How I Paid Off $50,000 In Debt and Bought Two Houses In Four Years
I spend lots of time writing case studies of how real-life people have turned this financial life around. Today I’ve decided to turn the spotlight on myself and share my “money journey”
It was impolite to talk about money
I grew up in what could best be described as an “upper-middle” class household. Both of my parents were Real Estate agents (which gave me the bug for buying real estate). To give you an idea of what life looked like;
- We had a house much bigger than we ever could have needed
- We had a nice car
- I was never left wanting on Birthdays and Christmas
- My parents were able to help out family members who were in financial need
- I’d head off to summer camp every year
I did not know at the time that all of these expenses meant that my parents were not saving any money for the future but it would be years before that would become painfully clear.
Money was a taboo subject in my household. When I was around 10 years old, my parents overheard me and my friends trying to decide whose house was worth the most (tiny Real Estate investors in the making) and scolded me. It was impolite to talk about money. Thinking back on it now, things could have turned out much differently if money and finances were openly discussed in the household.
In a sad, ironic, twist I did not qualify for government student loans because my parents’ recent income was “too high”, despite the fact that they were in the slow process of going bankrupt.
I started University in the fall of 2006. I was 18 at the time, but I was picking up on the not-so-subtle clues that my parents’ finances were not as solid as I thought. When my father needed to borrow money, from my extremely modest earnings as a summer camp counselor, to pay the bills, I knew times were tight.
It wouldn’t be for another two years before I realized how drastic the family’s financial situation was. 2008 was not an excellent year to be a Real Estate agent with no savings. My final two years of University were extremely turbulent. I watched as my parents declared bankruptcy, our family home was sold off (for below market value) and my own personal debt began to mount; partially to cover my costs during University and partly to help my parents pay for essential bills.
Through it all, life somehow went on and I graduated with my Bachelors in Economics & Business in 2010. I entered the worst job market in a generation with a hefty sum of student loan debt, in the form of a line of credit. The student line of credit that I had was much more burdensome than government student loans.
With Canadian government student loans, I would not have had to start making payments until after I graduated and the interest on my loans would have been tax deductible. With my line of credit, I had to make payments every month starting from the day I borrowed my first dollar. Needless to say, my credit score was in the tank by this point.
You might be wondering why I didn’t apply for government student loans. I did. In a sad, ironic, twist I did not qualify for government student loans because my parent’s recent income was “too high”, despite the fact that they were in the slow process of going bankrupt.
I spent the next two years working in the Financial Services Industry selling mutual funds during a time when people were terrified the stock market would completely collapse.
My big break came when I received full funding to complete my Master’s degree in Economics at the University of Guelph. In the summer of 2012, I moved halfway across the country (I lived in Halifax, NS, google map it) to a city where I didn’t know a single person.
It was the most challenging, rewarding, and life-altering year of my life. There is a massive leap in difficulty from bachelor to graduate level Economics program. In addition to my studies and my time working as a Teaching Assistant, I also had side gigs serving tables at a local restaurant and freelancing as a data analyst for a company making drones. The data analyst job became necessary as I was still sending money back home to help cover my parent’s rent.
Turning The Corner
I graduated my Master’s with a 3.7 GPA in the fall of 2013 and about $50,000 in student loan debt. I had been carrying this line of credit since 2006, making payments every month along the way. I was very much ready to say goodbye to this debt forever.
I quickly landed a good job in public policy and made a very important decision right off the bat. Even though I was making a decent salary for the first time in my life I decided to keep living like a broke student for as long as possible.
- I continued to live with roommates in a disgusting apartment above the health food store. Why? Because the rent was $350 per month.
- I continued to drive my dented, 15-year old, purple Chrysler Neon. Why? Because I needed a car for work, otherwise, I would have sold it and bought a bus pass.
- What’s on the dinner menu? Rice and Beans.
- Date night? Make a meal at home and go to the park.
- Vacation? What vacation?
You get the idea.
Living like a student, while increasing my income, provided me the additional cash flow I needed to start aggressively paying off my debt. I threw every penny I had at the debt. Over time, as my debt began to decrease and my income kept rising, I very slowly began to increase my standard of living.
By the time Trish and I were living together and preparing to buy a house in 2016, I only had $5,000 of debt left. Trish, who had paid off the last of her government student loans a year earlier, had a significant lump sum of money she was keeping in her checking account. After a quick discussion and run through the numbers we agreed that she would pay off the last $5,000 of my student loans and I would pay her back over the next two years.
Onward and Upward
By the end of 2017 we bought a second house back in Halifax and rented it out to my parents.
After moving into the house in 2016, we had a stroke of luck as the local real estate market increased by 50% in the first year after we bought our house. Trish and I both maintained a modest lifestyle that left us with plenty of leftover cash each month. We have very different appetites for risk so we developed an offense-defense strategy for our finances moving forward.
Trish handles the “defense” by making additional payments onto our mortgage. I handle the “offense” by maxing out our tax-preferred accounts and investing in low-cost index funds.
By the end of 2017, we bought the second house back in Halifax and rented it out to my parents. We knew the Real Estate market in Halifax, Nova Scotia, would not be increased by 50% in a single year, so if we wanted to make money, we had to make a good deal.
And a good deal we made. We found a semi-detached house in a nice neighborhood that needed some cosmetic work. The ugly, blue, carpets upstairs kept a lot of the first time home buyers away.
- We got the house for $220,000
- We quickly replaced the ugly blue carpets with nice laminate flooring
- Within 3 months neighbors on our street were selling comparable units for $280,000.
I would say through a combination of luck and determination, we are two for two on buying houses.
Where do we go from here? We will keep doing what we are doing. Trish will keep making extra mortgage payments and I’ll keep investing in Index Funds. One day I think I can talk Trish into buying some rental properties, but in the meantime, we have a pretty good system working as a team.
This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.