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Consumer debt paid Off… Now what?

I recently accomplished a major milestone, I paid off all my consumer debt! I made sure not to carry balances on my credit cards and not let debt get out of control. But I did use my credit lines to buy a car, help pay for a wedding, get renovations completed, and to prepare for a newborn. I had a small amount of college loan debt to finish off as well.

With parental leave coming to an end soon, I knew I would need to eliminate debt to be able to afford to have a parent continue to stay home to look after our son. To both pay off our debts and prepare for living on one income, I simply used the maternity leave and parental leave payments to reduce the debt. Since we were used to living without the extra money, we had to look at what we should do next, especially over the next couple of months while we still received the extra income.

The first thing we’ve done is open a TFSA with Tangerine (use this link for an Orange Key worth up to $50in bonuses and 2.4% interest for 6 months) to use as an emergency fund and for annual expenses like preparing for Christmas and life insurance. This will help ensure we won’t have to dip back into our credit lines when major expenses come up, whether it’s repairing our car or paying our property taxes.

The next thing I’m about to do is set up my child’s RESP. Delaying on this has been due as much to procrastination as it is to paying off our debts first. But now that we’re focused on putting some money aside, this is a good time to get it done. While I plan to set up a TD e-Series RESP, I recently found out that I’ll need to set up a GIC account as well in order to receive the Alberta Centennial Education Savings (ACES) grant.

After those savings accounts are set up and we get some money put away, the next thing we have to accomplish is paying down the mortgage, freeing up more HELOC room for investing through a Smith Manoeuvre.

Have any readers come to similar financial crossroads? What did you decide to do when looking at your financial situation and looking for the next goal you wanted to take on?


  1. Tian

    Start saving to buy land. A nice piece of rural property with good water such as a stream, pond, river’s edge. A small structure that can be improved upon, and about 100 or so acres.

    Your child and grandchildren will thank you for it. Urban living will become a thing of the past in their lifetimes. They’ll need land to be self-sufficient.

    • Babu

      Hi Tian,
      Thanks for your insight.
      Just wondering if you please show some light about the possible rural areas (and in which province) that I can think off.


  2. Jeff Kosola

    Awesome job! I’m happy for you.

  3. Financial Samurai

    Congrats man! How much consumer debt did you have, and how long did it take to pay it off? Do you have a post talking about your pay off system?

    Best, Sam

    • Tom Drake


      It never got terribly high, but never really got paid down either. We would use any extra money to pay down the credit lines, but as major expenses came up we would pull some back out.

  4. Balance Junkie

    Congratulations on clearing your consumer debt Tom! I can’t say I’m a fan of the Smith Manoeuvre, but it sounds like you have a great plan mapped out. 🙂

  5. Jen


    When we finished paying off our consumer debt, next in line was to establish an emergency account for 6 months of expenses.

    Once that was done, we worked on increasing our RRSP contributions (no kids for us yet) to make our maximum contributions each year, and fill up the backlog. We fall into the highest, and 2nd highest tax brackets, so getting that break on taxable income was huge for us. If we had kids, the RESP would fall into here as well, both to reduce our taxable income, and to get the maximum grants from the government.

    After that was filling up our TFSA room and tackling the last of my student loans, and now that those are done, we’re on to paying down our mortgage as quickly as possible.

    Keep us posted with what you end up doing and how it’s going!

  6. Money Reasons

    Nice job! I enjoy conquering milestones, especially financial ones!

  7. PT

    This is great! Congratulations!
    We were in a similar situation just last year. It definitely helps to have a few savings goals established, which it sound like you do.

  8. Edwin

    That’s an inspiring story. It motivates me to paid up all my debt. Thanks for sharing it.

  9. James

    once i got out of debt about 2 and a half years ago. the first thing i did was have a beer to celebrate then i got down to business.

    the most important thing for me was to never go down that path again so i set up a monthly savings account. i paid all my money into savings and then paid bills out of this.

    this allowed me to set up a nice savings each month. easy in theory but much harder in actuality.

  10. Max

    Congratulations! The next goal for me would be to invest in property. Maybe buy to rent, and aim to pay off the mortgage within 15-20 years. Beats saving for a pension.

  11. Sunny

    It is good to hear that you have cleared your consumer debt, and now you can think of saving that much amount in something constructive which support you in future.


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