I did have student loans and some credit card bills that took me a few years to get rid of — but that was right after graduating from college, and admittedly they weren’t for vast sums and weren’t extremely difficult to pay off.

Other than a home mortgage and a credit card bill that my wife and I pay off each month as we earn credit card reward points for hotel stays, we live a debt free life.

There are some life choices I made early on, along with some debts that made me rethink how I think of money. Here are some of them:

Borrowing little for student loans

Paying for college gave me an early view of potential debt in many ways. I purposely picked an in-state university to go to because it was cheaper than going to college out of state, and I worked as much as I could in the few years before starting college so I could afford it and wouldn’t have to work during college.

My parents paid half of my college costs, so that gave me a big start in trying to graduate debt free. I worked on campus during the end of my sophomore year and my entire junior year to help pay for expenses, but the pay was so lousy that I had to take out a student loan to make it through the last year or so.

I didn’t borrow much — I don’t remember the exact amount but I’m sure it was less than $5,000 — and unfortunately I graduated with debt.

Like most grads, I didn’t have a high paying job and it was difficult to pay off my student loans. I couldn’t afford to go out to bars or nightclubs with friends when I wanted to, doing everything I could to pay off my debts. Within two years, I had paid off my student loans and was debt free — for awhile.

A low income

This may sound like a simple reason to avoid debt, but it often leads to debt: Not earning much money.

While many people may use their credit cards more to pay for a lifestyle they can’t afford, I made a conscious choice not to use credit cards too much because I knew I didn’t have the income to pay the bills when they came due.

This isn’t to say that I didn’t use credit cards unwisely — I’ll get to that in a minute — but as a journalist who recently graduated from college and wasn’t making much money, I knew I already had to be frugal on my low salary. I guess if I had an income double of what it was at the time, I may have had more room in my budget to play around and go into debt because I was sure my monthly bills would be paid.

But when you’re unsure if you can pay for groceries, rent, car payment, student loans and other household bills, it somehow makes throwing money down on non-necessities a lot more frivolous. Being debt free, I discovered, was a little easier if I didn’t have money to begin with.

Too many bar charges

A monthly credit card statement can be sobering. I don’t mean this as a pun, but seeing line after line of bar charges on my credit card bill in the first few years after college was a sobering reminder that I was wasting my money.

I was using my credit card to keep up with friends who were better off than I was financially, and I had to put an end to that for a year or so while I got my credit card balance back in check and vowed to live debt free.

A major car repair bill

One of the biggest things that got me thinking about how much nicer it would be to live debt free was when I had to take my car in for repairs and I didn’t have enough money to pay the final bill.

The bill was so high that I had to call the credit card company to ask for my spending limit to be raised. It was and after spending about a year paying that expense, I vowed to live debt free. I never again wanted to be forced to have to pay interest for something that I could have saved for and paid off entirely at once.

The road to debt free

After that expense, I slowly started funding an emergency fund to pay for car repairs and other emergencies that come up in life as a way of meeting my goal to be debt free.

I’ve sometimes had to use a credit card anyway to pay for a necessary expense — but that’s the main point, that even the credit card has been used for emergencies only and only when they’re necessary. No more bar tabs to throw on a card.

Using a credit card to pay for a car repair is a rarity, and one I’ll usually only do so I can earn reward points and already have the money in an emergency account to pay the credit card bill in full when it arrives.

That emergency fund has led to creating other funds for other purposes, including our daughter’s college education, vacations, taxes and home repairs. It’s all part of a plan to live a debt free life, which is a lot easier when you aren’t using credit cards to pay for everything you see.

How I Chose to be Debt Free for Life is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

What is an Emergency Fund?

According to personal finance guru Dave Ramsey, an emergency fund is “a rainy day fund, an umbrella. It is for those unexpected events in life: a job loss, an unexpected pregnancy, a car transmission going out, and so on. This is not an investment or a Bahamas fund!”

In other words, you should never willingly use your emergency fund. It should only be used in times of a dire crisis when you can’t make ends meet (like from a job loss or layoff), or to cover things like a necessary house or car repair.

However, one area I don’t agree with Dave Ramsey on is that you should only have a $1,000 emergency fund while you are trying to pay off debt. These days $1,000 won’t get you very far if you have a major repair to make or if you have an unexpected job loss (especially if there’s only one income coming in to your monthly budget).

Therefore, I’ve decided to continue building my emergency fund at a steady pace indefinitely as I continue to pay off debt. After my consumer debt and student loans are paid off, I will throw that debt snowball money toward my emergency fund until it is fully funded with several months’ worth of expenses.

