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Repaying $40,000 in Credit Card Debt After Almost Being Homeless

Young people don’t always get the financial education they need about credit cards. This often results in poor spending habits and them incurring avoidable debt. According to Equifax Canada, consumers aged 18-25 have an average non-mortgage debt load of $8,715. What’s more, roughly 1 in every 100 Canadians in the same age group have at least one debt that’s more than 90 days behind. 

Without knowledge about how to use credit cards responsibly, many people are likely to make expensive mistakes. Tom is familiar with the stress credit card debt brings and has learned valuable lessons since. Here’s his story. 

Tom took the saying “you only live once” a little too literally…

“In my early twenties, I was foolish with money—I would buy things I didn’t need or spend money on food and drinks that I shouldn’t have.” 

He isn’t alone as a study by Restaurants Canada found that in 2018, young people under 30 spent 44 percent of their total food expenditures on food and alcohol from restaurants. Individuals between 30-39 spent notably less at 35 percent.

While impulse buying may feel good at the moment, overspending can have long-term effects on your finances.  

It went from bad to worse over time…

“I never gave my spending a second thought until I went back to school (on student loans no less). That’s when the calls began as I wasn’t always able to make my minimum payments,” explained Tom. 

Missing just a single payment can have detrimental effects on your budget and your credit score. It gets progressively worse when you pass the 30-day mark. That’s when consequences such as negative credit report notations and a higher interest rate can set in.

Tom was hanging on by a thread…

Just as Tom finished school, he got separated and had to find his own place. He was almost homeless until unexpected money saved the day. 

“A perfectly timed tax refund cheque saved me from living on the streets because that was all I had to use as a deposit on my own place. I had absolutely no money in savings, and with my credit cards and line of credit nearly maxed, it was only a matter of time before my life fell apart.”

According to the 2019 Canadian Financial Capability Survey, 64 percent of Canadians have an emergency fund that can cover three months’ worth of expenses. However, individuals who are separated, divorced, or single are less likely to have an emergency fund or afford an unexpected expense of $2,000, which was the case for Tom.

Depression set in when he worked hard to fix it, to no avail…

Tom tried to get things under control and thought getting enough work would solve his problems. So, he got both a full-time and part-time job. It still wasn’t enough to dig Tom out of the debt hole he found himself in. 

“I wanted more for myself, but I didn’t know how to make it happen. One time, I even managed to pay my debts down to a healthy level—but they piled right back up again,” he states. 

This isn’t surprising as a recent survey finding tells us Canadians rank money as their greatest source of stress.   

“It wasn’t long before that took its toll on my body and sanity. Once I realized that wasn’t really helping me solve the problem, I became depressed and frustrated.”

$40,000 in debt later, he searched for a helping hand…

Like many people, Tom found out about Consolidated Credit online. 

“I found Consolidated Credit on the internet. I was doing research as I had heard ads for many different companies and wanted to learn more about the various companies.”

Tom needed help with both the debt amassed on his credit cards and student loan debt. The credit counsellor helped him set up a payment plan so he could get the credit card debt under control. That also gave him more budget flexibility to start making the payments for his student loans. 

“When I joined the program, my debts reached a total of $40,000! I had about $17,000 spread out over a line of credit, and two credit cards. The rest was student debt—which was entering repayment mode.”

Consolidated Credit helped Tom control his credit use…

“In the past, I made promises to myself that I wouldn’t use my credit cards, or line of credit—these were all too easy to break. With Consolidated Credit for once, I wasn’t able to access any form of credit, and I had to learn to live within my means.”

It isn’t easy to live credit card free when you’re heavily reliant on them. However, a debt management plan requires you to stop using your cards while you pay off debt. This way, you aren’t acquiring new debt, while trying to pay off old debt. 

“It was a VERY eye-opening experience for me. Not always fun, as I had to say “no” to nights out, or weekends away, but it was definitely worthwhile. For me, the most effective part of the Debt Management Program (DMP) was the structure and discipline.”

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