From surviving to thriving...

purslane

Hello everyone. I'm starting this diary to try and create some accountability around paying off my debt, hopefully for good this time.

A little background: I'm in my mid-/late 30s, live in Germany with my husband (both originally from the UK) and am a freelancer. We're also expecting our first child in the next few weeks. I racked up some overdraft and credit card debt in the early 2010s due to postgrad studies, followed by moving abroad and not having work for a few months. I paid it back after I started my job, but retained the accounts because it is useful to have a UK bank account for things like trips home and buying gifts online for friends and family in the UK. However, in the last couple of years I got less disciplined about transferring money across to pay for these things promptly, and got in debt again to the tune of around £3000 between the credit card and the overdraft. Most of this came from several trips to the UK in 2019, gifts for Christmas 2019 and spending during the first lockdown in 2020 (my freelance work dried up temporarily and I had no income for a few months). I also got hooked on a phone game that I used to spend money on for extra lives, power-ups etc, which came from my UK accounts because my iTunes/Apple store account is still a UK one. (I honestly feel really embarrassed about how much I've spent on this game.)

Some numbers:

• Co-op credit card: currently at £1,507.39
• HSBC overdraft: currently at £700.08

• Total: £2,207.47

I don't have any debt here in Germany – I do have a credit card but it works more as a deferred payment card where everything has to be paid in full the following month. It isn't possible to carry a balance.

I've been making minimum payments and occasional extra payments for a while, but I feel really motivated to tackle these debts now. With the baby on the way, my husband and I have gone from having mostly-separate finances with a joint account for rent, bills etc, to combining everything and each having an 'allowance' for personal spending, so this makes me feel like my debts aren't just 'my problem' any more but 'our problem' (since repayments mean money we can't spend on our lives together) and I feel a lot of guilt/shame around this. Also, the baby is making me think about the future in a slightly different way and I want to get on top of my/our joint finances so our child (and any other future children) doesn't end up having to take care of us when we're older. I'm just under three years away from 40 and by then I would like to be debt-free and have more in savings, both for short-term emergencies and long-term goals (deposit, possible career change, retirement...). The last few years have been quite challenging, with various health problems, family drama, lockdowns and lack of work, and in the last year we've spent quite a lot on IVF and moving. Now we're finally in our nice cosy flat, awaiting the arrival of our baby, and I feel like we're finally beginning the life we planned years ago, and I want to stop 'surviving' and start 'thriving'.

I've taken some positive actions recently:

• Deleted the game from my phone and downloaded a sobriety app to motivate myself to not play it any more. Currently at 50 days!!! And I've saved around £70.
• Got really clear on the amounts I owe, interest rates etc, and put everything in a spreadsheet where I can track repayments/interest and play around with how making extra payments will clear it sooner.
• Transferred a couple of small windfalls (birthday money, social insurance refund, work I hadn't expected to be able to invoice for) to pay off the debts – reduced it by £363.62 in the last few weeks already.
• Finally reset my internet banking for the Co-op card. I had worried for a while that I was close to my credit limit, so I made a transfer from the HSBC account to the credit card a couple of months ago. Turns out that a) I wasn't in danger of going over the limit, and b) the interest on the overdraft is much higher than the credit card, so in hindsight this wasn't the best decision. But now I know and can access everything easily to check balances etc.
• Signed up for some survey sites, baby clubs with coupons etc. I did a lot of surveys/cashback sites when I was studying in the UK but hadn't really looked into it here until now.
• Cancelled my last regular donations/memberships in the UK. Aside from £0.79 per month for iCloud storage and maybe the occasional film on iTunes, there should be no more spending on either the card or the overdraft account.
• Set up a separate savings pot for Christmas, birthdays and holidays so it will be easier to keep track of this spending in future.
• Sent all our documents off to our tax advisor, which will hopefully result in a refund some time next year.
• Having regular check-ins with my husband about our budget, spending, emergency fund, how we will manage when we are both on parental leave/reduced hours and our income is lower.

Looking forward:

My focus is to pay off the overdraft first, then the credit card. It is the debt with both the highest interest and the smallest balance. According to my spreadsheet, I should be able to pay the overdraft off in July 2022 and the credit card in December 2022.

I have a Co-op current account with a small balance that will cover the minimum payments on the card until the end of the year. After that, I will need to transfer money across to cover repayments. We have a joint emergency fund with around €2,000 in it. Additionally, I have around €1,700 in my business account, which should go up to €3,100 once my last invoice for the year is paid. Last month we had around €300-€400 left after rent, bills, groceries, baby stuff etc (first month of new financial arrangements, not sure if this will be the same every month). I have €75 per month for personal spending, which will go up to €124 from January (when I am finally out of my gym contract!). So technically, we have enough to clear or substantially reduce the debts now, but I'm a bit hesitant to do this for two reasons. 1) Our income will be reduced for the next year while we are on leave/working part-time and we might prefer to have the cash easily available – e.g. the money in my business account might need to cover my salary for the first few months of 2022 while I build up work again and wait for projects to be finished, invoices to be paid etc. If we don't have money in an emergency fund or if I can't pay myself a salary, we might end up spending on the credit card/overdraft and I'd end up right back where I started. 2) I feel guilty accepting money from our joint savings or joint budget to pay off debt that I accrued by myself. My husband is supportive and says that it doesn't make sense to pay interest when I/we don't have to, but we are both so worried about getting by on less money that I would feel bad saying I want to make this a priority, and we aren't sure how much we could commit to repayments. Anyway, I've waffled on for long enough here, but I'd really love some input/advice on this from seasoned MSE folk if anyone has any thoughts!

