Shiny new debt diary - at the foot of the mountain!

marietje

I guess just after Christmas is a time when many people start new diaries, so I thought I'd join. I've had a very difficult year in 2012 and I'm really hoping things will get better. 2012 has taught me that many things are outside of our control and that the most precious things in life are very fragile, so I decided to take control where I can.

I'm a long-time MSE lurker and I've picked up a lot of tips here. I've tried quite a few things I learned here, some were more successful for me than others. My debt at its highest was £22850 (beginning of August this year). I got a loan of £7000 from my parents to pay off some of my debt, which means that I've paid off the grand total of £785 since September. Before this I rarely managed to reduce my debt, it usually increased and my cards were always maxed out and I could only afford the minimum payment. Thanks to the 0% loan from my parents, I can throw a lot more cash at my debt, otherwise it would take years.

There is no light bulb moment without some serious questions. How did I get into debt? I was debt-free when I moved to the UK 9 years ago but got a credit card with a £700 limit to pay for our wedding. Our wedding only cost £1000 including rings and clothes, but I never got around to paying off the card. When we moved to a new rental flat I got an overdraft to pay for the deposit. When I got the deposit from the previous flat back, we just spent the money. When I got a job in another city we bought a house with help from my parents (they paid the deposit) and my employer (they paid all the costs and the removal, but not in advance!). I consolidated my overdraft and credit card into a £7000 loan but we spent the money I got back from my employer. After a couple of years we remortgaged and got a secured loan of £10000 to do some home improvements and pay off some debts. We continued to spend on the cards. You can see the pattern...

Somewhere in the middle of this I joined the MSE forum and started getting cashback, doing surveys, selling on Ebay and Amazon. We usually used the extra cash just to fill holes or to spend. I always thought of myself as quite frugal and although I probably don't spend as much money as my OH, I'm very good at frittering it away on coffee, cosmetics, chocolate etc. rather than bigger things.

My OH and I lived on just my salary for about three years and things were very tight for us. We got very good at reducing our spending, but my OH developed quite an Ebay addiction. The result was that a lot of my salary was already 'earmarked' before payday and this became a vicious circle. My OH and I are both from outside the UK (two different EU countries), and we also have to spend a lot on travel to visit our families. Even if I tried to save money I never really used it to reduce our debt.

When I got the loan from my parents, my OH and I both felt that something had to change. We're wasting lots of money on interest and paying off things we bought ages ago.

It's very useful to write all of this down, I have to say. My next post is about my plan!

Mini Goals

I decide to give myself a few intermediate goals to aim for as soon as I can. I'm hoping to reduce the Amex balance to £2000 at the end of February!

M&S balance reduced to £6000
Amex balance reduced to £2000
M&S monthly interest below £100
Amex monthly interest below £25
Total CC interest below £100
PAD: £1000
Coffee: 22 days a month without buying fancy coffee

marietje

The strategy

The last few months I've used a combination of PAD (payment a day) and reducing credit limits as a strategy to pay off £785 in total. I know that reducing credit limits can have effects on your credit rating but temptation has been our downfall, so debt reduction is more of a priority. PAD works well for me but I'll experiment with other challenges.

Making money

I've sold a lot on Amazon and Ebay over the year, probably £1000s worth altogether. I'm going to have another look around the house to see if we can sell more. We still have books listed on Am@zon but they take ages to sell now. Anything that sells will go straight to the cards.

I've earned lots of vouchers from surveys over the years but I'm going to concentrate on fewer sites now: sw@gbucks and m@ximiles. I just cleared a £30 Am@zon voucher on m-miles and it's slow but relatively painless. I'm going to save the vouchers for treats and get myself an Ipad mini once I have enough!

Psychological snowballing

My OH is now self-employed so our income has increased. He wants to be debt-free in 13 months time so he's keen to contribute. I know him all too well so I'll count on his contribution as extra or a way to spend less of my own salary every month.

Despite his new way of thinking he still tends to think of spare money as extra to spend so I have to be strategic. He knows we need to pay off our M&S card first because it has the highest interest and he wants to keep an eye on it. If I start paying off much more than what I've budgeted for he might be tempted to see this as spare money for spending. For this reason I decided to focus on the Amex card (with a lower balance and slightly lower interest rate) for PAD and any extras. I'm sure it will be a very pleasant surprise when it's paid off early!

Challenges

I've signed up for the Pay off Your Debt by XMas 2013 challenge, focusing on paying off my credit cards. Now our household income has increased our grocery budget has slipped a bit so I want to tighten the purse strings.