With all of that in mind, here are 5 examples of things I would be willing to use my emergency fund on to avoid taking on additional debt.

1. Car Repairs – As mentioned, car repairs are generally something that most people would be willing to pay for with their emergency fund. As of right now, I only own one car and I need it to get to work and earn my paycheck. If my car broke down and I couldn’t get to work, I’d lose a lot of income that I need for my monthly budget. So car repairs are something I’d use my emergency fund to cover.
2. Home Repairs – I’m a homeowner, which means when something breaks I’m responsible for repairing or replacing it. Having a landlord that covers these unexpected expenses is a definite benefit of renting, but for me home ownership still won out. This does mean that I need to be prepared to pay for home repairs as things to do wear out and break down over time, it’s inevitable.
3. Emergency Medical Expenses – I set up a small category in my budget to help cover annual doctor’s appointments, monthly prescriptions and medications, and other anticipated medical expenses, but if I were faced with a medical emergency it wouldn’t be enough to cover much. Therefore, I’d definitely be willing to use my emergency fund to pay for medical expenses.
4. Needed Technology – This may not be something everyone would cover with their emergency fund, but since I’ve got a pretty stead income from freelancing online, I need to have a working laptop and reliable internet connection so I can work. With this in mind, I would be willing to use my emergency fund to buy repair or buy new equipment for my online business so I don’t have a loss of income.
5. Pet Expenses – I have 3 dogs and 1 cat. The cost of pet care can be expensive, but to me it’s worth it. I would be willing to use my emergency fund to cover emergency medical care or other expenses for my pets (within reason) because they bring me great joy and are my day-to-day companions.

As I move closer to full-time self-employment, I am also considering building an additional “slush fund” to help cover months where my income is lower. Variable monthly income is a part of self-employment and it’s important to be prepared for that. Some entrepreneurs choose to prepare for this by having a much larger emergency fund than what is standard, like up to 12 months worth of expenses instead of only 3-6 months. Others set up a separate fund  that they contribute to during high income months so they can easily off-set low-income months down the road.

No matter how you choose to set up your emergency fund or how much you are comfortable socking away, it’s important to know what you are comfortable using your emergency fund to pay for what you aren’t comfortable using it for. Everyone’s comfort levels for emergency funds are different.

What are you willing to use your emergency fund for? What wouldn’t you use it on?

Photo courtesy of: Chris Potter

5 Things I’d Use My Emergency Fund On is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

What this means, is that I spend a lot of time in my day job screening people out of opportunities that they have expressed interest in, and a lot of time in my spare time studying exactly what it is that is holding so many of us back.

I don’t believe that the cause of women’s issues lands squarely on women’s shoulders, but I do think that we have to take responsibility for some (if not many) of the things that limit us in the workplace and in our relationships.

Often, our behaviours is what hinders our potential, security, and success. Our behaviours can hold us back from getting that promotion (even if we earned it), getting the recognition we deserve, and getting what we want.

These are behaviours that I see over and over again with women of all ages, but particularly of the millennial generation. I struggle with them too. We need to learn to get past these four deadly sins.

Lack Confidence – And Show It

We’re all a little unsure of ourselves at times. Some days, we don’t wake up feeling like Superwoman.

Whether we feel that we bit off more than we can chew, or we’re just having an off day, lacking confidence in ourselves is a huge barrier to our own success. There’s a difference between lacking confidence outwardly, and strategically hiding our doubts.

Have you ever met somebody who just seems so sure of themselves? They do things with such ease and confidence, things that you would be shaking in your boots to do? Like those people who go up on stage in front of 500 people and carry out a presentation or speech effortlessly, without even a single stutter?

They’re nervous. They are not 100% confident in their ability to deliver that speech, despite their calm demeanour.

Fake it until you make it. Practice your “I know what I’m doing” attitude in the mirror, whether you are starting an internship or your on the first day at the job, or whether you’re trying to not make an ass out of yourself in front of your new boss. It’s an attitude that comes with practice, and you need to know how to fake it so people can take you seriously and you can get ahead.

Use Language That Minimizes Your Contributions and Achievements

 Which sentence sounds better, more professional, like it’s coming from somebody who you would respect and take seriously?:

“I’m not sure if I’m on the right track but I actually just thought I’d take a second to see whether this statement in the report is right? I just thought it happened differently.”

“I noticed that this statement in the report is mis-worded.  It supposedly happened differently”.

I don’t know about you, but I think the first one is a statement from a person just begging you not to take them seriously. You “just” wanted to do something? Is it that minor? You “actually” thought? Is it a surprise that you were thinking and analyzing the report?

There are a lot of things wrong with the first statement, and it minimizes the person’s contributions. There is a great article on this on Huffington Post.

