In less than a year and a half, I paid off over $14,000 in debt. It wasn't easy, but it was worth it. If I can do it, so can you! Here's how I did it...
Let me start off by saying I am not a financial expert and everything you read from here on out is me sharing my experiences and what I have learned. For those who, when reading like jumping straight to the nitty-gritty, each section of the story will have action steps. You can jump right to them.
In Fall of 2018 I took a look at my credit card statements. I had three cards at the time, one of which was a cashback card. Surprise surprise! Two out of three cards were maxed out. That other one card- well it had about $500 room left on it. One card was maxed at $2000, the cashback card was maxed out at $7000, and the one unicorn card had a $4500 balance on it. Here I was sitting in my room looking at a total of $13 500 in credit card debt. For reasons you will later learn, I did not add in the $17 300-ish left for my car payment.
How exactly did I get here? A simple recipe, to be honest. You mix in impulse purchases, neglected/late credit card payments, lack of personal finance education, not having a budget, and not knowing where I want to go in life. As they say, when a person has a reason they can achieve anything.
Let’s dive into it. The rest of this post will be broken down into chapters
Let Me Put You up on Some Game Young Blood
Learn the Money Game
After seeing just how much debt I had, something had to be done. I had two options: I could keep doing what I have been doing or make a change. The choice was really just that black and white. Since you're reading this, you already know which choice I made. I got my bathing cap on and dove in headfirst into making a change, baby! Ok, I lied. I didn’t dive headfirst. I merely dipped my toes in the water first before taking a plunge. By that I mean I knew I had to up my knowledge of the money before any changes can be made. Let’s be honest, it’s the 21 century, my ass is gonna sit on top of the shoulders of giants and learn from their mistakes.
That launched the first time I ever dove into Accelerated Learning. Accelerated Learning is when you immerse yourself head deep in information and come out of it with basic to above basic level knowledge.
Learn the Game Action Step
The first thing I had to do at this stage is understand how money works, find people who have paid off debt, learn how credit cards and interest rates work, and understand the impact of my credit score.
- Learn how money and banking work. You want to be able to know why banks offer you such a low percentage of returns on a savings account. Once you understand the game, you will then be better able to navigate the world of money. You will also understand why they charge you money to hold your money.
- Find stories of other people who have gotten out of debt. Take down notes and see what they all have in common. As they say, success leaves clues. These stories are all over Youtube. This also serves as motivational stories.
- Get your credit score. Understand how that affects your life, the ability to get a loan if needed, get an increased limit on credit card, ability to purchase property, and much more. The higher the number, the more you get treated like royalty at the bank.
- This is the weirdest thing ever: credit card interest rate and Billing Cycle. Many cards have a 28-day billing cycle which means that you will need to pay your balance within 28 days. Which means the due date changes every month.
Do a Self-Assessment
After getting a better understanding of how money works, it felt like I had lived under a rock and missed out on some important lessons about money. Understanding that I have a long road ahead, I decided to do something about it. At this point, the end goal was to pay off $13 500. If I have an end goal it would mean I need a starting point.
Mid-October 2018 was the first time I decided to track all my current and past expenses. To help keep track of it all, I downloaded an app called Monefy Pro. This was by far the easiest app to use out of all the ones I tried. The interface was simple and visually pleasing, better than any excel sheet. With the app now in hand, I had to go back three months and see where I spent my money. This is by far the most time-consuming thing to do: pulling out nine credit card statements and paper receipts.
This required a certain level of organization for me to be able to track Assets & liabilities. This is a lesson I learned after reading the book “Eventual Millionaire” by Chris Hogan. If you have not read it I highly recommend it. Chris shares examples of common-day people who are Millionaires. What makes them Millionaires is their Net Worth. Yout Net Worth is how much money you have after calculating all liabilities (things that need to be paid off). Here is a photo to help explain.
To help track everything, I created a Net Worth excel sheet, which you can access here.
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What is great is that you get to see the change in your Net Worth on a month-to-month basis. With everything being tracked, I have to say I started to feel a sense of ownership in my financial life. Once you have the clarity in seeing where all your money is coming from and where it’s going, it becomes much easier to start to navigate the Money game. Let’s be honest, it is a game. The sooner you learn the rules, the less financially stressed your life will be, provided you execute what you’ve learned.
