Debt Free College Graduate Shares Thoughts & Tips

This is a guest post from Tomasz Gorecki of the self titled blog. He offers a unique voice on personal finance and more specifically his recent accomplishment of becoming debt free. If you like this article consider subscribing to his feed.

I have written a short series of lessons I learned while on my way to becoming debt free but I haven’t had time to reflect and write about my reflection ever since becoming debt free in middle of March. So basically this is a great opportunity for me to rant a bit and provide some insight on how I became debt free.

Initially, I tracked my expenses for the month of March and that was a total smack in head for me because I realized I was barely over the top. So in April I developed a budget to follow and adjusted the numbers for the categories according to the expenses from March. Of course, I cut back on a few unnecessary things and this month, I have started to look for ways to minimize some of my costs.

From April, I committed myself to save at least half my income and in April I did save 40% but in the second half of April I did save 50% and continue that streak into May now too.

When I initially started with the budget it brought on a few challenges. One of the challenges right off the bat was allowing myself to make small purchases here and there and eventually that 5 bucks turned close to $100 in unnecessary expenses, therefore driving down my savings.

The other issue I came across was every time I was paid and I distributed the funds to savings and the rest to bills and expenses, my chequing account was left with 40 dollars or less. This created a bit of a panic for me because what if I needed to make a sudden purchase, I would be risking going into overdraft protection which is 5 bucks charge plus interest.

So I realized I need to set a buffet fund of like $100-300 in my chequing account to cover any unexpected expenses in the future, and I am actually in the process of putting in $100 this weekend.

Another thing I realized by having a budget is that it forces you to be creative and frugal. I don’t have the urge to go out to eat or go out to party because I know I don’t have the money saved up for it and because I have another priority for the week or month.

With that in mind, when I do save up for going out, I will appreciate it a lot more because I worked hard for it and deserve it.

My steps to being debt free:

• Track expenses
• Calculate total debt, find out interest, etc.
• Pay one debt off at a time (VISA and then LOC) and stop spending
• Have a balance sheet of your progress each month or every 2 weeks
• Reward yourself with your achievements along the way

Once debt free:

• Build a budget based on your expenses you tracked
• Determine a minimum level of savings you want to contribute each month
• For the first month have fun with the budget and see if you are left with anything
• Set goals for the next month for your budget such as a buffer fund or save up for a purchase
• Try to cut down as much as you can each month

The most important thing I realized is working with a budget and being debt free brings forth new challenges to deal with.

Challenges such as spending within the budgeted amounts for each category, not making purchases based on impulse or “want”. I probably learned a great deal of appreciating what I have and being forced to find alternatives when it came to looking into purchasing something.

Question & Answer With Tom Gorecki

Me: What interested you in reading Studenomics?

Tom:

1. We are around the same age and understand the issues facing our generation.

2. His articles are great and they open up room for discussion and the ability to add more value from readers.

3. A bonus would be geographically we are located close by and have similar backgrounds.

Me: What motivated you to start your own personal finance blog?

Tom: I think the main motivation has come from the struggle I have gone through with handling money for years and finally get a hold on my finances in recent months. Come to think of it, I think this is one part of life that we should all be experts in but then again that would become boring because it would become boring and not competitive. We need both sides of the scale in order for the system to work.

Getting back on point, besides my personal struggle with money, I’ve had an interest in business ever since grade 11 when I first took International business and fell in love with business. So throughout the years, I have read books, studied business in school and attempted to start businesses.

Me: What is your best financial tip to give to a college student?

Tom:

• Have goals
  • For your career
  • For what you will do after you graduate
• Save as much as you can
• Milk your career centre
• Get job experience while still in school
• Take advantage of international opportunities/jobs
• Find a group of people that are more successful then you
• Don’t depend on your parents, financially

Me: Any advice from your journey on becoming debt free?

Tom: Let me make it easier to understand with some points:

• Find out why you are spending so much money?
• Where is the money being spent?
• Are you getting any return or value from it?
• How does being in debt make you feel?
• Set some goals in terms of paying off debt, managing money and saving up

One thing that really helped me was associating with the right type of people, the kind that are more successful than me. I was fortunate to have a friend that was debt free and ahead of me career and financially too. You are who you associate with. I think this is probably the biggest factor for being in debt.

I know many people don’t want to talk about their money problems or problems in general but really in the end you are just lying to yourself and it will come back to bite you even harder.

Photo: One-Fat-Man