Why do you spend?

misskl

A bit about me...

Ever since leaving my hometown 8 years ago, I have
Got x 2 overdrafts of 2k = £4k in total
Got a 5k loan to help an existing business (paid off)
Got a 2k credit card to set up a business (paid off)
Got 3k on a card (to help me pay for things when I stupidly quit my 29k job with no job to go to and went down to 16k through temping!)
Got 8k loan -I have recently (last year) bought a car, with a loan for 6k, plus I borrowed an additional 2k to pay off my overdrafts (which were stinging me every month!)

I'm 29, and now living at my grandmas out of a suitcase... but I am earning 26k.
What I have left to pay off is:
Credit card £1500
Loan: £8500 (but I could sell the car and have about 3500 left)

This is the first time I have typed it all out and it has shocked me!! Needless to say, I can now trace my financial problems back to my turbulent childhood, and I have purely equated money with having fun and pleasure. It has comforted me, but I have never built up any savings.

It scares me that I'm nearly 30 and whilst everyone is settling down, buying houses etc, I am in this position. I honestly was so unconscious of how bad my situation was until everything crumbled and I was forced to face it.
I honestly think that if you are having trouble saving money, you have to ask yourself WHY? Why am I spending all of my money, money that is designed to look after me and that I have worked hard for?

I hope, with this forum, I can be debt free in 12 months (or less), and motivate others, that you CAN do it... if only you OPEN YOUR EYES and stop denying that you're hurting yourself in the long run :A

pcgtron

The amount of people on this board that have a car loan as part of their debt is scary in my opinion. Now I know that people need a car to get to work etc, as do I. But I have never spent more than 6000 on a car, and this was because I had the money in the bank and wanted to. Usual 2nd hand car spend, 3000-4000 and I have the money before I purchase. Everything else comes down to personal choice and well done for realising your situation.

It's hard, and good luck to you

soopa_de_doopa

Welcome Misskl and good luck with your debt busting!

I think I have just always tended to spend over what I earnt because my parents never spoke about money, they never taught me how to manage my own finances so I just didn't really have a clue and wondered why I was always overdrawn!! I have had to teach myself through trial and error (and spending a heck of a lot of time on here educating myself!) I am now trying to educate DH and our 4 kids in the same ways.....

I know quite a few people who spend far too much because shopping is their hobby, like they'll have a spare Saturday afternoon and not know what else to do but go shopping and they'll have to buy a couple of new tops which will be stashed in their wardrobes and maybe never have the labels removed. :eek: Thankfully I'm not a big fan of shopping and I prefer to bake or go walking than shopping!! So I guess boredom could be a big factor in some people's spending?

Anyway, I've rambled on enough, I'll be interested to see what others say! Interesting thread, will be following!

Soopa x

thecassman86

Welcome to the forum Misskl :wave:

It feels scary when you write it all out and think about it but once you have a plan in place that fear disappears - especially when you spend time on here! ... It's incredible reading some peoples stories where they have debts of £60k+ or even higher and yet still get to a debt-free scenario. It's inspiring.


My problem has always been stupidity, really. My (now) wife and I used to enjoy holidays (we still do, of course) and visited European capital cities... We used to visit around 4 per year, just for a few days at a time, and have visited around 20 in total. Many of the hotels we stayed in only accepted credit card... So, we used to get the cash saved up in our debit account, then pay it off on the credit card with the intention of paying it straight off with the money we'd saved. On a few occasions we did, and on other occasions we saw £nnn sat in the bank account, hotel paid on CC and frittered the cash away. Stupid.

It was all about discipline (as money saving often is)!

I do have a car on finance but i agree with pcgtron about paying for cars up front with saved money - i've never been in a position to do that yet but my current car will last me a while yet and i hope i can afford to buy the next one outright. Saying that, i could have easily afforded a much better and elaborate car than i went for (Clio!), there's still an element of rationale when i buy a car on finance.

Good luck in your debt-free journey!

misskl

Thanks all, for the support. I suppose I'm lucky I've only just realised this now, and decided to face up to my lack of financial management.

I'm on track for my credit card to be paid off in June (hurrah!) and then I plan to continue paying the loan, of which I should have around £7695 left.

I automatically pay £226 a month into this loan. Its fixed at 5% from my bank (HSBC) and there are no charges for paying more than this each month, although there is a resettlement charge.

My car is a 2010 renault clio, silver. The reason I went for a higher priced car is because it would (hopefully) retain its value and I wouldnt have to spend out lots on repairs like I would with an older car. The car was bought for £5999 and I used the other money to clear my 19% APR overdrafts.

