Erin’s Story…. Debt Free and Loving It!
Posted by John | Filed under I'm Debt Free!
My story starts back to when I was in my last year of university, I had completed my previous 3 years living at home and commuting to school. My parents were generous to me because while I went to school, I didn’t have to pay room and board and they helped me with tuition or books if needed. I was able to work part-time and that money was my spending money along with helping towards school expenses. However, in my last year, my nest moved across country, which at the time I was excited because I could finally be on my own, a real grown-up… little did I know how lucky I was. After I graduated university, I decided to continue with a technical diploma for specific job training and while my parents still helped with tuition, I had rent to pay and food to buy, along with all the other things 21 year olds do… i.e. going out with friends, eating out, drinking , shopping, etc. In addition, my schedule was similar to a work day so I had to go from working part-time down to casual and so I barely had any income. Since my parents moved away and I no longer lived at home I got a student loan to help pay for my rent and living expenses during school. However, given the fact that this wasn’t a lot, I also went to my bank and asked them for a student line of credit, which was “just for emergencies”.
And so the story of my debt begins, having the line of credit became by way of paying my credit card, anytime I didn’t have enough to cover it, I would pay it off with the line of credit. Over the 2 years while the monthly amounts didn’t seem like a lot the line of credit slowly starting to creep up and with my student loans I managed to graduate with $10,000 owing to the bank and the government, and so began the cycle of racking up the visa, paying it off with the line of credit and then paying as much as I could afford on the line of credit, only to rack up the visa again… it was a vicious, un-ending cycle and I just couldn’t seem to get a hold of things.
Then one day, I started dating a guy who after a couple months introduced me to “the spreadsheet”. It only required two things – keep all of your receipts and enter the information into the spreadsheet. Following the spreadsheet is simple and similar to the jar idea but its all on paper (well actually all on computer using Excel). I like to refer to it as budgeting in reverse, you set up categories for such as rent, utilities, groceries, clothes, eating out, gifts, miscellaneous, basically whatever you want to track, for example I wanted to see how much I was spending at coffee shops so I added a coffee column. Keep all of your receipts and then daily, weekly or monthly, enter the receipts. You put in the date, enter the total amount and then copy and paste the amount into the category (or split it up should it fit into more than one category). At the bottom, you can use the auto sum feature to add up the total amount spent and the totals of each category and that is when you see how much money you are spending and on what.
It took me about a month to collect all my receipts and entering them into the spreadsheet to see where all my money was going.
The next month, I was able to form a plan of getting out of debt. I figured out where I could cut my spending (bye bye specialty coffee) and decided on a reasonable amount that I could put towards paying off the debt and after my fixed expenses, the rest is what I could spend on variable. My debt repayment plan started with first paying off the credit card with the line of credit since the interest rate on the credit card was much higher. Then I called the bank and put a hold on the line of credit so that I could not use it any further, it basically became a personal loan, meanwhile I still paid the minimum fixed amounts on my student loans.
Slowly but surely that line of credit got paid off and the focus became the student loan. Once the line of credit was paid, I added that amount as an extra payment on the student loan and the amount just got smaller and smaller until it was finally gone and I could celebrate! Any additional lump sum amounts I received like tax refunds or bonuses I would put half of it towards the loan as well. This allowed me to become debt free 3 months earlier than initially planned!!! What an awesome feeling!
The surprising thing about following this spreadsheet is I actually felt like I had more money than before, even though I allotted a great deal of my income towards debt repayment. Seeing my spending in categories made me take a second look at things such “should I buy that new outfit, I am getting close to the end of the money and I might need gas money or groceries”. I became addicted to using the spreadsheet; I loved entering my receipts and couldn’t wait for the following month to see how my debt kept getting small and smaller!
It has been almost two years of using the spreadsheet, a year of which has been debt free and slowly my spreadsheet has evolved and I have tweaked it to my own liking. I have a worksheet for each month and another worksheet for where I keep a “running total” of what’s in the bank and what the pending payments are so that I know exactly how much money I really have at my disposal. Also, after the first year I was able to calculate the average amounts I spent on the various categories so now I actually have set budgeted amounts that I try to adhere to. However, that doesn’t mean I don’t ‘borrow” from one category to purchase something from another if I don’t have it in the budget. Because there are a running total of all purchases, I know when I am getting close to the maximum budgeted amount so I don’t go over the maximum budgeted amount for variable spending. More often then not, I have money left over from month to month.