Let’s Build a Snowman
First things first, we have to give attention to the elephant in the room: Credit Card debt. This will forever be the bain of many people’s existence. As I write this, the national average for credit card debt per Canadian is $23,800. W-T-F!!! Read that number back again Twenty-Three Thousand & Eight Hundred Dollars!!! Per person living in Canada. That’s bonkers to think of. That’s more than a down-payment on a home.
Looking deeper, I learned that the national credit card debt total is $80,000,000,000. As GreedyRates.ca shares, this is more than the GDP of Cuba!!!! Needless to say, a lot of us are living day to day in debt, and not financially free. I won't dive into the psychology of spending or how XYZ failed. This isn’t the place for such a discussion.
When it comes to credit card debt, I learned that there are a few ways to handle things. You can choose the SnowBall Method, Pay Largest First, Balance Transfer, and use a Line of Credit.
I won’t go too deep into explaining each method. For more info, click the link to find a great resource.
Pay Smallest Balance First aka Snowball Method
Method #1 of paying off your credit card is the all famous Snowball Method. The rules here are simple: you start off by paying the minimum balance for each card. Then you take the leftover money and put it into paying off the card with the smallest balance and work your way up. The main thing here is that it builds up a winning streak, and each card paid off allows you to see the light.
Pay High Interest First aka Avalanche Method
Method #2 of paying off your credit card is the Avalanche Method. Just like above, you want to pay the minimum payment on each card. Then you focus all the leftover money on the card with the highest interest rate. The goal here is to stop paying interest, which you learn is just stupid. The high interest rate puts you into a downward spiral.
Method #3 is more of a tactic than a method. It involves a balance transfer. So if you never paid attention, every now and again your bank will send you a letter saying you can transfer the debt from another credit card onto your current card with 0% interest for six months. The goal here is to have more money going into paying off your debt and not paying interest.
Use a Line of Credit
Method #4 is, once again, more of a tactic. A Line of Credit, for those who don’t know, is a set amount of money your bank has set aside for you to use as a loan. The great thing here is that it has a low interest rate, and you can use it for whatever you want. The goal here is to pay off all your cards with your Line of Credit. Then pay it off with a 3-5% interest rate versus the 19.99% credit card rate. This is also known as consolidating your debt. Oftentimes, when it comes to consolidating your debt, you can be asked to lower the limit of your other card.
How Exactly Did I Do It?
Armed with all the knowledge I needed to get started, it was now time to EXECUTE. In looking at the first two methods, Snowball and Avalanche, I did a quick self-assessment and decided to go with the Avalanche. The reason I went with the Avalanche Method was because the idea of paying interest pissed me off. The thought of not giving away money was all the motivation I needed.
I have to be honest with you, the path I took was very unconventional as, while paying off my debt, I decided to simultaneously invest $250/month in my Mylo, now called Moka account. For those who don’t know, Moka is a robo-advisor app that rounds the money up you spend each day and invests it.
Now this is not the best way to go about paying off debt. This for sure extended the speed at which I could have paid off my debt. The only thing I hated more than the high interest rate was being late to the party of Compound Interest and investing.
30 days later, after executing my debt payoff plan, it felt like I hadn't climbed an inch on this debt mountain.
I took a hard look at myself and asked myself one question: “Chris, are you really doing all that you can?” I really wasn’t. You know the guy Eric Thomas who is famous for saying “Do you want to succeed as bad as you want to breathe?” That video just flashed back in my mind. That’s when I sat down and devised a plan to EXECUTE!
Right there on my laptop I wrote down everything I was willing to sacrifice to get out of debt as fast as possible and to be able to start investing. My ass had to play catch-up on the investment game. Some folks had investment funds since knee-high (being a kid).
Granted, let me say that as much as I was upset about my past actions in spending and not knowing about investing, I am happy that I learned about it when I did. More about that later. Some of the sacrifices I had to make were:
- No going on dates.
