How to stay out of debt

backontrack83

Hello

Well after lots of reading and advise in June my husband and I will be debt free for the first time in our married life. :T

My next question is how do we stay out of debt? Now I understand the concept of no credit cards/store cards etc but what I mean is budgeting.

We have survived on my husbands overtime come Christmas, Birthdays etc that now we would like to stop having that and start saving, but how do you savvy people do that? I do not want to fall backwards anytime soon!

Thank You

Sarah

sourcrates

Hi,

Simply living within my means.

If I can't afford it, I don't buy it.

As an ex Slave to most forms of credit, it's quite refreshing !!!

MrsTinks

Start by setting aside what you used to spend on debts in a savings account. I'm not saying you can't loosen the belt a little but don't go nuts!

I'm sure there used to be an old proverb about saving a third?

Aim for that! Start with getting a healthy emergency fund squirreled away. First 3 months of living costs and bills, then 12 months worth. Now you have a healthy fun in place in case you loose your jobs.

Next lock that away in an ISA and forget about it. New emergency fund for if anything breaks or car needs replacing etc. Work how how much you think you need for this. Now work out what you want to do... is if saving for early retirement? Holidays? Being mortgage free?

Having targets I think usually works well for people who have been in debt because often we stop trying once we have met that debt free stage. But re-thinking our targets can keep the habits going for us

Gladioli

We have been debt free for a number of months, the first few months I slipped straight back into my old ways as in, it was there so I spent it as I did not have any structured savings in place .... I got to the end of 3 months and tried to work out how I had managed to pay of 3k of debt in the same 3 months in the prior year and this year I barely had saved £500. For me I need structure, regular savings and standing orders etc. We live very frugally however we are going to go on holiday this year, paid in full and still have a few months wages saved and savings towards my kitchen. What I would say is that how I manage our finances is not for everyone, we do live very frugally however it works for us and for the first time in our married lives we are debt free and have savings.

EssexHebridean

The SOA calculator that we refer people to for debt busting can be a brilliant budgeting tool as well - so it's well worth filling that in to see what your situation "should" be. Initially fill it in with just the stuff that's priority - rent or mortgage, council tax, utilities, food, essential travel. That sort of thing. That tells you what surplus you have to fund the rest of your lives. From there you can allocate emergency fund savings, money to set aside for things like presents, car maintenance, etc.

You may find having lots of individual savings accounts linked to your current account is a way forward - we're with Nationwide and can have as many linked savings accounts as we want, and can also name them ourselves - so at the start of each month money gets siphoned off to the car, holiday, present and fun accounts - and a few others, too! This means that when things like car insurance are due the money is there and waiting, which really relieves stress!

Once you have all those figures in place, then you should show a final surplus - that is the money you can put into savings for the future. Again, set a regular transfer to this, or transfer the amount you decide on at the start of the month so it doesn't just get frittered.

Above all - keep your eye on the ball. Check online banking regularly. If you can't trust yourself with a credit card, just don't have one. Review regularly and adjust things if needed.

Ilona

Hi. I have a simple method of staying out of debt. I know how much money I have coming into the house. That money is for me to do as I like with. I don't spend someone else's money, like a loan or an overdraft. I use my credit card for food and petrol and vet, and pay it off every month, they aint getting any interest out of me.

I spend as little as possible on my day to day living expenses, food and utilities. I only buy what I need. When there is money to spare I spend it on wants.

I don't do impulse spending, I am disciplined to walk into a shop and walk out again if they haven't got what I want at the price I want to pay for it.

By being careful I have been able to build an emergency fund. This will be used if anything breaks and needs replacing. I am continuously saving for my next car. As soon as I have bought a car I save for the next one which might be in three years.

Simple really, like balancing on a seesaw.
Ilona

dieselv2

Inspirational! I wish to get debt free as soon as possible to enjoy the stress free easy life.

The_Only_Girl

Hi I have been lucky to get out debt in 2015, and what a relief it has been! With no debt repayments to worry about, I have decided to change from a highly stressful but well paying job to one that pays less but with a lot less stress and one that allows me to spend quality time with my family. And despite the lesser income, this is the happiest my family and I have ever been. I wasn't easy to get out of debt and it wouldn't take much to wander straight back into debt. To make sure we stay out of debt, one of the most important things our family does without fail is budgeting. We give every penny a name, as one my favourite quote below says, I tell my money where to go instead of wondering where it went,

enthusiasticsaver

I have always used excel spreadsheets but good old pen and paper would do the trick too. On payday (assuming you monthly paid), you add up all direct debits needing to be paid that month and leave that in the current account with a small buffer in case one of the direct debits has gone up without you noticing so no chance of going into overdraft.

I then allocate the rest of the money into separate accounts - one is a spending account for food, entertainment, personal spends (a certain amount goes to both OH and me) and fuel etc. Another pot is an emergency savings account and then one (or more accounts) for annual bills, car maintenance and house maintenance, holidays and Christmas and gifts. Putting it down in black and white so you know how much you have to spend and have money set aside for everything helps you keep debt free.

datlex

Have a zero balance at end of day before your pay goes in. Then once your pay goes in:
Start by saving (can be to different pots- long term or short term e.g. presents), then by allocating bills direct debits and standing orders. You should have an amount left over for food, toiletries, entertainment etc. Then just allow yourself to only spend at most the amount you have left. Anything left at the end of the pay period i.e. the day before you get paid should be transferred to savings. Always remember "Will I use it" "Is it worth it" ( I add look today come back tomorrow if deal is worth it) when buying items which are not bills or necessities. N.B. it only takes 10 weeks to save for a £300 item when you put aside £30 a week. Which is not a long time to wait and you could get a better deal in the time you have to evaluate the item you want to purchase.

backontrack83

Thanks Everyone.

We are hoping to save for IVF, so that will be a massive saving pot, but at the same time I want to get 6 months worth of salary (if just for myself) so that if I do get pregnant I can take a years maternity (in my current job I get 6 months full pay).

I like the idea of separate saving accounts, that seems to make loads of sense.

We were(are) paying £700 a month off in debt so thats a big amount to have excess for savings and even if we have £50-100 extra a month thats still £600 we can put in savings accounts and gives us the opportunity to have a lifestyle that although not excessive would be more comfortable than what we are currently living.

Thanks once again. I will have a look at an SOA and use the debts section as where I want my savings to be instead.

We will not be getting credit, not for the first few months and only the IF we can get one, will I get a credit card and use it for food shopping then pay it off with the budgeted amount but that will only be to help start rebuilding our credit file.