While I read horror stories about people losing their jobs and bad economic times for several people due to the current crisis, it makes me remember of my own bad financial days. Since I am quiet about my problems in general, most people that know me ignore that I went through a bad timing. But you know what, at one point or another everybody does!
We gotta go
I was 19 and I had been living with my girlfriend (who is my wife today) for 2 years in my parents basement. It’s never easy to have two couple living in the same house, especially when one of them is growing up as adults and start affirming themselves.
I have always had a good relationship with my parents and I still have a really good one. However, during that specific period, let just say that my parent’s basement wasn’t the best place to live for us anymore. So we decided to move in Montreal so we can have our own place called home.
We didn’t have much money and I remember my dad saying:” What are you going to do? Max out your credit card and eat Kraft Dinner?” He didn’t want me to leave so he tried to scare me. Even though I knew he was right, I had to leave for several reasons and I decided to look for an apartment.
Credit cards are not to be used as an emergency fund
The only way I could pay my bills and eat was to withdraw money from my credit card on a monthly basis. Back then, I had 5 credit cards and I was flipping balance from one card to another so I can save a few bucks in interest and charges here and there. This is where I learn that withdrawing money from your credit card at a ATM machine triggers interest charges on the very same day!
We were not making enough to pay for everything and each month, we had to take more money out of our credit cards. After a while, those pieces of plastic started to be quite heavy in my wallet. We had to find a solution.
Work harder and use the snowball effect
The only way I could get around this situation was by working more in order to earn extra money. I decided to work 35 hours a week while I was doing my bachelor degree. I used to wake up a 2AM, go work, sleep from noon till 3PM and go at school at night.
I used all my extra money to pay off my credit cards. I attacked that highest interest credit card first in order to wave as much fees as fast as possible. Once the first credit card was paid off, I took that payment and add it to the second one. This is why we call it the snowball effect; as you pay your debts, your payment on the next one is getting bigger and bigger.
As you can see, I didn’t do any magic or anything special. I concentrated my effort in order to pay my debts as soon as possible and within 12 months, I was debt free.