From negative to positive…
2013 had been an extremely fruitful year for me for many reasons. My financial life is finally in order for the first time ever. Friends are wondering how I got out of debt and I’m finally comfortable enough to share it now. I went from being 18K in debt, to having a savings of 25k within 10 months.
Let me share what happened and the steps I took to get out of debt and start saving:
1) A good bonus
I joined my current company in Jun 2012 and received my pro-rated bonus in Dec 2012. The day before, I already knew how much I’ll be getting and I was elated to know I’ll be getting a whooping 20k bonus. To many people, it may not be a lot of money, but I have never receive so much money before in my life. I head straight to the Chanel boutique that evening after work to get myself a bag as I’ve always wanted one. I short listed 2 bags to “reward” myself, a Jumbo bag and a GST bag. I couldn’t decide on one and decided to sleep on it until after the bonus money is safely in my bank account the next day. To my surprise, the money wasn’t credited into our bank account, but my Managing Director was giving out cheques to us individually. When it was my turn, he handed a $20k cheque to me and asked me what I want to do with the money. After looking at him blankly for probably about 10 seconds, my exact words to him was “I’m gonna save everything”. At that moment, I forgot about my Chanel bag, I forgot about Xmas shopping, and all the fanciful things I wanted to get for myself. I decided once and for all that I’m sick and tired of being in debt. Not everyone has the opportunity to turn their financial life around, so I am gonna grab this chance and improve my life.
I didn’t exactly know how much debt I had, I thought it was probably about 8 – 10k. Within the year of 2012, I bought 2 designer bags, bought a iPad, signed up for a facial package that’s worth about 3k, and also borrow about 8k from my ready credit line from my Citibank credit card. All these debt was incurred and paid for using monthly instalment plans. After a few painful hours of consolidating my credit card bills, phone calls to banks to check for balances, and creating tables on excel spreadsheets, I found out to my horror that I’m over 18K in credit card debt.
The next few days were spent thinking if I should repay my credit cards debt in full, or to clear the outstanding balances first and continue serving the monthly instalment. And suddenly I remembered 2 years back in 2010, I did receive a bonus amount of about 10k, cleared my 5k credit card debt, spent the remaining 5k within a few months, and accumulated even more debts again (yes, I DO have a spending problem). The choice was clear. If I clear all my debt now, I’ll lose the motivation to save, since I will have no money in my bank account to show for anyway. So I choose to save, and repay my debt at the same time.
I began my search for answers on how to repay debts, how to save money, and most importantly, how to cut down on expenses. I realised it’s not just how much we earn that matters, but more on how much we save. I read practically everything I can find on budgeting, debt repayment, personal finance, wealth accumulation etc. I’ve been doing budgeting for companies for years and yet I’ve never budget for myself. It’s time I put my skills into good use. I spent days going through old bills and bank statements to get a grip of how my spending habits were like, and to my horror, I spent more than I earn, EVERY SINGLE MONTH. I realised it’s the small items that are really scary. Spending on small amounts of $20 to $50 per day can lead to over $1,000 wasted in a single month. I was so surprised when I realised I spent over $1,000 on dining out every month! My lifestyle was so highly inflated that I mainly only eat in restaurants, take cabs wherever I go, and buy whatever I set my eyes on.
Setting up a budget is easy, sticking to it is hard. However I was extremely determined to follow it through and a year later, I do see light at the end of the tunnel. In the beginning of 2013, my target was to have 20k in my bank account. Now at the end of 2013, I have exceeded my targeted amount.. The most painful part was the monthly instalments that I’ve got to service. I could have saved even more if not for the debt repayment of $700 a month. I’m still over 4k in debt, but I know it’s under control and the monthly instalment is manageable.