Small Steps Out Of Massive Debt!

GeorgianaCavendish

Thank you everyone and Happy New Year!
Christmas was difficult for us, we managed to wriggle out of about half our usual obligations (spending and otherwise) but I still felt extremely anxious the whole time. But actually, it really helped put things in perspective and made me aware of all the nonsense we get suckered into every year that neither of us actually enjoy - so we're making a point of saying "no" a lot more often this year.

On the financial side of things, the focus for the next three months is to meet all of our financial obligations while getting back into good MSE habits that we abandoned last year (meal planning, cash back sites, surveys etc) and any savings to go into an emergency fund.

At the end of this tax year I will receive a bonus and after lots of discussion, have decided to use it to repay the personal loan, the Very debt and my student loan. The Very debt will tick over from interest free to 49.9% in April, so it makes sense to take care of that before the higher interest rate kicks in. Although the loans are on lower interest rates than some of the credit card debt, paying them off early will free up £700 a month that will really help our monthly budget, ensure that we have a decent emergency fund and then snowball the credit card debt.

another_casualty

Good to hear from you again Georgina
It's what I'd call the first 'proper' week of the year now , and hopefully you can put everything behind you and move on into better things .
Sounds like you're making a great start already ...:)

CCW007

Subscribing, read your diary a while ago but lost track of it. Sounds like a sensible plan re Very.

Homegrown0

Lovely to hear that things are ok with you GC. You're right about 'obligatons' at Christmas time. If you don't like it, there's no need to suck it up. Spend your time how you want to spend it.

I'm doing more of that every year, little by little.

GeorgianaCavendish

It does feel like the first proper week back AC, complete with the increased traffic and crush of commuters during rush hour (travelling to work last week was blissful in comparison!).

My goal for this week is to put together an updated spreadsheet for 2019 (with the updated debt totals, interest rates, promo end dates etc) and then to input this information in the snowball calculator to help with the decision making re: debt prioritisation.
I think that it can sometimes be so challenging to be logical about debt when there are so many emotional factors at play. On the other hand, I know that in the past when I've tried to make a logical choice that has come back to bite me because what seems like the obvious solution doesn't fit with my way of doing things. I'm probably explaining that badly, but I'm thinking about the logical solution of paying down the highest interest rate debt vs the emotional boost of being able to clear a lower interest rate debt more quickly.

I think the biggest problem for me has been that I ploughed so much into making extra payments to the debt and didn't build up an adequate emergency fund. When the midden hit the windmill, we had to turn to credit to make up the shortfall. I'm really determined not to repeat the same mistake this year, even if it makes me feel uncomfortable to be padding out a savings account when we have so much debt. I need to be realistic about how long it will take to pay off the debt in a way that doesn't leave us without a safety net if our income is reduced.

I am having doubts about my plan to repay the loans before the credit cards, but I think that freeing up such a big chunk of income each month will have such a positive impact on our budget and emergency fund, which will then allow us to focus on tackling the credit card debt earlier. Otherwise, I think we'll have another year of no emergency fund and not making a dent in anything.

I feel like it is going to be a long old road, but at least I've got my feet on it again!

WannabeFree

I think while on paper some things look like they work better than others you have to do what's right for you. That's not always the same way as others do it but the end goal will be the same

x

bowdie01

Hi I also have around £10.000 worth of debt I have done the eligbility checker for a 0% balance transfer and the only card I am eligable for is capital one which I already have although not on 0%, I dont have problems paying my debt its just going to take me forever and I am having to work extra hours which are not always available! to make re-payments , I have considered contacting capital one to see if I transfer all my debt to them if they would allow me the 0% balance transfer ??? Can anyone advise please.

PositiveBalance

Hi Georgina!


It's good to have you back, milady!


I'm sorry to hear about the death of your relative. x


I know what you mean about maximising interest saving versus the psychological boost of paying off a smaller debt. Perhaps it is worth paying off a smaller debt if it motivates you more. Perhaps there's a middle ground. Get your current figures up here and we'll take a look.


I do know what you mean about an emergency fund, too. I've been listening to Dave Ramsey, the American financial guru. He recommends getting a £1000 emergency fund up before starting to pay off any debts in case of emergency (or £500 if you annual income is less than £20K). I have saved up £500 and must admit, it's a nice feeling having it there 'just in case'. Perhaps it's not a bad idea for you to save one up, too, before really going to town on the debts?

PositiveBalance

bowdie01 wrote: »

Hi I also have around £10.000 worth of debt I have done the eligbility checker for a 0% balance transfer and the only card I am eligable for is capital one which I already have although not on 0%, I dont have problems paying my debt its just going to take me forever and I am having to work extra hours which are not always available! to make re-payments , I have considered contacting capital one to see if I transfer all my debt to them if they would allow me the 0% balance transfer ??? Can anyone advise please.

bowdie01: why don't you ask your question in the Debt Free Wannabee section as I'm sure more people will see it there and be able to help you?

GeorgianaCavendish

Thank you Positive Balance

Over the weekend I played about with the Snowball Calculator to run different scenarios and see what effect they would have on the Debt Free Date. It was very interesting!
There were a few constants on all my Snowball runs and the main one was that the Very debt should be #1 priority, so that has helped to focus my attention in the short term.

I've now filed all that information away with my debt spreadsheets for the time being, and for this week my focus is on restarting YNAB to get a handle on where we are and what we can throw at the debt. I need to stop obsessively focusing on the bonus allocation question at the expense of addressing the smaller MSE things we can do to tackle the debt. Using the teaspoon analogy (which I love!) the bonus might help get rid of a bucket-worth of debt, but we're still going to have to do most of the work with our teaspoon.

I also did some housekeeping with moving a few direct debits over to the joint household account (a few have crept onto my personal account over the 6 months) and diarising renewal dates for our insurance policies. I don't think we'll be in a position to pay for our home insurance upfront which is a bit annoying because I know it will end up being more expensive, but I can always add that as a savings goal for 2020. At least we won't have to renew our travel insurance as we have no plans for travelling abroad at the moment.