Wow wee oh my - trying to hack away at my £54k debt (was even about to book a holiday)

enthusiasticsaver

Generally turning unsecured debt to secured by putting it on your mortgage is a no no. It may have been me who told you that you need to make sacrifices to learn the lesson so if that nugget stuck that is great. My tips for staying on budget so you don’t fall back into bad ways and end up with a bigger mortgage plus more debt in a few years time are as follows.

Get rid of the credit cards or maybe keep one but don’t keep it in your wallet. Lock it away and just use for the section 75 protection on large items and maintaining a good credit history. Pay it off IN FULL each time you use it. (Loud Martin Lewis voice there 😉) Cancel overdraft limits and decide on rules for loans for things like cars. We never borrowed more than 50% of the value of a car and over no longer than three years.

Budget, plan and save. Once a month or weekly if you prefer work out how much spare money you have. Monster your spending and save for things like car expenses, house repairs or replacements and Christmas/Holidays etc. Emergency savings are a must. 

Your parents obviously suspect you are living beyond your means and you have been. You had a large salary as I recall then moved back to the UK and a lower salary but carried on spending as before? Spending diary is the way forward.

I also suggest overpaying your mortgage when you are in a position to in order to rectify your mistakes as long as it doesn’t cause you to go back into debt. There is no such thing as spare money but any surplus after essential outgoings, savings etc decide whether to invest in your pension or overpay your mortgage or save for replacement car or whatever. Mindless spending is not the way to go. 

blue_eyed_girl123

I think, on reading some of your posts, that you view budgeting as quite a negative thing, focusing on the things that you can't have. Which is definitely true to some extent. But could you think of it as being more creative with the money that you do have? 

For example, some friends and I used to take it in turns to host dinner parties, rather than going out to restaurants (although yes, it does mean that someone is left with the washing up afterwards). I also have a thing for hot chocolates so I recently bought a fancy hot chocolate machine from a well known fancy chocolate shop (hopefully you can figure out what I mean), and actually I like the at home ones way more than shop bought ones now. 

Could you also use your Monzo pots more for your monthly spends - not sure if someone has suggested this already, so you put money away for hair etc, so you know what you really have leftover to enjoy. 

I hope that you're able to stick within your budget and don't get into debt again 😁. 

Rainbowtrousers

enthusiasticsaver said:

Generally turning unsecured debt to secured by putting it on your mortgage is a no no. It may have been me who told you that you need to make sacrifices to learn the lesson so if that nugget stuck that is great. My tips for staying on budget so you don’t fall back into bad ways and end up with a bigger mortgage plus more debt in a few years time are as follows.

Get rid of the credit cards or maybe keep one but don’t keep it in your wallet. Lock it away and just use for the section 75 protection on large items and maintaining a good credit history. Pay it off IN FULL each time you use it. (Loud Martin Lewis voice there 😉) Cancel overdraft limits and decide on rules for loans for things like cars. We never borrowed more than 50% of the value of a car and over no longer than three years.

Budget, plan and save. Once a month or weekly if you prefer work out how much spare money you have. Monster your spending and save for things like car expenses, house repairs or replacements and Christmas/Holidays etc. Emergency savings are a must. 

Your parents obviously suspect you are living beyond your means and you have been. You had a large salary as I recall then moved back to the UK and a lower salary but carried on spending as before? Spending diary is the way forward.

I also suggest overpaying your mortgage when you are in a position to in order to rectify your mistakes as long as it doesn’t cause you to go back into debt. There is no such thing as spare money but any surplus after essential outgoings, savings etc decide whether to invest in your pension or overpay your mortgage or save for replacement car or whatever. Mindless spending is not the way to go. 

Thank you and yes it was 100% you (not to discredit anyone else on the board who also gave some excellent advice). I think having some clear rules moving forward is a good tip. In my mind I will never take out car finance again but maybe what you do is less drastic and more real world. I was just going to have a fun budget and had not really considered saving for house repairs etc. Would that be as well as a savings account or is that the savings account? 

Yes you are correct. I took a dip in salary when i moved back to the UK and at that time purchased a flat. It goes way beyond that though and I have always been bad with money. Even as a boy i used to spend money in the arcade and then have to go knocking on doors to clean cars (this is when that was ok which shows my age) to recover the amount spent. My job now does pay me a decent salary and really should be enough to have a good life. 

It has been quite a journey so far and i have realised just how much of a strain and distraction it has been putting on me and others. I have been single for a while but now feel with this semi-sorted I am in a better place to meet someone. 

Thanks for your final tips on overpaying the mortgage where possible. I have set up a salary sacrifice towards my pension and plan to use my income from my flat (now that is interest only) as savings. 

enthusiasticsaver

I think it is difficult to say with any certainty you will not take out car finance (or any other finance for that matter) in the future.  What you can do though is decide on only taking out finance if it is affordable, low interest and for what I would call an asset like home improvements or a car etc.  Even then deciding to only finance a certain percentage as I said above and repaying over as quick a time as possible reduces the risk of negative equity, a very real possibility particularly with cars. Ideally saving for replacing these things is better but it depends on how old your car is, how reliable it is and how much it is needed. I am glad you have sorted your pension out as that is another big future expense that really benefits from thinking about early and salary sacrifice is a tax and NI efficient way of saving for it. 

As for saving for the other stuff.  People have all sorts of different systems.  I am uncomplicated at heart and after spending loads of time transferring between pots a few years back I decided on just two savings accounts plus our investment portfolio. This avoids the problem of all the car expenses coming in one month (as ours does) as October is awful with two lots of services/mots and one lot of car insurance and of course December is costly with Christmas.  Lots of people prefer to separate all their savings out and it is whatever works for you that matters. Ideally you need emergency savings (initially £1k when you have debt) working up to 3-6 months expenses to tide you over a job loss. This really should not be touched except in a dire emergency.  Now of course people do dip into it for things like vet bills or white good replacement or car repair but really these things are better budgeted for in your savings pot (held separately to emergency fund) or savings pots if you decide to run several rather than one as we do.  To decide how much goes in there I work out how much we spent on birthdays and christmas last year and up it by a percentage and divide by 12 and put that in each month.  Same goes for car repairs/maintenance/insurance and vet costs if you have animals and holidays.  I also put in a certain amount towards white goods replacement, house insurance, new carpets and decorating and boiler service/new boiler etc etc. Add all the car, house, gift and holiday costs for a year and divide by 12 and ideally round up to give you a buffer. Stick that in a savings account or four separate ones if you go down that route.  

We have a monthly personal spends budget each for clothes, fun etc, an eating out budget and one for food and fuel.  It is easy to do on payday.  Take your income, work out the bills/direct debits and leave that in your current account, put so much into savings and then what is left is for food, fuel, and fun. 

So our monthly budget  looks like  Income £3k less £500 to cover bills and direct debits ( no mortgage now so undoubtedly yours will be higher than that).  Our emergency savings account is full so we transfer £1k to savings to cover gifts, holidays, car and house expenses. £300 each for personal spends leaving us £900 for food, fuel and fun. It is a simple calculation and a few transfers at the beginning of the month and we know not to go above £900 either on our supermarket credit card or current account. Anything left at the end of the month goes into savings. Worked for us for years.