Since being debt free, I have managed to increase my RRSP contribution to the max amount the government allows and I also put a nice chunk of money into an ING account each month, which I have set up similarly in a spreadsheet with categories. I have a categories for emergency fund, one for house stuff, one for trips and one for just miscellaneous planned spending, i.e. if I want to purchase some stocks or buy some new ski equipment, I have money to do it (sort of like unplanned planned spending… haha). I can add or delete as many categories as I want. They can have a set amount needed by this date (such as for a trip) or they can be indefinite (such as a house fund). I enter the date, then the total amount of the deposit and split the amount into the categories. Some get $50 a month, while others get $200 a month, and once I reach my targeting amount for a specific category, I reallocate that amount to another category. Similarly, when I take money out, I enter the date, subtract the amount from the total and then subtract it from the category.
I recently reached a goal for my emergency fund, so I opened up an ING GIC account and plopped the money in there for 5 years as I don’t plan on ever spending this money. However, ING is flexible in that if I do have an actual emergency I can get it back at any time and the penalty is I don’t get the higher interest rate on it. I feel it’s a win/win situation. I note, that I have kept my emergency fund category in my regular ING account so I can continue building it up, as you can never have enough in there.
Becoming debt free and being in control of my finances has really affected the way I live my life and what my priorities are. When the stock markets crashed last fall and all we heard on the news was doom and gloom, I was able to think, “thank goodness I have no debt and some money saved up”.
My focus now is watching my net worth increase and making financial decisions that suit me and my life style!
July 7, 2010 at 10:49 pm
I too live by and love the Excel Spreadsheet that my husband introduced me to years ago when he was single and keeping track of his own student loan debt. I have been a big believer ever since, as one is a fluid budget tracking sheet and the other one I have is a total monthly debt one that shows proudly every month our debt is getting smaller and simultaneously our savings are growing which is a good feeling especially when unexpected car repairs and house maintenance items come up, although am starting funds for those shortly too so it does not feel like such a hit when it happens.
I thought that you explained the way you keep track of your expenses and money ideas very well, great job!
CONGRATS ERIN!!!
July 8, 2010 at 8:34 am
I live by my budget spreadsheet. Periodically I go through short bad periods where I just don’t get to entering my spending and then after a week or two I give my head a shake and get back with the program. It’s the best way for me to curb my spending (along with the automatic savings payments that come out of my account every paycheque).
Congratulations on your hard work and determination to succeed!
July 8, 2010 at 12:07 pm
I was lucky in that my brother created software just for this purpose. It allows me to import my bank account right into a spreadsheet and sort transactions without having to manually enter or save receipts (thank you God for computer savvy brothers!!) The software recognizes which are debits and which are credits and tallies everything for me with running totals. I always know what is left in the bank account now and where it’s supposed to be going! Tracking things was all it took for me to get things in line, now at 30yrs old my husband and I have paid off $30,000 in credit card debt, two vehicles and are working on the mortgage which should be gone by the time we are 35! We had always budgeted, but it never worked for us. The real key was tracking!!!
As an added thing that works extremely well for the two of us — we took our “entertainment fund” and split it three ways. Him, me, and together. This way we each have an “allowance” that we can spend without discussing or censorship from the other. We still have the “together” that we can discuss and work together to make decisions, but it just really helped to have an amount that is all “just mine” and “just his” and for anyone wondering – the allowance is exactly equal no “he makes more so he gets more” or “she got a bonus so she gets more” for us! Hope someone else finds that strategy useful as well! It solved a LOT of fights!
July 9, 2010 at 10:05 am
Erin,
Congratulations! What an accomplishment!
I too use a spreadshhet however it is different from yours. Could you email me a copy of yours if you wouldn’t mind?
Thanks….
Collencl@gmail.com
Colleen
July 10, 2010 at 3:35 pm
A great tale of success and inspiration! Congrats and thanks for sharing
July 11, 2010 at 11:45 am
Congratulations Erin on grasping this ‘money thing’ at such a young age. I’m most impressed by your ability to keep on top of it. Well done.
July 12, 2010 at 12:10 pm
You did a really good job!
July 19, 2010 at 9:10 pm
I would love to see the spreadsheets too!
zalsmadi@gmail.com
July 25, 2010 at 6:18 pm
GREAT ACCOMPLISHMENT!! I would love to see your spreadsheets too!
mccain8877@aol.com
September 28, 2010 at 12:50 pm
I am a single mother with no financial help for my 2 children and really need to get my spending under control.
Can you please send me a copy of your spreadsheets?
Thank you and congrats on being debt free!
September 28, 2010 at 12:50 pm
My email address would help…LOL
amandagillard@gmail.com
February 9, 2012 at 4:30 am
Thanks for your post on the traveling industry. I’d also like to add that if you’re a senior taking into consideration traveling, its absolutely vital that you buy travel cover for retirees. When traveling, senior citizens are at greatest risk of getting a medical emergency. Getting the right insurance coverage package for your age group can look after your health and provide you with peace of mind.