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Financial Diary of a 20something - My Debt Story.

by:
Elsa Michaels

Four years ago, I was 25 years old, living on my own, working my first “real” career-type job and had a commercial debt of over $11,000. This included $8,000 worth of credit card debt, $3,000 of overdraft, plus a few bills that were months past due. I knew I was at a financial rock bottom when my debit card was declined after trying to pay for my cab ride home one night after the bar. Knowing that my credit card would probably cause the machine to implode, I had convinced the driver to let me dust off my old chequebook to write him a cheque.

The next day I scrambled to borrow money to deposit into my bank account so the cheque would clear. It was then that I vowed never to suffer that kind of humiliation again – I would take control of my financial life.

Really, I had no excuse to rack up the commercial debt I did, I found a job right after university and had lived at home with my parents for a full year, in order to focus on paying off my student debt.

So then, what happened a year later, when I found myself completely unable to pay for a $15 cab? The answer: Life happened, or at least, how I thought life should be, now that I was a grown-up and independent. This is also known as lifestyle inflation. Lifestyle inflation happens when a person’s income increases, so they spend more money “upgrading” their life situation: their residence, transportation, gifts, clothing, entertainment, etc.

I went to university out of town and lived with three other roommates in a student ghetto, paying about $350 a month in rent. When I decided to move out of my parents’ place, I thought back to the gross conditions of student housing and decided that I “deserved better” now that I had a full-time, decent-paying (at least it was to me at the time) job. So I overcompensated by renting a beautiful apartment in one of those luxury condominiums in downtown Toronto. The rent I was used to paying almost tripled.

Then came the credit offers. Credit card companies must have gotten wind about my regular paycheque coming in because they started sending me pre-approved applications shortly after I moved out. Not only did I take advantage of those offers, but I also took advantage of the 0% interest rate for 6 months on cash advances. Yup, those credit card companies are tricky.

Since I didn’t have much saved, I pretty much relied on my shiny new credit cards to furnish my place. And now that I was downtown, I needed more stylish clothing to “fit in” with the decked out young professionals on their way to and from work, going to the club, and on the way to yoga ($100 yoga pants were a must!).

Then there was the food situation: lunch with colleagues (daily during the week) and dinners with friends (3 x a week).

Let’s not forget going out! Being a fresh-faced 24 year old, I was eager to immerse myself in the after work scene as a way to meet new people. I went from paying $3 maximum for a beer at campus bars to over $8 + tip! Weekend nights out, regularly set me back $80 to $100, including drinks and cab fare.

Essentially, I thought that living on my own, downtown and with a fancy new advertising job entitled me to the glamorous lives of the single-women-about-town I saw on TV.

That night in the cab, I was forced to come to terms with the fact that those glamorous lives were all an illusion, manufactured by corporate sponsors who WANT viewers, especially women, to associate their self-image with their consumption. The problem was that whether or not the debt was there, I still felt pretty lonely. My attempts at “fitting in” did absolutely nothing to alleviate the isolation I felt and in fact, it probably made it worse, since all I had to show for it was my debt load.

That week, I decided that I simply had to go back to university living for a while – I did it once before, I could do it again. So in the next three years, I paid off ALL of my debt AND even saved enough for a down payment on a small apartment by:

  • Getting rid of the fancy apartment. I moved in with a couple of friends and slashed my rent in half. My bank account felt the difference instantly. As a bonus, because I had roommates, expenses such as food, electricity, gas, internet and cable became a fraction of what I spent before.
  • Getting a second job. I read a financial article that made a good point about 20-somethings taking advantage of their youthful energy and free time to work a second job. Once a week, I worked as a hostess at a fun pub uptown. I made enough in tips to cover my food expenses for the month!
  • Reassessing my going out habits. Did going out three or four nights a week really improve my life? Was I spending my time in a quality way, nurturing important relationships? No. One or two nights at the bar was enough. Plus, quiet nights in with family, friends, and by myself was something that did improve my life. Drastically. I started feeling good again. If I wanted to meet new people, I find cheaper, more meaningful ways, such as volunteering for a cause I care about.
  • Refusing to shop or go into malls. I had all the clothes I would need for years, and I’m one of those people that cannot walk through a mall without buying something. So I just stopped going altogether.
  • Drastically reducing dining out. I started bringing my lunch to work and started cooking more at home. Surprisingly, I noticed that I was actually eating better.

I know it’s hard, really hard to give up all the stuff you supposedly love. But once you start letting go, you realize that keeping up with the yuppie Joneses, the stuff, the clothes, the slick apartment, all that stuff doesn’t matter. It’s just stuff that takes up space and your valuable time. As you let go of your attachment to material things, you begin to focus on what matters the most: friends, family, your career, volunteerism, taking care of you – and of course, your finances.

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