Small Steps Out Of Massive Debt!

Louoffofsparkle

Hi I’ve just started reading your diary, I’m in the early stages of my debt free journey and what you say about not throwing all money at paying debt really resonates with me.
I’ve got my plan in place but ended up paying extra last month in the middle of the month rather than waiting till the end to see what I actually have left. I think I’m scared I’ll just fritter it away. For this whole debt free thing to work I need to be able to trust myself with money again!

GeorgianaCavendish

PositiveBalance wrote: »

Hi Georgina,


Have you tried a zero-balance budget? I got it from Dave Ramsey and it works for me, especially as my income varies every month depending on what overtime I do/don't do.


Essentially, before the month begins you budget EVERY SINGLE PENNY due in to something; rent/council tax/food/debt repayment/socialising etc. If you spend more in one category, you have to take some out of another category to balance the books, but you can't spend more than you earn i.e. go into debt to pay for things.


From what you were saying about your Metro account, I would be tempted to pay whatever you were going to save in there onto whichever debt you are currently focusing on at the beginning of the month, that way you are more likely to stick to the rest of the budget and not fritter any of the OP money away.

I'll do some reading up about Dave Ramsey's zero balance budget, it sounds a bit like the YNAB mantra (give every pound a job!)

I'm really wary of making the overpayments at the beginning of the month because that is part of what I did at the beginning of my debt free journey and it caused me problems in the medium term due to poor/unrealistic budgeting.
I guess I'm also sick of having the fear that I can't trust myself with money and need to get rid of it as soon as I have it so the Metro account is partly a way of trying to break that cycle. Even holding onto it for a couple of weeks until it feels like a conscious choice to make the overpayment and not a panicky 'oh god, I've got to get rid of this money NOW' feeling.

To be honest, I really need to get better at budgeting! I am not good at making a realistic budget. At the moment, I'm viewing the Metro account as a work in progress and that as I improve my budgeting skills I won't feel that I need to use the account to "hide" my overpayment money from myself. We will see!

Louoffofsparkle wrote: »

Hi I’ve just started reading your diary, I’m in the early stages of my debt free journey and what you say about not throwing all money at paying debt really resonates with me.
I’ve got my plan in place but ended up paying extra last month in the middle of the month rather than waiting till the end to see what I actually have left. I think I’m scared I’ll just fritter it away. For this whole debt free thing to work I need to be able to trust myself with money again!

Hi Lou! Thank you for stopping by and good luck on your debt free journey
Making payments in the middle of the month sounds like a good compromise between making rash, unsustainable overpayments and frittering away money that could have been used for debt repayments. I think being able to trust ourselves with money is absolutely the key to this whole thing!

GeorgianaCavendish

I love my debt spreadsheet. It is the place where I record all the information about my debt that in my pre-diary days felt like a complete mystery, exact balances but also interest rates, expiry dates for promo rates, minimum payments etc. I started opening it whenever I felt uncertain about my debt to ground myself. HOWEVER, I've realised how much this habit of checking my spreadsheet multiple times a day is stressing me out and leading me down the path to self-sabotage.

Of course, it is lovely to see where I have made progress but I'm only making material changes to the totals once a month so after the initial high of the debt reduction, I'm left feeling frustrated at the lack of movement and tempted to make minor changes like "rounding down" a non-priority balance or making a spontaneous overpayment with money that should be used elsewhere in my budget.
I'm going to limit myself to checking the spreadsheet on only one day each week. I might end up looking at it multiple times on that day (to start with anyway!) but I really want to have some freedom from staring at the same numbers every day and second guessing my repayment plans. I might need to take up another activity to replace the urge to check the spreadsheet when I'm feeling a bit panicky though!

GeorgianaCavendish

In other news ... checked my dental insurance and the cost of the filling is covered! I've given the surgery my insurance details so they should be able to settle the cost on the day rather than me paying upfront and getting reimbursed later.

I've sold three items on ebay which will be posted tomorrow. I had another item sell and the buyer then change their mind, annoying but what can you do. I have an unexpected evening free tonight so planning to get a couple more bits up there.

PositiveBalance

GeorgianaCavendish wrote: »

I'll do some reading up about Dave Ramsey's zero balance budget, it sounds a bit like the YNAB mantra (give every pound a job!)

I'm really wary of making the overpayments at the beginning of the month because that is part of what I did at the beginning of my debt free journey and it caused me problems in the medium term due to poor/unrealistic budgeting.

To be honest, I really need to get better at budgeting! I am not good at making a realistic budget. At the moment, I'm viewing the Metro account as a work in progress and that as I improve my budgeting skills I won't feel that I need to use the account to "hide" my overpayment money from myself. We will see!

OK, so you have hit on the crux of the problem...are you basing your budget on what you realistically spend in all of your categories? If not, can you look at the past 3 months or so of expenses and give yourself a more realistic figure? TBH, There's no point saying 'Oh, I should only be spending £200 on food each month' if you are realistically spending £300.


You might even want to consider going the other way and knowingly give yourself *too* much money as it's easier to pull back in a controlled manner than deal with the feeling guilty that you have gone over for food/socialing or whatever. Then if you have anything left over in each category, you can pay it off a debt at the end of each month. And you can trim accordingly each month e.g. give yourself £350 for food in the above example and shave £20 next month when you know you didn't spend that this month.

Homegrown0

I'm similar to you GC - I feel like i need to get the money out or else it'll just get swallowed up. An approach that I've taken is to separate accounts. I have a bills account, a spending account, a savings account, an account for gifts/ clothes and then an empty ad-hoc account.

