustee told me that the one thing I have going for me is that the creditors a) can’t go after assets as I don’t have any b) I had already done what he would have said to do and that was change banks to one where I owed nothing c) he said that the only thing they could do is garnish my wages.

Even if they figured out where I worked it would take  them upwards of 6 months to a year to get the court to approve garnishing my wages. So in that regard, my declaring bankruptcy isn’t something I need to do just yet if I don’t want to. The fact that I’m losing one if not two income sources this year is a concern. He said I could wait until later in the year to file or wait until I got my income tax refund for this year (this was in February, and he told me I wouldn’t want to file until I had that refund.  If I filed then, I would lose both my refund for 2012 and 2013.

By waiting until I had my 2012 refund I would lose only my 2013 refund if I filed before the year ended). I’ve thought long and hard about waiting to file for bankruptcy — but I’m leaning towards doing it in April. My reasoning is my income tax refund can pay the monthly bankruptcy fee in full for those 9 months I’d be in bankruptcy. Any money from work I can then direct towards monthly bills and building up some savings for the lean months. My son works part-time now which has eased up on some things that I used to pay for him as he buys them himself now. I just want to file bankruptcy, get it over with, then start fresh and eliminate that stress from my life.

Contribution by: This is a Canadian Budget Binder fan who would like to remain anonymous.

Editor’s Note: The contributor wanted to share her life with terrible credit in hopes that others who are in her position don’t feel alone and can learn something from her story. It’s always nice to hear success stories but it’s also important to hear the stories of those people who don’t know where to turn and feel like they have “just been existing”. Life is about learning from mistakes we make and hoping that we don’t make them a second time. I believe by sharing her story today she has opened the gate and now she has to walk her path which she has started with budgeting. I wish you all the luck in your journey towards fixing your credit and understanding your personal finances.

Questions:

  • How did you turn your credit around?
  • What tips do you have to share with other readers that might have terrible credit and on the verge of bankruptcy?
  • What motivation can you give to our contributor today?

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