# Getting out of the red...a journey



## Helianthus (Oct 19, 2010)

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## Wealthy1Day (Aug 30, 2009)

A classic case of being young with high (good) debt and low salary.

You have to sometimes wonder (and I'm sure you have) if going into all that debt is worth it. But considering you've become a professionally designated accountant, now making a decent salary, see the future potential, your head is not in the sand relating to this debt and your spending, and you're still very young... I'm sure you can now see that it was and will be worth it. It's just not easy.

Your situation is classic. I would just focus on your personal financial planning, debt retirement AND retirement savings, and you'll be in fine shape.

While focusing on your debt, always be on the lookout for lower interest rates. I'm not suggesting bouncing from one product to another to get the best rate every 3 months (though that works for some people) but just be mindful of what you're paying because often people overlook the interest expense going out the door while paying down debt. What worked for me was always keeping my head up and simply asking for a lower rate. It will benefit you later to maintain a long history with your credit accounts when your credit score becomes a factor in buying a home or future car which is why I don't recommend bouncing from one product to another to save nominal amounts of interest. Keep your eye on your debt level AND it's cost, but don't be too anal about it either when it's the principal that needs to have most of your focus. Remember that the interest on your OSAP loan is tax-deductible so you likely don't need to pay that down as fast as your line of credit. Smart of you not to overlook what you owe to your uncle.

Good luck!


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## Montrealer (Sep 13, 2010)

I was in the same situation as you at one point and kind of still am:

Advice I have for you:

1) Pay off all of your bad debt a.s.a.p. 
2) Put aside at least 10% of your income in a HISA (High Interest Savings Account)
3) Buy a property, even if it's a condo 

Aside from that, your only in you late 20's (like me) and you have your whole life ahead of you, I don't see you having a problem. I know how much CA's can make (ball park) and if you stay out of debt, invest your money and make smart financial decisions, you will be fine in the long run and retire rich! 

Good luck and all the best.


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## Helianthus (Oct 19, 2010)

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## Plugging Along (Jan 3, 2011)

It does seem very daunting when you first get out of school, especially if you're going for a professional designation. I've heard this from dr, lawyers, and other professionals. I know ALOT of CA's, there is a huge potential for not only high salaries, but business opportunites (at least the ones I know)

I know that most of the people that I know who didn't continue with formal schooling after high school had a heck of a lot more money, and less debt than I did when I first got out. Now, that I'm in my thirties, it has been really clear that school was the right decision. I look at the salaries my friends are making, and they have been working longer than me, and it's not even close to mine. Short term it hurts, but just hang in there. 

The one thing I wish I would have learned earlier, was just being more frugal with my spending when I first started making money. The fact that you are thinking about your finanances and coming out with a plan is a great start. Paying off your debt will be your first priority, and you feel much better about your decision.


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## Square Root (Jan 30, 2010)

You have made the best possible investment-yourself. The fact that you are chipping away at your debts means you will eventually succeed. Being a CA is a very significant achievement- congrats.


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## Helianthus (Oct 19, 2010)

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## iherald (Apr 18, 2009)

Work really hard now, as a short term sacrifice, which will pay off for the rest of your life as you'll be in a better position in your career. Now is the time you make impressions on everyone.

But you seem to be on the right path to me! Make sure you don't go too crazy cutting back and forget that you're young, in love and need to have some fun!


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## CadMan (Apr 16, 2010)

Plugging Along said:


> The one thing I wish I would have learned earlier, was just being more frugal with my spending when I first started making money.


This is great, important advice. I've seen many, many colleagues who are in your position who start making more money and justify increased spending because they've been living on a shoestring budget since they graduated. The end result is that spending just increases with salary increases and you never get ahead of the debt monster. Keep focusing on your paying your debt and starting savings, however modest.


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## Wealthy1Day (Aug 30, 2009)

Helianthus said:


> The tax deductibility of the OSAP interest is great and for that reason, it will be the last to pay off, despite having the lowest balance. I'm kicking myself now for not knowing that OSAP loan interest was tax deductible. I likely could have had a greater ratio of OSAP debt to the rest had I really tried.


Hey, that's the past. Now you know. Yep, it doesn't matter what the balance is. When reducing debt, it's all about doing so at the lowest cost against you. That allows you to pay the full debt faster via savings from interest.




Helianthus said:


> The sequence of my extra payment focus will be Uncle, TD, OSAP. To me, it will be worth it to pay my Uncle back 1 year sooner, rather than saving $60 of interest. It was an extremely nice gesture to help me out like he did, and it has already been long enough.


Excellent! Often we focus too much on the cold hard numbers. But life and the people involved are far more important.


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## 72camaross (Apr 26, 2010)

I will be turning 26 in 8 days. You are miles ahead of me haha! I gave in and spent money when I was making money. Going cheque to cheque is no fun anymore.

March 1st has been my starting point for this year to live below my means and start aggresively paying down debt. I may have to sell some of the things I bought to do this but it is what it is at this point. I did recently invest in myself again by taking more courses so I'm hoping that will pay off towards the year end. 

