There once was a debt named credit card...

fredtheguava

Hello! Newbie lurker here - finally plucking up the courage to post my own Debt Free Diary after reading so many of yours over the past couple of weeks : )

My LBM came in fits and spurts over quite a chunk of time. It flickered and tried and flickered some more, and is finally shining like an old school bulb, not the slow burn of an energy saving one!

I have a mid range amount of debt. I have a plan in place for making the repayments over the next year, but have been soaking up all the many ideas for minimising my outgoings and maximising my incomings with glee. I'm looking forward to making some changes over the coming months to get things moving forward.

I currently have 2 CCs which need paying off, an unsecured loan that I used to buy a car which is halfway through the four year term, a smallish cash loan from my mum to ease the panic, and an overdraft that makes people make an O and suck in air when I tell them the size of it.

My plan is to be clear of everything except the OD by the end of 2012. I'm doing this by cutting down on the amount I spend in a month and throwing every spare penny at the debts. Hopefully, CC1 will be clear when January's pay comes in, so things will be looking brighter already : )

I've de-cluttered and sold a whole load of DVDs to CEX or MusicMagpie, and will be listing some books on Green Metropolis over the next few weekends. My grocery bill suddenly seemed outrageous as I'm a single person and was spending £200 per month on food - so I'm trying to cut that down but throwing any of that amount I don't spend at the debt!

So this is my journey so far. I plan to keep track of the decisions I make as I move towards my goal!

fredtheguava

Well, it's been January payday. Hurrah! Between being paid early in December and starting a new job where payday is now three days later, it was six weeks between paydays this month. Things were TIGHT. But I seem to have managed to sort myself out, to a point.

I have finally cleared CC1! To be fair, this happens periodically and then I fill it up again and end up having to BT to CC2, but I now have my MSE head on and won't be doing that again...

CC2 is down below the £1000 mark for the first time in a good long while. With some careful shopping and pulling in money owed to me by various friends for trips I've put on my card, it's now even below £900 and looks very much like I will be able to clear that one in just 2 more paydays. I literally cannot wait!

It's far from the end of the road though. I still have 23 months worth of payments to make on my car, which I still hope to be able to clear early in December. Then there's the OD of £1750 which is another issue altogether, and one which I'm not including in my 'debt' total as it's not costing me anything and isn't on a time limit. That's next year's target!

All in all, I have definitely made full use of my LBM! My MSE head is now constantly on, and it's becoming a habit not a hardship to think about where my money goes and on what. I have probably cut a third off my grocery budget in the last few months, and am using the extra to clear things faster.

I can't wait to clear CC2 and then focus on building up some savings and working out how to get myself 100% debt free in time to think about applying for a mortgage in the next three to five years.

I'm looking at the little steps, too. I've phoned all the people with whom I have a DD and moved the collection dates to right after payday. That way I know how much is left over after all of my outgoings have gone - which can be pretty motivating as lately it's been £100-£150 that I can throw at other things!

I bought a small divided file into which I'm placing each week's 'pocket money'. I had been taking this out weekly, but I think in order to ensure the above, it's best if I do it right when I get paid for all the weekends in that pay period. It means that if I know one week will be more expensive than another - like next week, which is half term - I can shuffle some pocket money and have the extra without needing to draw more out.

I think I'm doing okay. Not perfect - there are still areas I can work on. But okay. For the first time in a long time, I feel in control of my debt instead of it being in control of me!

fredtheguava

The plan was to be debt free other than my overdraft and student loan by the end of 2012...

I think I've scuppered it again - and have a new plan. I swear this MSE stuff is taking up every waking moment of my life at the moment - and quite a lot of sleeping ones!

I have a large-ish OD with my current account. I pay a fixed £10 fee at the moment for it, bearing in mind I rarely make it out of the OD month to month... I believe, from reading these forums, that that is going to double in the near future. In a year, that's £240 that could be in my pocket instead of theirs!

What I'm considering is using my CC2 (when it's clear from the current round!) to get a SBT and have the OD paid off by the card. They're offering 0% for a year if I transfer it by the end of April, which will be do-able at that point. It'll cost me around £70 but be a manageable chunk of loan debt rather than a OD which for some reason feels very stressful...

What do you guys think? Get it transferred or just keep living in the OD until such a time as I feel able to pay it all off? I tend to forget the OD is not MY money and would hate to transfer out £2000 of savings in one go to clear it!

On the weekly budget front, things are tight this week due to a work night out on Friday. I still have £2.50 to last me til the end of tomorrow, but I'm due to visit the big smoke (tickets are all paid for, dinner is sorted) and I'm afraid I'll end up overspending when I'm there. Do I give myself a break and take a tenner from a week later in the month or just tell myself I must live within my means??

fredtheguava

Every single month I think this will be the month where everything is just a bit different. The month where I've budgeted correctly and I'll be able to make all the necessary payments without stressing that something's going to bounce.

