In-debt to debt-free to saver - Help!

nearlytherenow

Hi everyone,

after a long and difficult journey of debt I am now in the very fortunate position where I will be able to clear the remainder of my debts by consolidating it into my mortgage.

I can go around the houses and say, oh yeah that bit was because of the wedding, or that bit was because I went to uni, but basically it comes down to the bare fact that I have been in debt because I spent too much.

So, my question is, how do you stay debt-free?! Does anyone have any top tips that they have used at this point in order to ensure that the debt doesn't creep back? I've seen friends do this, get to zero debt and then it all comes back again.

Any ideas and tips are gratefully received!

January2015

nearlytherenow wrote: »

Hi everyone,

after a long and difficult journey of debt I am now in the very fortunate position where I will be able to clear the remainder of my debts by consolidating it into my mortgage.

I can go around the houses and say, oh yeah that bit was because of the wedding, or that bit was because I went to uni, but basically it comes down to the bare fact that I have been in debt because I spent too much.

So, my question is, how do you stay debt-free?! Does anyone have any top tips that they have used at this point in order to ensure that the debt doesn't creep back? I've seen friends do this, get to zero debt and then it all comes back again.

Any ideas and tips are gratefully received!

You mention a long journey of debt, but do you have a similar journey of working to become debt free? You say you built up debt because you spent too much. Have you learned how live within a budget and work to clear off those debts yet? If you haven't, I would be concerned that consolidating your debt onto your mortgage could be a bad move. I've been there, done that and got the increase debt secured on my home to show for it. At the time I did that I hadn't had the experience of working towards becoming debt free and learning the life and budgeting skills I needed to manage my finances. All I did was build up the unsecured debts again...then I had a larger mortgage to pay AND unsecured debts to clear.

My biggest tip is don't consolidate but learn to budget and manage to live within your budget. Make sure your budget includes regular amounts to put by for emergency funds. We all have emergencies and if you slowly build up a fund, when they happen you will not be rushing to borrow money to cover them.

EssexHebridean

You're looking to consolidate (presumably) unsecured debt, into secured debt, is that right? Seriously SERIOUSLY bad plan - not least as you're asking how to stop getting into debt again - this is something you will learn best by working through the process and paying off - not through consolidation which, at the end of the day, is simply a short cut to allowing you to forget about how you got there in the first place.

How not to get into debt - budget, save any surplus, and live within your means. You've said it yourself - you spent too much. In the future you need to save for things and have the money before you buy them. Avoid credit cards like the plague until you're 100% confident of your own ability to use them sensibly too - and even then set them to clear fully each month. If your bank account comes with an overdraft ask your bank to limit it to £50 just to cover the odd oversight, not enough to allow you to spend into it.

Sanctioned_Parts_List

^this

Unsecured debt is effectively without consequences. Bad credit ratings, CCJs et al are effectively meaningless in the grand scheme of things. But secured debt is a serious issue - you lose your home if it goes wrong.

Never, never, never, secure an unsecured debt.

Anyway, you'll receive lots of tips but they come down the the simple truth: spend less than you earn. How you do it (software, fag packet, YNAB, envelope method) is up to you.

enthusiasticsaver

I would also advise against consolidating unsecured debt into a mortgage. It will be more expensive in the long run as you will end up paying if off over a longer period and the consequences of defaulting on a secured loan are so much worse than defaulting on an unsecured loan. As others have said above the temptation once consolidated is to carry on with the bad spending habits and before you know where you are you have a larger mortgage, having consolidated and credit cards and overdrafts build up again as you are lulled into a false sense of security thinking you are debt free. Please reconsider.

The only way to get debt free and stay debt free is to budget and live within your means and save for things you want rather than put them on a loan or a credit card. When you look at an item which you cannot afford to buy outright with cash consider if it is really worth going into debt over. A TV or holiday which costs £500 or £1000, say to yourself that is 5 or 10 months savings and think about whether it would not be better to wait those 5 or 10 months before buying it. Also save an emergency fund so you are not tempted to put things on credit when you have an unexpected large bill.

