I’ve told you already. Back in the days, I wasn’t really good with money.
But there was something that never changed: my hate for debts. Ever since I can remember, I’ve hated debts.
It might have started subconsciously, by seeing my parents struggling with it. Credit card debts, mortgage, credit lines, rooftops repair debt, new living room commodities. They were crawling under debts, and they seem to be unaware…
Or perhaps in denial…
I remember from a very early age promising myself never to spend more than I can handle. To try to live within my own means.
But once I got into University…boy that was another story.
Without any savings to help me, I had to take student loans, from the government and my personal bank (a student credit line). These helped me pay for my sessions up front and for the books I needed. At the time I was working part time at a convenience store. But it didn’t last very long. I had to quit my part-time job to fully dedicate myself to my nursing studies.
I know some people are able to juggle both work and studies, but it simply didn’t work for me. It was hard to find quality time to study…I had some family obligations too. But I know some people are able to do both, and if you’re I say go for it. It can very well reduce the amount of debt you will have at the end of your studies.
While I was a student, I still hated debt, but paid no mind to it. I didn’t have a set plan on how I would repay my debt once I would graduate…. as they say, out of sight out of mind.
But it was more than that. When you get these loans, the government or the bank doesn’t check to see what you’re doing with that money. So you have to be responsible enough to make sure you pay what you need to pay with it. And I was good at that. I would pay my sessions and my books. But whenever there would be some money left, I’d go shop, or buy random things with it.
In Canada, most loans used to come with a part of bursary. So based on your household income you could get, for example 5000$ for the session, 30% bursary and 70% loan. But during the year, they would recalculate your stuff and the percentages would always change. There would always be, at least in my situations, less bursary and more borrowed money.
So to make a story short, I ended up with 18,000$ instead of probably something around 15,000$. I know to a lot of you it doesn’t seem like a lot. And it isn’t really when I compare to my fellow American nurses. But for me, it was…
Graduating was bitter and sweet: you’re happy you’re finally done, but you’re also thinking about the debt monkey on your back.
After that, I was constantly thinking about paying it off. Thank goodness nursing is a profession where, in Canada, you can get a position quite rapidly. I started working less than a month after I finished my last stage. I met with my financial adviser to aggressively pay off both my government loan and my credit line.
So how did I do it?
1st: My paycheck would revolve around that debt. With the amount I was repaying, I would touch both the interest and the capital of that debt, which allow it to shrink up nicely and quickly.
2nd: I chose a repayment % from my paycheck that was aggressive yet comfortable for my budget. For me, it was around 33% of my paycheck.
3rd: I made bi-weekly payments instead of monthly one. Again, that allowed me to cut in the fat of the debt (the capital) rather than only superficially touch the interest. What attracts students to loans is, of course, the lack of means to pay for studying fees upfront. But what keeps students in debt is the attracting and very low interest rates that student loans have. However, student loans interests, just like a mortgage interests or any borrowed money with interest rates, add up. And if you don’t want to end up like the lady in this picture, you’d be better off paying those debts aggressively.
4th: cut on your expenses. It was relatively easy for me. I was still living with my parents. I would pay one bill for them (around 200$ per month) and buy my own food to make my lunches, clothes and “stuffs.” I took the metro and bus to go to work up until my 2nd year of working as a nurse, then got a car for 4 000$ (used, renowned Japanese model and cost effective). There are tons of ways you can reduce your expenses…you just have to think about it and make a commitment.
5th: I still managed to put a certain amount of money into a retirement savings account. There’s nothing worse than paying your debts and not having a dime that grows at the same time. So I would still put a 100$ from every paycheck into my savings, so I didn’t feel like I was ONLY paying debts.
6th: use your tax return money to pay some of the debt. You will also get a return on the interest portion that you paid (ask your financial adviser or your accountant about it). I know for some of us,tax returns mean travel money. But getting rid of your debt should be a priority. It will increase your buying power in the end. You will be free of debt and have the option of saving more in the future for, let’s say, this trip you were planning for months. It’s worth it in the end… I promise!
Debt really affected me, both physically and psychologically. In other words, I was something else! For instance, I’d wake up once or twice a week in the middle of the night, to check my bank account and see how much left I owed.
I know, I was hysterical.
But that was how much I hated debt. And I believe the way I payed it back wasn’t extraordinary. I could have paid it much faster than a year and a half, by reducing my expenses a bit further…
When I finished paying those debts, Gosh, I felt financially emancipated. It was probably the same feeling as loosing 20 lbs instantaneously. Except I had to work for it. But I remember still feeling sick to my stomach even when I owed only just a few hundreds of dollars… So when my adviser told me it was all gone, it felt like a huge weight was lifted off my shoulders.
She then suggested to transfer the same amount of money I was putting into debt into a savings account, which I did. So in the same amount of time (1 year and a half later) I was able to accumulate close to 15,000$ without changing my living habits.
So these were some of my key strategies to get rid of student debts. They can be applied to paying off any kind of debts. So many time I hear things like “I can’t take it anymore,” “help me pay my student loans!” It’s a step by step problem… my strategies are nothing fancy, just some good old sense. They’ve worked for me, but it doesn’t mean they may necessarily work for you…You may need to see a financial adviser to help your situation.
Are you still struggling with student loan debts?