Debt free at last after some luck

GandalsStaff

Since i graduated uni some 6 years ago i have had debt that just kept creeping up and up, interest rates starting out reasonable suddenly going up to levels that made reducing the debt hard. I was paying about £600 a month and only half touched the capital.

At my peak i was around £10,000 in debt but from today i feel a huge relief at the burden that has been lifted, so much so i am smiling more than i have ever done.

Going forward i am going to have a different approach to debt as below.

1) Mortgage is an acceptable debt (I am applying for a mortgage in a few months with a ~ 20% deposit

2) When buying something expensive, can i afford it now from my disposable income? if not then don't buy it.

3) Only spread payments out over a protracted period if interest free (Unless emergency such as Fridge going bust)

4) Put aside 10% of my salary into a rainy day fund

5) Look out for the future and increase my pension contribution to 10% (+ 10% company contribution) from 6%

6) Put £80 (Child Benefit money) into my daughters savings every month and teach her the value of money.

7) Budget!!! I need to look more closely at all the money that leaves my account and make sure i am not wasting it

8) Look for better deals such as my current account, Gas/Electric etc.

9) Use my credit card to maintain my credit profile, but clear it every month.

We need to teach more young people about the dangers of debt as it can be a vicious cycle that is hard to break especially for low earners.

If you have any tips i should add to my list please let me know.

andyfromotley

Hi,

well done you. What was the bit of luck that helped you out of your debt?

Cant disagree too much with your plan.

3) I don't bother with these at all. They are still an obligation that needs to be met. If you lost your job etc etc. I know it enables you to get the interest but they just aren't for me. The small savings are outweighed by the fact its debt for me.

4) Yes! When it gets to a reasonable level that you are happy with stop and use the money to overpay mortgage/debt etc

5) Yes yes yes!! Guessing you are about 27 years old, this is a great amount to be paying in and will set you for a fantastic retirement.

7) essential. YNAB works for me and plenty of others on here.

8) This should be routine for you with every single bill.

My own fave financial advice of the moment courtesy of Mr Money Mustache 'Stop buying !!!!!! you don't need'

Sounds like you are doing fab.

japmis

andyfromotley wrote: »

Hi,



7) essential. YNAB works for me and plenty of others on here.

Yes yes yes!! Now is a great time to start YNAB and budget from today onwards :beer:

twiggy86

Well done on getting debt free! Sounds like you've got a good plan going forward.

One thing I would suggest is rather than "Only spread payments out over a protracted period if interest free (Unless emergency such as Fridge going bust)" - start putting money aside into an emergency fund in case something like this does happen.

GandalsStaff

andyfromotley wrote: »

Hi,

well done you. What was the bit of luck that helped you out of your debt?

I took a £7 risk in a game and turned it into £40,000 (Online Poker tournament).
Ive now withdrawn it all and cleared all my debts and sent the remainder into a savings account until i need it for a mortgage. I am taking this bit of luck as a chance to start fresh and not make the same mistakes i have done in the past.
I currently have about £800 disposable income after all my bills (Rent, utilities, Childcare, food etc) so i have a bit to play with now.

This has cut my debt free wannabe chase from 2 years to immediate. I had been paying my debt down quite well for the last 9 months so i think i have the right midset going forward.

japmis wrote: »

Yes yes yes!! Now is a great time to start YNAB and budget from today onwards :beer:

I bought that a few months ago but didn't use it enough, am i right in thinking its completely manual and can't connect to your bank account?

twiggy86 wrote: »

Well done on getting debt free! Sounds like you've got a good plan going forward.

One thing I would suggest is rather than "Only spread payments out over a protracted period if interest free (Unless emergency such as Fridge going bust)" - start putting money aside into an emergency fund in case something like this does happen.

I agree, i suppose my Point 3) and 4) conflict a little.

andyfromotley

Yup pretty much its manual.

You can import a bank statement file for reconciling (although i prefer a paper and pencil!)

It has a neat phone app which allows for easy inputting of expenses.