Finally taking back control after a decade of debt

londoner2019

Hello,

Long-time lurker, first-time poster. I've had CC debt ever since moving to London after university around 9 years ago. Coming here for work on a very low wage, I quickly ate through my savings and started racking up debt on credit cards, without any real means to pay it off. Came to a bit of a head when I ended up paying interest on four different cards, meaning I was supplementing my income with payday loans to carry me through to the end of the month. I was paying around 200+ per month purely in interest. 

Was made redundant in covid times, and luckily freelance work, and subsequently a much better paying job came along. Coupled with not going out, not travelling at all, my outgoings are currently fairly minimal. I'd always been looking for 0% balance transfers, but using the MSE eligibility calculator and the amount I owed, I never thought I'd be able to get it all on to one card, and at 0%. That's where my fortunes changed a bit - because I was earning freelance money for around 3-4 months, I've yet to pay my tax bill. And my current account (Natwest) suddenly offered me a 0% balance transfer credit card for a substantially larger amount that I thought. I was able to:

Shift balance onto the new CC
Pay off the rest of the balance accruing interest with leftover freelance money/reduced outgoings/around 1200 of my tax pot already saved

Pre- life-changing moment:
Virgin CC: 3600 (of 4000 balance)
MBNA CC: 4600 (of 5000 balance)
Tesco CC: 3000 (of 5000 balance)
Lloyds CC: 1000 (of 2000 balance)
Total: 12200 debt

After:
Natwest CC: 8000 (of 8900 balance) (0% until Jun 2022)
Estimated 2200 to save for tax (due next Jan)

As of 9 Mar:
Natwest CC: 7000 balance / 8900
Tax pot: 500 / 2200 saved

I've always advocated keeping a spreadsheet of ALL outgoings, even to the penny. It's easy to get disillusioned with it and give up if you see that you're not making any progress. But here, I can see exactly how much disposable income I have left for the month - and I've made a pact with myself that any 100 chunks that I have left, I'll put on the savings/card. My income means that I can put 500 a month towards the card and the tax pot, and still have just under 1000 for everything else. In February I was very strict on myself to spend next to nothing so that I could clear any remaining card debt and close the other accounts. My outgoings (aside from bills) was 430. 

I know it will get harder once things open up again, and I'm able to travel (my partner's family live abroad), but as horrible as the pandemic has been, I've come to realise that I don't need new stuff, or random purchases such as clothes, and I'm able to be much stricter with my budget. But none of this would have happened if I didn't get that Natwest email offering a 8900 0% CC. 

I'm prioritising building up my tax pot first (so I can immediately pay it off), before pumping everything into the card. I'm still paying minimum 100 off on the card, then putting the remaining 400 (of my 500) to the tax pot. Anything I save at the end of each month will go to the tax pot until it's full. My spreadsheet tells me that I'll be debt-free by the end of August 2022 - two months after interest would start kicking in. 

From end of month:	Natwest	In	Tesco	In	For tax	In
Start-2021	-7000	100			500	500
Mar-2021	-6900	100			900	400
Apr-2021	-6800	100			1300	400
May-2021	-6700	100			1700	400
Jun-2021	-6600	100			2100	400
Jul-2021	-6200	400			2200	100
Aug-2021	-5700	500
Sep-2021	-5200	500
Oct-2021	-4700	500
Nov-2021	-4200	500
Dec-2021	-3700	500
Jan-2022	-3200	500
Feb-2022	-2700	500
Mar-2022	-2200	500
Apr-2022	-1700	500
May-2022	-1200	500
Jun-2022	-700	500
Jul-2022	-200	500
Aug-2022	0	200

londoner2019

Does anyone think it's more sensible to move the tax money over to pay the card off quicker? I read that if you owe less than £3000 in tax you can ask them to take it off your salary over 12 months

Blackcats

Hello.  You've made great progress - well done. 

