Officially Debt Free!

Just a short post and a quick update. As of today, I’m officially debt free! No more instalment plans to service and no more ready credit loan to repay. How wonderful is that? From now on, I have $500 more in disposable income. This means I have $500 more to spend on ME, MYSELF & I! I’ll have one less commitment/fix expense per month, and slightly more freedom!

So how will I be using this $500? I’m definitely gonna reward myself, and no, I don’t mean splurging on shoes or bags. I’m gonna reward my future self by saving this amount of money, adding to my emergency fund.

And one more thing I’m sure of. I’m never getting into consumer debt again 🙂

How I got out of debt (Part 2)

I’ve previously posted the first part on how I got out of debt here. Being in debt for years was really painful. I had totally ignored my debt situation and make no efforts to get out of it. However deep down, as much as I tried to ignore it, I know a certain part of my life was pretty screwed up.

Getting a good bonus, working out a debt repayment plan, and sticking to a budget were the first few steps I took to get out of my debt situation. I have to ensure not to fall back into debt again, like how I did before.

1) Changing habits/lifestyles

– Quit shopping

I realized whenever I’m bored, I’ll go online hunting for things to buy. Be it dresses, bags, accessories, or even gadgets. Shopping keeps me occupied and happy for awhile, until I received my new loots, then I’ll get bored and hunt for something else again. The first step to implementing a change is to identify the problem. In my case, it was the lack of self control, and the need for instant gratification. I made it a point to stop online shopping and I avoided shopping malls too, until I’m comfortable enough to just look and not buy. I also stop visiting designer bags forums, and stopped looking at advertisements of luxury products.

– Stop eating at restaurants

I used to dine at places like Ding Tai Fung, Crystal Jade, Ichiban Sushi and Sushi Teh whenever I meet up with friends or my boyfriend for dinner, which is like almost every other day. I even spent over $20 for lunch during weekdays. Now I eat at food courts and coffee shops, and I have to say I enjoy such local treats too! I still dine at my favourite places, but it’s usually reserved for weekends. Now on normal weekdays, $10 is more than enough for both lunch and dinner. One tip here, stop ordering drinks when eating out, just order plain water. They are not only free but much healthier too! I completely stopped buying bubble teas and Starbucks coffee back to the office post lunch too. It’s usually the small amount that adds up.

– Stop taking taxi

Compared to spending a few hundred dollars on transport previously, I now only spent about less than $100 a month on public transport.

2) Goals setting and setting of priorities

I never knew what I want in life and was just drifting through and enjoying life as it is. I guess everyone went through that stage when they were younger. After getting my bonus, I really sat myself down and started thinking of what I want to achieve in life. I want financial freedom. I want to be debt free, to enjoy the small things in life, not be bound by material things, and to finance my lifestyle using passive income. It is then that I realised I need very little to make me happy. Good health, being surrounded by people I love, good food (not necessary expensive), and self development are what matters. All these does not cost me a lot of money.

Once I sorted out my priorities, decisions making became easy. I know clearly what I want, and what I do not want. I’m no longer tempted by designer stuffs and the “finer” things in life. I no longer have temptations to shop and buy thing. Even for my upcoming wedding, I planned and budgeted in such a way that even if we make losses for the banquet, it is still affordable for my fiancĂ© and I. I don’t care if it’s not extravagant. What I want is an awesome marriage, not be debt ridden after all the glamour is over. And we all know the number one problem couples usually face is financial difficulties. I don’t want that to happen to my fiancĂ© and I.

3) Change in environment

I would say the biggest catalyst in helping me get out of debt and turning my financial situation around is due to the fact that I changed my job. I made many good friends from my banking days, and they are still some of my closest friends. However, I’m not entirely agreeable on their spending habits (sorry folks!).

My current colleagues on the other hand, they aren’t the most exciting or fun loving people. They are in their late 30s to early 40s, but they sure know a thing or two about amassing wealth and they know the importance of being debt free. One repaid his HDB loan within two years, and one within seven. My Finance Manager fully repaid his 5 room BTO the day he moved in. They are frugal, yet generous people. Being in such an environment prompt me to save and work hard for my goal of attaining financial freedom.

So all in all, without my current job (for the bonuses and the good influences), I’ll probably still be in debt, and most likely carry debt into my marriage and into my 30s.

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.

My Favourite Personal Finance Bloggers

Getting out of debt and trying to gain control of my financial life wasn’t easy. Thankfully, I encountered these Personal Finance blogs which really helped and motivated me.

And now, I hope to share these sites with you.

1) The Simple Dollar

I find Trent Hamm’s blog to be especially inspiring because not only is he partially handicapped (blind in one eye and deaf in one ear), he also went through a complete financial overhaul (like me) and managed to clear his debt within eight months.

He not only writes about every financial related topics from how to save money, clear debt and invest, but also writes about how to be a better person and on behavioural finance, a topic that is of great interest to me. Some of my favourite blog post from Trent includes the following:

does money buys happiness
17k in credit card debt
14 simple money rules of Trent which he lives by, which sounds like very good advice to me

2) Afford Anything

I love this blogger! We corresponded through a few emails and with Paula Pant‘s encouragement, I started my blog and she gave me some ideas on how to go about doing it.

Paula is an inspiration in the sense that she is living the life of her dream and travels and writes for a living. She is also a landlord and bought her fourth house before the age of 30. She is the epitome of living a passionate and financially free life.

Here’s a few of my favourite posts by Paula:
Only rich people invest
You can afford anything, but not everything
Reasons we spend money
Money vs Happiness
Reading Afford Anything helped me searched deeper within myself as to why I had previously overspent. I found out that when I buy things, I am actually using material goods to fill up voids in my life, to try to make myself feel better, and found out that I shop or spend relentlessly when I’m stressed or unhappy (basically with myself).

3) Len Penzo

Len writes in a quirky yet practical manner on most of his posts and I found myself reading his blog the entire Saturday morning and afternoon the first time I came across it.

Here’s a few good reads:
Secrets of the millionaire next dollar
Driving an expensive car is not impressive
Debt free people
15 year vs 30 year Mortgage loan and Reasons not to repay mortgage loan early

Besides reading about personal finance articles, I’ve also spent a lot of my time reading about rich and successful people, and trying to pick up their good habits as well. What better ways to be successful than to learn and read about such successful people?

I hope you’ll like these bloggers and find their articles useful like I did. There are many more financial bloggers out there who had helped me in one way or another, which I can’t possible list them all. If there’s a chance, I’ll like to meet them personally and thank them for impacting my life somehow. And of course, I hope to be an inspiration like them one day. Wish me luck!