Today, I woke up in a cold sweat—which is unusual in itself since I’m going through that stage of life that hot sweats are a little more common. I’m going through a financial squeeze right now with some hefty dental work for both myself and my kiddo (who is in post-secondary education). With almost $15k of dental work bills, I also found out I have to fly back to the UK to deal with some family issues. My phone is also on it’s way to a (not so early) retirement. I’m wrangling with my trusty budget and squeezing every penny into and out of every savings account. Now, I do have an emergency fund, which will need some serious replenishing in the coming months/years, but it got me thinking as I lay there at 3 am, what if I didn’t have that cushion?
The last time I went through a similar situation, with various costs bearing down on me, I wasn’t in a situation where I could manage. I ended up getting into debt and that my friends is NOT a way to build wealth, let me tell ya.
If you have any kind of debt, then this is a clarion call to you, to say it’s time to confront the menacing spectre lurking within your bank accounts and credit statements, yes, we have to deal with the dreaded D word: Debt. Time to haul that terrified head out of the sand and get that stupid debt under control.
Let’s dispense with the platitudes and conventional wisdom that advocate for mere tinkering around the edges of these financial woes. There is no pussy-footing around when you are constantly thinking about your lack of money. Debt is stressful and makes your whole life stressful when you have debt. The mail delivery person coming towards your door is stressful and your email inbox with your credit card statement is stressful. So, we’re not here to discuss superficial remedies like coupon-clipping or just tinkering with some fancy budgeting manoeuvres, at least not right now. No, we’re diving headfirst into the heart of the matter, armed with the knowledge and resolve to get you debt-free once and for all.
As I said, I’ve been there, done that, worn the t-shirt (the t-shirt that took months to pay for btw), and all while navigating divorce and single parenthood in one of Canada’s costliest cities. Yet, I realize I was lucky enough to emerge with invaluable insights and knowledge and a steadfast commitment to empowering others on their journey towards financial emancipation.
Now, let’s get down to brass tacks here. Debt is a raging inferno—a cataclysmic emergency demanding our immediate attention. It can affect your life in so many ways including your credit score (you may struggle to get a rental agreement, mortgage, or credit card) and your ability to save for things that are really important to you. That may be saving for retirement (boring but crucial) or that super exciting jungle adventure trip to Belize (sounds better doesn’t it?).
Let me tell you the cautionary tale of Dolly (maybe her name is short for dollar?)—a poignant story of the perils of debt neglect. Dolly, fresh out of school and armed with a shiny new degree and big-big dreams, headed off into the big wide world of adulting with a student debt amount of $30,000. What Dolly didn’t head out into the world with was financial savvy. With no personal finance education from home or school, she was quite oblivious to how her circumstances and lifestyle would soon come crashing down.
With a starting salary of $50,000, Dolly felt like she was on top of the world. However, she didn’t quite grasp the concept of living within her means. Instead of budgeting wisely and prioritizing debt repayment, she indulged in the temptations of city life, treating herself to dinners out, shopping sprees, and weekend getaways with her new roomie.
As the months rolled by, Dolly’s debt continued to grow. While she diligently made the minimum payments on her student loans, she also managed to rack up a hefty $17,000 credit card balance in just two years (clearly she wasn’t living in Vancouver or that would have been two months). To make matters worse, her job required her to relocate to the city, where she rented an apartment with a roommate.
Life seemed to be humming along nicely until one day, Dolly received the dreaded news—the owner of her rented condo was selling, and she had to find a new place to live. Despite her best efforts, two landlords rejected her rental applications due to her dismal credit score, a consequence of her mounting debt and missed payments.
With no other option, Dolly reluctantly packed her bags and moved back home to her parents’ house. It was a humbling experience, facing the reality of her financial missteps and coming to terms with the consequences of her choices. I also feel a little sad for her parents at this stage…they’d turned her bedroom into a home gym and yoga room! If only they’d taught her about personal finance management I hear you shouting!
