A new start...

lizbristol

Hi, I'm here because I'm looking for help to get myself out of debt and back into the black.

I'm only 26 but I've always been terrible with money. The phrase 'sticking your head in the sand' pretty much sums it up - I've ignored my bad spending habits as they've never caused me really serious trouble, and I'm ashamed to say that my parents have bailed me out on more than one occasion.

However, I've just got engaged and it's really hit home how terrible I've been with money over the years that I've been independent. Not only do I need to start saving for a wedding, I really want to start married life with a clean slate, and make sure that I don't saddle my fiance with my debt.

Since leaving uni 4 years ago, I've never got out of my student overdraft of -£3000. So now, minus 3K is effectively my 'zero', and to make matters worse I often go over the limit and get bank charges. Also, after being self-employed for 18 months during 2009/10 and failing to put anything aside for tax repayments (I'm cringing just writing this - I know it was so stupid), a huge tax bill came as a nasty shock earlier this year. I ended up borrowing over 3K from my parents, which I'm now paying back to them at a rate of £200 a month. Another tax bill for just over 1K has just landed on the doormat, so next month is going to be interesting.

I also have 11K of student loan to pay off, which I haven't even begun thinking about (it's very easy to ignore it as no one hassles you to pay it back), and about £150 on a credit card, which I've resorted to using recently. I have a car on credit which costs me £200 a month and repayments are for about 3 years, but luckily I don't have a mortgage so rent and bills are only £400 per month.

However, here's the thing I'm really ashamed of - I actually earn a very good wage and my monthly take-home after tax, NI and student loan repayments is 2K. Theoretically, I should easily be able to pay off all my debts, but every time I tell myself "this is the month I'm going to start being good with money", I end up back where I started by the end of the month.

I'm really determined to make a change now, so that by the time I get married in Sept 2012, I will have cleared at least my overdraft and paid my parents back (and hopefully saved a bit for the wedding... :shocked:).

I know that my situation isn't half as bad as a lot of peoples' on here, and I realise that I'm very lucky to have been in a situation for the last few years where I could (sort of) afford to be an idiot with money. However, the thought of now getting back on track is very daunting as I've been avoiding doing it for so long. Not sure how I'm going to go about it yet but I'm hoping that the advice and support that I might find here will help me out

Thanks for listening,
Liz

Pollycat

Hi Liz - and welcome.

The good news is that you currently have a really good amount coming in each month so, with the incentive of a wedding to fund, you should be able to get yourself sorted.

Best thing is to do a SOA (Statement of Affairs) using this template:
http://www.makesenseofcards.com/soacalc.html

With £200 for your car, £200 to your parents and £400 for bills, you should still have a surplus of over £1K each month.

The key to getting sorted is to find out where that money is going (if you don't already know) and keeping a spending diary and noting down everything you spend that isn't in you SOA can help identify where you're spending it.
It might be on Starbuck's coffees, glossy mags, make-up etc.

Tixy

Hi and welcome and well done for deciding to face up to things, head in the sand is easier in the short term but in the long term you'll be glad you've decided to tackle things.

It sounds like the first thing is to work out where your money is going currently, so starting a spending diary for a couple of months where you write down everything - even the odd 50p spends - is a great starting point. Some carry a notebook with them or record it on their phones, others do a spreadsheet of their spending.

On top of that our other suggested starting point is to write out a statement of affairs to show what you need to pay each month and what you should have left to put towards debt repayments. We use this calculator -http://www.makesenseofcards.com/soacalc.html - and if you also post the results on here people can suggest where you can make changes/get things cheaper/try cutting down etc so you can target your debts quicker.

You say you go overlimit on your bank account - so the first aim is to stop that and the extra charges - is it because you don't realise you are about to go over or because you don't budget for everything you need to spend/DDs going out. If you don't have internet banking then sign up for it and get into the habit of checking your account regularly to try to avoid these blips.

Good luck and congrats on your engagement

lizbristol

Thank you both! It's really encouraging to get replies so quickly

Will be doing an SOA this evening so will let you know how I get on...

Tink_04

I take out a set amount of money each week to spend and don't take my card out with me to avoid buying on impulse! I also have a few different accounts so I have one that all my DDs come out of and put in how much needs to go out in it and a seperate one for spending, one for shopping and one for petrol so everything is divided up at the beginning of the month. Good luck and well done for posting

lizbristol

Thanks Tink! Yes, the 'set amount of money per week' thing is something I've tried before, but I need to be more strict with myself. Inevitably I end up using my card at some point - especially when I've had a couple of drinks after work and my self-control is low

I'll try actually not taking my card out at all so the temptation isn't there. Thanks!

elaine12022

Hi liz, good luck with sorting things out.

From your last post, is it fair to say that when you go out for a drink, it makes you more open to temptation? Perhaps that is something you can address.

lizbristol

elaine12022 wrote: »

Hi liz, good luck with sorting things out.

From your last post, is it fair to say that when you go out for a drink, it makes you more open to temptation? Perhaps that is something you can address.

