I've got myself into a MASSIVE debt in 9 months...

Teacher2

I have just stumbled on this thread and have read the whole thing open mouthed all the way through. Firstly I recognise how incredibly honest you are, weebit, in 'sucking up' all the criticism and carrying on telling it how it is. Secondly, I note that much serious concern has been voiced and excellent advice offered.

To get your way out of this debt you need to do several things as follows:-

-take a lodger to help pay the rent
-stop all socialising which means no gigs, concerts, pubs, holiday, flights, trips etc. whatsoever
-plan meals and shop for only what you need
-buy no food out of the house whatsoever which means taking a packed lunch and a drink wherever you go whether it be work or for social purposes
-give up all subscriptions to Sky, Pay TV, gym etc.
-both of you need cheap PAYG phones
-walk everywhere you can. No car and minimal public transport costs
-let your friends know you're retrenching so they can be onside
-let your family know ditto. Their social events (weddings) seem to be a major cost to you. Tell them how much you owe and ask them to be onside with your retrenching
-your wife needs to do as many extra shifts as she can as they seem to be well paid
-get the help of YNAB or do it yourself (properly) and budget every single penny
-avoid temptation which means no shopping malls, food fairs, Christmas markets etc.
-don't buy any presents for others until you are debt free - but tell people why! They'll be sympathetic if they can see you making an effort
-find a range of free activities to take the place of the expensive ones you are dropping. You are in the best place in the world for free culture. The world class galleries, parks and museums are free. Join a library which offers much more than books free. Walk, run, exercise, talk, read, listen to the radio and watch Freeview

These are all concrete things you can do not generalised abstractions and wishful thinking. Oh yes, and don't put it off, start now.

Good luck.

dirtycredit

Retrench! What a great word! I've never heard it before. Thanks Teacher2 I'm going to be using that one from now on.

Sorry dahhling, I'm retrenching.:T

UrbanDanceSquad

FinallyGettingFree wrote: »

UrbanDanceSquad: We're talking about a small emergency fund here - a grand in savings compared to the 50 grand OP owns. It stops you having to put more debt onto credit cards when the inevitable happens and allows you to keep paying down debt in a thorough and consistent manner without added stress. It's pretty standard advice, and I think it makes perfect sense.

Obviously it doesn't mean "put all your money into savings and none into your debt" - it's money specifically for the emergencies that life throws at us.

With respect, I have to disagree. Debt is a massive emergency and all available funds should be 'ring fenced' to pay down the debt. Something I wish I had learned many years ago, but better late than never.

However, and I may get flamed for this, if you are going to 'ring fence' an emergency fund then surely it's better to pay off the equivalent amount on a CC which you know won't be subject to sudden closure or limit reduction? That way, you lessen the impact of interest from the balance on that CC but always have access to the amount (the emergency fund) you paid down. This nonsense of 'earning interest' on a small emergency fund whilst shelling out loads in debt interest is exactly that: nonsense.

weebit

UrbanDanceSquad wrote: »

With respect, I have to disagree. Debt is a massive emergency and all available funds should be 'ring fenced' to pay down the debt. Something I wish I had learned many years ago, but better late than never.

However, and I may get flamed for this, if you are going to 'ring fence' an emergency fund then surely it's better to pay off the equivalent amount on a CC which you know won't be subject to sudden closure or limit reduction? That way, you lessen the impact of interest from the balance on that CC but always have access to the amount (the emergency fund) you paid down. This nonsense of 'earning interest' on a small emergency fund whilst shelling out loads in debt interest is exactly that: nonsense.

It's been a few days since I've been on this thread and I have a few things to update, but first I want to address this comment.

Let me set this hypothetical scenario based on a very possible set of circumstances. My current contract ends in mid-April (real). I've not saved any emergency fund (false). My last paycheck is not a full month due to ending mid-month. I have apx. £2600 of bills to pay. My wife earns £1900, I've earned £1000. This means we have £300 to spend on food and travel in the next month. It's a struggle. End of May comes, I've still not found a job. My wife has earned £1900. I've earned £0. We have £2600 of bills to pay. We can only pay £1900 of them leaving £700 unpaid. All of our credit cards are closed, we have no further avenues of funding. We default on 5 credit cards. They each charge us a £12 late payment fee. The £6000 we have at on a 0% deal has been defaulted on, so they bump up the interest rate to 18.9%. End of June comes. I've still not got a job. We've not eaten for a month. We have £2800 of bills to pay. My wife earns £1900.....

...It might sound rambling, but the above is a very real scenario. If i had an emergency fund to draw on, I could have taken that money to make up the deficit from that. Instead, this scenario makes us less well off than we would have been if I hadn't have saved the emergency fund.

And regarding the visa money, again this money HAS TO BE PAID. We have no choice in the matter other than my wife leaving the country, returning to South Africa (£900 for a one-way flight) and earning only £700 a month - hardly covering her living costs, let alone our debt.

weebit

So... now that I've addressed the "emergency fund" thingy above, I'd like to give you all an update.

I've looked into YNAB and downloaded the software. It took a while to figure it out, but it seems just the thing to help us both manage our money. It does seem a bit counter-productive to fork out $60 for a piece of software that's designed to save you money, but I'll see how we get on at the end of the free trial. What it has shown me though is how much I didn't realise was going out compared to what was coming in. Everytime I add a line to the budget, it has a direct effect on how much is "spare" to pay onto the debt. I've already noticed a few things I didn't account for on the first day so it will need some tweaking, but I guess that's the point of this thing, right? I've loaded the app onto both our phones and it's really simple to use. I tried to make an Excel Spreadsheet a while ago which did pretty much the same thing, but compared to this, it was really cumbersome and so I gave up on it.