It's never yet been that month. This morning I logged into my Banking App to find that I had only £30 left of available funds and at least £70 worth of payments to go out - if not more. I stupidly overpaid on a CC I knew I shouldn't do yesterday because I was so desperate to just clear it. Now I leave myself at risk of going over my OD limit.

In the grand scheme of things, my plan is still on track. I've shifted all DDs to near the beginning of the month. But for some reason I always forget that that can mean up until the 10th-ish and think the money left over a few days after payday is safe. It's not! There's still £100 or more to come out and I have to get that into my head.

CC1 will be clear on March's payday. Unfortunately - moneywise - it's then the Easter holidays, and holidays always end up being expensive, plus I've got a wedding to go to which won't be cheap. I am so excited to go, I just know it'll end up being more expensive than I can really plan for.

So back to frugalism! My grocery budget is already in place, so I've definitely got money for food. I will need more fuel this month as I need to drive home for my grandad's funeral. But I have a freezer that's pretty well stocked and I think I'll just have to forgoe the treats I have. Hopefully that will have a positive effect on my waistline as well1

Ugh. Sometimes it all feels too much and the light at the end of the tunnel seems somewhat dimmer than usual.

yorpington

Hi Fred,

Have you tried the envelope system? It worked really well for me - I work out exactly how much money needs to stay in my account to cover all bills, charges, DDs etc. Then I take the rest out in cash and split it into envelopes for the different categories on which I know I will spend that month. So you could have food, fuel, socialising (like going to weddings, which are so expensive, omg!) That way it's out of your account so there's no confusion over pending direct debits, and you can see exactly how much you have left for each until payday.

Just a thought Keep your chin up - the first couple of months are really hard while you try to figure out what works for you and what doesn't. At the very beginning there's a rush of enthusiasm but when little things seem to keep setting you back it brings you back down to Earth with a bump!

I just know it'll end up being more expensive than I can really plan for.

A book I've just read says that budgeting is all about telling your money where to go instead of wondering where it went :rotfl:

fredtheguava

I think I do a form of the envelope system... It goes like this:

• Rent comes out the day after I get paid
• Grocery money gets paid onto the card which I then use to pay for it all
• 'Pocket money' comes out in cash and goes into a little divided folder to be used each week

The only thing not included is fuel, and I'm still not sure how much I'll be using per month, as I've just started a new job. There just seems to be so much that I can't predict, when in actual fact I should be able to plan it down to virtually the last penny!

I think I will give myself a limit for the wedding, and try and think of ways to keep it as cheap as humanly possible!

That quote is pretty much exactly what I need to remember! Thank you.

missrlr

If you manage to stick to the budget you will be so proud of yourself and realise you can sort the rest of the finances out whereas if you let it slip you will be despondent.

If you want to know reasonably accurately about fuel for work quickly fill up the car to the brim then drive ONLY to and from work and top it up again - you then know per day how much it costs you and if you write down the number of litres when petrol prices change you can recalculate accordingly. Then you calculate as follows

number of days driving to work in month x number of litres x cost per litre = amount you need in that month for fuel
and can budget accordingly.

You could using the above take it one step further and calculate cost per mile in fuel for your car (if the journey is representative e.g. not all stop start when you would be mostly driving on motorways for the rest of time) and so for any journey you can calculate fuel costs and plan for the month where you know there are other journeys to be done too

I have a cash flow tracker - simple excel spread sheet that has start balance (pay day) and one item per line in date order when things come out with the description and amount and a running total column - and if it falls below a specific value then it goes RED each month I plan what should come out and when from the account and update as the month progresses so if I make a change e.g. extra payment then I can see the knock on effect later in the month. If you have basic spreadsheet knowledge then it's quite simple to set up but requires you to use it.

You need to either generate cash to fill the gap or change your OD limit otherwise you will have charges and so on - I realise you may already be on the case, but best sometimes to state the obvious.

Also have you reduced the credit limit on your cards so you aren't tempted to fill these up again? Another worthwhile trick to keep temptation at bay.

Did you look into the BT for the OD? Could be a plan - just check out the charges and benefit using a snowball calculator

best of luck - keep at it you just need to fine tune the cash flow and get into the save to spend routine

MuffinTops

Hello FredTheGuava,

You sound quite similar to me in a few ways, particularly the sudden rush of enthusiasm followed by a wall crash!

I've tried lots of different ways of budgeting and when I choose a budget to last a period of time I tend to spend it before that time is over. So, I now have a daily £10 budget. This is for all of my daily items. This does include petrol for me as I don't drive to work, but sometimes it will also include train fare to work and back. From this money I need to buy groceries, toiletries, nights out, days out, presents for people and everything like that.

