Cait Flanders reached the end of a tough two-year journey last week when she made the last payment on what was once a crushing $28,115 debt load.
"I thought it would feel anti-climactic but instead I can't stop smiling. I used to lose sleep over how much debt I had… I don't have to do that any more," she said. To celebrate, the 27-year-old Vancouver-based manager of a mortgage rate comparison website grabbed a coffee and drove to see the ocean with a friend.
Ms. Flanders's story of financial turmoil is not unique. But what is exceptional is the discipline and focus she applied to regaining control of her finances – and how that process has changed her life.
Ms. Flanders hit financial rock bottom in June of 2011, when years of living off of borrowed money and paying just the minimum on her credit cards statements caught up with her. At the age of 25, she had racked up just over $28,000 in debt – $4,000 in student debt, and the rest of it consumer and car-related.
"I can't say that I own 50 pairs of shoes or went on amazing vacations. It was mostly that I was living this lifestyle that I could not afford," she said, like paying for rounds of drinks on nights out.
"The minute I realized how maxed out I was and how little money I had left, I knew that getting my first paycheque was not going to put me in a better long-term situation."
Ms. Flanders decided it was time for drastic action. To save on rent, she moved back home for six months. She locked down her spending. "I never shopped, I never even got my hair cut. I was super super stringent and really serious about putting every penny I had towards my debt."
Scott Hannah, the CEO of the Credit Counselling Society in Vancouver, a non-profit organization that helps people resolve their debt and money problems, pegs the average debt load of people who come to see them at between $20,000 and $40,000. But they also routinely meet consumers with over $100,000 in credit card debt.
"As a society, we have moved away from saving for something first and then buying it. People get caught in that trap of instant gratification and then they have difficulty getting out of it."
When interest rates rise, many people will realize how badly they have been mismanaging their money and credit, Mr. Hannah said. "A lot of people are living in a false economy that will come back to bite them."
He described Ms. Flanders's achievement as a "huge accomplishment," adding: "This person had the ability and motivation to do it on her own – not everyone can."
A major source of support for Ms. Flanders has been her personal finance blog, where she tracked her transformation from "being a maxed out, overindulging idiot to becoming a balanced and financially sound woman."
The blog, she says, has kept her honest. "I started posting weekly spending reports and never lie. I have had people call me out for how much I have spent on Starbucks in a month," she said. "If not for my blog, I would not be where I am today. Talking to people about this has been so helpful."
Here are four specific things she did to curb her spending:
1. I avoided shopping malls and online websites like the plague. I knew I didn't have extra money to spend, so I just avoided all situations where I could end up spending money.
2. I left my credit card at home for months. Seriously, as soon as I paid it off, I was almost scared to look at it – let alone keep it in my wallet.
3. I took advantage of student discounts at the gym and started spending a large portion of my spare time there. When I was a student, I was only paying about $28 a month on gym fees.
4. I barely ever went out for drinks. If I wanted to have a few drinks, I brought a bottle of wine to a friend's house. But most of the time, I offered to be the designated driver.
To watch a recent Globe and Mail video with Ms. Flanders, click here.
Today, Ms. Flanders is renting her own condo in a Vancouver suburb. She is dismissive of the suggestion that she reward her achievement of becoming debt-free, saying: "I don't see how this should be rewarded. I spent years doing stupid stuff with my money."
When pushed, she concedes that after years of not shopping, she might treat herself to some badly-needed new clothes. But what she really wants is to accumulate an emergency fund. "I would love to just see some money sitting in my bank account."
Her situation is not as bad as it could have been. Thanks to good advice from her father, Ms. Flanders does have some RRSPs. And because she always paid the minimum on her credit card balance, her credit score is excellent.
Looking further ahead, she plans to start saving for a down payment on her own place and educate herself about investing and saving for retirement. As for the blog, fans can relax. Now that she sees there is a "life after debt," Ms. Flanders plans to keep writing.
"I have never not owed money, well, since I was 19 and got my first credit card," she said. "But now I have to figure out a life that I have never know before – to have all of my money be mine again."
Her advice for others grappling with debt? Don't think of your credit cards like bank accounts. "I know I'm not alone in the fact that I used to treat mine like it was this piece of plastic that could let me do whatever I wanted, whenever I wanted. But at some point you need to pay for it all, so it's better to just save up for what you want and pay with cash."
The toughest part is making the move from just hating your debt to doing something about it. "If you want it gone, you need to make it a priority. There will be good days and bad days, and there will be lots of sacrifices. But when it's gone, your money will be all yours again," she says.
And that feeling of regaining control of her financial destiny, says Ms. Flanders, is indescribably sweet.