- No going out spending money (like I mentioned above, no bachelor Party)
- No buying food in restaurants
- Cutting back on spending (this also meant food)
- No new anything (not even clothes when I got a gift card)
- Cut back on the amount of food I purchased (a lot of my bills were towards groceries)
- No travel (duh! This also meant work-related which was hard as I love to learn)
Then some changes I made in lifestyle were:
- Cutting back on the amount of food I ate. I would end up having one shake and one meal at the end of the day. Which mean my ass fasted 7 days a week #NoRegrets
- Walk out of the house with no money or credit cards
- Look at my accounts daily as a reminder to stay on track
- Increase my income by accepting to work with any and every client, never saying no, at any time of the day.
- All money outside of mandatory bills went right into paying off debt.
Let me dive deeper into my lifestyle changes. I know that the above seems extreme, and what I am about to say is even moreso. I’ll be honest with you guys, a large part of why I did this to myself was to punish myself for not having followed through. And for being so reckless. What do I mean by follow through? Back in my last year of high school, I made my way to the BANQ (a massive library in Montreal). The BANQ is where all the cool kids hung out. One day I was curious about money and I took out a book on investing. This book was advanced and I spent most of my time with a dictionary going through the book. The one thing I recalled from that book was that Mutual Funds are a waste of time. So yeah, me taking these drastic measures was to punish myself for not doubling down on my curiosities.
How exactly did my day to day look like? Pretty simple.
A Day in the Life of Someone Who F***Ed Up
I would wake up early in the morning, meditate, go over my finances, journal or read (depending on my mood), make my way to work, have a high fat shake and work most of the day. When I was not working, I’d listen to finance and investing podcasts, and listen to Nipsey Hussle. I would skip lunch and either meditate for a bit, go for a drive listening to a podcast or Nipsey. I would come back to work then go home and warm up food from the freezer. Many times on the drive home I would tell myself I could just go buy food or groceries. I played this fun game where I’d tell myself how inconvenient it would be to have to make a left turn and then spend time finding parking when home.
99.9% of the time I chose to drive home and skip getting food.
What I would do once a week is order a large pizza for $12 as a way to get a big influx of food. My sort of reward for staying on track. When we’d order food at work, I would politely say no, to the point that people stopped asking, which didn’t bother me at all as I was on a mission to eradicate this debt.
How Exactly Did I Do It? Cont’d
Two months into this routine, I knocked off about $1500 of my debt. Things were on the up and up. Ya boy was feeling good, but not distracted. At this point I started to learn about a line of credit. I contacted Anhony’s cousin, Dylan, as he worked at the same bank I was using for my main account.
Dylan was my contact to the bank. He helped explain to me a lot of the processes at the bank. When I wanted to create a TFS (Tax Free Savings Account) to invest in, he told me what was needed. I would then go to my branch, since his workplace was 40 minutes away. After he explained to me how to go about getting a Line of Credit, I made an appointment with my branch.
I walked into this meeting feeling great about the strides I’ve made in paying off my debt. I calculated that If I got the Line of Credit, I’d be giving away less money to interest. Long story short, I didn’t get the Line of Credit because my credit score was too low. The lady at TD who saw how motivated I was, told me to keep doing what I was doing and come back in a few months.
Now four months in on this new routine of mine, I have to be honest, I have learned to really enjoy not spending money. I would talk about it with a friend of mine and she told me she did the same thing too. At the end of each day I would look back at my balance and smile seeing the number get smaller and smaller.
Month 5 is when I decided I had to learn how to invest my money.
Learning to Invest
While I was putting myself up on some game (learning), I decided to learn about what the next steps were for after paying off my debt. Everywhere I looked they spoke about investing. Not knowing much, I leaned to a good friend of mine, Marcelo Taboada, who is in the finance world. He is part of a dope podcast called The Empowered Investor & Nerds (a kick-ass podcast about ideas, culture, and politics).
Throughout my journey, all he would do is point me in the right direction and answer most of my questions by giving me resources to read. He and I are similar people: we love to learn. He knew very well that just giving me the answer wasn’t going to cut it. He guided me and gave me clarity on what I was learning. Crazy enough, being Canadian, much of the information when it comes to investing is mostly about living in the US. Dude was like Yoda, and I was Young Skywalker.
