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debt diary

Multitasking mother with her daughter.Thinkstock

Sergio Jaramillo had $33,000 in student debt when he finished his undergraduate degree in biochemistry at the University of Guelph in 2011. That figure climbed to $37,000 by the time he finished his master's degree in 2013.

His wife, Stephanie Boilard, whom he met at university, had $28,000 in student debt after graduating with a degree in molecular biology in 2011.

Earlier this spring, the couple paid off the last of their student debt, which they've calculated as $73,000 combined, including interest. They've also saved $17,000 for a down payment on a house, which they hope to buy in two or three years, after having their first child last year.

How did they do it? The old fashioned way: They scrimped and saved and followed a very strict budget.

"We are boring people. We stay in a lot," says Mr. Jaramillo, 26, with a laugh.

For starters, their spending habits didn't change much after graduating from university, or even after paying off the last student loan payment. That's in part because of the new baby, and because they're living off of one income again with Ms. Boilard on maternity leave.

Their debt repayment plan was strategic: They used tuition tax credits built up as students, and then the money received from tax returns, to pay down chunks of debt.

Related: 23-year-old who owed $50,000 thought 'debt was a normal situation'

Also, when Mr. Jaramillo got a company car for his job at Agilent Technologies in Guelph, they sold their used Honda, saving money not only on insurance, but also on gas and repairs.

"There was a lot of second-guessing of what strategy we were taking — to save or pay down debt," says Mr. Jaramillo. "In the end we decided to aggressively pay down the loans … Having debt didn't make us feel good."

Once they got closer to paying off the student debt, he said they felt more comfortable setting aside money for a house.

The couple has travelled a bit, including to Colombia (where Mr. Jaramillo is originally from) for their honeymoon. They've also tacked vacations on to the end of Mr. Jaramillo's work trips to places like Europe and San Francisco.

Their focus now is on saving more money for a house, their child's education and, eventually, retirement. Mr. Jaramillio has a pension and a group Registered Retirement Savings Plan through his work, but they're also setting aside money for his wife, who doesn't have the same work-related retirement savings options.

Susan Stefura, principal and fee-only financial planner at Toronto-based Bespoke Financial Consulting Inc., says the couple has done extremely well by learning how to manage money properly.

"That's where people tend to go wrong, they aren't living frugally enough," compared to what they earn, says Ms. Stefura.

"How much are you willing to sacrifice to achieve your goals? … It's a challenge for many people."

She congratulates Mr. Jaramillo and his wife for not only paying off debt but also setting aside money for future plans, which in their case is buying a house, as well as retirement.

"You don't often hear people at their age and stage of life talking about retiring," Ms. Stefura says.

She also applauds the couple for being wary of not buying a home before they can comfortably handle the mortgage payments. She recommends they wait until they have at least a 20 per cent down payment, to avoid mortgage insurance fees.

"People tend to rush" into buying a home, says Ms. Stefura. "You don't want to put that kind of pressure on yourself," until you're sure you can manage it.

Mr. Jaramillo says they plan to delay a house purchase for a few more years.

"We are fearful of becoming house poor as we try and live off one income," he says.

His advice to others looking to pay down debt and save for a home is to make a budget – and stick to it.

"Knowing where your money is going is the best thing you'll ever do for your finances," Mr. Jaramillo says.