Feeling positive about banishing a decade of debt

pippa_pelada

Hello there - first post! I’ve (we’ve) been on this debt free mission for the last year now and I’ve only just found this forum. I wish I’d found it earlier but it’s reassuring me that I’m on the right track at least and I’m finding everyone’s journeys to being debt free very inspiring! I’m hoping a debt diary will really keep me accountable and also help analyse how we got into this debt trap in the first place.

Our joint debt story goes back 10 years of being together and with 9 of those with our heads well and truly in the sand. My husband’s debt issues go back to way before I met him and I didn’t realise quite so much how far they stretched back until I started on this mission and doing all the research into our finances.

Last November I found out that my husband was struggling with his NatWest credit card with a £20,000 debt. Prior to that we’d taken out a £25000 loan in Dec 2018 as I’d got into trouble with a high interest Capital One credit card (11,000 debt mostly built up from struggling with sky high interest payments and living in denial) and he’d had a nasty tax bill that he’d paid off on a Barclaycard (back when HMRC would let you) but then he started using the Barclaycard in addition to his existing NatWest one so between us we’d racked up £25,000 of debt on the Capital one and Barclaycard alone in the space of 4/5 years. We subsequently got rid of both of those cards with the loan and the monthly payment for that is 549.24 and at time of writing, we have 3 years left but I/we plan to pay that off at least a year early.

The NatWest card I mentioned at the beginning was something I was aware of but I hadn’t realised that he was just paying off and then re-spending the minimum amount every month in an endless cycle and had been for years. I couldn’t understand why we were always in debt and struggling for money when we shouldn’t have been. I’d assumed he’d been paying it off so after yet another argument about money, I asked him for his banking log in and went back through years of statements to see what the patterns were. I was beginning to think he had a secret life involving gambling or a second family hidden away as we never really had any spare money – happily, no secret life to report just lots of money mismanagement and debt denial...

pippa_pelada

I was gobsmacked at this cycle of only paying off the minimum and then re-spending the same amount every month as he generally always had the same amount of money in his current account at the end of the month and I knew what he earned so there was no excuse but I couldn’t really judge as I’d racked up my own debt too. It must have been so stressful for him and I had no idea. I wish I’d known sooner so I could have helped him out the hole he was in. I think the more he stressed about the debts, the more he would spend. 

So, it was exactly this time last year I had my LBM along with a feeling of power as I could now finally see exactly what some of the issues were and more importantly, could do something about it.

He no longer has any money left in his current account at the end of the month as I take it all out and either put it on the credit card and/or add it to the savings/emergency fund. It’s been, at times, an emotional struggle over the last year as we haven’t always seen eye to eye with the importance of getting out of debt (he still makes mad impulse purchases!) but gradually as the months have gone on, he’s spending less and is taking the same pride as me in seeing the debt slowly shrinking. He’s given me complete control over his bank account and I’m thankful that he trusts me to get on and sort it. I’m aware that by doing this I’m not helping him to sort his issues with money and debt but I have to get rid of the debt first before I can help him tackle that.

pippa_pelada

Last November we owed £41,000 on both the bank loan and the NatWest card and didn’t have any savings at all, one year later we owe £27000 and have £1000 in an emergency fund and it feels amazing to have got this far. Yesterday I paid in enough money to the NatWest card to bring the balance under 10,000 for the first time in 6 years and knowing that the December statement is going to say that 4 figure amount instead of 5 means that I’m on track for paying off all our debts (apart from the mortgage) by the end of 2022.

Our current debts are:

NatWest loan – £25,000 down to £17,082 @£549 a month

NatWest credit card - £9960 – I try to pay off a minimum of £750 a month and it has averaged out over the year at around £850. We’ve had some months where we haven’t really made a dent in the amount other than the minimum due to life getting in the way and others where I’ve paid over £1200 to make up for it. The monthly minimum repayment has come down from £305 to £150. The next milestone will be to pay off enough so that the monthly repayment is under £100 but I’ll still keep paying the same amount regardless. I’ve found that working towards these milestones have really helped my progress.

