You got this... Debt free in 2014

happybunny86

Thanks Laura and unsavvy for stopping by

In terms of what I did Laura, I really wish I had a better to story to tell but its not the best. I signed up for a debt management plan with step change in 2010 because I struggled to budget with my money and I thought paying one creditor would help. In all honesty I could afford all the payments but it seemed so complicated I didn't want to the hassle and didn't realise how serious the defaults would be. They went through my budget rigorously and it really cut anything non essential out of life so it was pretty tough but I understood I owed people money and I had to pay - they wouldn't accept me wanting a few luxuries as a good excuse not to pay them back! At this point I got rid of all the cards so I couldn't put any more on them. Thats a requirement of the DMP i think.
The biggest problem with a DMP is it doesn't teach you to control your finances or budget. If anything it problem made things worse for me. At the time I had a lump sum rent which included all my bills etc and then 1 lump sum for all my debts, so I didn't really learn to budget payments coming out at different times.
I still spend on luxuries I didn't need, ignored the budget which meant I had to go without the things I really needed. I remember living off fishcakes for a week because they were really cheap and I had no money for food. I also had to get a lift to work for a week as i didn't realise my car insurance had bounced and they cancelled it and I had no money to pay the first 3 months to a new insurance company until pay day.
Eventually I moved in with an ex bf which lightened the load on rent etc but he was always keen to go out for food and drinks so I struggled to keep up with his lifestyle.
Through all this though I kept up with the DMP payments. They came out on the day I got paid with the rent so if I was stupid with money I was the one who had to live with it. Where as before I could cancel/move payments to creditors I didn't have that option anymore as the money was already gone.
I moved to being paid every 4 weeks and broke up with my bf at a similar time. I had no idea how to budget - it sounds silly but I still find this hard to keep track of what I'm spending and what's coming in and out and to know how much money I really need for things! I ended up defaulting on my DMP as the money was no longer in the account on a set day every month. Sometimes I had to keep it there the whole month before pay day and not spend it and i was just hopeless at it. I did only have 1 final payments of £330 to pay but I found out that the defaults on my accounts were going to prevent me getting a mortgage so I thought all the 'hard work' was pointless. I ended up getting a shop direct account for new clothes and a laptop and then not being able to keep up with those payments either - the interest was astronomical and added another £3k to my debt.

When we broke up I moved to live on my own and had to borrow money from my parents (who are retired) for the first 3 months. I always paid it back but my mum mentioned how they were really struggling at one bit and I realised it was completely unfair of me to be asking her for subs when I earned so much more than her.

So through the above I realised in December that I want to move in with my new boyfriend in 2014 and I do eventually want a mortgage when all my defaults drop off and more than anything I want to learn to budget. So now I record everything I spend in an envelope budgeting app. You basically assign your whole wage to different envelopes and take the money out of them when you spend it - all virtually of course. I put my petrol allowance for the month on a Sainsburys giftcard which is my physical envelope I suppose to make sure I use that. I do a big essentials shop at the beginning of the month and now put the rest of the money on another giftcard for the supermarket shop. I know i could probably get i cheaper by shopping around but when you add petrol and the little things I'd add in as treats by going to 5 supermarkets this is the cheapest way for me. All my bills are assigned as virtual envelopes with the dates they come out on so I can check them off when they come out of my account.
I keep of anything coming up car insurance, MOT etc in a calendar so I can work out how much these will be (ish) and make sure I have the money spare that month.
I love this method it makes it really easy for me to see what money I have to spend and whats still due to come out. means I can't go ahh sod it i don't have any money anyway and go and blow it all on everything.
In all honesty I wish I had done what I'm doing now rather than go on a DMP. I could afford the payments I just didn't want to live in the harsh real world of trying to live on a budget! All lessons learnt but i'll definitely be teaching my kids not only how to budget but ho to live off a budget. When you go to uni you just get credit thrown in your face and you think you'll just pay it all off when you get a job and its just not that easy!

Not very inspiring Laura but hope it helps! I def took the long route to learning! I think you really need to think about your behaviours. Even though its much better to snowball debts and pay off with the biggest with the high amount of interest first it can be outweighed by the pleasure of seeing the smaller ones drop off.

Haven't updated in a while as its been so busy with work. I've been plodding a long okay. I keep getting a bit excited in Sainsburys. When the moneys gone its gone though so need to be a bit careful on the food budget.

I have declined an invitation to a night out on Saturday because I don't think I have the budget - Although I do keep wavering as I haven't had a good night out in a while and I don't know what i'll do if I don't go out. By the time I've paid for taxi's even if I drink before I go it won't be cheap.

Paid off one of my debts - woop woop! Had a phone call with HSBC as promised them I would increase my payment at the end of Jan once this other debt was paid off. Could tell when I'd said it in Dec then thought it was an excuse to get them off the back so I think the guy nearly fell off his chair when I said I would be upping as agreed and had already changed the standing order if he went in to change Happy bunny 1 - HSBC 0 (Although they win really as they get the cash)

Other than that will just keep soldering on!