The scary thing when you want to learn about how the Stock Market works is there are so many resources. I decided to choose to follow people who understood where I was coming from. That is when I found Dr. Boyce Watkins. He was (and probably still is) the only Melanated person to have a PHD in finance. Let’s read that again. The only Melanated person to have a PHD in finance. After spending a few days watching his videos on YouTube, I took the plunge and bought his course.
I know I said I wasn’t going to spend any money. I can tell you as I'm writing this, that course has paid an ROI 10 fold. I signed up for his Black Money 102: How to Invest in the Stock Market course. That is when I got to learn the fundamentals of investing. The information coming from a man of colour who understands the history and the world we live in was a major plus. For me it was important that I voted with my dollars and spent it on his course. This is a man who quit his job as a professor at Syracuse to start an online curriculum to help other melanated people. That right there is a mission I stand behind.
How Exactly Did I Do It? Cont’d Again
Eight months in and I have officially finished paying off my cash back credit card. BOOH YAHH!!
With $7000 paid off, I was feeling great. No more interest rate of 20.99%. Now it wasn’t time to slow down and get comfortable. I was just at the halfway mark. I still had two more cards to pay off. At this point, not spending money was a habit. I’ve grown used to my self-imposed daily fastings and learning more about finance.
With one credit card paid off, I moved my focus to the next card. With the knowledge I gained about investing, I started to create a mock portfolio to get myself prepped and ready for where I will be putting my money in my future debt-free life. One thing I learned is that every dollar you make has to have a purpose and a place to go.
10 Months in and the speed at which I was paying off this debt increased. The hours at worked increased, and I was now sitting at $4500 of debt to pay off. Within the month, I got a letter from the bank saying that they are offering at 0% interest the opportunity to do a balance transfer. The next day I got back from work, called up the bank and organized to have my debt transferred. Now I was looking at a maxed out credit card and another card that was empty.
I decided to keep the empty card as a backup backup emergency fund. A backup backup because one of my goals, once being debt-free, was to have a $1000 emergency fund and a $5000 emergency fund. What I loved most about having all my debt on one card was no longer needing to transfer money from one bank to the next and no longer needing to manage two different due dates.
12 months in I decided to book that appointment to get a Line of Credit. This time around, I called my boy, Daniel, and made the 40 min drive to his office and secured myself my first Line of Credit ever!! Not gonna lie, the process was super easy this time around. I walked in, we chatted and he congratulated me on the speed at which I chopped down my debt. He even admitted he’s never heard of anyone doing it that fast.
I told him these exact words “I’m a man on a mission BABAY!” We laughed, he logged in, got the info I needed and seconds later I had a Line of Credit with a few thousand dollars at my disposal. Walking to the car, the first thing I did was transfer over $3000 dollars onto my credit card. I have to say it was nice seeing that credit card balance at $0. Looking back now, I think that triggered something in me.
The Victory Lap
Within the next 45 days I paid off $3000 and was OFFICIALLY DEBT-FREE!!!! Immediately after I made that last transfer I contacted my friends that were with me on this journey to share with them the good news!!!
They were super excited and proud of what I had accomplished. At the end of each call, I reminded them, but mostly myself “The Journey ain’t over. Now it’s time to Build a Safety Net Phase”.
Here, family, is where this chapter ends. I will most definitely do a part 2 of this story and share my journey on How I Built My Emergency Funds and my portfolio to 2.5x my original debt within two years. For now here is a list of the things I learned during this journey.
What I’ve Learned
- Spending money is an emotional thing
- Not spending money is super fun
- Having a plan for retirement is crucial to your future life
- Learning the basics of investing is mandatory no matter how boring the subject. It’s like learning how to cook
- Power of saying No Thank You
Action Steps & Resources
Learn How Money Works
- I Will Teach You To Be Rich by Ramit Sethi
- The Richest Man in Babylon by George Clason
- The Maple Money Show
- Ben Felix
- Rational Reminder
- The Money Guy Show
Learn About Credit Card Debt and Paying It off
Learn About Investing
- Dr. Boyce Watkins
- Earn Your Leisure (early episodes)
- Minority Mindset
- Ben Felix
- Build Wealth Canada
- The Canadian Investor
- Canadian Couch Potato
- I Will Teach You To Be Rich by Ramit Sethi
- Everyday Millionaires by Chris Hogan
- The Empowered Investor by Keith Matthews