Taking on the 1% Challenge: Update 2

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As the six or so readers of this blog might know, I have been doing the 1% Challenge for the last several months. Put forth by Paula Pant over at Afford Anything, it is a challenge to bump up your savings rate 1% each month for a year or until you hit a target savings rate.

I have not set a target savings rate per se, because I am still in early days of getting my financial life together. Figuring out what my spending looks like from month to month is still a mission, making it super hard to predict a reasonable and regular savings rate for my income and lifestyle.

But I still needed some big time motivation to bother increasing my savings rate.

Why?

Because I have a thousand different things I am saving for right now. Seriously, count them. A thousand.

A down payment, a new laptop, a wedding, vacations (yes, plural), and a car. Oh, and I’m still getting rid of that last 10K of student debt.

This blog is called Making it Rain for a reason, folks. I work hard to earn money and I like to spend it on things I enjoy and people I love. Yes, some of my money goes to the necessary evils like retirement funds and investment accounts but that’s because future Kate is also down to make it rain.

Let’s be honest, though.  Saving is boring. IT JUST IS. And the only way I seem to be willing to increase my savings to reach my many goals is by finding an extra $30 or $40 a month to save here and there. Beyond that, I’m out.

Hyper-frugality is not for me, and I do not have a high enough income to save a significant portion without making big cuts to my lifestyle.  I have already made some compromises like not buying a car in a mission to pay down my student loans faster, and I am just not willing to trim down my lifestyle anymore.

So 1% at a time it is.

If you want all the gory details of how to calculate your own savings rate and what I include in mine, go check out the original post back in March here.

Two months into the challenge, my first recap saw me hit the following savings rate:

March Goal: 30%

March Actual: 29%

 

April Goal: 31%

April Actual: 33%

 

I fell a little short of my goal in March, only to jump past my target rate by a couple percent in April. Despite the numbers being a little wonky, I was pretty happy with this because it is still absolutely crazy to me that about one-third of my income is going toward savings and debt repayment.

While those numbers were a little uneventful, check out my standings from the last two months. Without further ado, my savings rates from May and June:

 

May Goal: 32%  

May Actual: 34%

 

June Goal: 33%

June Actual: 41%

 

Whoa! Fireworks! Champagne! I know, you are all very impressed with my 41% savings rate in June. How did she do it, you might ask?

-Pared down her grocery bill?

-Only ate at a restaurant once or twice?

-Miraculously negotiated cheaper rent overnight?

 

Not a single one of these, my friends.

In fact, June was one of my spendiest months of the year. I had a pricey trip to Toronto for a family visit that included lots of picking up the tab for a family birthday and Father’s Day and a round-trip Via Rail ticket.

You know what really helped me destroy my savings rate goal?

Earning nearly $2000 more in June than I usually do in a given month.

Thank you, side hustles.

In fact, my savings rate could have been much higher in June but between travel, birthdays, Father’s Day, and other summer shenanigans, it was not my first priority and I wanted to enjoy some of my hard-earned dollars.

Lesson of the day: saving more is way easier when you earn more.  June’s income was totally out of the ordinary (and May’s was actually quite high, too) making it way easier to crush those savings rate goals.  Even though my income is probably going to simmer down over the summer, I am still going to shoot for my goal of 34% in the month of July.

This is going to take a lot more finagling than when I was bringing in the big bucks, and it might not happen when I am earning numbers much closer to my regular salary, but let’s see how it goes!

How are you all doing with your savings rate goals?  What percentage are you saving right now and how have you been able to increase this over time?  Let me know in the comments!

 

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How to pay off $7,000 of student loans in 7 months

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I hit an important financial milestone about a month ago. In early May I made a hefty transfer of $1000 toward my student loan, and this payment pushed my student loan balance comfortably below $10,000.  That means I have paid off $7,041 of debt in 7 months.

While getting my loan balance into 4-digit territory is an important milestone, I almost didn’t feel like it was totally worthy of celebration because I have totally been here before.

Let’s rewind three years.  By early 2014, I had spent the last four years working overseas and, even though I was making it rain just about everywhere except my savings accounts, I was still smart enough to be throwing money at my student loans.

I managed to get the balance of my student loans from my undergraduate degree to around $3,000. I was this close to getting it paid off in its entirety…

…and then I went to grad school. And guess who took out more student loans? This girl.

It has been crazy frustrating to be shackled with piles of debt again, but I am coming at it with a few more years of financial mistakes wisdom under my belt this time.

And I am paying back my loans on a pretty normal income. I do make a good living. Full disclosure, it is higher than the median individual income in Canada. But I do not have the luxury of earning six figures (or let’s be honest, anywhere remotely close to that). I do not have the benefit of having a high-earning partner, or living at home with my partners, or one of myriad factors that often help people destroy massive, intimidating sums of debt super quickly.