I don't know about the tax question - I would make sure you get an official answer though as you wouldn't want to find that you couldn't pay your tax.
good luck on your ongoing journey

londoner2019

Thanks! With my spreadsheet and constantly checking credit scores, I think I'm simply obsessing over it all a little bit. I check my account every day and add every penny to the spreadsheet. I'm always looking at ways I can shift things around but I'm going to stick with what I've got. I think I'd rather pay off that tax bill in full so that it doesn't eat into my monthly salary.

Re: credit files - I check them all but I've found Clear score to be a great tool. It shows how much you've owed historically in a nice graph - my total owed is the lowest since 2017. I don't wake up in a cold sweat worrying about it. 

I've been reading up other diaries and planning longer-term too - it's inspiring to see people build up savings and emergency funds. I can't wait to get to that position!

We're also in the process of moving house - which should release another 100 to put towards this. I've already started a 'potential' spreadsheet tab, so see what the extra 100 a month would do. The debt-free date (including the tax stuff and some dental work that needs doing, albeit not immediately) would shift up to April next year. Lots of waiting and seeing, but it's looking ever more promising.

londoner2019

On track to have an extra 300 left at the end of the month to put towards stuff. Lockdown has been very, very kind to my bank account.

Does anyone have any concerns about spending habits changing in the summer onwards? Or tips for reining it in? I fear that this progress will be stunted a bit by the end of the year - it's impossible to gauge a realistic budget when you've been living a totally different life in the last year!

londoner2019

House move making progress - both sides are chain-free so we're expecting to complete by the end of next month. Our current property that we're renting has been put up on the market today - for about £100 pm less than we're paying now! Outrageous stuff... we've lived here for five years as good tenants, but clearly that just makes us easier to fleece some extra £££ from...

MidsHollie

Hi Londoner. I’d recommend that you use a zero based budget. It works great for me, as once I get paid, my money goes to where it’s supposed to be, and that’s it, until next payday. I don’t have to move things around, or think about what I should or shouldn’t pay off because it’s all set as soon as the money hits my account. I think this will also hep with your worries heading in to summer. If you are able to stick to a zero based budget now, it will be easier then. You’ll just need to add in a few lines for trips out etc and make sure you stick with it.
Earlier in the thread you said that every £100 spare you would send to the card. I paid off two of my cards by sending every spare penny, as quickly as I could to the card. So any eBay sales, and survey profits, any cash back. Any extra money i wasn’t expecting went immediately to the card. It really does add up quickly and you won’t be tempted to spend it 

londoner2019

Thanks @MidsHollie - I think I'm just overthinking it too much. I should stick with my original plan and go from there, while using any extra to put towards the card.

Budgeting in trips out, food/drink out etc is such a good idea. Even if you've budgeted everything else and you know what you're left with each month, budgeting in £XX for this means I'm not worrying that I'm halfway through my disposable income; instead, I have planned for it and I don't need to worry.

The same goes for this month, for example. I'm down to about £70 until the end of the month, but that includes the extra £300 that I wasn't expecting to be saving. I know I shouldn't feel bad if I end up going over, because that £300 was part of my disposable income for the month anyway, but I'm already thinking about how my balance and my spreadsheet will look if I can put that to the card or something. 

Obsessing like this probably isn't healthy, but it's something to do at least, during this lockdown!

londoner2019

Payday tomorrow, and while I ducked under my +300 self-imposed threshold (new electric toothbrush), I've managed to claw that back - moving out on 28th next month so they don't need a full month's rent. The extra £300 is going straight into that tax pot, meaning it will be sitting on £1200, and I'll chip away at the CC with £100. I should be able to start my tax return next month, meaning I'll know exactly what the bill is, rather than an estimate.

I've made a very rough budget for April in terms of going out to pubs and restaurants - and I haven't shaved any budget off groceries, which I would expect to drop if I am not in the house 24/7. So I know I have a "pot" I can use to get that first drink in  

Work has been quite busy, which means I've been checking my bank balance, spreadsheet and credit scores less obsessively. 