With this method I've switched around my thinking. Instead of "cutting in" to next week's budget or tomorrow's budget I save for it. If on Monday I know I'm going out Friday I try to spend as little as possible all week so that I have around £30 for my night out. If I've miscalculated my outgoings then I save and put what I can back into my account each day.

I (and I believe most people on here) do the same as missrlr with typing up an excel spreadsheet and adding income and all outgoings on there. Once a bill comes out I change the colour of that to a grey so that it's still on my spreadsheet but not as visible.

I also live alone so I completely understand the worry of having just the one income, although I am lucky that I don't have any children to feed and clothe and when money is tight it's only me suffering for that.

For me, the benefits of that daily £10 budget is that I now cycle a lot more as I don't want to give my money to the rail company. I go shopping at times when I know I'll get good bargains and I shop around more. Having £10 in your wallet that's yours to do with as you need to but it's great to save it is, for me, much more motivating than thinking that I've got £250 left to last the month. With £250 left then my thinking process is that I can buy something for £30 and I'll be fine, I'll just be more careful. But on £10 a day I tend to think that if I can go 3 days without spending I can have that. Then I feel I've achieved something when 3 (or more) days later I go and buy that item. It's also teaching me the value of money again.

I really hope that helps. Sorry it's so longwinded. I'll subscribe to your diary and pop in to see how you're doing.

Also, celebrate the good stuff. You've done so well already just in the past month. The light bulb is on, flickering or not, it's there and it's doing it's best to stay. The issues you get to start with are just you trying to find your MSE feet, which you're doing really well with. So you're a bit skint now because you overpaid on your CC. A few months ago you were likely to be a bit skint because you'd generally overspent in some area, weren't you? From what I've read I think you're doing great. Well done!

fredtheguava

Thanks, MuffinTops! I think you're right and I do need to focus on the positives. A few months ago when my partner was shopping in Hollister this past weekend I would also have bought myself a t-shirt or something.. Instead I could put that £40 towards a CC instead of *on* a CC : )

The petrol thing may well be the one thing I can't control or predict. I am a teacher and so the 'monthly' thing rarely works as month to month the amount of days I work changes significantly. My ideal would be to get to the point where I can fill up when I get to empty instead of having to put £10 in here, £15 in there to stretch to the end of the month. Soon, soon.

missrlr - I do a similar thing, but I have £30 for the week to spend on things to do at the weekend, meals out etc., and I make myself save up for things instead of 'borrowing' from my future self - which reminds me that I should be doing that for the wedding!

I have looked into the OD thing and will be doing it just as soon as I make my final payment on the CC. I am desperate to see the £0 balance on both cards before I then put a balance of £1900+ back onto one! I have planned out the payments for the year to ensure it gets paid off, as well as hopefully being able to save a little once the CC is fully paid. I cannot wait to not have to be panicking mid-month every month!

I'm now a little bit concerned that all my planning is going to go to waste as I think I'm going to be forced to move house. AGAIN. I have not lived in one place for more than eleven months in ten years and it really stresses me out! Where I am now, I have such a great deal and it's likely to be impossible to match it. But the people who I 'lodge' with are looking to buy a home and the one they have their eye on is simply too small for me to continue to live with them... So the search begins again : (

fredtheguava

Well, the living situation may not be as dire as I thought. I have been in touch with a good friend of mine who currently lives in a bedsit for a darn sight more a month than it would cost for us to rent a 2-bed flat together. The only sticking point is that she would like us to include her partner too. I am thinking about this quite seriously - they've not long been together, but it would make things a hell of a lot cheaper for me. We need to have a fairly serious chat about the way forward, because I think it really could work.

I don't currently have enough savings to pull together a deposit, but I have a few months to build it up. I'm thinking about reducing the OD payments I will be making and then increasing them once I have the deposit together so all comes out right in the end. Yet again, my careful planning is falling apart at the seams! I wish I could just get a settled living situation sorted. It's really difficult for me to be moving so very often!

But I'm now three weeks from D-Day - that is, clearing my CC debt completely! It will be the first time in a long long time that I am not paying a huge chunk of my earnings towards CC debt. Admittedly the first thing I will be doing is BT-ing the OD onto that same CC, but I feel differently about that. It feels calmer, and like I might just be in control sometime soon!

MuffinTops

Hello FredtheGuava,
It sounds from here that you are making great progress. I understand how unsettling it must be not having a long term place to live, but it does sound like a good move forward with your friend and her partner. That would leave things open for you if and when you wanted your partner to move in if you weren't in a position to get somewhere with just the two of you?

Congratulations on getting so close to actual CC debt freedom. I know you'll put the OD on there afterwards, but it is still a huge achievement getting that debt out of the way so that you're in a position to move another debt aross.

Read back on your posts sometimes when you feel you're being pushed back as it may hopefully put things into a brighter perspective for you. The things you see as back steps were always going to happen, but now you're in a better position to face them and deal with them rather than wondering how you'll cope.