Head in the sand for years... Updated 08-Mar-06

Hey everyone,

Just wanted to say how happy I am to have found this site a few days ago. Not only has it saved me from nearly entering into an IVA with a less than helpful company (which would have been completely unsuitable) but it's also given me some excellent tips on how to save some cash going forward and most importantly how to think differently about money.

I guess I should do a brief rundown of how I got to the debt figures below...! I suppose it all started at university where in addition to the usual student loans I made the mistake of getting my first credit card, and when you're skint and at University in London, the temptation is too much to bear. Being in control of a credit card aged 18 and living in a big city is not a sensible idea. I didn't go mental on shopping sprees or anything like that but I certainly got used to the idea that even if you didn't have any spare cash you could still go out and enjoy yourself... :beer:

By the time I left uni I had the credit card, plus student loans from the bank and the government and a hefty overdraft. "Helpfully" ( ) the bank were only to keen to give me my first consolidation into a 'Graduate Loan'...

Fast forward a couple of years and I now have a fiancee and a flat that we've bought together - the mortgage is a stretch but we're getting by... Or are we? By now there's at least 2 credit cards full up with a few grand on each - the excitement of buying our first place together and fitting it out, plus planning our wedding and honeymoon certainly contributes to those totals.

In steps our bank with an offer to 'consolidate' all our debts into a personal loan - student debts and joint debts now all rolled into one big loan...

Next up, a year or so later and we decide the flat's too small for us and the cat (:o) so we buy a cheap terraced house. Seems a bit manky on first viewing but the potential is obvious and we smell easy money! On moving in , the problems are worse than we thought - an apparent infestation of cats seems to have overrun the previous owner and the whole place needs complete gutting...

We tart it up as best we can on what we think is a limited budget, but even this leads to the CCs being maxed out again in addition to the consolidation loan... and with finances being stretched we stupidly consolidate the Credit cards into another personal loan... and, yep you guessed it, found more that we simply 'had' to do to the house and maxed them out again... (stop me if you've heard this story before!)

Next bright idea, hey, let's get the house valued... luckily the house is now worth substantially more than we paid for it, to the tune of enough to pay off all our debts. Result! So we remortgage and stick all of the debts onto the house...

Now we are rich (or so we think, as we now appear to have no debts and a decent income...), so we can afford some luxuries - new car, new bathroom, Sky TV, Nice mobiles, broadband, big fridge, big TV etc etc.

We're plodding along quite happily when it suddenly strikes me that we don't have as much money as I think we do, and, blow me, how have those credit card balances crept up again? Ah, it must be from all those times when we didn't have enough cash for our shopping at the end of the month because our mortgage and car payments are so high that we're actually struggling and I didn't realise it... Still, we're young and we're still making our payments and doesn't everyone live on credit these days?

Around this time my wife loses her job - !!!!!!! Somehow we get by (by means of borrowing money on one credit card to pay the others' minimum payment, that kind of thing...) when she gets a new, better paid job, this is cause for celebration and we think everything's okay when clearly it isn't.

This was about 18 months ago now and I'm sure as you can guess things don't improve in the meantime. Since we've somehow found the money to make every payment each month for god knows how long, we believe we are getting by. So why are the debts still mounting up? Why do we keep adding more and more debt when we have more coming in every month than going out?

I start to panic around December... I can see that we can't afford to get much this year but don't want to let my wife down so ignore all the evidence and put yet more on the credit card in order to have 'the best Christmas... Ever!' But there's something wrong, I'm getting sloppy with making the payments each month, normally I do it all on payday but I'm starting to chuck all the bills on a pile and not wanting to look at them until it's too late... When I do make the payments (which I always somehow manage to do), it immediately send our account into the red (on payday!)

By the end of every month, the account is way over the overdraft limit and we're racking up bank charges at about £100 a month... it seems like a neverending cycle so around October last year I take decisive action and decide it's got to be stopped. Down come all our CDs off the shelf, over 1000 albums collected over 13 years, and on they go to eBay, fetching us a nice sum. It goes into the bank account and we think things are sorted.

But by the next month, things still aren't looking so good and we're still in danger of going over the overdraft limit at the end of the month. So down come all the DVDs off the shelf, around 100, which we sell at work for £5 each... In goes the money - next month same problem again. By now we're throughly cheesed off with selling all our wordly posessions and being no better off.

We somehow get through this Christmas by selling a few items of junk out of the attic but something's seriously wrong, we just can't right the bank account and even a helpful cash injection loan from my parents can't sort it out. I'm not sleeping, I'm feeling ill and stressed and even my wife who isn't prone to worrying is not happy.

So we look at the finances and decide to try the old consolidation trick one last time - turned down at every attempt. Now we're seriously worried and don't know what to do...

As a last resort, we phone a company advertising on TV who I don't want to give any free publicity! Now, although I will say that this company didn't even want to talk about Debt Management and tried to force us into an IVA, they certainly put us straight on a few things.

I thought I could budget and I've been keeping a spreadsheet since 2000, but going through our monthly outgoings on the phone with the advisor it quickly became apparent that my figures were woefully inaccurate. For instance, I'd been allowing £30 a week for shopping for the two of us and £10 petrol, but regularly spending at least double that. I'd made no allowances whatsoever for going out, entertainment, car tax, house insurance, car insurance, haircuts, clothes, takeaways, car maintenance... but we were still paying for all these things.

In total it turns out that we have around £500 more going out every month than we have coming in.

How the heck did this happen?

1) Because we ignored the signs that we were in serious trouble (bank account always overdrawn, having to sell things to make ends meet)
2) Because I was completely unrealistic with my monthly budget and refused to believe that it wasn't working
3) Because I thought we were a lot better off than we really were - remortgaging the house to include all the debt gave me the impression that we were young professional people with good disposable income and we adjusted our lifestyle accordingly and then wondered what was wrong.

So what now?

Luckily, since we don't really have an extravagant lifestyle, we have about £450 a month to offer our creditors and PayPlan seem confident that they can sort out a debt management plan for us. Just from a rough calculation it looks to me like it'll take at least 10 years to pay it all off.

An IVA may seem like an easier option considering that we would be debt free in 5 years with a good chunk being written off but I'm not one for taking the easy option. We borrowed the money that we did with every intention of paying it all back and pay it all back we will. It's just going to take a while, that's all.

Thanks to the lightbulb moment and finding this forum my wife and I are now getting ready to adjust our lives for the next 10 years in order to get square, and if we can really get it all cleared by the time I'm 37 then I'll be very happy indeed.

I don't pretend to be a completely changed character yet but I've learned a load this week and it'll come gradually as the DMP starts and I don't have a choice... Let's face it, with 10 years to change my way of life I'll have a job not to!

Thanks for reading.

James