For the move, I'm anticipating my monthly house outgoings to be under what I'm paying now, as I mentioned in an earlier post. So I've made a "potential" plan, which involves shifting 600 each month, rather than 500. It's the desired plan, but that's all it is until I know exactly what everything will cost.

londoner2019

A side note to all this - my sleep patterns have massively improved. I used to wake up in the middle of the night with my heart racing - or worse, would be unable to get off to sleep, just lying there thinking about all this. I still sometimes let my mind wander and think about other things - mostly stuff I need to do for work - but having control of the finances means this is no longer a factor. 

It's exciting to see the number go down - from a height of £12k+ (I actually think it was over 13 at one point), I've brought it down to £7k already, albeit using self employed income, pretax, to help me get there. And I'm halfway to clearing the tax bill too. Dreaming of the time I can build up additional funds in my current account, pay extra into a pension, pay extra into a mortgage and get myself a rewards / airmiles CC. Plus I should have paid off my student loan in around 6 years' time, which frees up a couple of hundred a month again. That's the end goal, and I know the journey is long, but with this diary, and my precious spreadsheet tracking each individual step, I can track my progress and celebrate the little wins.

londoner2019

I've been thinking a lot about how I got where I am. It all started with the 2008 financial crash and some poor decisions made as a student... when I was younger I was pretty frugal. I did have an expensive taste, but I always knew the value of money. Would take on extra paper rounds, weekend work, always had a part-time job right up until university. Through inheritance and otherwise, I had saved upwards of £6,000 and placed that in an ISA. Unfortunately the ISA I placed it in was an Icelandic one, which went bust in 2007/08. 

The unfortunate moment was that all of a sudden, on top of student grants and maintenance loans, £6,000 found its way into my current account in my first year of uni. I was having too much fun to realise I should definitely move this, and somehow over the next few years I frittered it all away. I genuinely don't know how I spent that much - I'm sort of grateful my bank transactions don't go back that far because I would be terrified to see how it went.

Instead of having some savings put away, I ended up leaving university well into my £2,000 overdraft. A rather expensive trip saw to that as well. And then coming to London already in my overdraft, and on a small wage, meant that I had very little disposable income, which I didn't deal with well as I was excited to live the London life.

I recall panicking that I would never get out of my overdraft, and attempting to budget, but there was just so little left over that I couldn't claw my way out of it. Then I discovered credit cards and money transfers, and 0% for three years... it was my first ever credit card, and all of a sudden I felt I was in control again. But as I started earning a little more - not loads more, still far too little to really be comfortable in London - I started spending more. And then a second card came... and then there was a third... and fourth... the latter to try and switch some of the balances to 0%.

The worst moments:
- going for. brunch with friends, and panicking, ending up paying for purchases and withdrawing cash on these CCs
- travelling back to the airport of a very large European city on my own (for work), finding that the trains were not running and realising I didn't have the 50 euros to pay for a cab to get me there. Fortunately I ended up sharing a cab with a foreign business man who expensed it and didn't ask for any cash
- turning to payday loans. Almost every month. Sometimes twice a month, when I optimistically took out a smaller loan than I needed, without changing my spending habits at all. Once, I took out a loan while I was still in the supermarket. Another time, I didn't have enough on my card and I had to just leave my basket after all my CCs declined.

Sorry, bit of an outpouring of a story here. I know I'm in a better position than many - my partner is comfortable financially, and I have friends and family who would bail me out if I was desperate. My partner put up my half of the rent and bills for a month while I was redundant / waiting for freelance money to come through. I've factored repaying her back once I've cleared the card.

I'm mostly proud that I'm clawing my way (for the most part) on my own. I went through it in my head probably hundreds of times of how to ask my partner or family for a loan, but the shame of having to do that was too much.

On a lighter note, I managed to expense a home desk and chair to my company, and I'm expecting a refund from my energy company as we've been overpaying on the direct debits. Great news!