enthusiasticsaver

Sounds like you have  made a good start and I would suggest that you tackle that overdraft first mainly because it is probably expensive (most overdrafts are around 40% interest) but also because it can be withdrawn at any time.  Whilst I understand wanting to save for while you are on reduced income making it a priority to repay it will give you peace of mind. Maybe you divide any spare money in two and put half into savings and half towards the debt? Communicating with your partner about money regularly is also a great idea.  We have joint finances but a personal allowance each month into our personal accounts which can be spent on whatever.  That saves arguments and helps us to budget.  If you are prone to spending on impulse get used to not taking your card out with you and only spending on planned expenditure. 

I would say that having a new baby comes with all sorts of unforeseen expenditure so getting to grips with this now is worthwhile.  Will you have childcare costs or will you both be able to cover that between you by going part time? 

purslane

Thanks for this! That's a really good point about the overdraft potentially being withdrawn as well. I hadn't considered that.

I think I'll definitely bring up the idea of putting something extra towards the debt. Even a small amount now would reduce the interest down the road.

We won't have childcare costs for the first year, except maybe the occasional babysitter if we go out. We'll both be working 50% of the time and splitting childcare evenly. It should work out that by the time we are regularly paying for childcare, we'll both be back working full time.

savingholmes

I would prioritise clearing the OD. You are married and pregnant so I would accept any financial help from your husband. Paying any interest is a waste

purslane

Quick update as I've now had this month's statements for both accounts. Not much actual progress since my last post, as I wrote that one just after making a bunch of extra payments, but after the minimum payment and interest the credit card is now below £1,500, and I rounded the balance of my Co-op current account down to the nearest ten and sent the difference to the overdraft, so that's now under £700.

• Co-op credit card: £1,490.12
• HSBC overdraft: £696.87

• Total: £2,186.99

I made a mistake calculating the interest in my spreadsheet. With my predicted repayments, it'll actually be November 2022 when I clear the overdraft and early/mid-2023 when I clear the credit card.


Other recent frugal/money-related things:

• Our food spend has been very high so far this month, but I have made and frozen about 30 portions of food plus some snacks for after the baby is here, in addition to what we've eaten, so hopefully that will be reflected in slightly lower food spend in November/December. We also had a few quarterly/annual payments come out this month, so we're trying to get to the end of the month without dipping into our emergency fund. We did a stock-take of our cupboards at the weekend and made a meal plan based around things we already had (lots of dried pulses!) and our online shop was very cheap – although, it turned out, partly because we had forgotten to add essential things like toothpaste or butter, so we had to edit the order and do a couple of top-up shops! But I was very insistent on paying for the top-ups with cash and only buying what we went in for.
• I sorted out some old clothes and boxed them up to send off to a service my friend recommended that will sell them for you. I probably won't get as much as if I'd sold them myself, but happy for them to take a cut and save me the hassle, since I could have this baby any day now! Now I just need to drag myself to the post office...
• Used lots of coupons to earn extra points we can put towards e.g. Christmas food shop or baby stuff. Was thinking maybe some cloth nappies, since that might save us money in the long run as well.
• Found out my contributions to health/long-term care insurance and pension are covered for the next two months, which works out as an extra €450-ish in our budget. Having another finance check-in this weekend to plan our budget while on parental leave and decide how much of the extra can be put towards the debt.

savingholmes

Sounds like you have been ultra productive. Your future self will appreciate it

purslane

Had another money check-in over the weekend. Decided to take money from the emergency fund to clear the overdraft and pay off the credit card in a more 'slow and steady' fashion. This seemed like a good balance between clearing debt and avoiding interest on the one hand, and having money on hand during parental leave on the other hand. The transfer has gone across and the account balance is three whole pounds in the positive! And I'm looking into closing the account and just keeping the Coop current account with no overdraft function.

So my total debt is now just the credit card, still at £1,490.12.

We also did a new budget. Discovered we will have more money left after essentials once we're on leave than we thought we would, but then our financial situation always looks good on paper and feels like total chaos in practice, so we're still going to be very cautious. Also, there might be a period where we're not getting paid from our work but are still waiting for maternity/paternity pay to get set up. So for the credit card, I'm going to stick to making the minimum payments plus small overpayments (probably £50-£60 a month total) for the next couple of months, and come up with a more aggressive plan in the new year.

savingholmes

Always good to have a plan. Even better if you stick to it