# My public journal, owning up to my debt



## jwsclark19 (Nov 24, 2014)

I made a post earlier to indicate our goals, but in this thread, I am going to make a more thorough description of our debt, investments, and our progress. Our goal is to be debt free (other than 0% car loan and mortgage) in 2.5 years. Here's a list of our expenses, assets, liabilities and incomes. 

Income combined after tax: $5984/month
Assets:
- Condo - $169,000 when purchased 1.5 years ago
- Car#1 - $16, 000 current value roughly
- Car#2 - $3500
- Boat - $1700
- Motorcycle - $2500
- TFSA - $1100
- Chequing account $3000
- RRSP - $8300
Total Assets: $205,100

Liabilities: 
- [email protected]% - $156,000
- Line of Credit @ 5.99% - $14000
- Government Student [email protected]% - $13000
- Student [email protected]% - $11000
- Car Loan @ 0% - 17000
Total Liabilities - $211,000
Assets - Liabilities = ($5900)

Monthly Budget to get debt paid down:
$1000 - Mortgage
$124 - Property tax/Mortgage insurance
$316 - Condo Fees
$283 - Car payment
$116 - Student LOC payment
$400- LOC payment
$300 Student loan payment
$250 - Emergency Fund
$300 - TFSA (wedding fund. Getting married in 1.5 years)
$400 - Groceries
$350 - Gas
$120 - (average monthly carry forward amount for annual car repair/supplies expenses)
$120 - (average monthly carry forward amount for vacation)
$100 - Alcohol
$115 - Utilities
$85 - Cable
$107 - Parking
$336 - Insurance for both cars and motorcycle
$150 - Restaurants
$105 - Personal care
$40 - Pet supplies
$180 - Shopping
$120 - Everything else

Total Expenses - $5417
Income-Expenses - $567 (Which will be split between TFSA and debt repayment)

We've been working with this budget for over a month now, and in January, we stayed $300 under budget. I figure with the $815 we are making towards debt repayment, combined with annual bonuses from work, and tax refunds, we can get it paid off in 2.5 years, and really start building our net worth up. Any tips on areas we are over-spending are appreciated! I know everyone will say sell the motorcycle, but....that's just not happening lol. I put 12,000 km on it last summer commuting 185 km/day back and forth to work, and saved enough money on gas to compensate for the $800 I pay for insurance. This thread is mostly to keep myself motivated. I'll update our net worth on this thread every couple months.


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## BoringInvestor (Sep 12, 2013)

Kudos on taking your debt seriously and striving to eliminate it. 

Looking at your budget I see you're saving $250 for an emergency fund. Is that your chequing account?

To eliminate your LOCs and student loans in 30 months, you'll need to pay down an average of $1,270 of principle each month.
Presently, you're paying $816 towards principle and interest. 
Do you expect you'll find sufficient savings and have additional sources of incomes to pay them all off in this time frame?

Re: your LOC, how did you accumulate $14,000 on it? Was it a gradual process of (over)spending, or a larger project/purchase?
Was there spending on your LOC that is not accounted for in your budget (i.e., electronics, furniture, home renos, etc.)? If so, you should rejig your budget to save for these areas too.

Thought there is always flexibility to reduce a budget, if you want to maintain your current spending I'd suggest at a minimum prioritizing what you could reduce/eliminate if something occurred.
For example, if one of you lost your job tomorrow, what would you take out or reduce?


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## heyjude (May 16, 2009)

This is a great start. Here are a few suggestions. 
1. Consider cutting cable. I did, three years ago, and don't miss it. 
2. What is "shopping"? Do you go to the mall for entertainment and come back with impulse purchases? If you need new clothes, put them in a clothing budget. If you buy books, consider using the library, and put them in the entertainment budget. If you pick up interesting kitchen gadgets (like over designed vegetable choppers seen on TV that are hard to clean), they should go in the home category, and maybe you should stay away from the mall. There should be no category named "shopping".
3. $400 for groceries and $150 for restaurants is not too bad for two people. Are you making the most of your food budget? Learning to cook well with fresh local ingredients is one of life's great pleasures, and meal planning means you minimize waste. If you enjoy cooking, eating out may be less attractive. 
4. $120 for "everything else" needs to be examined. If $90 is spent on gym memberships, fine. But if $90 is spent on tobacco products or at the casino, this category needs a rethink. I don't even have a miscellaneous category!


