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Money issues are real and they are serious. When you are stuck in a bad financial situation, the decision to not follow your dreams of traveling the world has nothing to do with taking a leap of faith, courage, or determination. When your finances are a mess, money (or lack thereof) can make you feel like a prisoner of your own life.

It’s a horrible place to be in. I know, because I’ve been there. In 2011, I made a decision to pursue higher education and left  Canada to get my Masters in London. I didn’t have rich parents to pay for my schooling nor did I have any savings. It was an incredible experience, but I racked up over $100,000 in debt, made up of money spent on tuition, living expenses, and travel. I wanted nothing more than to continue traveling and never have to go back to a corporate job ever again, but I simply couldn’t, the loans weren’t going to pay themselves. I put my dreams of traveling the world on the back burner and concentrated on paying back those dreaded loans.

London, England

Living in London proved to be a tad more expensive than I thought

Today, 2.5 years later, I am debt free and my bank account is finally in the green. I didn’t win a lottery or come across an inheritance. I made some drastic changes to my life and chipped away at my debt one month at a time. It took smart financial choices, extreme budgeting, and a lot of sacrifices, but now as I pack up my life and get ready to embark on a life of full-time travel, I can vouch that it was 100% worth it!

Here is how I did it and how you can too!

Part 1: How to Manage and Minimize Your Debt

Step 1: Consolidate your debt

When I graduated from my Masters I had 3 school loans, 1 line of credit, and 2 maxed out credit cards. Sounds scary and/or of control doesn’t it?  It was! Each loan had a different interest rate and its own repayment schedule and some were charging me exorbitant amounts in monthly interest. I applied for a credit limit increase on my line of credit and transferred the full amount of my credit card debt and one of my student loans to that account. The total amount of debt didn’t change but having 4 loans accounts was better than 6. It seemed more manageable.

Debt Consolidation

4 debt sources and better than 6!

Consolidating debt can come with a lot of financial benefits and it’s something I recommend to everyone that’s stuck with multiple sources of debt. It allows you to get a better understanding of your total debt, helps you manage monthly repayments, and often also saves you on interest payments.

Step 2: Minimize Your Annual Interest Rate

Multiple loans almost always come with different interest rates. Your car loan may have 5% APR interest, your student loan might be at 7%, your personal line of credit might be at 10% and your credit cards at whooping 19.99%. Consolidating your debt sources will undoubtedly help you reduce the overall interest you pay on your debt. If you can find a way to shift your debt from high interest rate loans to lower interest accounts, you can save thousands of dollars in interest payments per year.

Start by contacting your local bank to find out what low interest credit lines you might qualify for. Even if you already have a line of credit, your bank might be willing to increase your balance and allow you to transfer some high interest loans to that line of credit. In my case, I had to demonstrate my ability to pay off some balance before I was granted a limit increase and was able to transfer some of my high interest debt to that line of credit.

Colourful credit cards

Search for credit cards with balance transfer offers

Search for Credit Cards with 0% Balance Transfer offers. These allow borrowers to consolidate their credit card debts onto a single card to save money on interest charges, often at a low introductory or 0% APR (Annual Percentage Rate). Here are a few Canadian offers, American offers and Australian offers worth considering. Pay attention to the length of the deal and transfer only the amount you know you’ll be able to pay off within the specified time frame. If you leave the balance on this card past the special offer time frame, you’ll be charged the dreaded 19.99% interest which will defeat the whole point of this tactic.

Ask for help from family/friends. My parents didn’t have the cash to help me pay off my debt (not that I ever asked them to), but they did have a low interest personal line of credit that they allowed me to tap into while paying off my loan. I transferred some of my debt to their line of credit, saving thousands of dollars in interest payments over the last 2.5 years. It was still my debt and I was still responsible for its repayment, but the interest I saved did help me to get into the green faster.

Asking to take advantage of someone else’s low interest rate is a big ask, but if you do have a good relationship with your parents/other family members or maybe have a really good friend willing to help you out, it’s certainly an option. Sign some papers, make the agreement official and never default on your payments! There is more on the line with this option then bad credit rating.

Step 3. Work Out a Reasonable Payment Plan

Once I consolidated my loans and lowered my interest rates, the next step was to figure out a plan for paying off my debts. A great budget was key to making a plan and sticking to it, but so are realistic expectations.

tips to save money

Your monthly savings = Cash in – Cash out. It’s that simple.

  • Figure out your monthly expenses. Include rent/mortgage payments, bills, car payments, food, entertainment and don’t forget travel! Let’s be serious, if you have a travel bug, you won’t be able to go for years without travel, so budget for it. It’s ok to let that be your “treat”.
  • Figure out your monthly income. What is actually coming into your bank account on a monthly basis, after tax and other mandatory deductions.
  • Calculate your monthly savings. Cash in less cash out. It’s that simple.
  • Calculate your repayment period. If you owe $50K and your monthly savings are $1K, it will take you over 50 months to pay off your debt (don’t forget about the additional monthly expense of interest payment).  That’s 4+ years. Can you wait that long?

When I first sat down to work out my repayment plan it sent me into a bit of a depression. I was living in Shanghai at the time, which should’ve made my expenses a lot lower than living in, say, North America. But once I put down every expense line on paper and compared it to my savings, I quickly realized that it wasn’t good enough.

I needed to either drastically reduce my expenses or find a better paying job. If I didn’t then I would be stuck paying off my debt for another 4-5 years.

Step 4. Consider: Can You Do Better?

I wasn’t willing to settle for 4-5 years of debt repayment and was committed to doing whatever it took to pay off my debt sooner. Shanghai and I were already in a rocky relationship so I started to look for other options. I considered moving back to Canada (which made me even more depressed than spending 4-5 years paying off my debt while living in Shanghai), I looked into moving back to London, Singapore, and Australia. I researched available jobs and their pay grades, I analyzed the cost of living (this website is awesome to help you do that) and potential savings. And I decided that my best bet was to move to Australia.

Max and I are exploring Australia together

It was a bit of a leap of faith. After all, there was no guarantee that I would find a good paying job and be able to navigate my way around the working visa issues. But I was willing to hustle for jobs, I was willing to work more and work harder. It ended up being easier than I ever imagined.

Read next: Moving to Australia Debunking Myths and Misconceptions

So before you settle and devote 4-5 years to paying off your massive loan, consider your alternatives.

  • Can you find a higher paying job in another city or even another country? (I did this!)
  • Can you pick up a second job to help you pay off debt faster?
  • Can you start your own business or do some freelance work on the weekend to be able to save more? (I did this!)
  • Can living in another country/city reduce your expenses or increase your salary? (I did this!)
  • Can you rent out your room on Airbnb?

 READ NEXT:

PART 2: BEST MONEY SAVING TIPS TO HELP YOU SAVE FOR TRAVEL

 PART 3: HOW TO TRAVEL THE WORLD FOR LESS

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2.5 years ago I had $100K in school debt that held me back from being about to travel the world. Here are some tips that helped me pay it all off!

Do you feel like your debt is holding you back from your dream of traveling the world? What do you find to be the toughest part of paying off your debt?