I also want to post here regularly so I'm not tempted to lower my payments, or worse, increase our debt!

marietje

I noticed it really helped to write things down and recognise my debt pattern. It makes me even more determined to finally make a difference.

The last couple of days have been a bit mixed in terms of spending. I've paid an extra £64 off my target card (Amex) in PAD and a £45 Quidco payment. I still have to pay an extra £60 to get the card below £3000 after interest.

I couldn't resist the sale and bought 5 tops for £150. I don't buy a lot of clothes and I usually buy on Ebay, but hopefully these will last me for quite a while. My OH is waiting for some invoices to be paid so I have to cover some extra expenses. The tricky thing is that when his money comes in I need to insist that we use it to pay off the cards, otherwise the vicious circle continues.

The other good thing is that I've barely touched my salary (paid early for Christmas) and I probably don't need to dip into it for another week or so because I have some money left from my last salary payment. This never used to happen before but I also need to make sure that I use it strategically!

marietje

I'm setting myself a challenge of paying off 5% of my debt every month, which is £513.26 after interest. For January I have to do PADs of £5.55 to make it.

What I like about PADs is that ypu do something every day and you see the debt going down little by little. I often found it hard to keep going with just one monthly payment.

Going to spend New year's eve with friends tonight. We're not wasting money on fireworks (very popular where I'm from) so that's a good start.

marietje

Another £5.55 paid today, so still on the right track.

I had a good chat with my OH about our plans and he will really try to set aside more cash to pay off the debts. He often feels that he 'deserves' to spend on himself now he earns money, but he also understands that we have to be realistic.

The good thing is that he now buys things (he's a bit of a collector) with his own money, leaving me with more of my salary for survival and debt. I often wish it wasn't like that but you can't force someone into a lightbulb moment. I think I did the right thing not telling him (yet!) about my extra payments, although I almost did this morning.

marietje

It wasn't exactly a no-spend day today. My OH and I are staying with my parents and we're cooking dinner for them tonight. We got fish, veggies and two nice bottles of wine for €30 (we're in the eurozone for the next few weeks!). I obviously don't mind doing this because they have been so good to us over the years. My OH spent €25 on toiletries (yes, he is a man!) and we spent €10 on a present for friends who have been amazingly supportive while we were going through a very difficult time.

The good thing is that I still haven't touched my January salary (apart from PAD and direct debits) so that's great. We still have about €180 left so that should last us a while.

marietje

This is my last post for a while because my OH and I are going to stay with my aunt until next Saturday. She doesn't have an internet connection so I'll be limited to free wireless internet on my phone.

To make sure I don't slip in the meantime, I've just transferred 9 days worth of PAD to my Amex card. It's too easy to let it slip otherwise. The challenge for us is not to spend more than the €160 we have left until the 12th. It should be quite doable at home but because we're travelling and staying with people, it's not that easy to keep things tight.

When we stay with my aunt we usually have breakfast at hers and bring a packed lunch (we shop for our own food so she's not out of pocket). The weather is nice enough for us to picknick outside every now and again. We also try to walk everywhere, keeping us fit and it saves public transport costs. We often cook dinner for her so that's also a way of saying thank you (and it keeps us away from eating out). I'm going to see The Hobbit with my sister (pricey, but I'm a fan) and have a frugal meal together, so hopefullly that will be most of our costs next week.

Let's see anyway.

Evcakes

Well done on all your hard work so far, enjoy you're time away.

All the best with your debt free journey.

marietje

And before I forget, as I posted on the Pay Off Your Debt by XMas 2013 thread, I calculated that I need to pay 1000 pounds a month towards my debt (before interest) to reach my goal. If my OH can set aside enough money from his freelance work this might be possible!

I really need to get my mobile bill under control when I'm travelling - it's already 6 pounds higher than normal... I don't use mobile internet or make phonecalls but I do send text messages. I've got a spare phone with a local sim card so I use that for local calls and text messages. I should really try to use Skype to text when I'm online.

marietje

Thanks Evcakes!

It really helps to write it all down.

marietje

Back again!

Just a quick update to say that my OH is still waiting for some of his invoices to be paid, so it looks unlikely that I will make my goal of paying 5% off the 2013 total... Things might still change and I'll keep PADing, so let's see.

The good thing is that we have enough money to survive until my payday, not a lot, but this is probably the first January in years that we don't have to rely on a credit card to pay for the basics! That's quite an achievement.