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## jwsclark19 (Nov 24, 2014)

Thanks for the input, BI. We're going to be getting a $5500 gift in September, and we will be getting $5000 tax refund between the two of us within the next month, and are expecting the same next year. I also get $2500/year after tax bonuses each year that will be put directly on to our debt. The LOC was spent mostly on renovations we did to the condo. So hopefully with these bathroom renovations etc, it's not just money down the drain, and will add $14k in equity to the condo. The renos in the bathroom/kitchen are very nice. My LOC was my emergency fund when I first bought the condo, and once it is paid off, it will be replaced by my emergency fund savings account. My emergency fund is not my chequing account, but a high interest savings account. There is only $300 in there right now, as we just opened it at the beginning of last month when we started this plan. Thanks for mentioning the budgeting regarding the spending on my LOC. I hadn't actually considered that. We will likely take about $300 of the extra money left over, and put it into our emergency savings, $100 into the TFSA wedding fund, and whatever is left over into our debt repayment.


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## jwsclark19 (Nov 24, 2014)

Thanks HJ, I couldn't agree more with your comments. We have learned to cook very well. The meals we make at home are getting to be even better than going to the restaurant! Last month, we actually only spent $50 on restaurants (mostly coffee), and we didn't pay for one sit-down meal. I have a feeling we can knock a little off in that category. We are going to cut cable this month. Right now, we are paying $85/month for cable AND internet, due to my negotiating with the cable company. Our deal is about to expire this month, so we are going to cancel cable, and stick with just internet for about $60/month. Our "shopping category" includes $80 for clothing, $50 for hobbies, and $50 for everything else. I can probably knock a little bit off of the clothing category, as we haven't been spending that much. I would say $500/year on clothing would be reasonable for two people. This was an over-sight on my part, and it appears we have budgeted two "everything else" categories. We can eliminate the $120 for everything else. The $50 for everything else in the "shopping category" is to cover things like birthday cards, the odd small charitable donation, gifts for each other's birthday etc.


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## jwsclark19 (Nov 24, 2014)

I also forgot to include the $75 entertainment budget. This will be for things like bowling, etc. We didn't spend anything in this category last month, and will try to keep it that way except for the odd occasion. We also eliminated the $120 for the "everything else category", so we should now have at least $612/month left over for extra saving/debt repayment. We spend a lot of money on gas, which isn't ideal, but I drive 185/km a day commuting back and forth to work, and she drives about 60 km/day. Unfortunately, we both work in completely different areas, so no matter where we move, we will not really be able to avoid the combined amount of driving we are doing.


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## jwsclark19 (Nov 24, 2014)

First update: After one month we've made great progress. We were actually under budget by a few hundred dollars, but I am just carrying forward that budget for certain categories (particularly automotive service). We got our income tax refunds, and put all of that money towards our debt, and some of it into our emergency savings. Here's an update on accounts and net worth:

Assets:
Condo - $169 000
Car #1 - $16 000
Car #2 - $3500
Boat - $1700
Motorcycle - $2500
TFSA - $1100
Chequing - $2450
Emergency Fund - $1850
RRSP - $8800
Total Assets: $206 900

Liabilities:
Mortgage - $156 097
Line of Credit - $13 300
Government Student Loan - $9600
Student LOC - 11 299
Car Loan - 17 400

Total Liabilities: $207 696

Assets - Liabilities = (796)

You'll notice some of the liabilities numbers are slightly higher than last month. It's not because I went into more debt - I just didn't perfectly accurately type in the exact amount of the liability. In any case....A good increase in net worth over the last month


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## Plugging Along (Jan 3, 2011)

Liabilities: 
- Line of Credit @ 5.99% - $14000

$250 - Emergency Fund I would consider putting the $250 from your emergency fund into you LOC, until it is paid off being it is a short term for when you will have it paid. When you have the LOC paid, then you could put reallocate those funds to your emergency fund
$400 - Groceries - This is pretty good for 2 people, you could probably do a little lower, but that would take a lot more effort.

$100 - Alcohol - Is this something that can be reduced? Nothing wrong with it, but it is totally discretionary, so you have to decide how much enjoyment it brings you.

$85 - Cable - I would cut the cable, and see if you can get Netflix or something. We went down from $160 for satellite, to $20 for Netflix, and another subscription

$150 - Restaurants - Same as the alcohol. I brew my own coffee, and this is one of the areas we totally cut when things are tighter

$105 - Personal care - What's in here? Seems a little high, but again don't know. 

$180 - Shopping - I would itemize this more too.

$120 - Everything else - get rid of this category


I think its great that you are getting your plan in order.... keep it up.


