Growing up, we hear constantly about all the good things we’re supposed to do in our 20s and 30s—things like getting an education, travelling, and buying real estate. But what people don’t tend to talk about is how expensive it all is, and how we should be planning for it.
Canadian tuition fees have risen 40 percent in a decade, Instagram makes conspicuous consumption more addictive than cigarettes, and one in five Canadians spend more than half of their incomes just to keep a roof over their heads. It’s no surprise that Canadians are the most indebted people in the world—although our debt burdens have been shrinking in recent months.
All this debt is taking young people to some desperate places. Fourteen percent of Canadians who can’t shake their debts are aged 18 to 29, and 38 percent of this group admitted resorting to high-interest payday loans to help keep their head above water.
When you’re staring down a $3,000 credit card balance and a 19.99 percent interest rate, it canbe hard to see the light at the end of the tunnel. But there are endless stories of people who learned the hard way and found their way out of debts large and small. From skipping vacations for ten years, to living off a sailboat, here are three strategies for debt success.
Bryan Kingston, 34
Advertising Professional, Toronto
It’s a bit of sad story. I was seeing someone when I was 23, and my partner and I were planning on moving to Toronto. Then he bailed two days before we were supposed to move. I had bought all this furniture, and had bankrolled the entire thing with a personal loan. This was on top of the student loan that I had from college. At one point, I was $50,000 in debt. It was devastating, and I had to very quickly learn how this was all going to affect me in the long term. I wasn’t very educated in personal finance, so I didn’t understand interest rates, what my rights were, or the repercussions of things.
The first thing I did was try to negotiate with my creditors. I went to Credit Canada, because I was getting calls all the time and it was making me depressed. They gave me debt counselling, and they took the majority of my creditors and put them on a plan. The only thing that wasn’t on there was my student loan, because my parents had co-signed. Had I not had them on as co-signers, I likely would have had to declare bankruptcy.
I had a job lined up in Toronto, but it was entry level and I was making peanuts. I had to make monthly payments of $600—and that was just the minimum payment—all while trying to live by myself in downtown Toronto. I made a couple thousand by selling my car, all of which I put onto my debt. And as I started to move up in my career, I could put a bit more aside, too.
It got really dark sometimes, and it felt like I was never getting out. There were times when I had to go to food banks because I couldn’t afford to eat. This was while I was working in advertising. It was super embarrassing. I didn’t talk to anyone about it, except for a few close friends. And you don’t want to get into a relationship when you can’t afford to do things, so I didn’t date for a long period of time.
I would miss payments sometimes. I felt so frustrated with all that money going to people, and I wanted to keep some for myself. Eventually, I realized I could do what I had to do for my debt, but I still needed to have a life. I started to give myself a little leeway, and it made me much happier.
The experience ultimately made me smarter with my financial decisions. Over the past few years, I’ve been able to maintain my payments, and now I have a bit more spending money. Minus a little bit of credit card debt, I became debt-free last October. I was able to take a vacation this past year for the first time in ten years. I went to Southeast Asia for three weeks. Honestly, it was worth waiting for.
Kristin Hanes, 37
Blogger and freelance writer, San Francisco
I carried $3,500 in debt for almost ten years. I first took it out when I was living in Seattle, and I had a boyfriend at the time who went on business trips to Europe. I knew I couldn’t really afford it, but I wanted to go, so I went to one of those loan companies who’ll give you a loan really fast. Of course that was a mistake—it was a 30 percent interest rate! When I moved to San Francisco a few years later, I needed a deposit for an apartment. So I went back to that same loan company for another $1,500. It seems like such a small amount, but when you have a 30 percent interest rate, your payments are significant.
I was not doing a good job paying it off. I had a full-time job in the city, and all the money I made was going towards rent and living expenses. I set up an auto-payment which put $200 a month towards the debt. It didn’t even cross my mind that I should contribute more to pay it off sooner and work towards an emergency fund.