Let People Put Their Needs/Wants in Front of Your Own

 A sure-fire way to make sure nobody takes you seriously is to let people bulldoze you. Women, in general, get a lot of flack for exhibiting the same behaviours that men are respected for. If a woman is direct and firm, she’s described as “bitchy”. If a man is direct and firm, he’s described as “smart” and “powerful”.

We’re all wading shoulder deep in gender stereotypes (including men), so lets start rejecting them and standing up for ourselves.

You’re not a “bitch” if you tell somebody who cut in front of you in a line that they cut in front of you. You’re not being “catty” or “dramatic” if you stand up for yourself if somebody is attacking your idea at work.

On the same note, stop being everybody’s assistant. If you take on assistant type duties (making the coffee, taking your coworkers papers to be filed), you’re single handedly stunting your growth. Studies show that women are more likely to pick up the assistant type tasks, just because they see that it needs to get done and nobody else will do it. STOP. Somebody else will do it. If you don’t, there will be others.

I’m not saying you shouldn’t help people out, but don’t sequester yourself into a role that is not yours.

 Don’t Protect Yourself

Here’s the thing. I’m a practical person. I love my boyfriend, but I have seen many, many couples divorce and split up. It’s sad, but it happens. Nobody gets married thinking “Hey, if it doesn’t work out, there’s always divorce!”; but you’ll never meet a successful company that doesn’t have a contingency plan, and you should have one too.

As women, we have a duty to ourselves; we must protect ourselves. I believe that each member of a couple should have their own RRSP, own career (even if one of you has to put it on hold for a short while for children or dream chasing), own car (or method of transportation), and own emergency fund. You may not hold the same beliefs, and that is fine, but if you don’t, then find another way to protect yourself.

I’m simply saying that no matter how in love you are, and no matter how good things are going, protect yourselves. Nobody else is going to watch out for you if anything happens.

It’s sad to see so many women stunt their own growth and undermine their capabilities, even subconsciously.

4 Ways to Hinder Your Potential, Security and Success (For Women) is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.

We established that everyone has a price. Everyone has a limit of how much self control, resistance, or willpower they have before the rewards for the action opposite outweighs the rewards for the desired action.

This applies to your finances, as well, and this is why personal finance is so very personal.

An example I have exhibited recently is with my car. I wanted to save; my intentions where to bring my net worth up by a substantial amount in 2012. I also wanted to go on a trip and be able to buy a new couch. My “price” was the prospect of having no car.

In simpler terms, I was excited and more than able to save for all of those things I listed above, but I wasn’t willing if it meant having no car. I obliterated my plans to reach those goals by taking on new debt, because for me, the opportunity cost of having a car outweighed the opportunity cost of buying those things and increasing my net worth.

Where this really gets people in trouble, is if their opportunity cost for material things or spending frivolously is higher than their opportunity cost for paying bills and being financially responsible.

In simpler terms, people get in trouble when their opportunity cost for the “wants” outweigh their opportunity cost for the “needs”.

Sure, paying for food and hot water, health and shelter, those aren’t fun things to have to pay for. I’d, too, rather spend my money on trips to Mexico and a cute dress from my favorite store.

But will I do that at the cost of my ability to pay for my means of getting to work?

If debt wasn’t an option, we’d really be able to see where our opportunity costs lie. If I wasn’t able to take on the car loan, would I have spent my entire income on a car, or would I have realized I couldn’t afford to do that and moved closer to work and school?

If debt wasn’t an option, would some of the people that Gail Vaz Oxlade helps on ‘Till Debt Do Us Part let their homes foreclose to pay for their boats and lattes, or would they cut those out of their daily spending diets?

Where do your opportunity costs lie? What are you willing to forgo for your lattes, your iPad, and your Manolos?

Before sinking yourself into more debt by purchasing that dress in the boutique below your office, think about this “If I didn’t have a credit card, what would I be not paying for to buy this dress?” If the answer is nothing, because you have more than enough cash in your account for the dress, your bills, and your savings, great.

If the answer is security, or the contribution to your emergency fund, you should be weighing the opportunity cost between your financial security and the amazing pattern of that adorable dress.

What if the answer is your RRSP or Roth IRA contribution? Are you willing to forgo your future stability for a dress you’ll grow tired of in six months?

Weigh your opportunity costs as if debt wasn’t an option. It’s hard to do, because debt is an option for most of us, but it really helps put some things into perspective.

Individual Opportunity Costs is a post from: When Life Gives You Lemons. Did you like the post? Follow me on Twitter, like me on Facebook, or hop on over to my blog and leave me your feedback.