Wednesday, July 11, 2007
Aftermath
First of all, thank you for all of the congratulations and phone calls. You can imagine what being out of debt means to us.
Now, if I may address the most common question, how did we not know we were close to being out of debt?
Well actually, judging solely by our loan balances, we weren't close to being out of debt. However, in addition to aggressive repayment of our debt, our financial guru also had us putting a good percentage of our income into savings. These were divided into short (taxes, emergency fund), medium (mat leave, house) and long term (RRSPs) savings.
Yesterday, it occurred to me that we have exactly as much saved in our short and medium term savings as we are in debt. We wondered if it made sense to transfer those savings to pay off the remainder of the debt. If we were no longer paying on the debt and its related interest, our savings will be replenished very quickly. We'd already proven how quickly we could build up savings despite our substantial debt payments, just by keeping control of the spending.
The worry is, of course, leaving yourself vulnerable by spending your savings. Well, we still have a significant safety net in our RRSP's, which we don't touch, and the income stored in Trevor's corporation, which can continue to pay him should there be a job loss. And given that a significant chunk of the next round of paychecks does not have to go to debt, we'll be in the black all the quicker, so long as we don't spend.
So we checked with our financial guru and when she gave us the go-ahead, it was done and done! We are at zero.
The end!
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