I do need a car. Would you recommend I sell up/buy a cheaper car to be debt free, or not? I can afford the monthly repayments.

My plan was to use the £300 I have been paying off my card to put into a high interest savings account to save for a house.

Thanks:D

abby1234519

misskl wrote: »

My plan was to use the £300 I have been paying off my card to put into a high interest savings account to save for a house.

Pay off all debt first, you won't find a high interest account that will do better than the interest you will pay on debt. Remember it will get taxed if it isn't an Isa.

Pay off debt and then save...

bambos

I agree with Abby1234519 you should pay off debt first and then save. There is no point having savings if you have debt IMHO.

The main reason we have debt is that when me and my husband first met we had a credit card which had a £5000 limit and much like thecassman86 we travelled a lot.......we also enjoyed lots of pizza and evenings out which was very foolish. We sold my beloved MR2 Roadster to raise funds for when we got married and spent the whole £4000 on our wedding but had no debt from it which is know is a common reason for debt these days although I'm not sure why people would spend tens of thousands on their wedding, we had the most wonderful day and everything was stunningly beautiful just using e-bay and charity shop finds such as vases etc.

I then left my job when we adopted two children and the financial pressures of not only being unemployed but now raising our two babies was immense. Our debt started to spiral and now we are left picking up the pieces. It's no ones fault but our own and we sometimes sit and ponder if our quality of life would be so much better had we been more frugal and managed things better but we always reach the same conclusion that we wouldn't have learnt the most valuable lesson........not to live beyond your means!

We have managed to get our CC down to £1700 and husband is paying another £700 off tomorrow so that's down to £1000 but I still have £1380 on my CC and husband has £1000 O/d and mines £1070 also have Studio Cards account with £310 on it from Christmas. It's not ideal at all but we mange things in small chunks and are very frugal.

I also ensure that we think about purchases and we always talk to each other about buying things. We budget and we have cut up the big credit card when we had our lightbulb moment.

I find it sad when some months we can barely afford the food shopping and sometimes we have to try and use our Nectar points and Tesco vouchers but when we are buying the food shopping with cash we always go to Aldi which we think is excellent quality and you really do get so much more for your money.

My husband worked for a while with people who have learning difficulties and many of those use an envelope system where cash is put into envelopes for the month and only those envelopes are used. We use this system and we lock the debit cards in the safe and give my parents the keys this means that if we want to access any further money we not only have to confir with each other but also explain to my parents why we want the keys back :eek: lol.

misskl

abby1234519 wrote: »

Pay off all debt first, you won't find a high interest account that will do better than the interest you will pay on debt. Remember it will get taxed if it isn't an Isa.

Pay off debt and then save...

Yes, but my loan is fixed at 5% and the First Direct Account I want to put my £300p/m in is 6% interest, so wouldnt it be better to save money in that, and then in 2-3 years I will have a house deposit and paid off the loan as well?

I havent got an emergency fund either, I think I would feel more comfortable keeping my ISA as my emergency fund, and then building up savings from June onwards.

I just think it will make me feel more stable if I have savings, then once I save up enough I can decide to pay off the loan entirely or just wait until my monthly repayments end (I might be wrong??)

bambos

misskl wrote: »

Yes, but my loan is fixed at 5% and the First Direct Account I want to put my £300p/m in is 6% interest, so wouldnt it be better to save money in that, and then in 2-3 years I will have a house deposit and paid off the loan as well?

I havent got an emergency fund either, I think I would feel more comfortable keeping my ISA as my emergency fund, and then building up savings from June onwards.

I just think it will make me feel more stable if I have savings, then once I save up enough I can decide to pay off the loan entirely or just wait until my monthly repayments end (I might be wrong??)

Hi Misskl,

Although I really do see your logic in relation to having savings I would personally clear off some from your credit card, that would bring it under £1000 and then you can continue payments into the credit card account but you still have the credit card limit available if something catastrophic happened and you needed funds.

Personally I really do not see any point at all in having savings when your interest rate will be quite minimal with £488 but the interest on your credit card will be really high so I would clear that first.

misskl

Thanks for that, yep the plan was to start saving in June when my evil credit card will be paid off! I will just have the loan left by then.

bambos

misskl wrote: »

Thanks for that, yep the plan was to start saving in June when my evil credit card will be paid off! I will just have the loan left by then.

Sounds like a good plan Misskl. good luck with the debt.