Debt Motivates Me in a Way Savings Never Could

I’m writing this post from my way-too-expensive bed in my brand new house. Owning a house, especially as a Millennial and in Alberta wasn’t something I ever thought would happen. If you remember right, Le Monsieur and I went house hunting last year only to be horribly disappointed with the prices and states of the houses for sale.

Then, spontaneously we found a house that was in our price range and impulsively purchased it. I love it. It’s 875 square feet (plus finished basement) and I have my own closet and bathroom, something which fulfils all my teenage dreams.

However, with our lovely new house comes the biggest liability I’ve ever had – a mortgage. And, while our mortgage is nowhere near the size of what people in Toronto or Vancouver have over their heads, it’s still hefty and is exactly the kick-in-the-butt that I’ve been looking for.

Falling Off the Wagon

I absolutely love personal finance. I originally got into PF to make friends with similar interests, not because I was looking for a way to pay off $30,000 of student loans. I started my first blog as a student, made some PF bloggers friends and frugalled my way to $45,000 saved by graduation. I travelled through Europe and moved to Calgary and then to South Korea where I earned enough in 10 months to pay off all my student loans. Then I moved back to Alberta and fell off the frugalwagon. Big time.

You see, here’s the thing. Le Monsieur and I are really frugal people. We each make more individually than we need to survive together. That, plus the fact that our cost of living is so low in rural Alberta meant that I was free to “retire” and be a stay-at-home wife (not that I did or ever would, but the idea was suggested to me by many, many people in town). My income was spent on vacations and luxuries and nonsense and for the first time since 2006, I didn’t keep track of what I was spending.

Without a reason to bring in money and no way to see what I was earning vs. what I was spending, I started to notice that I was having trouble paying my Visa bill every month. I would get paid and I would transfer it all to Visa and then I would realize that I literally had $0.17 in my bank account and wonder where it all went. At tax time I cried because my savings account was empty. When I was reassessed I had to ask Le Monsieur to cover it. Every way I turned I owed money and had no money simultaneously. Then, like any sane person, I decided the time was right to buy a house.

Holy Mortgage Batman

I’ll be the first person to admit that we did everything wrong when we bought our house. We didn’t have a down payment fund, nor did we have a pre-approval from the bank. Luckily, our financing was done privately and very unconventionally. In essence, we traded a low-interest rate for fantastic pre-payment options.

You see, the idea of having a mortgage for the next 25 or 30 years not only scares me but actually makes me physically ill. Even thinking about it right now, my stomach is in knots at the idea of owing someone such an large amount of money for an obscenely long time. I don’t want to be in my 50s and still paying my mortgage. In fact, I don’t even want to be in my 30s and still paying my mortgage.

So, with renewed gusto, I have been looking for extra work and have shocked myself back into frugal mode. Instead of take-out coffee every day, I maybe only have coffee 3x a week and always at McDonalds so I can get freebies. Meals are more frugal with less meat (the added benefit of that is faster weight loss!) and more vegetables. I’ve joined my town’s living-frugal Facebook group for tips on how to save money. In other words, I’m no longer indulging myself as I have been doing for the past year.

The change has been amazing. My Visa bill is $37. My savings accounts have over $6,000. I don’t understand who 2015-2016 Vanessa was but holy cow am I glad she’s gone. She didn’t even have savings! What a loser.

The New Budget

We had about a week between our purchase date and closing and I spent it packing, signing up for utilities and getting insurance quotes. While I feel that our insurance is exorbitant, multiple brokers have returned the same or higher numbers so I guess that’s what I’ve got to pay.

This is the first time I’ll be paying for natural gas or water and the first time I’ll be paying electricity in Alberta. I have to say that I’m shocked at the numbers people are giving me. $100 a month for electricity? AND $100 for natural gas? My bills in Quebec we like $70 every two months for heating AND electricity. Ugh.

Bill Amount Comments
Electricity $100 I have no idea but this is Le Monsieur’s estimate
Natural gas $100 Ditto
Water $50 Ditto
Internet $60 Local provider, rounded up
House insurance $80 Paid once a year but this is the amount I’ll set aside
Car insurance $90 Ditto
Cell phone $35 3 months = $99tx on Public Mobile
Spending money $200 Money for coffee, dinners out, etc.
Total $715  

$715 doesn’t seem like a lot of money – in fact, it’s less than the $10,000 a year that I lived on as a student in Montreal. The difference between now and then is that I didn’t have a spouse to help pay the bills or to rely on for financial support if I’m unable to work one month.

(This is why it’s super important to pick the right spouse. If he had married a spendaholic or I had married someone who works minimum wage, neither of us would be able to fulfil our financial goals)

The major key to living on $715 a month is to remember that it’s just temporary. I don’t have to live on $715 a month for the next 30 or 35 years until the mortgage is paid off since the very fact that I’m living on so little will allow us to pay off our mortgage in less than three years.

There’s another blog post coming soon about our mortgage pay off plan but the stretch goal is to have it gone by the time I’m 30 or, at the very least before 2019.

Having such a short pay off schedule means that we can temporarily forego things like RRSP or TFSA contributions without falling too far behind. Although there is opportunity cost involved in not contributing, at the end of the day I would much rather be debt-free than have a maxed out RRSP. As a compromise, I did promise Le Monsieur that I wouldn’t use the Home Buyer’s Plan or cash in my TFSA to pay down our cheap debt.

The TL;DR of this Post

I am so, so happy to be back in debt only so I can use it as a motivator to live frugally and pay off all that debt. I’m going to put myself on a strict $715/month budget and throw my extra cash at my mortgage so that it’s gone by 2019.

*edit because I wasn’t clear: The missing parts of my budget — groceries and gas for the car — are my husband’s contribution to our household*

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