An Update on my Student Debt Situation

Hey everyone, it’s been a little while since I wrote my original post explaining my student debt situation, and what I’m doing about it. Today, I’ve got my first update on how things are going!

If you remember, I started with $40,000 in total debt from my MBA, and last post I was able to pay off $500. So I was at $39,500 when we last left off.

I’m pumped to be able to say that I’ve made some serious progress on knocking that debt down a few more notches. Let’s walk through how I did it, so that you can do the same!

CPP/EI Savings

If you live in Canada, you pay into a pension plan. For most of us, it’s the Canada Pension Plan (CPP), but in Quebec it’s the Quebec Pension Plan. Whether you like it or not, each paycheque, about 5% of our before-tax earnings go into this pension fund, which supplies us with an income at retirement.

Employment Insurance (EI) works in a similar way. Each paycheque, we put a bit of money into a pot that will provide a basic income in the event that we’re laid off of work.

Here’s the thing though: There are caps on how much you pay into these funds each year. In 2017, the salary that would max out your contributions was $55,300. This means that if you made more money than this, you had at least one paycheque where you didn’t contribute to the funds, meaning you had at least one paycheque where you had extra money floating around that you didn’t budget for.

I’m fortunate to be above the $55k threshold. So I took the extra money and slapped it right on to my debt. Between now and end of year, it’s going to make one hell of a dent. Best of all, it doesn’t change my quality of life at all!

Debt paid off this way: $175

Grocery Savings

My sister-in-law tipped me off to an app called Flipp, which aggregates grocery store flyers each week. You can search all flyers for savings on, say, broccoli, clip the one with the biggest discount, and then go to a price-matching grocery store and rake in the savings.

I normally spend about $50 per week on food. Using Flipp, that number dropped to about $35 per week, giving me a total of $60 in monthly savings. Not bad for a couple minutes of work!

Debt paid off this way: $60

Staying under Budget

The time-tested, old-fashioned way of paying off debt. I have a bit of disposable income each month that I use toward whatever – extra savings, nights out with friends, a new TV.

Until I pay my debt off though, a big chunk of this extra income has to go to that. So I took that and applied it to my debt, and passed up on that extra restaurant dinner and a couple cases of beer. Instead, I cooked at home and used the carbonator I got for xmas to make myself a healthier bubbly drink (bonus points for that I guess!).

Debt paid off this way: $500

A Financial Windfall

I was given a gift from family this month – a very generous gift. This is obviously not something that happens every day – it’s a windfall. But what do people often do with windfalls? They spend them.

Don’t get me wrong, I get the logic – it’s money you never really had anyway – but that logic will kill you if you’re trying to get out of debt faster. So if you walk into a financial windfall, do your wallet a favour and use at least a big chunk of it to pay down your debt. Hey, we’ve got to have a little fun now and then too, right?

Debt paid off this way: $1,000

Interest added to my Debt

Now the crappy part – when you borrow, you almost never get the money for free (unless you’re borrowing from the bank of Mom and Dad, which I’m not). My line of credit comes with what’s called a variable interest rate, meaning that the interest I pay fluctuates depending on the Bank of Canada’s prime lending rate – that’s the rate that its very best customers are given when they borrow money.

Because the Bank of Canada recently raised its prime lending rate not once, but twice, I pay more in interest each month than I used to. All the more reason to pay this debt off as fast as possible. Who knows how much more they may raise the prime rate in the future?

Debt added on this way: $135

Wrapping it Up

This month was a good one for me in terms of paying down debt. Even though $135 of interest got added on to my debt, I paid off an extra $1,600 beyond that, without affecting my standard of living in any major way.

This is the thing I keep reminding myself. Yeah, $40,000 in debt is intimidating. It can feel like you’ll never get out from underneath it. But you can’t focus on the overall number. All you can do is focus on putting whatever you can each month toward making that number smaller.

And if you do that, it WILL get smaller. When it does, take a moment to celebrate that. Reward yourself (in an affordable way) for hitting some big milestones along the way. Progress has a way of building on itself, and it’s worthwhile to celebrate that.

Total Debt Remaining: $37,900

CATEGORY: Personal Finance

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