Smodlet

nearlytherenow wrote: »

Hi everyone,

after a long and difficult journey of debt I am now in the very fortunate position where I will be able to clear the remainder of my debts by consolidating it into my mortgage.

I can go around the houses and say, oh yeah that bit was because of the wedding, or that bit was because I went to uni, but basically it comes down to the bare fact that I have been in debt because I spent too much.

So, my question is, how do you stay debt-free?! Does anyone have any top tips that they have used at this point in order to ensure that the debt doesn't creep back? I've seen friends do this, get to zero debt and then it all comes back again.

Any ideas and tips are gratefully received!

How do you ensure the weight lost does not creep back? Eat fewer calories than you burn... If you don't want to be in debt, don't be in debt! Spend less than you earn, QED. There are plenty of tips already on here and you can have all the support and advice you can handle; the fact remains, if you cannot learn to discipline yourself to live within your means, all you have done is dig yourself a deeper hole.

Sorry to be blunt but I have just been on a thread where my self-restraint has actually done the OP something of a disservice, so I am feeling overdue for some bluntness. It does not make what I or anyone else says less true.

If you really want help, post an SOA and let us all see what we can do to help you trim your outgoings but please, stop patting yourself on the back for putting your house at greater risk than it was before.

mrsscattercushion

I strongly suggest you consider every other alternative to consolidation, especially if you are turning unsecured debt onto your house.

"I will be able to clear the remainder of my debts by consolidating it into my mortgage". I know this sounds simplistic but do bear in mind, if you are determined on becoming debt-free that you still owe this money and that a mortgage is a debt. It is easy to think hat having no store, credit cards or other loans means you've cleared them, but you still need to budget and factor in the increased mortgage payments that happen. And definitely not clear them and rack the debt up again, which I read about countless times on here.

I've always been careful and a saver. My OH is a spender. He got into serious debt and ended up clearing it via a DMP over 5 years. Since clearing it, he hasn't accrued any more debt (although still isn't a real saver). Since I had to give up work because of my health, we're down over £2.5k a month yet our quality of life hasn't changed and we do still save a little a month. What helped us was changing the attitude to money. It became about "need" rather than "want". Budgets put in place and stuck to. Priorities agreed, utilities and insurances haggled and best value from every penny spent. Our life has been much simplified but actually more fulfilling without much material things really being bought.

It is possible if you are determined so wish you the best of luck!

nearlytherenow

Thanks everyone. I really appreciate the advice. I've been a reader on these boards for a few years and have learnt a lot from the start. I initially found the forum when I was looking for help to get out of the PDL trap and I managed to do that. I've learned a lot about budgeting and spending less so it is just the final push now. My attitude towards debt feels much different now to ten years ago.

I've just read a thread on the old style board that had lots of saving tips on it Too thanks everyone!

Smodlet

I am glad you have learned so much from these boards... pity the most important lesson for you seemingly has still to be learned: Think long and hard before consolidating debt and never, never, never turn unsecured debt into secured debt.

D- and detention! Could do better... and you will, you already go to the best school. :cool:

nearlytherenow

Smodlet wrote: »

I am glad you have learned so much from these boards... pity the most important lesson for you seemingly has still to be learned: Think long and hard before consolidating debt and never, never, never turn unsecured debt into secured debt.

D- and detention! Could do better... and you will, you already go to the best school. :cool:

You are absolutely right. To be honest I hadn't even thought about secured and unsecured debt as this is my first mortgage and I haven't focuses on that before.

Staying out of debt is going to be something that I will have to work on, I know that, but I'm determined to do it and live my life by spending my own money and not someone else's. And especially not someone else whose going to sack interest on top and keep tempting me further down the debt path!

sourcrates

Been there, consolodated 20k unsecured debt onto the mortgage.

Circumstances changed, house repossessed.

Biggest mistake I ever made, don't do it, can't stress enough, do not do it !!!!