pay off debt
Money & Finances

Paying off 10k during a pandemic

I’ve read titles like this before.  You’d have to make so much money in the first place to be able to pay off debt like that, right? I never would have believed it was possible on a low income until I did it myself!

When I shared my success with the good folks of “Thriving on Minimum Wage” I received such an overwhelming response. Hundreds of people liked my post and congratulated me which made me feel like I had accomplished something so much greater. I hadn’t just bought a home for my family; I had shown so many hopeful people that it really is possible!

But I had one skeptic. “I’m sorry I’m having a really hard time believing you managed to maintain ur monthly bills plus pay down $1100 extra per month on minimum wage.” She said. And I get it, I wouldn’t have believed it either.  So I logged in to my bank account and took a look at the money coming and going to see what changes enabled me to pay off debt.

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My baseline income in the months before Covid was around $2500/month. That is income from working full time as well as child tax for 2 kids. Rent and bills varied between $1000 and $1200 depending on the power bill, around $400 for childcare, and an average of $900 on other spending (food and everything else). There was pretty much nothing left.

Then the pandemic hit, schools and daycares were closed, and shopping became essentials only. I was lucky that my partner worked from home and was able to care for the kids, and that my employer adapted to a safe working environment, so I was able to keep earning an income. I stopped going anywhere but work, home and one grocery store, and I hated even going there. And between the stress of working in such uncertainty, and a massive case of mom guilt because “everyone else” was at home with their kids, frankly, I became depressed. My spending dropped to under $500/month and I wasn’t shelling out on childcare anymore. On top of saving hundreds each month, extra money came my way. The extra GST and Child tax credit from the government came in and went straight to my credit card, and my employer gave everyone a $2/hour bonus for working during Covid shutdowns, which later turned in to a permanent raise. By the beginning of September, I had paid down $9000!

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At that point we began talking more seriously about preparing to by a house. I did a lot of reading on where my credit score needed to be and how low I needed to get my debt load, and what I could probably afford.  It seemed like it would be possible for me to actually buy a house within the next year if I kept up this pace.  Then the cutest little house came on the market, below my projected budget and I just had to see it. I jumped headfirst, unprepared into the real estate game, which was the most stressful and rewarding thing I’ve ever done. 

Over the next 3 months I scraped together every penny. I kept on working even though I desperately needed a break, I pushed back the mom guilt and I (gasp!) skipped bill payments to juggle my cashflow. My credit cards were off limits as a condition of my mortgage, and I had to somehow come up with almost $3000 in expenses and closing costs. The day before closing, my mortgage specialist called and said if I could manage to get my credit card down an extra $1000 she could give me an amazing rate of 1.79%, so I transferred over some of the money I had put aside for closing and crossed my fingers that I would still have enough for the lawyer. Thanks to a $300 gift from my mom and $20 I found tucked in the bottom of my purse, I closed the sale with about $8 to spare!

I did not start out the year thinking I would be living in my own home by the time 2020 ended, my main goal was just to pay off my debt and get in a better position to buy in a few years time. In an ideal situation I would have been debt-free, had a 20% down payment saved and had pre-approval from a mortgage lender before I ever looked at a house. But raising a family on a low income is never ideal and I took a leap of faith that it would all come together in the end. I know that it was a privileged to continue earning an income through the pandemic, and the boosts from the government helped me tackle my goal a little faster, and if this had been a regular year it probably would have taken me much longer. But that doesn’t mean that I never would have reached my goal.  I would still to this day be paying off debt and dreaming of a home of my own, and if it wasn’t 2020 it very well may have been 2021.

Ask yourself, each time you open your wallet: does this purchase get me closer to or further from my goals?

With Love

Melissa

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