Outstanding car loan balance (hubby’s) - £8665 (£577 a month) The plan is to keep the car for a couple of years once the balance has been paid off in 15 months and then put that same monthly amount into a savings account until he needs a new car. Part of hubby’s long term debt issues have come from overstretching with car finance but over the last few years he’s realising that a car isn’t the most important thing – plus, I drive it more than him anyway as it’s nicer than mine! He commutes to work by train or at least he did pre-covid.

pippa_pelada

I’m very aware that we’re fortunate to have a healthy household income (mainly thanks to hubby) but I’m also aware that that in these covid and brexit times, that can all change in an instant. I live in constant fear of hubby being made redundant given that he’s the main earner and us having absolutely no backup plan especially in our late forties. I’m also very conscious that the workforce is a harsher place for the over 50’s. I’m naturally a worrier which I only realised in the last decade. It means I’m constantly planning for the worst so every day where the sky doesn’t fall in is actually a good one! 

My long term mission after paying off the debts is saving up a contingency fund of 6 months salary. At the moment we only have a savings fund of around £1000 which fluctuates depending on what’s needed that month but that’s only something that we’ve had for the last year and it’s been a godsend when anything unexpected come up, which it inevitably does. Previously, we’d whack any unforeseen expenses on the credit card which was of course, a huge mistake. The Starling bank account has been a revelation too with all of the saving pots I’ve got going on (included in the £1000 savings). Actually, thinking back, I think opening a Starling account and having those separate savings options was the very first kick up the bum and a definite light bulb moment.

I also want to start overpaying the mortgage from 2022 as we've not been in the position to do that before.

pippa_pelada

Main goals for 2021

Save at least £5000 in the savings pots and £1000 in an emergency fund

Pay off the credit card in full in order to start saving to pay off the loan a year early

Grow my small business

Sell whatever we can on ebay although we have made a good start on that and that’s helping massively with the emergency fund

Cut down on the unnecessary spending by starting to get the food bill down. It’s currently around £700 a month for the two of us and my two teenage (and hungry!) step kids every second weekend which is ridiculous. I reckon that’s where we can make the biggest savings starting in January.

pippa_pelada

I just got the log in details for our mortgage account (£1384 a month – 5 year fix at 2.6% and due to be renewed and hopefully renegotiated to a lower rate in April) as I realised I’d never done that myself. We have our monthly payment coming out and I never think about it further than that. Overpaying the mortgage was sometime in the future so it was all very abstract. Anyway, all logged in and I got the info for overpaying the mortgage and it’s so easy, I had no idea, neither of us did. I just transferred £20 to see how long before it all shows up on the system. So that's yet another thing I wouldn’t have thought about doing without reading these diaries over the last few days here on the forum. Here’s the list so far (I only came across the forum on Thursday)

a)      Start savings account in Premium Bonds as I’ll be reluctant to cash that in except in an emergency - £300 so far

b)      Signed up for surveys for a bit of extra cash - need to verify my account with Prolific, have done a few with Opinium

c)       Signed up for Ziffit and in process of de-cluttering unwanted books and dvds - easily found £30 in books I no longer want

d)      Overpaid the mortgage by £20! (I'll chip away at it even if it’s just a small amount here and there)

e)      Done an SOA and really got to grips with incomings and outgoings and faced up to how much our debt really was at its height (horrendous especially when I add in the car) and exactly what it is now

I'm so glad I found this forum!

bamgbost

Well done and welcome to the forum!

Sounds like u have a plan. And I wish you all the best.

designingalife

You have made great progress in a year and seems super motivated, good luck and I look forward to seeing you progress in the year to come, I’m sure these forums will help turbo charge your efforts !!

EssexOstrich

Fab start!! Well done and good luck x

pippa_pelada

Thank you for the warm welcome  

pippa_pelada

Most of the big direct debits came out today. We're £200 ahead of this time last month but I'm sure that won't last with Christmas around the corner! I checked the mortgage account this morning too and the £20 I paid last night is already showing up. I feel like this is a real game changer as I honestly had no idea it was so easy to overpay but now I feel foolish as I could have been adding small amounts here and there over the last seven years. Oh well, I know now!