Year in Review: We paid back $17K in 2018.

We paid back $17K in 2018. 

Honestly, I wouldn’t believed that if I hadn’t done the math myself (twice, just to be sure).

In fact, if you told me at the start of 2018 that we would finish out the year with only the student loan outstanding, I would have laughed.  While reaching this point was the goal, I knew it was probably an unrealistic one. I would have been content with any progress. 

The fact that we pulled it off…well, it’s the icing on the cake. 

With 2018 coming to a close, I wanted to spend a little bit of time reflecting this week. And since this is a personal finance blog, it felt appropriate to start with a little look back on our finances. 

So let’s have a look. 

Year in Review: 2018 Progress Report

For ease of reading, I broke this review down into five sections, each focusing on a significant milestone of our debt-free journey in 2018. 

Step 0: The Emergency Fund

Before we started really tackling our debt, we built an emergency fund. 

Dave Ramsey’s baby steps call for a $1K emergency fund but I think that’s bananas (I wrote more about that here).  That covers our rent for one month – and literally nothing else. The idea of only having $1K in the bank stresses me out, so we saved $5K instead. 

We aim to keep this account at $5K at all times, but sometimes that’s not possible. For example, right now it’s closer to $4K, thanks to having to shell out money on a couple unexpected expenses (such as new winter tires. Sigh). Getting this account back to $5K is on the to do list for the new year; regardless, for our debt free journey, an emergency fund was Step 0.

Step 1: The Credit Cards

We paid off two credit cards in 2018.

This is something I didn’t write about here. There’s a simple reason for that: it wasn’t really that big of a deal for us.

Yes, it was debt, and yes, it was something we had to deal with before we could see progress in other areas. However, when I say we paid off our credit cards, I’m not talking massive debt – I’m talking a few hundred dollars.

Once we decided to get serious about our debt, it didn’t take any time at all to pay down these balances. After an all-cash budget stint, we have returned to using credit cards (more on that here) and I am happy to report all our cards are either at zero or will be at zero by the end of the month. Hooray! 

Step 2: The Car Loan

Since we use the snowball method to pay off our debt (not sure what that means? You can read more about it here), once the cards were paid off, we turned our attention to our next smallest debt: our car loan.

We took steps to grow our snowball to tackle this debt. As suggested, we reigned in our payments on other debts. In the case of the credit line, that mean paying the interest and tossing only $20 a week on the balance; for the student loan, we applied for an option that allowed us to make interest only payments. This freed up our money to focus on our car loan.

Along with the $286 monthly payment, we tossed $575 extra dollars on the loan every month. When we had months with five pay periods (we get paid opposite weeks), the snowball was a little bigger.

The end result? In April 2018, we made the final payment on our car – 14 months early!

Step 3: The Line of Credit

This is the point where we really saw just how effective the snowball method can be. With two credit cards and the car loan paid in full, we had the momentum we needed to keep going with the next debt line: our credit line.

The credit line came into our lives in 2014. It was used to purchase our first car: a Subaru Impreza known affectionately as The Green Beast.

I loved that car so much – yes, even though it caused me endless headaches during the final weeks of ownership. I wrote about the lessons I learned from my first car here; honestly, the only regret I have is taking out a loan to pay for it.

By the time we really turned our focus to the credit line, the balance sat at about $8.3K and we were paying about $80 a month in interest. Ugh.

Once again, we saw the snowball method in action. With the car loan paid in full, we were able to roll all the money we were using on that loan directly to the balance on the credit line. And seven months later, on November 15, I made the final payment on our line of credit.

I have never been so happy to see a zero balance on an account in my entire life.

Step 4: The Student Loan

With the credit cards, the car loan and the credit line behind us, we have moved on to our next – and final – debt: the student loan.

The snowball method stipulates that debts be paid in order of balance, smallest to largest. The student loan is most definitely the largest debt, coming in at $47,355.79.

Just seeing that number makes me cringe. I cannot for the life of me understand how it’s become an acceptable fact of life that post-secondary education and debt go hand in hand. But that’s a different post for a different time.

Unlike our first four debts, this one is going to take some time to pay off – and there are many factors that will influence our progress.

My goal is to put at least $1K on the loan every month in addition to the $440 minimum payment. If we can do this, I anticipate we can pay back the entire loan in about three years. Maybe sooner, if circumstances change for the better; maybe not, if the opposite occurs.

There are a lot of unknowns as we move forward, but what I do know is this: it won’t take us 10 years to pay this loan off. Nope.

Looking forward: the plan for 2019

My debt payoff goal for 2019 is ambitious: by this time next year, I want to have paid back at least $15k. It’s a big number, a lofty goal, but I do believe it can happen.

As it stands, we are set to pay about $5K back on the principle by March. If we average $5K every four months, we should be able to hit that goal – especially when you consider this does not include additional payments that could come through other means (like our tax refunds).

I’m also planning to look for ways to make a little more money. I’ve written before about why I don’t side hustle (you can find that post here); I stand by that post so much that I am hesitant to call this effort side hustling. Rather, I intend to look for some casual opportunities that will primarily help with site improvements here. I have a couple things I want to do, but I don’t want to pull money from our debt snowball to do it. So, this is something I plan to investigate a little more in the new year.

On the savings and investing front, I don’t anticipate much change. We’ll continue to maintain a $5K emergency fund and toss a little money toward our RRSP, particularly in the lead up to the March 31 deadline. 

Final Thoughts

Our financial situation today looks very different than it did a year ago. Yes, we still have a lot of work ahead of us, but I am so proud of the progress we have made so far – and I’m excited to celebrate new milestones and victories as we move forward in 2019.

How has your financial situation changed in the last year?