Back in the comfort of her childhood bedroom, Dolly embarked on a journey of financial redemption and humility. She created a strict budget, trimmed unnecessary expenses, and committed to aggressively paying down her debts. It wasn’t easy, but with determination and perseverance, and the support of her parents, she made steady progress.
Over the next three years, Dolly chipped away at her $47,000 debt mountain, month by month, paycheque by paycheque and contemplating her fate on the long train ride into the city every day. She sacrificed short-term pleasures for long-term financial freedom, learning valuable lessons along the way about the importance of living within her means, budgeting wisely, and prioritizing debt repayment.
Finally, after four years of hard work and sacrifice, Dolly celebrated a major milestone—she became debt-free. It was a moment of triumph and relief, knowing that she had conquered her financial demons and reclaimed control of her future. She was able to adjust her budget regularly, as her debts diminished so that she was paying more and more off the principals owed, and less interest.
But perhaps the most important lesson Dolly learned throughout her journey was the power of resilience and the importance of never giving up, even when facing what seemed like an unclimbable mountain. She emerged stronger, wiser, and more determined than ever to build a secure and prosperous future for herself, armed with the knowledge that financial freedom is within reach for those willing to work for it.
And let us not forget the sobering reality faced by many of us who become trapped by credit card debt—a sneaky trap that continues to siphon financial resources and stifles our ability to build wealth. The monthly interest at a rate of 21% on a $1,000 balance would cost you $17.50 in the first month. In the second month you’re then paying interest on $1,017.50.
In the words of Elvis, “we’re caught in a trap…[and] can’t walk out”, but it’s certainly not because we love debt so much, but because it’s hard to figure out how to get out of it. Yup, that harrowing tableau of exorbitant interest rates and mounting balances serves as a stark reminder of the urgent need to address debt with unwavering urgency. But where the heck do you start?
Well, since we’ve established that the time for half-measures and procrastination is over, let’s roll up our sleeves and get down to brass tacks (not tax!). Debt demands a decisive response, today! You need a resolute commitment to slash your current expenditures, bolster your savings, and annihilate that stupid debt with ruthless efficiency. Here’s a quick checklist for you to get started, use a notebook or better still, a spreadsheet, to do the following:
- Collect all your debt statements in one (hopefully not so big) pile.
- Column A: Make a list of the creditors (who you owe).
- Column B: List how much you owe each creditor.
- Column C: Write down how much the interest rate is on each amount owed.
- Column D: Multiply the amount owed in column B by the interest amount in column C and put the amount in this column. This is how much interest you will be paying that creditor in a year.
- Column E: Divide the number in column D by 12 for the monthly interest amount.
Well done, this was the scary part. But fear not, because just by reading this far, and making a list of your debts, you’ve already faced your reality and committed to a financial transformation. You’re now going to play with the numbers and your income amount to work out how much you can throw at each debt by paying off as much as you possibly can each month. With my upcoming book, I have created a Debt Repayment Calculator for readers to use which will help you see the date you can have your debts paid off. Book and resources coming soon!
But what can you do in the interim did I hear you ask? Stop paying for lunches out, stop paying for morning coffees at Starbucks, start selling things from your home that you don’t use, and start thinking of ways to generate more income…you need to get the debt paid down as fast as you possibly can. Period. If it means you have to go get a second job for six months or start a side hustle, now is the time to get that income rolling.
Let me assure you: the road ahead may be arduous and a little boring, but the rewards are immeasurable. Getting that debt paid and saying to yourself “NEVER AGAIN” will be the best single thing you can do to start your wealth accumulation. So, arm yourself with courage, fortitude, and a relentless focus that pisses off all your friends because you won’t go out next weekend. But you will defeat your debt and will see those rusty old shackles of financial servitude crumble before you. Bob Marley (you know, the one from Scrooge) be damned—you will not be dragging around this debt for the rest of your life. You’ve got this, and you’ll feel like a different person once it’s gone. And that’s when the real fun of wealth accumulation can begin.