BTW, does anyone know how to not pay the full $60 for this software? I'm not asking for anything illegal, but is there a promo code I could use for a discount?

@Teacher2: Thanks for the advise. All good in theory, but most things are unworkable in practice. No gigs, holidays, pubs, presents etc. at all... for 5 years? What kind of life is that? I need to live a little, give me a break!

I have used ebay a lot when times were hard and being honest, it pays poorly compared to working over time (and often less stress).
Could you re-locate outside of London as you are freelance?
Would your wife be able to become a british citizen to reduce costs of visas.

- Unfortunately, there is no such thing as overtime in my job. I get paid a fixed rate to get the job done, regardless of how many hours I work. The best I can hope for is a day off in lieu!
- Although I'm freelance, I do commute into Central London everyday to work in the office, and occasionally go out on location. It's not a work-from-home job.
- It's not simple to become a British Citizen. She needs to have lived in the UK for 5 years before this happens. When she was first granted her visa to live in the UK as my spouse, the visa lasted for 2.5 years. after 2.5 years, we have to renew for another 2.5 years (this is the stage we're at). After this next visa ends, then she can become Naturalised (aka given indefinite leave to remain status) and be eligible to sit the citizenship test. If she passes, she's eligible to apply for a British Passport.
- regarding ebay, yes I do only have a limited number of things I can sell, but these are things I no longer need or no longer use. It's a short-term cash injection to help reduce the debt right now. It's not a long-term solution. I'm ok with that!

KxMx

Totally normal to tweak YNAB, I went back to my spreadsheet so many times the first month to fiddle, then in month 3 I made more adjustments because I saw again what was lacking.

I'm really glad even at this early stage you are seeing a direct impact as to your outgoings effecting your debt repayments. Seeing it in cold hard numbers is very sobering and very motivating not to spend!

I also think an emergency fund is sensible, as long as more emphasis is spent on paying off debt. I'm paying back my savings at a x2 rate to my emergency fund and that works for me.

UrbanDanceSquad

weebit wrote: »

It's been a few days since I've been on this thread and I have a few things to update, but first I want to address this comment.

Let me set this hypothetical scenario based on a very possible set of circumstances. My current contract ends in mid-April (real). I've not saved any emergency fund (false). My last paycheck is not a full month due to ending mid-month. I have apx. £2600 of bills to pay. My wife earns £1900, I've earned £1000. This means we have £300 to spend on food and travel in the next month. It's a struggle. End of May comes, I've still not found a job. My wife has earned £1900. I've earned £0. We have £2600 of bills to pay. We can only pay £1900 of them leaving £700 unpaid. All of our credit cards are closed, we have no further avenues of funding. We default on 5 credit cards. They each charge us a £12 late payment fee. The £6000 we have at on a 0% deal has been defaulted on, so they bump up the interest rate to 18.9%. End of June comes. I've still not got a job. We've not eaten for a month. We have £2800 of bills to pay. My wife earns £1900.....

...It might sound rambling, but the above is a very real scenario. If i had an emergency fund to draw on, I could have taken that money to make up the deficit from that. Instead, this scenario makes us less well off than we would have been if I hadn't have saved the emergency fund.

And regarding the visa money, again this money HAS TO BE PAID. We have no choice in the matter other than my wife leaving the country, returning to South Africa (£900 for a one-way flight) and earning only £700 a month - hardly covering her living costs, let alone our debt.

Why are you dwelling on a scenario which hasn't happened? Say for instance you save your emergency fund but then land a new contract once the old contract finishes? How much unnecessary interest will you have paid due to 'ring fencing' a fund? Rather than worry about something which hasn't happened, why not put the same effort into making sure that such a scenario does not play out?

Don't get me wrong, I do understand your thinking here. However, in the long term, such an approach will cost you more in interest.

UrbanDanceSquad

weebit wrote: »

@Teacher2: Thanks for the advise. All good in theory, but most things are unworkable in practice. No gigs, holidays, pubs, presents etc. at all... for 5 years? What kind of life is that? I need to live a little, give me a break!

Possibly the life of someone who'd rather not go bankrupt.

rogue999

Weebit - YNAB is often on offer on Steam, it's £29.99 at the moment but i've seen it drop lower than that - might be worth checking on 'black friday' or looking in over the next couple of weeks for offers. Also if you sign up to some of the free online webinar style courses, someone (or more than one person, can't remember now) on each course wins a free copy - they courses really explain how it works well and I enjoyed the ones i did.

weebit

UrbanDanceSquad wrote: »

Why are you dwelling on a scenario which hasn't happened? Say for instance you save your emergency fund but then land a new contract once the old contract finishes? How much unnecessary interest will you have paid due to 'ring fencing' a fund? Rather than worry about something which hasn't happened, why not put the same effort into making sure that such a scenario does not play out?

Don't get me wrong, I do understand your thinking here. However, in the long term, such an approach will cost you more in interest.

I'd rather not take that risk. I'm not going to respond to any further comments about whether or not you should build up a cash emergency fund. It's no longer a productive conversation.