Werner C. Duever

Financial Security Advisor
Investment Representative
Freedom 55 Financial

My debt free journey

When I was young, I didn’t have a worry in the world. My parents were good providers and all my needs were taken care of. We always had good vacations in the summers and we owned a snowmobile when we lived in northern Ontario, and my parents got me a ski membership when we moved to London. In the ‘80s my father bought a sailboat, so summers were now filled with sailing adventures.

 

I completed my engineering degree in 1985 and after a small period of time I found my first engineering job in Mississauga, Ontario. I had the good fortune of having high paying jobs with British Columbia Rail and Canadian National Rail while going to university so I was able to finish school with no debt. Then came my first engineering job and new found freedom from my parents and making money. I quickly purchased a new car after my Honda Civic broke down at a Chrysler dealership (instead of trying to keep in working a little longer and saving for a newer car) and got an apartment in Mississauga that was a little more than my budget would allow. Obviously I now had a credit card and life was good, or so I thought. The debt kept piling up and I took a roommate to help split the cost of my apartment.

Fast forward to the 1990s and now my engineering career was in full swing and I was now enjoying my second new car, a 1996 Honda Civic where I was making monthly payments. Although I did enjoy having a new car again it still drove me more into debt. I also borrowed money to invest in a registered retirement savings plan (RRSP) index fund at a bank and invested unwisely into investments that dropped in value. I still owed money on the RRSP loan which I put on a line of credit. It took a few years to pay back this loan and I had nothing to show for it. It was a real blow to my investing future but not one that completely took my belief away from investing.. Things started to turn around for me in 2005 when I bought my first home with the encouragement of my mother and father – one of the best financial decisions I made! I was now starting to build equity and I had a home I could call my own instead of paying rent to someone else. I did however buy another new car while I was renting, a 2003 Honda Accord – not one of my best financial decisions and I had a monthly payment commitment again after purchasing the home. I bought a new home – because I love new things and really enjoyed the process of picking out my own decor and cabinets. I watched intently the construction of the home.

In 2006, I married my lovely wife and she brought a whole new financial dynamic and awareness to my life that I did not have before. Before we met I had about $30,000 in credit card debt and was pretty content to pay the minimum required payments. Even so I did have a desire to be debt free I never seemed to be able to get out from under the credit card debt load. I didn’t have an emergency fund in place so when an unexpected need came up I used my credit cards or line of credit. My wife had no credit card debt and only about $5,000 owing on her car. She shared with me that “she would be in tears if she could not pay off her credit cards completely with her next pay check’. So our two financial philosophies collided and our first few years of marriage were a bit strained. Fortunately we did get a windfall of about $10,000 from a London Life insurance benefit from the passing of a family member and a generous severance from my former employment in 2008 which pretty much wiped out our credit card debt.

Today we live within our means and save for our trips or purchase before we travel or buy. When we do use our credit cards for convenience but know that we can pay off the cards completely with our savings. I have grown to hate to pay interest on debt and rather keep that money in my pocket. We have a generous emergency fund in place and if an emergency comes up we know that we will not have to go to a bank to help out but instead we can use our own funds. And at the same time our emergency fund is growing because we have placed the money in segregated fund policies* and continue to make regular monthly contributions.

I have a whole new appreciation for my wife and her determination to stay out of debt. I really appreciate her steadfastness to remain credit card debt free. Occasionally we do have to use our line of credit to pay for unexpected charges like repairing our pre-owned Honda Accord last year. However, we are diligent to make sure the debt is paid off as quickly as possible and we plot the debt repayment on a spreadsheet and review every week how we are doing.

There is only one more debt hurdle for us and that is our home loan and we are now vigorously attacking it and paying it down with any extra money that comes our way. I can do this conveniently with online banking and enjoy making each extra payment. I am also keeping track of the monthly interest owing on the loan (money that will eventually be put back in our pocket and not someone else’s pocket). At the same time we are contributing to our three savings baskets: retirement, emergency fund and fun/vacation fund.

It is a good way to live being credit card debt free and I am now starting to experience the lightness I felt as a child when I had no debt and worry in the world. I am looking forward to the day when we have no debt at all and we have an asset base large enough to provide an income stream to pay for our lifestyle. Even so, we are enjoying today and the journey we are on to living a debt free life!

*Benefits of Segregated Fund Policies