I had to update my wardrobe from university cool kid to young professional as well, who knew clothes were so expensive. I'm used to 2nd hand clothes for 2$! 

Good luck and congrats on being a CA! That's awesome.


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## Helianthus (Oct 19, 2010)

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## Saniokca (Sep 5, 2009)

Montrealer said:


> I was in the same situation as you at one point and kind of still am:
> 
> Advice I have for you:
> 
> ...


Number 1 and 2 are great. I would NOT follow number 3. Do yourself a favour and rent until you have the 20% down...


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## Helianthus (Oct 19, 2010)

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## 72camaross (Apr 26, 2010)

I beg to differ! The bank will always give you money lol. That's how I ended up with 2 mortgages! But I'm in NB and both my mortgages is less than 170k haha. Not a 220k condo...


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## sags (May 15, 2010)

Life is a great teacher, and you have learned at an early age how evil debt can be. This is an invaluable lesson, that many never seem to learn.

You have lots of years ahead, so concentrate on paying down your debt in a gradual, but straightforward and unrelenting fashion.

After living with all that debt, and the subsequent payments, when you make purchases in the future, you will be reminded of how difficult those "easy monthly payments" can be, and will make choices that will benefit you most.


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## Helianthus (Oct 19, 2010)

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## GeniusBoy27 (Jun 11, 2010)

I just want to say that it's hard when you first come out of school. Both my wife and I came out after 17 years of schooling (independently) with 9 degrees in total and close to $250 K in debt. I still live frugally like a student (I drive a 20 year-old car). In the last 4 years, with a combination of hard work, super savings, and smart investing, we've gone to a net worth over $700 K (not including a real estate holdco). When I was in school, I kept wondering what I was doing, when all my friends were making big dollars being full-time physicians and living the good life, so to speak. 

You have a very disciplined approach to paying off your debt, and you'll get there (and I love the fact that you want to pay back your uncle first). What I would say is don't focus on your debt solely. Focus on increasing income through better job opportunities, and your debt will go away much faster. There are 2 sides of the ledger -- everyone worries about cost, but you could do much better especially with your job profile, if you increase income. At the same time, life is short. Don't forget to enjoy it, even if it costs you a little now.

At your income, and your extremely low rent, you really do have the potential to save a lot of money. Your take home pay is around $40-45 K, meaning if you're in the high savings mode, you could save $20-25K/year, if you choose to do so.

Best of luck!


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## Helianthus (Oct 19, 2010)

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## Helianthus (Oct 19, 2010)

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## KaeJS (Sep 28, 2010)

Helianthus said:


> Making progress, but things could have been better. Blew $3,000 in Vegas a couple weeks ago...oops!


^ That means you aren't learning.

You could have wiped out almost all of your OSAP...

Vegas isn't going anywhere.


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## Helianthus (Oct 19, 2010)

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## Mark Rose (Jun 14, 2011)

Remember that a dollar saved is worth two dollars earned once you factor in expenses and taxes. Not spending money on non-investments is the fastest way to wealth.


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## Guigz (Oct 28, 2010)

Sadly, your car is probably no longer worth 3,000$. 15-20% depreciation per year is standard so 2,850$ is what it is at now


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## Plugging Along (Jan 3, 2011)

KaeJS said:


> ^ That means you aren't learning.
> 
> You could have wiped out almost all of your OSAP...
> 
> Vegas isn't going anywhere.


Sometimes the best learnings comes for getting off the right path, and learning from it. True he could have wiped out his OSAP, but looking at the rest of his numbers, it looks like he has been making some pretty good progress. He would have been financially further ahead, however, based on his salary, and his overall progress, the $3K will be a blimp in the long run, it's not going to matter much in a few years. Now, if he keeps doing that, then there's a bigger issue.



Mark Rose said:


> Remember that a dollar saved is worth two dollars earned once you factor in expenses and taxes. Not spending money on non-investments is the fastest way to wealth.


True again, however, investments are just in financial $. There are also investments in yourself. Not spending money on ANY non-investments are also the fastest way to starving and insanety.


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## Helianthus (Oct 19, 2010)

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## Sampson (Apr 3, 2009)

I think your situation highlights something very important, motivation.

While getting out of the red is critical for your present and future financial standing, your mental health and happiness is critical too. My suggestion, as part of your debt repayment plan, siphon off a little bit for vacations or other fun items.

As long as your keep on track of your plan, and you are happy with its terms (re: when your debt will be gone), then you are set. There's nothing that says you need to divert every penny towards debt repayment - you could live a sorry unhappy life if you choose that strategy.


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## Phil-Carney (Aug 11, 2011)

"getting out of the red is critical for your present and future financial standing,"

So true..

This is one of my goals too. Of course there are different shades of red if we are to take this analogy further. First thing I had to do is recognize the differences with different forms of debt. As each lender is different so there are different ways and priorities to pay off these debts. I could never be late as that incurred a late fee (what a waste) but I did discover if I called
the creditor they very often would waive it. Then I had to address which loans had the highest interest rate and try and settle those even it meant transferring them from one lender to another lender who charges less interest.

Anyhow, this is a great great thread. I am glad I found this Forum.


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