This week we are excited to share another story from our Young Debt-Free Families interview series. Calm ‘N Cents joins us from north of the border in Canada to share his family’s story about a variety of topics including living debt free – no mortgage.
Calm ‘N Cents has quickly become one of my favorite follows on Twitter. Our views seem to align with regards to paying down debt (and a mortgage), the benefits of a 9-5 career, the importance of increasing income, and the need to create a strong safety net with an emergency fund.
When Calm ‘N Cents agreed to participate in this interview, he had just received the sudden news that he had lost his job. A job that paid well and one that he thought was stable. He shared on social media the raw emotions that came with that sudden job loss. It was a stark reminder to us all that it’s critical to have a strong financial foundation in place because you never know when the rug may be pulled out from under you.
“Cents” responded to this interview just a few days after finding out about his job loss. Please read on to learn more about his young family’s story. I hope you enjoy it as much as I did!
Young Debt-Free Families Interview with Calm ‘n Cents
1. Start by telling us about yourself. Please include any details you feel comfortable sharing about your family, job situation, income level, and amount of debt paid.
We are anonymous so you can call us “Calm” and “Cents”. Calm ‘N Cents refers to our approach to finances and life, generally. We focus on simplicity and frugality.
We are a Canadian couple in our 30s (32 and 35) with no kids (may change one day), two cats, and no debt, including NO mortgage, living in a small town in rural Ontario.
Calm works full-time as a Data Analyst. Cents was recently laid off; he was a mid-level government manager for the last number of years.
Our current gross income is ~$71,000/year, down from ~$140,000. Combined, we have paid off $17,000 in student loans, done as a lump sum in 2015, and a $65,000 mortgage (on a $270,000 house), paid off in 282 days between September 2018 and July 2019.
We also intentionally carry no balance on our credit cards and have never paid credit card interest.
2. What inspired you to payoff your debt? Did you have a specific moment where you decided to make it a goal to payoff your debt?
Calm’s student loans totaled $17,000 and were incurred to fund her undergraduate degree. The motivation to pay off the student loan debt arose when she realized that she could do a Master’s and use the funding package and external scholarships to pay off her undergraduate debt. She made a goal of paying off her student loans before we got married, and did so 3 days before-hand in 2015.
The motivation to pay off the mortgage was mutual and was born out of security. Calm grew up poor and badly wanted to own out-right the first house she purchased. Cents is debt-averse and does not like to owe people money. Combined, the motivation allowed us to throw everything we could into first, the house down payment of $205,000, and then the $65,000 mortgage to ensure that, if something unexpected arose, like a surprise lay-off, we would have zero debt to worry about.
3. How did you stay disciplined throughout the process to pay down your debt?
Spending discipline was something we built into our financial approach in 2013 when we were in grad school and moved in together. We had limited funds and had to apportion our income to the areas that provided the most practical value.
As our income increased, we made the conscious choice to continue living like cash-strapped graduate students, which allowed us to eliminate lifestyle creep completely from our finances. We were able to take every pay raise and put it into savings, which eventually became a debt-free/mortgage-free existence with a growing index ETF portfolio.
4. Were there any apps, tools, or websites that were especially helpful in paying down debt?
We did not use specific apps, tools, or websites. Most of our budgeting was done through Excel spreadsheets built by the two of us to track monthly income and expenses.
Tracking monthly income and expenses was very important for us because it allowed us to see how much we were saving and spending, and where we could cut further, or spend a little more to fit our lifestyle. It also afforded us the ability to see when we reached a specific milestone, like having enough money to pay off a student loan, or having enough of a lump sum to put it in a tax-advantaged account.
Since our 2018 house purchase, we have been using MadFIentist’s Networth Tracker, which we have augmented to fit our own purposes.
5. What advice would you provide to other young families who are overcome by the stresses of debt?
The best advice we can give is to start by tracking your money.
Document your monthly income and expenses for a three-month period to assess your financial situation and then look to where you can cut back or whether you have to consider supplementary income sources (side hustles, etc.)
In many cases, people get into debt because they do two things: 1) They have too many wants; and, 2) they fail to understand the flows of their money.
Understanding where you’re over-reaching on #1 and knowing the nature of #2 will allow a family to better approach its debt.
When paying off debt, we suggest starting with the highest interest debt first and working back to the lowest. You’ll get the highest return from your money putting it into the highest interest debt first.
6. What was the most challenging part in your journey to become debt-free?
The hardest part about becoming debt-free for us was finding two well-paying jobs and stability in one location for long enough to really build up our financial reserves. Having a disciplined spending mindset and being natural savers was a great start, but at some point you just have to make more money.
Once we were able to find that stability and buy a house, we used our methodical approach to knock out what debt we could. Luckily, we were able to do so before something unexpected arose, like a job loss.
7. How has becoming debt-free changed your family’s life? How do you expect it will impact your family’s life going forward?
Becoming debt-free has reduced stress and provided us with more security, increased monthly cash flow, and added financial flexibility.
Not owing any money to anyone on a regular basis is one of those life benefits that is qualitative and rarely discussed in a numbers-dominated world. If something were to happen, we know we own the house and no lender has any interest in our property.
Having no debt or mortgage also frees up monthly cash flow that would otherwise go to mandatory, regular debt service payments. Instead, we have the flexibility to put it where we value it, rather than where a bank does.
8. What are future plans for your family after becoming debt free?
Currently, our plans are to stay debt-free; to continue to invest in index ETFs; to find Cents a new income stream to allow us to save more; and, to work our way to FI.
9. Are you pursuing (or have you reached) financial independence?
We are definitely pursuing FI. Prior to Cents’ job loss, we were on pace to retire in late 2024. That will likely be bumped back, unfortunately, but with some luck, not by much.
10. Is there anything that you haven’t yet covered that you’d like to share?
Yes. It is an aspect of finances that is paramount to debt-freedom and that is the emergency fund.
Between 2013-2015, we regularly had a Contingency line in our budget for emergency costs. That became an emergency fund as we went along.
Many people will run into debt issues when they do not have enough money available to cover unexpected outlays and may have to resort to using a credit card or pay-day loan. These types of debts run 19-500%+ and can really bury your finances.
Make sure you’re making regular debt payments, but also ensure you’re building up your emergency fund at whatever pace you can so if something arises, you don’t have to take a step or three back on your debt to deal with it.
11. Where can we learn more about your story?
We have a blog that we currently use only for quarterly life updates; however, there is a lot of solid information in our #GradSchoolFinance series pertaining to how we started our financial journey in 2013-2014, along with posts on house purchases, the rationale for paying the mortgage down quickly, and how we managed to pay our mortgage off in 282 days.
The best place to learn and follow us is on Twitter: @TheCalmNCents.