Then my boyfriend Tom and I went on a hiking trip near San Francisco. He had the idea that we could give everything up, be intentionally homeless, and just camp out indefinitely. He figured I could save over $20,000 a year in rent alone. After a few weeks of mulling it over, we went for it. First we camped out in a tent, and then switched to living out of Tom’s car. This was back in 2015, and I didn’t know that there was a “Van Life” thing happening. This was before all the Instagram posts. When I was doing it, it felt very alternative and weird. Some of my friends would ask, “Are you ok? You know we have a guest room, right?”
We lived in a car and tent for just four months, but I paid off all my debt and got a pretty good emergency fund saved up in that time. Ever since then, I only buy things I can immediately afford. When I recently bought a van, I bought the whole thing in cash. I now think debt is absolutely terrible. The only time I borrow is when it’s through a credit card that offers rewards, but I still pay off the monthly balance in full.
There were some surprising expenses from living out of a car. My food bill did go way up, but it still wasn’t even touching what I was paying in rent. I tracked everything using an app. Most people would think my gym membership is pretty expensive—it’s $200 a month—but that’s a place where I go to work. I can go there eight hours a day, and they have WiFi, free tables, and a shower all in one. In my situation, it’s good to have somewhere to hang out.
If people are struggling with debt, there’s a lot they can do that isn’t super drastic like what I did. I found a really cheap cell phone, mine is only $30 a month. And cutting back on cable and on the monthly subscriptions like Netflix. I used to have all that, but I cut them off, and now just go to the library. They’ve got movies, TV shows, and I can just sit on the sailboat [that we live on now] with my laptop and watch that. And scale back on your living situation. Get a roommate, or lose your car. Living below your means, even just a little bit, or for a short time, can make a really big difference.
Erinn Todd, 27
Operations Manager at an Environmental Nonprofit, Hamilton
I graduated university owing about $16,000. I paid off about $8,000 of that before I started my Masters, but by the time I finished that, I had $18,000 in debt from the two programs combined. I'm a person that needs a financial cushion to feel comfortable, so to be in that position, with no money in the bank—it was unnerving. I was extremely fortunate that my dad offered to pay the interest payments on my loan while I was job hunting, which helped take the pressure off during the 11 months it took me to find a full-time job. I know that's a privilege many people don't have.
After I found a full-time job after grad school, I paid off $18,000 of debt in 14 months. I focused on keeping my expenses as low as possible. I did the odd job here and there, but I was adjusting to a new role, in a new sector of the environmental industry, so my capacity for taking on extra jobs was limited. Now, I have a decent paying job, but I work in the nonprofit world, so by no means am I bringing in gobs of money.
I rent a room in a house instead of having my own place. I made sure to find somewhere that was on the bus line so I could use transit to get to my job. I’m old school and don't have data on my phone, because I have a grandfathered $30/month phone plan and don't want to pay more. I only pay for things with bills, and I save all my coins. It seems like a minor thing, but when I'm consistently paying for things with cash, it can add up to a few hundred every few months. I’m a vegetarian and can eat fairly cheaply, so I would try to cook at home.
I keep a notebook where I log a bunch of different things like my financial life, my fitness, etc. I also kept a log of my debt payments and outstanding balance so that it was a conscious thing I took note of every payday. Seeing the balance decrease was a big motivator, especially when I broke sort of milestone moments—getting it below $10,000, getting it below $5,000, etc. I’d email my dad about hitting them, and he was always a big cheerleader which helped too.
I basically tried to keep my lifestyle as minimal as possible so that I could throw every extra bit of money at my debt. Also, while this isn't for everyone, I did convert my [Ontario student] loan into an Education Line of Credit. From talking to both the bank and my loan officer, I found that the line of credit provided more flexibility with payments in terms of allowing extra payments and overpayments. I also had good credit and was able to get an interest loan that was actually a little bit less than my OSAP loan. It was a bit of a risk because you don't have access to the same protections if your financial situation goes down hill, but it did help me pay things off faster.
I know it can be difficult, given how low wages are in comparison to the cost of living for so many people, but trying to focus on your progress and successes, no matter how small the step may seem, is really important.. Focusing on a constant lack makes it very difficult to move forward. If you try to focus on your progress and the relative abundance in your life, those incremental steps will eventually add up.