I want to break free!

Sauvignon_Blanc

Hello,

I've decided to write this diary to hopefully document my journey to becoming debt free. I have been really inspired after reading other diaries and I really hope to be able to join the debt free roll of honour one day.

A bit of background - my husband and I excitedly bought our first home in 2005 with a Northern Rock Together Mortgage. We also consolidated our debts with 2 separate loans, one secured loan (25k) and one unsecured (18k) I realise now how silly we were but at the time I thought property prices were soaring and we were bound to make money on our house and that somehow everything would be work out one day. I don't even know how such massive debts accumulated, suppose just stupidity and living way beyond our means (before and after we met).

Fast forward 8 years, I took voluntary redundancy from work which paid off the 25k loan and we were desperate to move house as we now had 2 children and had outgrown our little house. We had no money to go up the property ladder so we decided to move into a rented house. We sold our house for the same price we purchased it for but unfortunately we had to take the unsecured element of our mortgage with us. I got a part time job which didn't pay very well but kept us going and now I have a better paid job.

My light bulb moment happened middle of April when we saw a house we were really interested in buying and went to our bank to see what our chances of getting a mortgage were (my parents were going to lend us a 5% deposit). We were offered half of what we actually need. I came home and read a very interesting article by Martin on what to to to improve your chances of getting a mortgage, I really wish I had read this first.

I worked out our current debt and I was really shocked, I had no idea it was as much as it is. I know that sounds silly but it has again just crept up.

So this is where we are...

NRAM - 15,998 (unsecured element of mortgage)
NRAM - 1,398 (originally 18k, last payment due in Oct 15)
Overdraft - 3,000
Credit card - 5,800
Car loan - 3,606
Catalogues - 1,600

Total Debt - £31,402.

I am mortified by this and feel very embarrassed that we are still living a life full of debt. Our friends are all much better off than we are and they all own their own houses. I am determined to get us out of debt and on the road to saving for a house.

So this is the start of our journey and I hope I can complete it. My first goal is to get our total debt down to £25,100 by the end of the year. Fingers crossed.

SB x

mumstheword***

Good luck! I have debts at a similar level :-(
Will subscribe to your thread with interest

Sauvignon_Blanc

Thanks mumstheword, good luck to you too

MuffinTops

Hello SB (great name),

Isn't it shocking how easy it is to run up a huge debt without really realising how serious it gets? But it's great that you've looked at it all now and feel negatively enough about it to want to make amends.

Good luck. I'll be cheering you on from the side lines.

PinkPoppies

Best of luck!

snowscreamer

Hi Sauvignon Blanc,

I was attracted to your diary as your username is my favourite white grape... Also I am currently on a similar journey having managed to rack up debts without realising the scale of the problem. I have found YNAB has really helped me see where my money is going is month; keep track of my debts and allocate money to repay them each month. I've gone from spending £500 more than came in each month to £500 less without feeling like I'm living an austere life. Amazing how much you can spend without much added value to be honest! It also allows you to virtually put money aside for Christmas, birthdays, car tax and other annual expenses so that they don't come as a shock and you reach for the credit card...

I would definitely recommend you give it a go as it's totally changed the way I think about money and we intend to continue to use it to build up savings and make sure we continue to spend wisely even after the debt is paid off. Worth a look!! I don't work for YNAB or anything - I'm just it's biggest fan - never would have made it this far without it.

Good luck - looking forward to seeing your progress

Snowscreamer

Sauvignon_Blanc

Thanks Snowscreamer, am a bit confused by YNAB. Do you have to have an offline budget spreadsheet before you use this? As it keeps asking me to sync my budget data.

snowscreamer

Hi SB,

Did you download on your phone? You need to set it up on a Mac/PC first; create a new budget there (fairly self explanatory but ask if you have any questions) and then once you've done that if you like you can sync it with your phone via Dropbox. The feature set on the phone is limited - just for checking your budget and entering transactions whilst you are on the go - it's much more powerful on Mac/PC.

Snowscreamer

Sauvignon_Blanc

Great, thank you. I'll try it on my laptop

Sauvignon_Blanc

Well today has thrown me a little. We have been advised that we have passed the affordability test for the mortgage we need. We weren't expecting this at all. I have had my head focused on us reducing our debt while continuing to rent our house for the next 2-3 years.

We pay £1100 a month for our rent and our mortgage repayments would be £150 more than this but it would be money going into our property instead of our landlords.

I just don't know what to do for the best. Does anyone have any advice? It's fixed at 4.49% for 2 years.

Obviously we haven't got a decision in principle yet just passed the affordability test.

newlifeahead

Wishing you good luck too.
Great news on the affordability test

subscribing too