I received an email from Curtis last week regarding how to deal with all his debt. This was the email:
I have a question in regards to student loan debt. Myself and my wife both have student loan debt over $40,000 combined. We both have good paying jobs with a total income of about $80,000-$85,000. We have purchased a modest home and own a modest car. We find it very difficult to get any kind of savings going other then investing in our RRSPs every year. Do you have any advice or recommendations when it comes with balancing this amount of debt?
Curtis, I've felt your pain, we were in a very similar situation when we first graduated also. $40k in student loan debt, new mortgage, and a new car loan.
What we did was sat down and created a cash flow spreadsheet (budget). To start, determine what you spend on a regular day. Do you buy coffees or go out for lunch? Does your wife? Eliminate the unnecessary spending, and put it towards your debt. Also, when you receive unexpected income like a tax return, or job bonus, save it up and put it on your debt.
Some tools to help manage your cash flow?
I use MS Money at home, but I hear that Quicken is a really good package for Canadians. If you create your own spreadsheet, it doesn't have to be complicated. Open up your favorite spreadsheet program and use 2 columns, expenses and income.
For the expenses (monthly):
- Mortgage + property tax
- prop insurance
- utilities (heat and light)
- home improvement
- car payment
- car insurance
- car maintenance
- dining out
- RRSP contributions
- debt repayment
Income is self explanatory.
This will help determine what you have left at the end of the month. If it's not much, then you'll have to look at where you can cut back. What I found to be a real eye opener was when my wife and I sat down and went through what we spent money on in the run of a day. Those coffees/cigarettes/beers/fast food can be killer on the budget. Get rid of those unnecessary expenses, and you'll have thousands more in your pocket every year. For example, cigarettes are around $10/pack, if you have one pack a day, that's $3,650/year! Even having a couple of coffees a day at Tim Hortons will result in $1000/year.
In the end, it comes down to 2 things, either reduce your expenses or make more money. Ideally, do both. :)
- Create a budget and figure out where you can reduce costs.
- Put all extra income onto your debt.That's basically what we did and we're now debt free (except for mortgage).
Hope this helps! Do you have any tips for Curtis?
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