Today is a special day.
Today, we paid off our credit line.
Finally.
Some background information, for those who may be new here: we took out this credit line in May 2013 to buy our first car. It has carried a balance ever since.
Over the years, we made occasional payments, but we didn’t start making any meaningful progress paying it back until April 2018. Over the last seven months, paying this off has been our top financial priority. Needless to say, I have never been so excited to transfer $391 from our chequing account in my entire life.
I don’t even want to think about how much interest we have paid on this loan.
What does this mean? Closing in on the one year anniversary of our debt-free journey, we have paid off two credit cards, our car, and now, our credit line.
One year later, we only have one debt left to go: the student loan.
It’s our biggest debt by far.
It’s also the one with the most ambitious pay-off goal.
The student loan: by the numbers
Total amount owed: $47,355.79
Minimum monthly payment: $440
Goal for additional payment to principle: At least $1k a month (and ideally more)
This is an integrated Canada student loan; there are two parts: a federal portion and a provincial portion. All payments are managed through the National Student Loan Service Centre.
The $440 minimum payment represents a combination of interest and principle…and considering the interest rate is over 8 per cent, it’s safe to say most of it covers interest.
Gross.
It’s worth noting this marks the first time we have been in a financial position to make even the minimum monthly payment on this loan.
For the first year or so after Jeff graduated, we relied on the repayment assistance program to bring the minimum payment down to a manageable level, one that is significantly lower than the actual minimum payment. When our income rose enough that we became ineligible for repayment assistance, we switched to a program that allowed us to make interest-only payments for a period of 12 months over the life of the loan. We dedicated those 12 months to aggressively paying back all of our non-student loan debt.
October 2018 was our final month of eligibility for this program – and thanks to our dedication over the last 12 months, we’re in exactly the position we wanted to be in with all of our other debt paid in full.
The big, crazy, ambitious goal
Three years.
The goal is to pay off all $47,355.79 of this loan in three years. Maybe even less.
It’s a big goal. Maybe a little bit crazy. Definitely an ambitious one.
It’s also doable.
Maybe.
Things working in our favour
- This is our only debt!
- We have a financial cushion in the form of a $5K emergency fund.
- We are both currently employed full-time.
Things that could work against us
- We are both employed right now. That does not mean this will be the case all the time for the next three years.
- Life happens – and visits from Murphy can be expensive.
- The potential for burnout. Paying off debt…sucks sometimes. And while I think we do a good job of not getting sucked into the mindset of keeping up with the Joneses, that’s sometimes easier said than done.
The path forward
There are two immediate things that need to happen if we are to pull this off.
The first thing is the focus of this post: we need to set a goal and lay out some preliminary steps to get there.
In our case, the goal is a three year payoff and the immediate step to get there involves making additional principle payments each month. Rolling our snowball from the credit line to the student loan will help us see real, quick progress on the loan. Doing this means we should be able to pay an additional $1K-ish every month.
The second thing is something I am still torn on: I may look into a side hustle.
I’ve shared my thoughts about side hustles before, specifically, why I haven’t pursued one (check out that post here); my feelings have not changed, but after a season of rest, I think I am ready to look for some casual, short-term opportunities. Anyone working a unique side hustle? I’d love to hear about it.
The combination of these two things will help us smash this debt for good.
Final Thought
Paying off the credit line has brought us one step closer to financial freedom. The prospect of tackling our final debt, the student loan, is daunting – and that’s why it will be important to focus on the big picture: once this is out of the way, we’ll finally be in the green. It’s that big picture view that will, I believe, help us keep going when we’re feeling burnt out on the process.
So bring it on, student loans. We’re ready for you.
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