Personal Finance

Starting Over (Again): Year 1 on the road to Debt Elimination

Starting Over Again Year 1

A year ago… I picked up and walked away.  Not only was I ending a very difficult relationship with divorce, I was almost $100,000 in debt.

A year ago… I moved to a new city, a new apartment, and started a new job.  Freakin’ out!  ummm yes!  But also determined to start over and start to make decisions on my own terms.

The Plan

As much as my Gemini nature would like me to be flighty and find an island far away, the Earth Goddess in me needed a plan.

  1. Ask for help
  2. Income
  3. Safe Place to live

Execute the Plan – Debt

The first step was to ask for help. In Canada, we have several options for dealing with debt, the options that I looked into were:

Consumer Proposal

A consumer proposal is a formal, legally binding process that is administered by a Licensed Insolvency Trustee (LIT). In this process, the LIT will work with you to develop a “proposal”—an offer to pay creditors a percentage of what is owed to them, or extend the time you have to pay off the debts, or both. The term of a consumer proposal cannot exceed five years. Payments are made through the LIT, and the LIT uses that money to pay each of your creditors. Government of Canada

Bankruptcy

Bankruptcy is a legal process performed by Industry Canada under the Bankruptcy and Insolvency Act, by which you may be discharged from most of your debts. When you file for bankruptcy, the trustee becomes the administrator of your property and assets. One of the roles of the trustee is to wind up the property by selling all the assets and depositing the funds in trust for the creditors in bankruptcy. Canada Revenue Agency

There is obviously a LOT more information that you need to know and review before you decide what the best option for you is.   Both options are legally binding and both options wreck havoc on your credit scores.  You need talk to a Trustee to know exactly what is the best option for  you.

I decided the best option for me was a consumer proposal.

  • 5 years
  • set payment
  • credit score that sucks!
  • monthly budgeting

Debt is not taken care of but the resolution is in progress.  Next.

Execute the Plan – Income

I had been out in the cabin in the woods, homesteading and building a house…. well there is very little opportunities for additional income.  I needed to take massive action to stop the bleeding, literally.  The decision at the time was get a job.   I love my work and I am very good at it!  I started out on the job hunt late spring and was off to the city mid Summer.

Yet again I had to ask for help…. I think this was one of my biggest lessons!  I stayed with a gracious friend until I was able to get to arrange an apartment and another friend helped me with my the money I needed.

Regular pay cheques started coming in.  Yes!  Budgeting was critical at this stage, living expenses, proposal payment and personal loans, crazy really.

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Execute the Plan – Safe Place to live

With everything else falling into line finding a place to live was not as easy as I had hoped.   Budget was very important, so the place had to fit my needs from a personal comfort AND a budget comfort prospective.  So basic we were talking, safe, comfortable, cheap!  I added in a few things, like close to transit so I could easily get to work and downtown when I needed to and close to grocery shopping.  Nailed it! 30 minute train ride to work, 45 minutes to downtown, and by down town in mean, the OCEAN! 🙂

Live the PlanStarting Over Again Year 1 on the road to Debt Elimination

This is where it actually gets really hard!

Here is where I sat:

  • Personal loans: $10,000
  • Proposal: $21,000

Legally I have five years to pay off the debt, never one to back down from a challenge, I am hoping to do it in two and a half.

Day to Day Living

Living in the lower mainland is one of the most expenses in Canada.  But there is always something you can be doing that helps a little and as they say every penny helps.

  • Budget is a must – I know I know, it is a pain in the butt.  But you need to know what is happening with your money at all times.
  • Entertainment is a must – you have to have an entertainment budget item.  You need to be able to treat yourself every once and a while.  You decide how much that is based on the results you are looking for.
  • Empower yourself with Knowledge – there is a lot of really great information available out there, start small, take baby steps, but keep working toward becoming more informed about how to save and spend.
  • Start with small – one action everyday will move you forward and will keep you going.   You really start to see your progress speed up as those small actions compound, just like compound interest. 🙂

Okay, after one year I am here:

  • Personal loans: $3,500
  • Proposal: $14,400

$13,100 paid… not quite as high as I would have liked.  OH I failed to mention I have begun savings and there was this unfortunate and sad event with a used car (that we will never speak of again that was a … $1500 mistake).

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There is a lot more to come in this story… savings, rebuilding your credit and relationships… oh my!  If you want to follow along with the story, sign up for the weekly newsletter to receive notifications of new posts.