I toyed with my budget so many times, trying to figure out how to find hundreds of extra dollars that just didn’t seem to exist. I simply did not have the disposable income to make huge payments toward my debt every month.

Or so I thought. Since going into repayment last November, I have averaged just over $1000 per month toward my debt. Seem crazy? It might be, but I think it can be replicated if you are tenacious and have sexy dreams about getting rid of these monthly payments for good.

Let’s walk through a few of the ways I did it.

HOW I DID IT

Upped my minimum monthly payment immediately.

In Canada, the federal and provincial government wants you to pay back your loan for the next 9.5 years. No freaking way. I am getting this thing gone in a couple years, and you can too.

Go up your monthly minimum payment, even if it’s only by $20. Pay a little more than you have to. Your framework of how much you can really manage to pay back every month will slowly start to shift, and you may find that you can even throw a little extra at it every now and then. When I changed my monthly payment to $500, it was a stretch for my budget. I really wondered whether I would be able to make it work for more than a couple months, and I thought I would have to lower it back down again to $400 or less. As it turns out, I have not only been able to put $500 toward my debt every month but way more. Rock on.

Side-hustled my face off.

Side hustling is an effin grind. I know some people love their side hustles. I do not. I have about four of them, and they are all okay. I freelance write, I grade standardized exams, I write standardized test exam questions, and I also do contract-based research. P.S. I also spend about ten hours a day getting to and working at my day job. Suffice it to say, I do not have a lot of free time. This is not my first choice, but this is a compromise I am willing to make for right now to get this debt gone. With my side hustle funds coming in at $2,824 in 2017 thus far, they are a huge part of the reason I have been so successful with my debt repayment.

Did not buy a car.

This one was a killer. In case you had any illusions about Canadian winters, walking and taking public transportation to work through a six-month-long Ottawa winter is no joke. It involved multiple layers of pants and navigating over mountain-like snowbanks. It also means that what could be a 15-minute commute in a car is a 45-60 minute commute by public transit.

Needless to say, there were many moments I was desperate to buy a car. That bus ride to and from work certainly gave me plenty of time to daydream about car ownership.

But not buying a car is the reason that my transportation expenses average a mere 6.6% of my monthly expenses. That frees up a lot of extra room that would simply not be possible as a car owner.

Used my money for other things, too.

We all know the story about so-and-so who paid off a bazillion dollars of debt in 17 seconds, but that’s just not my jam. Those stories are amazing and inspiring and have played a major role in my personal debt repayment journey. But there are so many other things I want to be doing with my money right now, too. Listen, I haven’t just been paying off my loans and buying boxed wine over the last seven months. I have also:

-Contributed to my retirement fund.That’s right, I’ve transferred about $1,500 to my retirement account in seven months. This is less than impressive to many folks. For someone who did not HAVE a retirement account until seven months ago, I am unreasonably happy with myself about this.

-Built up my emergency fund. Yes, I have all the mixed feelings about my emergency fund. But there are some possibly imminent changes coming up in my life, including a potentially expensive move to Vancouver…and mother of God, I am so glad I have suffocated my spendy side for the last seven months and not run off to Cuba with this money. My current and future self, especially any future version of me living in Vancouver, are already thanking me.

-Built up a travel fund of $800. To appease my aforementioned travel beast, I have also been tossing some extra moolah into a travel fund. There are lots of potential trips on the horizon and it feels so awesome to know that when the time comes to charge a plane ticket or a hotel stay, I’ve got it covered.

-Saved $700 toward a new laptop. The one I am currently tapping away on makes legitimate crunching noises. If anyone else has had this happen with a 6.5-year-old Macbook, please let me know what my future holds. In any case, my baby is hanging on for now but it’s just a matter of time.

-Traveled.  I have lived in a bunch of different countries, and traveled to even more. Traveling is a huge part of my life and I knew it would be integral to continue prioritizing this even as I paid down debt. In the last seven months, I have covered Washington DC, Kuala Lumpur, Malaysia, and also made the rounds to the more local but lovely cities of Toronto, Winnipeg, and Quebec City.

Indulged in good beer, cottage weekends, and nights out. Cause you gotta enjoy life.  Nobody here is saying that you have to live like a recluse to pay down debt quickly.

 

Taking charge and paying down my student loans has been difficult. It has been all-consuming at times; I even went so far as to say that it has affected my relationship with my partner. So I hope you take my last point to heart and are using your money for other stuff, too.  Be kind to yourself, your family, your partner on your debt repayment journey. It will get paid off eventually.  

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How are you doing with your debt repayment? Have you been able to pay it down quicker than you imagined or is slow and steady winning the race? Let me know what’s working for you in the comments!