My financial awakening, if we can call it that, wasn’t something that happened overnight. Instead, it was the slow culmination of a few life events that all, in one way or another, revolved around money. After getting laid off in early 2016, I tried my hand at freelancing for the better part of a year, which both drained my TFSA savings account and left me in debt. Then, in September 2018, I started working as a personal finance writer and began to report on topics like debt, insolvency, and the credit system. In October, I saw an all-female panel of financial planners speak at an event about women and money management. Come December, I read and reviewed a book about getting rid of your debt without using guilt or shame tactics.
When I look back at all those moments, here’s what I see. The debt that I accumulated post-layoff deeply concerned me. The job in personal finance writing inspired and educated me. Being in the presence of financial planners motivated me. And reviewing that book gave me the confidence to commit to getting rid of my debt.
For the first time in my adult life, paying down my debt is something I’m ready to do.
Last month, I booked an appointment with a financial planner. I assure you, it was only through sheer irony that this decision happened to coincide with the start of a new year. I’m not one for giving myself unrealistic new year’s resolutions that I know I’ll never live up to, but I’ll admit that the decision to get real about my money lined up pretty nicely with a time of year that is traditionally about making positive changes.
I was hoping for an experience similar to those I’d read about in the book. I wanted to be told by an impartial expert exactly how much money I should be putting toward my debt each month, how much I could save (if anything), and how long it would take me to become debt-free.
After I scheduled the financial planning session, I got assigned some homework: a three-tab Excel spreadsheet that required me to look my finances squarely in the face. We’re talking all debts, all assets and liabilities, all fixed expenses, monthly spending, and monthly saving. I handed over account balances, minimum payments, interest rates — you name it. It was all on the table.
I was always under the impression that while paying back debt, you should be throwing every extra dollar you have toward it... But what I learned is that actively saving while paying back debt is the only way you won’t continue going into debt
It took me two whole days to finish it. For an entire weekend, I pored over old monthly credit card statements and debit card transaction history, trying to determine my average monthly spend in categories like groceries, toiletries, and dining out. This financial planner was having me turn over every stone.
As I finished, I exited the spreadsheet with a twinge of uncertainty. Had I filled everything out correctly? Had I left too many qualifying notes in the margins? Had I properly accounted for shared expenses, since I live with my partner and we split things like rent, gas, groceries, a Netflix subscription, hydro, and internet? By the end of it, I felt like all I had given this financial planner were the messes and guesses inside my head.
A few days later I got an email reply: Thanks so much for sending in your completed docs, she wrote. Gold star on your homework. ;)
“This is very doable”
Feedback fiend that I am, I was motivated by that imaginary Gold Star. Maybe I wasn’t so bad at this financial responsibility thing. A week later, I arrived at her office.
“What are you hoping to get out of today’s appointment?” she asked me after I’d settled in.
“I’m here to develop a debt repayment plan,” I said. “My debt payments are sporadic and usually driven by anxiety or guilt, and I want to know exactly what I should be putting toward my debt each month so that I can actually get rid of it for good.”
“Great!” she said.
As we opened my spreadsheet, there were a few items she wanted clarification on, like what account certain joint expenses come out of. There was also some fine-tuning that needed to be done. For example, she moved some of my monthly spends, like my parking permit and my licence sticker, to my “annual spikes in spending” category.
Our plan was taking into account how I already live my life, not how I should be living it according to some arbitrary rules
Off the spreadsheet, the annual spikes in spending category actually operates as a savings account. I was always under the impression that while paying back debt, you should be throwing every extra dollar you have toward it. And only when your debt is paid back could you then start saving with any intention and spending without any guilt. But what I learned is that actively saving while paying back debt is the only way you won’t continue going into debt. Need a bridesmaid dress three months from now? Pull it out of your spikes in spending savings account, which you’ve been contributing to monthly. No credit card. No guilt. She also had me create an emergency savings account for unexpected things, like car repairs or, well, getting laid off.
This was the most refreshing aspect of facing my finances: they were being examined realistically. You see, I’m a writer. And while full-time employment is something I’m enjoying right now, layoffs in this industry happen every other hour. My financial planner wanted me to implement a savings plan that would set me up for being able to live for a few months should I get unfortunate news again one day.
