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debt diary

Young man in debt.

Tom Ruddy was a spendthrift in his 20s. He had a steady income, working as a short-order cook, but was enjoying life a little too much, in hindsight. That included eating out a lot, buying nice clothes, going on trips and upgrading his hotel rooms along the way.

Mr. Ruddy says he was doing fine financially, until he decided to change careers. He went back to school to get a business diploma at Fanshawe College in London, Ont.

"That's when things got out of hand," says Mr. Ruddy, now 31, from London. "I didn't really change my spending habits [while in school]. For lack of a better word, I was stupid."

When he started college, he had about $5,000 in consumer debt and needed to take out student loans to help pay for his tuition, books and other costs, since he was no longer working full time.

When he graduated two years later, he had $40,000 in debt – half of which was provincial student loans, the rest in consumer debt. At one point during school, he was even forced to use his credit card to cover tuition.

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A couple of months after graduation he got a full-time job at a call centre, but was barely making ends meet. That was even with a part-time job in retail that he started during his second year in school.

"I was making enough to keep my head above water, but I knew if I wanted a car or a house some day, it wasn't going to happen," Mr. Ruddy says. He describes his financial situation at the time as "hopeless."

He realized something had to change.

"I was working too hard to be as broke as I was and as tired as I was," Mr. Ruddy says.

He reached out to Consolidated Credit Counseling Services of Canada Inc., a non-profit organization, which helped him create a budget for paying off debt, spending more wisely and saving. Money management was something Mr. Ruddy says his family never talked about growing up.

"It was a huge adjustment for me to learn to live within my means," Mr. Ruddy says. "It's something I think everyone needs to do at some point in their life."

Jeffrey Schwartz, executive director of Consolidated Credit in Toronto, says too often people in debt don't recognize they have a problem, or are too ashamed to admit it and address it.

"[Mr. Ruddy] recognized he had an issue ... and reached out and got help, which is critically important, especially when it comes to people's finances," Mr. Schwartz says.

"Too often, Canadians think that they're doing great just by making the minimum payment each month," he says. "They fail to realize it could triple the costs associated with an item. If they're just paying the minimum each month, it could take decades to pay off."

To lower his expenses, Mr. Ruddy lived without the Internet and cable TV for months, and still doesn't own a car. He eventually got a higher-paying job at a technology company in London, which allowed him to not only pay off debt more quickly, but save money too.

As of January, Mr. Ruddy paid off his consumer debt and today has about $18,000 left in student loans. He's also set aside about $3,000 in savings. He has created an emergency fund "in case something comes up called life."

Mr. Ruddy says, "It's nice to know I have money in the bank. If something happens to me tomorrow, I'm not dead in the water."

He is more careful now about planning for expenses he knows are coming, including a trip to Toronto in July. "It's more careful insight and planning that I didn't pay much attention to before."

He's also using cash more often, to help track his spending better. Last year, he surprised a travel agent when he paid for a Las Vegas vacation with his debit card. "She was shocked that I was handing over the money up front," he says.

In the short term, he'd like to buy a used car. Down the road, he'd like to save enough for a down payment on a house.

"I want to put down roots. I want to have a family, eventually," Mr. Ruddy says. "Not only that, it's a sign that I've made it. It's a sign that I pretty much came full circle from five or six years ago –almost not having enough money to have a place to live – to the other end of the spectrum."

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