I think you've just hit the nail on the head, Elaine!

I knew that I was probably spending more than I thought I was on nights out etc, but after doing an SOA last night I nearly had a fit. Whenever I've done budgets before, I've guesstimated how much my monthly spend is, and frustratingly it's always ended up well below what I'm getting in each month. So something obviously wasn't right. When I did the SOA last night, I went through my bank statements for the last 4 months and put EVERY transaction into categories to see where the money was really going.

I was absolutely shocked to see how much I've been wasting on going out every month - I thought I was probably taking out the odd 20 quid as cash here and there, as well as using my card in the pub a couple of times a week. It turns out that I've been taking out around £500 in cash every month AS WELL as spending around £400 on my card in pubs and restaurants :eek:

I'm appalled at myself, mainly at how stupid I've been not to realise how much money I'm spending, but also at how much that means I've been drinking...

Cutting back drastically on cash spending and nights out will hopefully get me paying off my debts asap - I also realised that there are a few other savings I can make here and there. My OH and I went food shopping for the whole week last night, and managed to spend only £32 between us for the whole week's food - breakfast, lunch and dinner! That's down from nearly £100 a week, as we normally just shop for that night's dinner rather than planning meals, and I buy lunch at work. We also bought lots of much cheaper items than I'd usually buy in the supermarket, like canned soup rather than fresh, etc. I'm amazed at the price difference it made overall by just saving a few pence here and there.

There are also other things I can save on, like magazine subscriptions, clothes etc - which should all help.

I'm feeling really positive today, after feeling like a massive failure yesterday, so thank you for all your encouraging replies so far

I'll let you know how I get on!

Tixy

Frightening when you add it all up isn't it liz - but we've all been there and all underestimated those spends.

Sounds like a good plan in place and you should start making some inroads into your debts and that overdraft.

Good luck.

dib-dab

One thing I do which is a bit dull but very effective is that I keep a spreadsheet of absolutely everything I spend and categorise it - so categories include car expenses, eating out or drinks, groceries, phone, bills, clothes and other 'treats' etc. Then I can see exactly how much I spend on each category - I also have a monthly average since I started keeping the records so that I can see if categories are above average on a particular month and then can see why and address it if necessary. And it actually becomes a bit of a fun challenge trying to bring the average down or to try to make sure a category is below average. I update it every few days so I can see straight away if a month is becoming a high spend month and then that also prompts me to tighten my belt a bit. (Sorry, I have edited to add this comment as I have just read your latest post and have seen that you have started to do this already - keep it up, it's so useful!)

I also did a projection which showed me when I could expect to have the debt paid and even better, how much I can expect to have in savings a year after it is all paid off - it is great motivation.

I have a bit of an insight into how you feel because my younger sister got married last week and she is often having to be bailed out by our parents, they even still pay her mobile phone bill from years ago when she lived with them. I must admit this annoys me because I have never asked them for anything (and she spends a fortune on takeaways!) - but she was very upset just before the wedding and was in tears saying how awful she felt that she was about to get married and still having to ask our parents for money. I love her to bits and ended up being upset with her too - so I imagine this is how you are feeling. But despite feeling annoyed that she has had a lot more from our parents than I have I would much rather have the feeling that I have stood on my own 2 feet (by some miracle) than have had loads of money dished out to me. So when (and I say when because I am sure you will) you get yourself sorted and get married I am sure you will feel really proud of yourself too.

Congrats on the engagement and good luck with your financial planning!

lizbristol

Hi all,

So I've spend the last couple of days working out exactly what I owe and what I can afford to pay back and when.

The good news is, it's all do-able! Still feeling positive about it, although a little daunted at the scale of it.

First of all, I've drawn up a strict but realistic budget that requires me to stick to a set amount to live on each month. I'll be paying for everything except my food shopping/DDs etc (which I've also budgeted for) in cash, and will be leaving my cards at home. It will certainly be a change from what I've got used to, but I think it will be manageable.

I've worked out that I can still just about get by next month and still pay off that big tax bill - it won't get any of my other debts paid off but it will avoid me being charged interest on the tax bill and will get it out of the way. It's my birthday coming up next month, so I figured I can ask for a little money instead of a present from family, which will get me through the month for buying food, petrol etc.

Then in October I should be able to pay off my credit card as well as begin to make a dent in that overdraft. If I reduce it bit-by-bit each month, I should be able to get the whole lot paid off by April next year! :j

I'll still owe my parents money, so once the overdraft's paid off, I'll increase the monthly amount that I'm paying them, which should leave me in the black by June/July 2012. Phew!

It feels like a long time at the moment, but I'm just keeping in mind the fact that if I'm debt-free by July, I'll at least have two months to save for the wedding. It's not much, but I'll be so proud to be able to contribute that little bit knowing it's my own money!!

Thanks again for all your advice so far, it really is encouraging to know that other people are in a similar situation and to have somewhere to 'download'

L x