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Today I have another session of M$D Dollars & Debts Interview Series. This interview features Josh over at The Investor Kid. Josh has a degree in philosophy and has a passion for becoming debt free. Aside from his passion for becoming debt-free, he also has a passion for new financial apps and services available to ordinary folk like himself! He believes there’s so much on the market today that can help newly minted investors make the most of their money. He’ll be cataloging his experiences over the next few months/years on his blog. If you’d like to follow along and read his reviews of the various apps and services he’s tried before diving in yourself, check out some of his posts!
The science major asks “Why does it work?”
The engineering major asks “How does it work?”
The philosophy major asks “Do you want fries with that?”
Dollars & Debts – Introduction
Philosophy majors are notorious for making excellent employees at fast food joints. It’s a stereotype, but there’s likely some truth to it! With that being said, did you know that a degree in Philosophy can actually qualify you for a job as an accountant? Neither did Josh! From Aristotle to Accounts Receivable – he received an offer for a paid internship at an accounting firm a few months after completing his degree and was hired as a Tax Accountant straight out of the internship. He worked in the client financial services industry on Canada’s east coast for about a year and a half before packing up and moving across the country to flee the harsh east coast winters! He is now working as an accountant for a tech company on the west coast.
When did you start learning about money?
After I spent way too much of it and had to deal with the consequences!
I had accumulated a decent amount of student loan debt over my time in school and rather than being careful with my loan money I spent it. It’s amazing how easy it is to spend money when it isn’t your own! Once I was faced with the looming reality of loan repayment, I started to realize the importance of being financially responsible. Had I learned a few years earlier, I’d probably have a lot less debt today.
What got you started on your financial independence journey?
It was in my first 6 months or so working as an Accountant that I realized the importance of becoming financially independent. Naturally, working in my chosen field meant I was dealing with money day in and day out. I was surrounded by people at my firm who had achieved financial independence at such a young age. People younger than me were buying houses with hefty down payments. I started asking myself what I had been doing wrong. The answer? I hadn’t been planning for my future! I’d been too busy living in the moment to set long-term goals for myself.
I decided it was time to open a savings account. So that’s just what I did! Then I opened an RRSP (Registered Retirement Savings Plan) account, which is similar to a 401k, and then a TFSA (Tax-Free Savings Account), which is similar to a Roth 401k. I had separate goals for the money I deposited in each account, and I started making regular monthly payments to each. The more my accounts grew, the more I wanted to deposit into them. I loved seeing my balances grow in each so I started scaling back my purchasing habits so that I could save more!
Related: A Beginners Guide To 401K Plans
How much debt did you have?
The entirety of my debt is from student loans. I’m lucky enough to only owe around $50,000 – $60,000 in total, as I know some people have much more debt. However, at an average salary, paying off $50,000 in debt can still be quite an undertaking!
How much have you paid off? And what steps did you take to do it?
This may sound strange to some, but I actually haven’t paid off any of my student loan debt. That being said, I’m in a position to pay off about 30% of it in a lump sum when the time comes. I’m currently not paying any interest on my student loans thanks to Canada’s Student Loan Repayment Assistance Program (if you’re a Canadian government student loan holder, I recommend you look into the program!) Because I’m not paying any interest on my student loans, I decided I’d be better off saving/investing my money and earning interest on it instead!
So over the past year, I’ve been making student loan payments to myself. Every time a paycheck comes in, a percentage of that money goes into my student loan fund. I started by putting about 25% of my earnings in savings each month, but that quickly grew to around 40% (some months even more!). After 8 – 9 months of putting my loan payments into savings, along with the full amount I received back on my last tax return, I had accumulated $15,000.
I will likely be required to start making payments on my student loan in the next year or so, and by that time I plan to have at least $20,000 to draw from for loan payments in addition to my other long-term savings and investments.
What are your money goals for the next year and long-term?
I have three long-term financial goals:
(1) Save for retirement
(2) Save for a down payment on a house ($50,000 – $60,000)
(3) Pay off my student loans ($50,000 – $60,000)
In addition to my short-term goal to save $20,000 as a student loan repayment fund, within the next year I would like to build up an investment portfolio for myself of around $10,000.
If the interest I’m earning on my savings/investments is higher than the interest I’m paying on my student loans, I will make the minimum payments required and allow my wealth to grow. If the interest on my loan ends up being higher than what I’m earning on my savings and investments (which it shouldn’t), I will have a fund to draw from to make a lump sum payment on my loan. Though at this time I don’t anticipate that being the best course of action for me.
Related: Debt Payoff Methods
What obstacles have you run into that you had to overcome?
About a month after I started my internship at the accounting firm I began dating someone long distance. My significant other only lived an hour and a half away, but I ended up having to travel to visit on weekends that I wasn’t working. Some months I didn’t travel much, but several months I spent every weekend traveling between cities. This ended up being a major cost to me and definitely set me back in my efforts to save.
I started making changes through the week in anticipation of my trips on the weekends. If I was going to be traveling any given weekend, I would claw back my spending through the week. I knew I’d be eating out or having drinks when I went to visit and would at times be paying for two people. With that in mind, I would stop eating out through the week and save my spending money for the weekend. It ended up making my visits that much more special.
I’ve also recently packed up and moved straight across Canada, from the east coast to the west coast. I started a new job on the west coast and I am much closer to family but moving across the country was costly. I was, however, able to cover the majority of my costs by selling furniture and even my car! I’m now using public transit until such time as I decide I’m ready to purchase another car for myself.
Any words of advice for those that are afraid of starting their journey or are feeling like they aren’t making enough progress?Firstly, you don’t have to be making a lot of money to start saving and preparing for your future.Click To Tweet
I guarantee you my salary was not impressive when I started working as an accountant in the client services industry! Even so, it was then that I decided to rein in my spending and think about the things I wanted a few years down the road as opposed to the things I wanted today.
Secondly, it can be beneficial to cut back your spending in some areas, but you have to set yourself up for success. Set a goal for yourself, or multiple goals. You may want to go on a big trip, or you may want to purchase a house, or perhaps you’re already thinking about retirement. Start by envisioning something that you want. Write that vision down to remind yourself of it. If you’re anything like me, it won’t take long before you become passionate about seeing your savings and investments grow.
We need to set realistic goals for ourselves and as we start to strive towards them we begin to develop healthy spending and saving habits.
Trust me, if I could do it so can you! I’m not debt-free yet but I’m on the right track!