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

weebit

lovehackney wrote: »

Just found your thread and read it all the way through... wow, quite a journey you've been on! I wish you best of luck for the future. I did want to share a personal anecdote however (which I also shared on the dairy name "Dairy of Reinventing Ourselves" or something like that) as I believe it is relevant for you.

In your last few posts you've mentioned earning more and so paying your debt down faster. Obviously in theory this is a good idea, but I'm concerned that as you earn more, you'll think you 'deserve more' - your wife especially!! - and spend more. A thought process that goes like "Oh well we have another £200/month now, so can afford to spend another £50 on gigs / going out / whatever..."; "oh well let's celebrate the pay rise with a weekend away..".. and before you know it, you've eaten up the whole payrise.

As an example, 5 years ago I left university with about £3k debt (credit card and overdraft, not including my student loan). My first job was well paid for a graduate (£32k) but I was living in London and it was expensive. I needed clothes to look the part and well, clothes cost money! 2 years later I moved jobs and got a big pay rise (salary of over £50k).. well wouldn't it be nice to go on holiday this year! To treat my parents to lunch at a michelin starred restaurant! To move flats and live on my own - after all, I can afford the rent now. Before I knew it, my debt was at £5k. A year later, my salary went up to £60k. And then £80k. And you know what - I still have £4-5k of debt. Because each time I bought something or upgraded my lifestyle. My clothes got more expensive, my dinners out got more expensive, drinks with friends - I'd buy a more expensive bottle of wine etc.

Now, in this time, I've been fortunate enough to buy a flat (with my boyfriend, and through his judicious saving and an inheritance). We have a combined income of over £140k, and £10k of debt between us. Yes it's manageable, I don't struggle to pay (significantly) more than the minimum payments. But the reason it hasn't been paid off? Because I wasn't tracking my spending. I didn't know what I could afford. I'd pay off over £1000 on pay day.. only to respend £1000 by next payday. All those small purchases added up. Since beginning of January, I've been logging EVERY spend. I didn't realise I spent nearly £300/month on groceries (for one!!) - but now I know I do, I know where to cut back. I have a spreadsheet on my phone which I update immediately after any purchase, and check my bank accounts daily to check DDs etc. It's made a significant difference to my debt and budgeting (I know it's still early days) but no real difference to my life. Now I can clearly see the trade offs - I had to spend £5 on an eye test today, so thats £5 less on socialising this month.

I don't want to come across all preach-y (and I've rambled enough), but I can't stress enough that it's all about how much you SPEND not how much you EARN (unless you earn zero of course). Getting a payrise or a lodger will really help you out - but this money MUST be directed towards your debt. No 'one-off' treats because it's the first month with more money. Even your celebratory prosecco needs to come out of your grocery budget!

Hi, thanks for your comments. I totally get this and have started tracking all my spending since late November 2015. I'm using YNAB (You Need A Budget) and both me and my wife have the apps on our phones which we update whenever we make a purchase (or a couple of days afterwards in the case of my wife!). Yes, these one-offs do need to come out of somewhere. in the past few months, whenever we have overspent in one category, I reduce another to balance it out. Sometimes this has been the "extra debt payments" category which I hate doing, but it is making me think about what we're spending and the impact it is having.

FinallyGettingFree

Great news Weebit, sounds like you are making a bit of steady progress. I use YNAB too, and it is SO good for making you realise that "yes, I can have this treat - but it means I will be paying off less debt" - suddenly the treat seems less desirable all of a sudden!

weebit

A new month, a new update.

Things are going ok. as you can see from my signature, i currently now owe £48,599.51 - a reduction of £1713.43 since December. A slow start TBH and I wish I had done more by now. I do know why though and it's for a couple of reasons:

- The British Government have increased the cost of my wife's visa from £1049 to £1311, so I set more money aside to pay for this. We'll be applying in May or June and the money is sat in our account earning interest whilst we wait for the right time.
- We have rented out the spare room, but we decided that we needed some extra storage, so we used some of the rental income on £150 of cupboards and £180 on a second fridge to help us live more comfortably.

Some positives though:
- We've managed to reduce our food shopping costs to around £175 a month on average for the past 4 months
- Tesco offered me a 0% balance Transfer till October 2017, which meant I was able to pay off my MBNA Card, plus it reduced my month interest charges from £320/month to £250/month. I hope MBNA also offer a deal to reduce this further.

However, this month is predicted to be a good month. We don't have any large payments to make so we should have £900 extra to pay towards the debt, and if my calculations are correct, by the end of April, my debt should be standing at around £47,700 and end of May around £46,300.

Teacher2

Hooray! Well done.

Life2short

2 cups of coffee, 2 rollies and a bath run cold....I eventually got to the end of your diary and glad to see some sort of progress at the end!! Truly wishing you well and further debt busting. Knowing that you do not want to go IVA or DMP, have you ever considered a consolidation loan...and then rid of the CCs and overdraft (as in close them). That way your credit rating would still be intact but would have a fixed payment and a DFD ?


Your diary has inspired me to up my game even though our situations are very different.


Good luck I will be checking in.

debtfreeoneday

Didn't want to read and run.. just wanted to give you hope you can pay you debt off, we have paid off over £60k and are still going and it took us a lot longer, but it is doable so don't give up and set yourself goals and targets! Good luck!

Teacher2

debtfreeoneday wrote: »

Didn't want to read and run.. just wanted to give you hope you can pay you debt off, we have paid off over £60k and are still going and it took us a lot longer, but it is doable so don't give up and set yourself goals and targets! Good luck!

Over £60k. Good grief, that is amazing. Well done you! What an inspiration.

weebit

A new month, another update.

Things are going amazingly well. I've been offered a couple of balance transfer deals, so now my monthly interest has decreased from £317 in March, to an estimated £207 next month!

I've also managed to make quite a few extra large payments this month, thanks for some additional income including quite a lot of overtime from my wife, and being paid to look after someone's cat!

On the job front, it looks like a promotion is coming very soon. I work freelance and my current job finishes towards the end of May. I've spoken with my current employer and it seems my next job might be a step-up with a rise in wages too. I don't know details yet, but it's very exciting!

Verbatim

That's good news but are you on target for df in 3 years? I guess that's about 17k a year with things speeding up towards the end when you'll be paying less or no interest. But you've paid off less than £4k in 4 months or 1/3 of the year so far, so I guess might expect to pay off around £12k by the end of the year. At that rate it will take you at least 4 years. I think you are still prioritizing your comfortable lifestyle, (second fridge, new cupboards), rather than debt reduction.
Which of course is fine if that's what you choose! Keep going at whstever speed you think is right for you and good luck.

weebit

As I've mentioned, I do intend to pay it all off, but not "at all costs", i.e. we still want a life and not recluse ourselves. We have definitely cut back though, spending less on food, taking lunches to work, going to fewer gigs etc. My 3 year plan does also assume that I'll have a steady increase in wages which is quite normal in the industry I work in.

One other thing, a few years ago, we borrowed £4000 from my wife's mum and we still owe around £1400. She lives in South Africa, so to her, she lent us 61,713 Rand, and this is what we'll pay her back. However, the exchange rate has changed so much that we now owe her 12,600 Rand, which currently is £606 - this means around £800 has been "written off" so-to-speak thanks for the exchange rate change. She's visiting us this summer, and we've said to her that we'll give her £800 to pay off the debt in full.

I also have £3300 apx. at a debt collector and paying £1/month to them. the plan is this will be the last debt I pay off with an F&F - hopefully with 50% or less. If they agree, that could also shave off a few months of being in debt too.