She had me think hard about any other spending spikes I’d missed or would be faced with this year: new furniture, new winter boots, vacations, and so on. She also asked me how often I get things like facials, haircuts, and the like. Our plan was taking into account how I already live my life, not how I should be living it according to some arbitrary rules. With personal finance, there’s no one-size-fits-all approach.
Then she paused.
“Can I ask why, with such a high limit on your personal line of credit and a significantly lower interest rate, you haven’t combined your line of credit balance with your Mastercard balance?”
I had been doing this, I told her, to, yes, take advantage of the lower interest rate, but when I noticed my credit score dropped slightly a month or so ago, I was concerned it was because I had reached the 30% utilization threshold on the line of credit. So I stopped.
“That’s fair,” she said. But then assured me that the transfer would be worth it in the long run. “Imagine how much your credit score is going to go up,” she said, “when that entire limit is freed back up!” We agreed I would move my Mastercard balance to my line of credit right away so that going forward, I would just be working on the line of credit.
Having an expiration date on my debt made me feel in control of it for the first time in a long time
After everything was in its correct category, she revealed to me my Magic Number: the amount I could be putting toward my debt each month on top of my minimum payment after all my fixed expenses and monthly savings contributions were accounted for. This was precisely what I had come here to learn. My magic number was $300. But because I wanted to increase my portion of some shared expenses, we agreed to reduce it to $200.
“This is very doable,” she told me as she scanned the spreadsheet, making sure we’d addressed everything. Those four words caused the shoulders to drop from my ears. A wave of relief rushed through me. So I’m not a massive failure, I thought. “You’re a textbook case,” she said. “Easiest client of my day.”
She fussed with the spreadsheet some more and voila: with this plan, she said, I would be free of my consumer debt by June 2020.
I left my appointment feeling optimistic but also kind of dizzied. Having an expiration date on my debt made me feel in control of it for the first time in a long time. I no longer felt like I was lying on the beach with sand being shovelled onto me, slowly but surely burying me. I was finally beginning to dig myself out.
That said, this was the first time I’d ever done such a deep dive into my finances, and it had been two hours of non-stop numbers. I don’t enjoy doing that much math on a regular day, so I was feeling pretty wired, not to mention hungry, so I hopped in a cab to make for a think-free ride home. Depleted of all mental energy, I came home and gave my partner the low down. As was to be expected with a worrier like me, I started second-guessing the numbers. “Didn’t you just figure it all out?” he asked me. “You’re good. You don’t have to do the math yourself. You have that spreadsheet.”
He was right, but I started second-guessing what, exactly, had to happen on my next pay day, which was fast-approaching in 24 hours. Because some of our shared costs were decreasing in a month’s time but others, like my rent and car payment contribution were increasing immediately, I was feeling confused about how much needed to go where from my next paycheck.
I like to think of my debt now as a houseplant — a living thing capable of new growth only if I make the conscious decision to water it
The next day, I did what I always do and transferred half of my portion of rent into a different account. But after my partner transferred me his portion, I came up short. Had I not done the math right? I reached back out to my financial planner to see if maybe we’d miscalculated somewhere along the way.
You have a deficit because you’re trying to start the plan too soon, she replied via email. You need enough pay’s to build a surplus in your account so that it will even out over the course of the month.
She was right. We had met closer to the end of the January, as February’s rent and other monthly expenses were approaching. That maybe wasn’t the best time to implement significant financial changes. This eager beaver had learned her lesson. I didn’t need to start the plan this very second. I could just relax.
The road ahead
It’s only been about a month since I met with my financial planner. But it’s going well and still feels achievable. I now know exactly what I can spend — freely — every week, which is a more conservative amount than I was giving myself before, but it’s still livable. I’ve been making an extra effort to bring my lunch to work around three to four times a week in order to make that amount go further.
My debt isn’t something that scares me anymore; something that I frantically throw different amounts of money at each month in a bid to keep it from creeping higher. I like to think of my debt now as a houseplant — a living thing capable of new growth only if I make the conscious decision to water it.
See, I now understand exactly what it takes to prevent it from flourishing. My job now is counterintuitive. I must deplete the drying soil of all its nutrients so that one day, I’ll be able to start fresh. Only this time, I won’t be growing new debt. I’ll be growing my savings.