Debt free before 2023...

mattobo

I’ve read a number of these debt free wannabe diaries having been lurking on these boards for a while and thought it was time to start my own!

We're a family of 4 in our mid-30s with two young daughters (2 and 5). I have a good career and we made a decision when our youngest was due that my wife would stay at home for a while until going back to work fits more easily. We're both happy that this is the right decision for our family, but it does also mean that we live entirely on one salary. I’m completely aware that this is a very fortunate position to be in and many others are not afforded this choice.

As such, we often end up in a position where we live month-to-month and have eaten into any savings that we once had, but I’m aware that this is partly due to living beyond our means and partly not having tighter control over our spending. I (confession time...!) also have a habit of justifying spending beyond my means on the basis that I can ‘afford’ things (if by afford, I mean make monthly payments on the basis of having a stable and relatively secure job). In June last year, I took out a personal loan for £25k to buy a new car (that in hindsight was a bad financial decision). I took this over a 7 year period on the basis that I expected to be able to overpay and clear it sooner but so far this has not been very successful. We’ve also had a number of other items taken on 0% finance that have added to the monthly outgoings.

I have taken steps to reduce my debts down and have just reached a point today where in the last year I have paid down the remaining amounts on all 0% finance debts (treadmill, kids bunk bed, phone...things that I know I should have saved for if I really wanted them!) and a 0% credit card which had around £4,500 balance last year. I also cleared a personal loan of a similar amount on my wife’s car recently, so that is now fully paid.

My only debt is now my main mortgage (substantially below 60% LTV and fixed until March 2023) and the car personal loan (which stands at around £21,666). I know that, financially, paying the 0% debt before the car loan is a more expensive approach but as the car loan is (only) at 3.3% I felt I would benefit psychologically by only having one debt to focus on rather than the burden of several debts.

I also took corrective action on the car decision by subsequently downgrading to a car that will be cheaper to run long-term and actually better suited to our family situation (but not as fun as the one I bought last year!). This has done very little for immediate cash flow (and the remaining balance on the loan is higher than the value of my latest car) but I know it is a better financial decision in the long run.

I want to be in a position that the car loan is cleared as quickly as possible...definitely before I need to remortgage in March 2023 and ideally sooner (I’m going to set December 2022 as a target...this requires a monthly payment of around £775 which I think is achievable with controlling spend in other areas...any earlier would be a bonus but I think it would stretch us in other areas too far to have as a realistic goal!). I thought this could be a good place to keep me accountable and track progress.

A secondary goal is to build up a bit of a savings buffer as when any non-monthly bills arise I end up dealing with them in that month and this derails my ability to overpay my debts consistently. Some of this has arisen from choosing clearing debt rather than saving but it has left us with almost zero savings. As a starting point I’m just going to look a bit further ahead and put some money aside for bills coming up but would eventually like this to become part of normal monthly saving.

ceremony

Best of luck to you! It sounds like you're already very well organized. You're well ahead of me - I'm hoping to have a 'clean' credit rating in 2024 and then jump on the mortgage treadmill. Getting your wife on board will help a lot. It's a good feeling not being stressed about money any more. Look forward to following your diary!