How I got out of debt (Part 1)

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.

2) Budgeting

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.


4 thoughts on “How I got out of debt (Part 1)

  1. lol. i like the part where you say i spend all my time budgeting for other companies and not budgeting for myself.

    google up “money is fungible”. you are probably suffering from some psychological bias. every one of us do. compartmentizing your money.

    but i think its coming to the end. i can see you building wealth much more. thats some crazy bonus. never got that in my life.

    • Hi Kyith,

      Thanks for dropping by again 🙂

      Yeah I was “lucky” to have a good bonus. (I don’t believe in luck though). Amassing wealth is way more fun than spending money! The only pity is that I didn’t get started earlier, and got myself into so much debt.


  2. Hi Jasmine,

    Good to read your latest post and I just wanted to highlight that what you said is very true – it’s not how much we earn that’s important, it’s how much we spend and save!

    It’s scary to see this nation become more and more materialistic as the days go by, and to me it’s like a disease which is creeping up on society and slowly choking the life out of it. Even when I take the bus to work or step into the lift, you can’t help but notice all the branded stuff people carry. Newspapers like to splash advertisements about luxury brands and banks like to tout easy “lines of credit” to snare people to indulge and splurge. It’s all very good for the economy, but extremely bad for the consumer! In fact, it became so bad that MAS has instituted more curbs and controls on credit card spending and balances, to come into full effect by mid-2015 – I am sure you have read about this too. This is how much things have deteriorated over the years, with increased spending on now just luxury brands, but all aspects of life such as meals, transportation and entertainment.

    It’s admirable that you had the patience to consolidate all your loans/debts and tell yourself that you need to do something about it. The most important statement to look at is your personal balance sheet – most people do not think of their lives this way. For me, being in (excess) net cash all the time is very important and I know I will not be subject to any interest rate rises. There are friends who constantly tell me to lever up as I am “too conservative” in not taking up additional loans to purchase investment property. I always find it strange that the mindset is to gear up to your eyeballs and aggressively “invest” in real estate. These friends have loans ranging from about $500,000 to $4 million, and how they can sleep well at night I am not sure! For me, it is always good to have a strong Balance Sheet, which in turn will enable you to have show good cash flows in your cash flow statement.

    Perhaps it also helps that I do not have many “wants” haha. Other than good meals with family and friends, I actually find it tough to spend money as there’s nothing that I really want in terms of physical possessions which can add value to my life.

    For me, happiness comes from relationships – being together with my family at the mall or at places of interest, walking with my wife in a park, cycling with friends at East Coast or just having a chat with some peers/colleagues.Probably the only physical possessions I accumulate are books, as they help to enhance my knowledge!

    As I get older, I am also actively trying to channel my funds to help others. I discussed this with my wife before – if I ever get a good bonus, I will use part of the funds for donation to help the needy. I’ve already begun to donate this year by selecting my charity of choice – SASCO. I can honestly tell you it feels great to be able to give and share – look at the scores of unfortunate people out there (e.g. the victims of the typhoon at Tacloban) and you will know there’s so much more we can do as human beings to help one another out.

    Just some thoughts as I wait for your Part 2.

    Here’s wishing you a Merry Christmas and Happy 2014! Keep up the good work on budgeting and saving!

    • Hi Musicwhiz,

      Nice to hear from you again. Merry Xmas and happy 2014 to you too 🙂
      I agree on what you said. Right now at this current state of mind, material things are completely unimportant to me, while I focus more on building meaningful relationships, saving up for emergencies and life events, personal development, and being thankful for what I have. I have very little wants now, and I am actually surprised at myself. I’ve completely changed from a shopaholic to a mad saver, only spending on important things that create values in my life.

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