How To Reduce Debt While In University
At the experimental age of 16 I was the typical male teenager. I didn’t get out of control, that often. I splurged on trips, suits, and entertainment with no regrets. I was fortunate to have been brought up in a very financially savvy family. I knew the repercussions of financial irresponsibility. You could say I was lucky and I sure was not Irish (pun intended).
My grandmother, my mother, aunt and her husband came to Canada in the early 70’s and had to build everything from scratch. They weren’t particularly affluent in India either. There usually wasn’t a lot of money to go around, so my mother found out the value of a dollar quite early on in life and instilled that into me (something I am grateful for). Both my mother and aunt paid their way through university and got great jobs. My mom started out as a teller at the Bank of Montreal and worked her way up to branch manager. My aunt is now a director of fraud at TD Bank.
My first time (get your head out of the gutter)
I started working as soon as I legally could. One month after my 15th birthday, I got a job at Laura Secord in hopes of meeting some females. I didn't have many expenses and was able to save most of my "sweet and cold" earnings. How I miss the days of little to no expenses. Once I finished high school, I had saved up around $10,000. I thought this was pretty good having only worked part-time for 2 years making $7.50 an hour serving ice cream to the typical mall going teenagers. I was ready to head to university and I was stacked with 10 bands! I was on top of the world.
$30K to $15K real quick
My parents saved up around $20,000 for my education which was to be disbursed throughout the 4 years. Once I started University my spending started to get out of control. First day of classes, hit hard with a $1,000 textbook bill! I saw the tuition, dorm room and meal plan costs and within 1 year, half of my parents Registered Education Savings Plan (RESP) savings were depleted along with a large chunk of my savings. Why do people make out university to be so fun? Bleeding money was not fun for me. All I see is my bank account being depleted and my heart sinking. Not fun.
My second time
To help with the rising costs of school I was not prepared for I got a part time job. At first, I just worked at the Laura Secord in Waterloo, Ontario because that was the easiest switch for me - I was a master of the single, double and triple scoop and waffle cones (I love waffle cones). Plus, it was a great place to meet college girls . Well into my first year living away from home the stresses of school and freedom caught up with me. I couldn’t manage working 25-30+ hours a week, partying and acclimatizing to the new workload in first year. I stopped working. My savings got depleted further in second year by all of my ancillary expenses, textbooks and 1/2 of my rent.
Hindsight is really 20/20
I guess if I had done a little better in University I could have saved myself and my family a few thousand dollars (insert shake my head emoji). I wouldn’t have had to retake some courses and, in hindsight, I might have had a better idea of what I wanted to do. In third year, I picked up a bartending job (to meet more girls, see the trend?) in a local restaurant/café and worked there for the rest of my school career while also juggling studying. It was difficult, to say the least, but I did okay. I had to stay back an extra year because I switched majors in second year, and that’s when my finances started to really get unravelled. I took on a student line of credit. By the time I was finished school, just from tuition, textbooks, and living expenses such as phone, internet, heat and hydro, I had pretty much maxed it out, along with my student credit card. I paid tons of interest every month (won't get into details). On a positive, I was able to do this.
I tried applying for OSAP (Ontario’s Student Assistant Program), but for some reason, my family and I made too much—ironic because I didn’t have any money left.
You’re supposed to be in debt when you’re in school, right?
To be fair, I also splurged on a trip here and there: Montreal, New York; as well as spending money on entertainment, clubbing and alcohol. In then end there’s no shame in it, you have to let loose once in a while. In my defense the Drake track "YOLO/The Motto" had just come out. My main problem was that I couldn’t make enough to keep up with all my school expenses (Expenses > Income = oh shit). I had refused to allow my parents to provide any more money after they had used up their RESP savings, I was too proud to take their help, this led me to become highly levered with a negative net worth. FML.
From that point on, half my paycheck would go towards my student line of credit and my credit card. In just over 5 months, I had everything paid off! However, I knew that my credit score was still in the toilette. I made it a point to pay every single bill on time and in full, closing out the credit I didn’t need. I used my credit very infrequently and paying it off immediately before I even got the bill.
It didn’t help that I had been in a couple of car accidents along the way. So, any work I had made on paying down my debt was immediately reversed with car repairs. That was absolutely demoralizing. Life happens.
Nowhere but up
I knew that I had to be conservative from here on out if I wanted to ensure my financial success. As soon as I was done paying off my debt, I put 10% of my pay towards my retirement, 10% towards my emergency fund which would cover car expenses or things that I couldn't foresee coming (future accidents). I would parse out the exact amount of money I would need for my bills throughout the month and leave them in a separate account that I couldn’t access with my debit card when making purchases. Finally, I would leave myself about $150 per week for enjoyment: coffees, movies, dinners, gas, and maybe a date here and there. That’s where I’m at now. Within 12 months, I had eliminated about $12,000 of debt and grown my net worth to almost that same amount. And now, I am comfortable and relaxed about my finances.
I intend to purchase a condo and move out. I have committed to focusing on at least 3 personal fiance goals: retirement, emergency fund and one big expense like a house. After my house, I’m going to start saving for a car. And in the meantime I’ve worked tirelessly, analyzed my expenses, my revenues and found cost cutting measures to ensure that I stay on my financial path to success. I highly recommend you write down an annual budget and stick to it! The hardest part now is bringing in more money. But if you translate that into a goal, and especially if you’ve been on the flip-side, you can use that as a massive motivator to keep focusing on your career; because at this point, you want success for many more reasons than just the main financial one. You want to grow as a person in any way you can, you have a plan that you want to be able to stick to, you will want achieve your life goals which, like it or not, require some investment. Finally, you want to be able to give back to those that have helped you.
Key Lesson: You’ll never be financially prepared for everything life has to throw at you.
Post-secondary education, cars, houses, trips, weddings, and those unforeseen emergencies are expensive things that take years to save up for. I keep thinking to myself that if I only had $500,000 I would be able to buy a condo downtown, a car, a business wardrobe and live comfortably. But you can’t think in massive numbers like that. No one is going to get $500,000 dumped into their lap overnight. And even if you’re working, it’s going to take a while to hit that number. The idea is to have a plan and stick to it—that way, no matter what your salary, you can work it into your plan if you stick to percentages. It’ll take some time, but your progress is something you’ll notice every time you look at your bank account and in your mirror. You won’t be stressed and worried about money as much.
Key Lesson: People leverage themselves too much.
A part of it is due to how expensive living and raising a family has become in a major metropolitan city like Toronto. But, once again, you have to stick to your plan. I would highly recommend keeping your housing costs to, at most, 30% of your gross income. Any more and you won’t have enough money to cover your other non-housing related expenses while also having some money to enjoy your life with.
Key Lesson: Always work in percentages.
It makes your goals seem a lot less daunting and it makes it so that you can always put money towards your goals. You always have 10% of your income, but if you turn that into dollars and say, “I need to save $300 bi-weekly” it sounds much more difficult. Housing costs are insane now days. So, I know finding something that equates to 30% of your income is difficult, but, another lesson I’ve learned, is that you can’t have everything. Something always has to give, life is about compromise. Keep that in mind, be responsible and conservative and stick to a plan, and you may not end up with everything, but you will end up with peace of mind.
Jeet Ghoshal | Contributor