FinanciallyUnsavvy

Hi HB

Sounds like you've been through quite a lot of ups and downs to get where you are - well done for persevering and finally learning how to budget. It's certainly not easy.

I love your idea of using pre-paid giftcards for your essentials! Great idea to budget without having to carry around cash. The only slight concern there is if the stores concerned go into administration - I wouldn't have thought that be a problem with Sainsburys though!

Well done on declining a night out. Perhaps you could arrange something else cheaper instead of going out on the town? Perhaps a night in with friends - get everyone to bring a bit of drink around, split the price of a takeaway? Put some music on and have fun? I've had much more fun at house parties than going out in the past!

laurag89

Thank you for sharing your story happybunny!
A DMP isnt possible for me due to my line of work, but listening to your story I think I have had very similar problems in terms of budgeting and the same attitude of just buying what I wanted as I was in trouble anyway.

My payments are fully affordable and I can overpay every month providing I stick within my allocated budget every month. So it seems like im doing the right thing, its just a slow process and I just want it gone overnight even though I know it isn't possible. .... Find it absolutely amazing how quickly I managed to rake all the debt up in the first place!

You are doing extremely well and if the virtual budgeting is working then by sticking to it you will get to where you want to be, I think one of the hardest things is finding a way to budget that actually works for you!

happybunny86

Thought I'd check in for an update. I ended up going out at the weekend as some of the plans for next weekend have changed.. we've cancelled one of the day trips as the place is closed for winter so I used the £30 from that to go out with. I was really happy I got to go out but even happier than I had originally said no and stuck to budget either way.
I got some bad news on Saturday. I have another default. I'm very gutted about this as it was rather out of the blue. The post had been going to my exes house about it and he hadn't forward on. I had been paying the debt off but only at £20 per month and they wanted more. He finally forward on the letter and I changed the address and the first thing they did was hit me with a default saying they have been trying to contact me about paying extra Going to try and write to them to say if I pay it all off in one go would they remove the default but doubt it will happen. Treated myself to a hair mask £1.69 to cheer myself which is much better than the spending binge I would usually go on, still feel super deflated though as puts the mortgage back another 6 years

FinanciallyUnsavvy

Sorry to hear your bad news

Keep your chin up hun - it's not ideal but it's certainly not the worst thing that could have happened. Fingers crossed that you writing to them (esp. if you are in a position to pay off in one go) it'll remove the default. I don't really know anything about defaults etc. so I can't give you any advice I'm afraid, but try to stay positive!

You'll get there- sounds like you're doing excellent with your budget so keep with that xx

happybunny86

Financially Unsavvy -
The prepaid gift cards are a godsend. I just use them for Sainsburys so shouldn't be an bankruptcy issues. I do however have a £400 currys voucher which was an insurance claim i'm saving until I move house and I'm very worried about their financial position but keeping an eye on it!

Took your advice on the house party and we stayed in and had drinks at mine. My friends agreed to come to mine first as they know the ££s are tough. This meant we could share taxi's into town reducing costs and having a bottle of wine before we went so we didn't spend that much at all.

I have just reread the default notice and in my panic it says it won't be registered as a default with credit agencies if I pay before 9th Feb. My pay day is 7th Feb so I will be able to pay it off and live off bread and jam in Feb!!

FinanciallyUnsavvy

happybunny86 wrote: »

I have just reread the default notice and in my panic it says it won't be registered as a default with credit agencies if I pay before 9th Feb. My pay day is 7th Feb so I will be able to pay it off and live off bread and jam in Feb!!

That's such a relief! Phew. So glad you will be able to pay it off! :j

Knowing that Feb will be tight maybe you could use a bit of money from the end of this month to stock up on some cheap but lasting foods? Pasta, rice, tinned tomatoes etc. etc.? At leasts February is a short month!!

happybunny86

I get paid every 4 weeks so every month is a short month but you are right I'm going to need some staples so I'll be stocking up and putting some bits in the freezer too.
Makes me more determined to take lunch to work and to keep on track. Will help me pay off everything quicker in the long run xx

happybunny86

Thought it was time for an update!! Paid the "default" on Friday so it's definitely bread and jam this month haha. Took unsavvys advice and have stocked up in some staples to keep me going. Between doing slimming world a few tears ago and MSE has made me realise how easy it is to cook up a good meal for cheap. Had a lovely Lloyd Grossman esque sauce with pasta for tea using up some leftover bacon from the weekend.
Did the budget tonight and it is beyond tough but I'm determined not to ask my mum for a loan this month. It's going to be worth it in the end. Did a quick tally up and whilst I don't think I'll quite be debt free by the time I move in with my boyfriend I definitely think I'll be down to one creditor.
Chatting things through with my boyfriend and we've decided on a cheap valentines which will help too. I'm cooking Friday and fish and chips Sat - his treat.
Expect I'll be posting on here a bit more this month to keep me on track. First motivation is to get up tomorrow and cook lunch for myself
Xx

FinanciallyUnsavvy

Lovely to hear from you!

So glad to hear you're on track. You're doing so well! It may be a tough month, but it'll soon be over, and we'll certainly keep you on track if you stick around

Good luck hun! x