Hello, all! It’s finally the last time you’ll have to read this italicized introduction about how I’m still on my six-week blogging maternity leave. Fortunately, for both myself and for my readers, I have some awesome female friends who love money just as much as we do and they’ve willingly shared some of their favourite blog posts. This week, my brilliant friend Jennifer has shared her very personal story about debt repayment and how she managed to change her habits to effectively pay off $40k of student loans!

If you’d like to still chat with me (even though I’m not as dope as Jennifer), you can join me on Twitter or Instagram for small life updates and cute pics XOXO. Now let’s get to the good stuff. 

When I graduated law school $50,000 in student debt, I did not have a system for my money. It’s embarrassing, and humbling, to admit that all I did was set an arbitrary line as to how much I could spend whenever I got paid and threw the remainder towards my loans. The result? I, obviously, was too lenient with myself and barely made any progress towards conquering my mountain of debt.

Since then, I’ve built a system that’s worked for me. Over the past 2 years, I’ve paid off 80% of my debt all the while eating out, going on vacation, buying several books, and adopting a dog, despite that during that time I left a well-paying job to work somewhere that fulfilled me but came with, at first, a 50% pay cut. If you have solid systems in place, you can take professional risks and not completely deprive yourself, all because you have debt that you’re actively working towards paying off. If you want to know more, feel free to shoot me an email and I’d be happy to talk to you.

Budget

The first thing I did was make a budget. I didn’t know how, so I asked someone. My girlfriend, to be specific. She had just finished paying off $25,000 of student loans in 10 months. I asked her if I could see her budget. I then took a piece of paper and wrote out all my expenses, and divided them into two categories: fixed expenses and variable expenses.

My first budget was far from perfect. I chalk this up to the fact that I had no idea what I was doing. I never tracked my expenses before so I didn’t know if I was budgeting too much or too little for things like dining out and entertainment. Eventually though, after tracking my spending for the next few months, I managed to nail down the perfect budget — not too restrictive so I could still enjoy life, but not too lenient so that I could start putting a dent into my student loans.

Two years later, the skeleton of my first budget still remains. Now, whenever I receive my last pay cheque of the month, I open up my budget template (a very basic one on Microsoft Word — I’m not fancy) and see if I need to alter anything for the month ahead. If I know there are several birthdays coming up, I’ll slightly modify the numbers so I’m prepared.

The biggest lesson I learned is that you need to be open to tweaking your budget every month if your life circumstances call for it. Don’t try to fit a square peg into a round hole. You need to make your budget work for you, not the other way around. Hands down, this made me stick to a budget that much easier. Now, I actually look forward to checking in with my budget each month because I get to see exactly how much money I can throw towards my debt the next month. It gives me something to look forward to.

I also don’t live on the paycheques as they come. The money I spend this month is what I earned last month. If you can, I strongly encourage you to do this. It’ll help you sleep easier at night.

Separate

As author Adam Kirk Smith once wrote, “Research shows that willpower is more important than IQ. That’s why the point isn’t to become smarter but to become more self-disciplined.” Do you know how hard it is to stop yourself from spending everything in your chequing account? The answer is: very.

To this day, I divide up my money into various savings accounts, mostly to keep the balance of my chequing account artificially low. I don’t ever feel like I have a ton of money to burn since they’re spread out over 5 savings account (one of which is at a different bank institution altogether) and an RRSP and TFSA account.

This method tricks me because the only money in my chequing account is what I can spend for the month — my fixed expenses including rent is stashed in savings accounts. No matter what, I won’t accidentally dip into the money I’ll use next month.

Simplify

I’m all about simplicity. I’m an anxious person by nature, and I don’t need another thing to worry about. Here are all my financial tools:

• Tangerine Money-Back Mastercard (no annual fee)

• Tangerine Chequing (my debit card)

• EQ Bank Savings Account (my emergency fund and long-term savings live here)

• ScotiaGold Passport Visa (I literally only use this when I travel/rent cars)

• RBC Visa Classic Low Rate Visa (I don’t use this card at all. I keep it because I’ve had this card since I was 17 years old)

As you can see, I use Tangerine for my daily banking. I normally use my debit card for my daily purchases and then I automate my bills to my credit card. I use my ScotiaGold Passport Visa about once or twice a year since I don’t travel very much. Other than that, I regularly transfer money over to my savings account at EQ Bank, which are for my long-term savings goals. Everything else is divided into savings accounts at Tangerine.

And there you have it! Nothing fancy. I don’t care for credit card reward programs because I think it’s just an attempt by credit card companies to gamify adding debt into your life. I don’t need to buy more things to get the occasional freebie in return. The cash I get back each month from my credit card is enough for me.

This system is truly bare bones. I don’t pay fees on any of my financial products (the fee for my ScotiaGold Passport Visa is waived since my professional student loan is with Scotiabank) and it gives me enough friction that I never dip into money that I shouldn’t. It’s not sexy, but then again, organizing your money shouldn’t be. Once you set things on autopilot, it’s uncanny how much you’re able to let it work in the background while you do other things with your time.