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## jwsclark19 (Nov 24, 2014)

Thanks PU, I did actually cut down on several things on that original budget, now that I've got a better grasp on our spending habits. We're spending about $375 on groceries. Cable/internet is down to $75. We're hardly spending anything on restaurants. Last month we spent $40 on restaurants. Personal care includes money for razors, hair cuts, toothpaste, toiletries, etc. Shopping includes money allocated for gifts, hobbies, and clothing. I think that was also a category we chopped a little bit. We also eliminated the "everything else" category. The reason I'm putting money into the emergency fund is because we are expecting to have to make some repairs to our 2nd vehicle within the next year. I'm also inheriting $5.5k in September, which will go directly on to the LOC. Along with $3k in bonuses from work within the next year. So as the LOC is paid off, I would like to have an emergency fund, and then be in a position where I never have to use the LOC again.


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## jwsclark19 (Nov 24, 2014)

Here is the updated budget. These numbers have been working great so far, and is allowing us to save lots of our money, and pay off debt fairly quickly. At the same time, we are contributing to our RRSP's. The refunds we get from our RRSP contributions each year will go towards debt repayment. I will also be getting a 3% raise in April. Any extra money I get from the raise will go towards debt repayment. 

Net income: $6104.23 (not including yearly bonuses)

Personal Expenses:
Auto Insurance: $336.32
Auto Payment: $283.42
Gas: $350
Parking: $107.25
Auto Service: $125(money not used carries forward each month in our budget for this category. Will cover major repairs as well as oil changes etc.)
Internet/Cable/Netflix: $65
Mobile Phone: $137.86
Utilities: $92 (equal billing hydro)
Entertainment: $75
Bank Fee: $10.80
Alcohol: $150 (This should be lower in the coming months, as I started brewing wine at home)
Coffee shops: $25
Fast food: $25
Groceries: $400
Restaurants: $100 (So far, we have been doing well with not eating out, and have been well under budget here)
Gifts: $30
Condo Fees: $316.03
Home Supplies (cleaning chemicals, furniture, dish soap etc. etc.): $150 (Unused money carries forward each month, and can be used for furniture, renovations etc.)
Mortgage: $1000
Property tax/insurance: $124.82
Gym: $34.62
Hair cuts: $10
Laundry: $30
Pharmacy: $30 (unused amounts carry forward, and eventually get transferred to savings)
Pet food/supplies: $40 (unused amounts carry forward and can be used for unexpected vet visits etc.)
Clothing: $40
Hobbies: $100 
Travel: $200 (Transfers to savings, and to be used for vacations when the time comes)
Total Expenses: $4388

Savings/Debt Repayment
Questrade RRSP: $150
Emergency fund (high interest savings): $250
Wedding fund (TFSA): $500 
LOC repayment: $400
Her student loan: $300
Student LOC: $116

Total Savings/Debt repayment: $1716

Not reflected in this as well is my work pension plan which takes money off the top of each pay cheque. I contribute 5% of my gross pay to my pension plan with sunlife financial, and work matches 3%. It works out to $255/month into my pension. The net income shown in this budget accounts for money that has been already deducted for my pension.


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## My Own Advisor (Sep 24, 2012)

Good on you when I read this:

"We're going to be getting a $5500 gift in September, and we will be getting $5000 tax refund between the two of us within the next month, and are expecting the same next year. I also get $2500/year after tax bonuses each year that will be put directly on to our debt."

Killing debt is key at your age, any age. 

Get rid of that LOC, student debt, before age 30 and you'll be doing well. In your 30s, you can start saving for your retirement and work on killing that mortgage.


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## Plugging Along (Jan 3, 2011)

I think it's great to see that you have found a way to reduce you monthly spending by almost $1000 a. Onth. That's great. 

I have found continuing to make small changes each month really adds up. Keep going!


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## heyjude (May 16, 2009)

Bravo! Just keep that up, and you will begin to see your debt melt away over time.


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## jwsclark19 (Nov 24, 2014)

2nd update: 

Budget is still going quite well. I made some minor adjustments here and there, but for the most part, it has stayed the same. We are saving about $100/month on alcohol as we are now making wine at home. We put the money we spent on wine making equipment under the "hobbies" budget. When we buy a wine kit, we split half of the price between alcohol and hobby budgets. We increased out gas budget from $350-$400/month, since gas prices went up slightly, and we decreased our wedding savings by $100/month. We also found another $75/month to contribute to RRSP's in Questrade which is being invested into some good ETF's. Work is picking up for me as the summer approaches, so I aim to earn an extra $400/month or so of overtime, and this will be considered "found money". This overtime cash will be split between our wedding fund and debt repayment.

Net worth is now $1786. Doesn't sound like much, but considering 2 months ago, our net worth was ($5500), this is working out pretty well . With the gift we will be receiving in September, along with tax refunds, we should be debt free in about 2 years, except for my interest free car loan, and mortgage. Once we are free of debt, we will save aggressively for a down payment on a house that so we don't have to stay in the apartment style condo.


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