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Photo by: Andrea Chiu

OK, I ended up going on that vacation which is why I haven’t written a new blog entry for a few weeks.  Sorry for the lack of entries and thank you for your input on my last post. I want to continue on this topic of whether you or me deserve a vacation while in debt. As we can see with all your comments, everyone’s got an opinion and they’re pretty diverse.

I asked Gail whether she thought a girl like me deserved to go on a trip and this was her response:

For a girl who calls herself an Unspender, you’re doing a lot of shopping: there’s the trip to Hong Kong, the new laptop (yeah, I know, the ipod was free), the wedding in Calgary and now the trip to Vancouver. Only you can decide if these are worth the long-term costs. It’s your money and your life. But don’t delude yourself. If you are spending money you haven’t yet earned, you’re not going to be in a Happy Place when a crisis hits. And if you think having a 5-year-old laptop was a crisis, think again. You may think you NEED a vacation, but you WANT a vacation. You NEED a roof, enough food, and clothes to keep you warm. You NEED to be able to get to and from work. (Okay, if you work on the new laptop, it might be a NEED, but only if you couldn’t work on the old laptop.) I’m not going to tell people they shouldn’t take vacations when they have debt. I do believe you shouldn’t spend one iota on unessentials until your debt is repaid — and while your vacation is a frugal one, you seem quite resigned to being in debt for a long time. Hmmm. Little Debt Fatigue rearing it’s ugly head? Have you calculated what it’d take to be out of debt in three years? Two years? One year?

Now I don’t disagree with Gail. I know the difference between a need and a want, but I don’t agree with the idea that a person in debt should not spend any  money on any unessential things until they’re in the black. That approach may work for some people and I tip my hat off to them. Unfortunately, I don’t think it’s realistic for me to exclude occasional trips to the movie theatre or a round of drinks with friends. That just isn’t living to me and I know I would be very unhappy and overwhelmed. I think many people feel the same way.

Reader and fellow-blogger Nancy Zimmerman has an approach I agree with much more. She put it well when she left this comment:

What worked for me in the long term – and this goes against almost all financial planners – was to pay just a bit more than my minimum debt payments, and just resign myself to that as part of my life for the next several years, and at the same time, start saving up for things and start investing.

That accomplished a couple really, really important things for me:
1. My money started being FUN and INTERESTING and ENCOURAGING instead of always only about the black hole of debt
2. I discovered what it felt like to save up for something, and go on a trip, and come back without having increased my debt.

Long term, the debt went away, and I still had the savings habit plus a portfolio.

Lots of people will say: don’t do anything but pay off your debt (often said with a judgmental tone!). That makes cold financial sense, true. But even more effective: for you!

I couldn’t have said it better myself. Let me know, would you recommend Gail or Nancy’s approach to becoming debt free? Perhaps you have another way of attacking debt?

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Photo by: Paul Keleher

Saving money while still in debt may seem like a silly idea. Why not put that money towards debt and lower your money paid to interest? But on my journey to debt-free living, I’ve found that almost everyone suggests setting up an emergency fund—even if you’re in a lot of debt.

The logic is that if you are unlucky enough to be laid off, have an accident or fall victim to a natural disaster, you spend your money and not a credit card, line of credit or anything else that will charge you interest. Instead of paying $800+19% interest/month to get your car fixed, you’re just paying $800.

At first, I was tempted to put $1000 into my credit card debt instead of setting up an emergency fund. But the more I read about other people’s debt, the more I realized that many of these people started out in a little bit of debt like me. But then they found themselves without a job or had a medical emergency. They didn’t have an income or an emergency fund to pay for living expenses. Instead of being in $20,000 of debt, they soon found themselves with a mountain of $100,000 or more debt to pay off.

I didn’t want fall into that trap so I deposited my tax return into a high-interest savings account at my bank. I know it’s not much and I admit I’m having difficulty following my budget these days, but It’s comforting to know that there’s money in the bank in case of emergency.

Lesson learned: No matter what, have an emergency fund for those unpredictable situations. You never know what will happen.

The news is not short of articles about debt, recession and every day financial matters. But I was surprised to see that Margaret Atwood is the latest author to tackle money matters. I’ve always respected the first lady of Canadian literature, but wouldn’t call myself a fan. Still, the idea of a talented writer philosophizing about money matters  excites me.  The acclaimed author of The Handmaid’s Tale, Alias Grace and Oryx and Crake will release her new book in October. Titled Payback: Debt and the Shadow Side of Wealth, it is described as follows:

The most prestigious and eagerly anticipated nonfiction series of the year teams up with legendary poet, novelist, and essayist Margaret Atwood to deliver a surprising look at the topic of debt – a timely subject during our current period of economic upheaval, caused by the collapse of a system of interlocking debts. In her wide ranging, entertaining, and imaginative approach to the subject, Atwood proposes that debt is like air – something we take for granted until things go wrong. And then, while gasping for breath, we become very interested in it.

Payback is not a book about practical debt management or high finance, although it does touch upon these subjects. Rather, it is an investigation into the idea of debt as an ancient and central motif in religion, literature, and the structure of human societies. By investigating how debt has informed our thinking from preliterate times to the present day through the stories we tell each other, through our concepts of “balance,” “revenge,” and “sin,” and in the way we form our social relationships, Atwood shows that the idea of what we owe one another – in other words, “debt” – is built into the human imagination and is one of its most dynamic metaphors.

CBC Radio’s Ideas will also be presenting a lecture series to go along with the release of the book. Atwood will be speaking in cities across Canada, all on the topic of debt.

I’ve already reserved my copy at the library and look forward to posting a review.

By Wolfgang Staudt
Photo By: Wolfgang Staudt

Hi, I’m Andrea and like many university graduates, I’ve found myself in a not-so-little financial hole. I’ve got $20,000 of credit card and student debt to pay off and I don’t know the first thing about personal finances. This is about to change. Unspending is the process of taking my money back, one penny at a time. By living a more frugal lifestyle and educating myself about finances (including those confusing terms), I will climb out of debt in the most efficient way I can. This isn’t about restricting life’s pleasures, it’s about being smarter with my money. I know it will be a long journey with a few bumps, but I’m looking forward to the end of the road.