With that empty account, I've been known to siphon my overpayment money into there to separate it from the busy accounts then at the end of the month when it has not been needed, then I can pay it to the debt. Is this kind of thing an option for you?

GeorgianaCavendish

PositiveBalance wrote: »

OK, so you have hit on the crux of the problem...are you basing your budget on what you realistically spend in all of your categories? If not, can you look at the past 3 months or so of expenses and give yourself a more realistic figure? TBH, There's no point saying 'Oh, I should only be spending £200 on food each month' if you are realistically spending £300.


You might even want to consider going the other way and knowingly give yourself *too* much money as it's easier to pull back in a controlled manner than deal with the feeling guilty that you have gone over for food/socialing or whatever. Then if you have anything left over in each category, you can pay it off a debt at the end of each month. And you can trim accordingly each month e.g. give yourself £350 for food in the above example and shave £20 next month when you know you didn't spend that this month.

I think you've hit the nail on the head. I'm trying to impose my ideal budget without making decisions based on the actual spends. There might not be much difference between ideal and actual in some categories, but the guilt about not sticking to the categories is colouring all my financial decisions.
I will set aside some time to review all our transactions and compare those to the budget.

Homegrown0 wrote: »

I'm similar to you GC - I feel like i need to get the money out or else it'll just get swallowed up. An approach that I've taken is to separate accounts. I have a bills account, a spending account, a savings account, an account for gifts/ clothes and then an empty ad-hoc account.

With that empty account, I've been known to siphon my overpayment money into there to separate it from the busy accounts then at the end of the month when it has not been needed, then I can pay it to the debt. Is this kind of thing an option for you?

I have this to some extent, I've got 2 current accounts. One for household expenses (also where the emergency fund accrues) and one spending account. It would be good to break this down further!

GeorgianaCavendish

March 2019 Debt Total £28,211.45

STUDENT LOAN
£2,521.49 (7 repayments left)

PERSONAL LOAN
£3,787.54 (10 repayments left)

PAYPAL £1,363.94
£1,363.94 ~ 17.9%

MBNA £5,357.33
£923.42 ~ 6.9% (expiring 1 Jul 2019 regular rate 23.9%)
£4,433.91 ~ 6.9% (expiring 2 Dec 2019 regular rate 23.9%)

BARCLAYCARD £6,265.53
£6,265.53 ~ 6.9%

LLOYDS £3,578.14
£1,133 ~ 0% (expiring 16 Nov 2019 / regular rate 28.2%)
£1,415.14 ~ 0% (expiring 27 Dec 2019 / regular rate 28.2%)
£1,030.00 ~ 0% (expiring 29 Dec 2019 / regular rate 28.2%)

TESCO £850
£850.00 ~ 0% (expiring March 2020 / regular rate 34.9%)

HSBC £4,487.48
£2,223.68 ~ 0% (expiring 31 Apr 2021 / regular rate 22.9%)
£2,263.80 ~ 0% (expiring 29 Sep 2021 / regular rate 22.9%)

I made some changes since I first posted the March debt totals:
I moved the highest interest HSBC and Barclaycard debts and part of the MBNA debt to 0% and I was able to make some over payments due to a small bonus payment.

I've now reordered the debts from highest to lowest interest rates and will be focusing on reducing the PayPal debt for the next 3 months.

PositiveBalance

GeorgianaCavendish wrote: »

I think you've hit the nail on the head. I'm trying to impose my ideal budget without making decisions based on the actual spends. There might not be much difference between ideal and actual in some categories, but the guilt about not sticking to the categories is colouring all my financial decisions.

I think I used to do exactly the same thing. Don't get me wrong, I'm still not some 100% perfect Budget Queen as I'm sure there's a bit too much interplay between my food/transport/socialising budget, but it's much better than it was and, more importantly, I feel in control of it. I could be more strict if I wanted/needed to.



I think it all changed for me when I stopped trying to have an overall 'perfect' budget where each month I spent exactly the same amount on the same things/in the same categories (my earnings vary each month so that doesn't help, either) and I could look at my month and plan it out as soon as I got my new payslip. My telephone bill came in a bit more than normal this month? OK - I've got it covered. I have an extra social event this month? I've planned for it, although it means I can pay a little less off my debt this month, but that's OK as I've got it covered and planned for and I'm still moving forward...



Some people also do a cash envelope system...put your monthly amount of money for your category in an envelope and when it's gone...it's gone! (The food category always scares me most for this, but perhaps I should start doing it for socialising as these past two months have been crazy! :rotfl:) Seeing how much money you do/don't have in any category might help you.


There's some food for thought for you....for free, so you don't need to dip into your food envelope! :rotfl:

Working_Mum

WE are all perfect at being imperfect aren't we!! I am not always sure we are kind enough to ourselves as we try to get things right.

I operate a "good enough" approach whereby i plan the best I can, monitor headway made and am happy if I have been able to be adaptable and pragmatic in my approach. Covers the bases + approach.

I accrue/squirrel money away for socialising and birthdays - I keep this cash in a couple of tins which I leave at work so I cannot access them too easily. I also have an "emergency tenner" in the back of my purse for bargains I spot or if I need to do something which is a little impromptu (like running into a friend when out and we get a coffee).

I think being organised definitely takes the stress out of budgetting but we have to be kind to ourselves too when things go a little awry. Being organised around birthdays has definitely unlocked my creativity too which is good for the soul.

Have an ace day everyone.