At the end of my 2nd DMP

ChampagneSupernova36

Good evening ,

my last post on this forum was on the ‘debt free roll of honour’ where I spoke about how I created my 6k of debt on a DMP:

Lightbulb moment - January 2017

Debts at their highest - £6223.42

Debt-Free Date - 1st June 2020

Now, fast forward less than 2 years to March 2022 and I was back on a DMP for nearly twice as much as debt!! Now, when I made my final payment for my previous amount of debt I was totally and utterly determined to NEVER get back into the same position again but here I was even worse off than before ! 

I have 5 payments left on my current DMP and it feels great now that the finish line is in sight, I have that same determination ten fold to stay debt free. I don’t think I dealt with the root cause of my overspending and living beyond my means, I went though one of the most horrific depressive episodes I have ever experienced and lost sight of who I was and what I was doing. Thanks to good friends and family and therapy I am out of that mindset and can really appreciate everything that I have and realised that I am enough and I have enough as is. I feel like a totally new person in terms of how I handle my emotions and I am so much more confident and much happier and I’m glad to put that episode behind me.

This DMP is my final reminder of how I felt back then and every time that direct debit comes out I’m reminded of that horrible time. 

Now, my question is to anyone who has found themselves in my position where they’ve found themselves back in debt after recently clearing it all. I’m honestly terrified of falling back into any sort of debt and I mean it when I say I am determined…. But that’s exactly what I said last time… 

In fact I think my exact words were ‘I’m never going to get myself into debt again’ but here I am. Once my DMP is over I will be £745 better off each month and went to be sensible and rebuild my credit back up (back to back DMPs have obliterated it). I’m looking for anyone who has managed to remain debt free and never look back , what’s your advice ? What do you do when you find yourself slipping back into old habits ? I’ve started creating pots on monzo to spread out my wages and I am also earning £300-£400 more per month than I was back when I got myself into this mess.

Sorry this has ended up being quite long but I’m just writing down how I feel (something I’ve learnt to do since my recovery) and looking for anyone who can relate. I’m a silent follower of so many of you and so I would really appreciate and feedback and advice

Good night , E x

enthusiasticsaver

I have counselled people in debt before but not had experience of it myself but I do wonder why you want to build your credit record up again given you obviously struggle or have struggled to live within your means? 

If you have in the past struggled with managing credit the safest thing is not to take cards out or borrow.  If you have over £700 spare each month then you could easily build savings up quickly. I am 64 and can count on the fingers of one hand how many times I have used credit and it is perfectly possible to live without it.  Of course if you need a mortgage that would be different. 

josephine82

When I paid off my debts I took another look at my budget and identified what my financial goals were and then set up standing orders for moving money into various pots as soon as I got paid so that I didn’t see the money. 

But, I also worked out what I wanted to do that I didn’t do while I was paying off my debts, and allocated money for that into my ‘spending’ money for the month so I had a bit of money for a meal out, a takeaway etc. 

I also opened another current account and moved all of my bills to the new account, and just moved that money once a month into the bills account. 

This meant that all money left in my main account was mine to spend, after bills and savings. Having it organised in this way made me confident I was doing mostly good things with my money for my goals (buying a house, saving an emergency fund) but also enjoying my salary. 

Hope this helps. 

13thlegion

Clearing debts is a massive achievement. Doing it twice must be more than twice as hard and an even greater achievement, well done!

As tips on not using credit, as @enthusiasticsaver says avoiding it is a good option. This can be helped by not opening credit accounts in the first place. If we didn't have the cards, none of us would have ended up here (This is an over generalisation to make a point but hope you get the meaning).

Another things that has really helped to change my mind set is setting goals. The monzo pots are a useful tool for this because you can basically live on the reverse of credit, set money aside each month and when you need it it is there. So setting goals like what holiday you want next year, when you will go shopping for new clothes, socialise, help the kids with driving lessons, or anything at all, can be really useful at keeping control and habits focused. Then saving for each goal.

You've done really well living below your means whilst on the DMP. Some would argue that getting debt free isn't quite at the clean slate start point yet. The next stage is the debts you owe yourself in building up a substantial emergency fund, so that if anything does happen that is unplanned/unforeseen then you can 'borrow' from your own money instead of someone else's. There are threads on here with challenges like the 3-6 month fund savings. Work out how much 6 months core expenses are and keep saving until you reach that point. 

So glad to hear you are in a much better place than you say you were in. The reason I stay around these forums is for threads like this as they are so motivating for me on my own journey to debt free. Thank you.

TheAble

Would echo what ES said. With the exception of a mortgage (keep it a modest one), no more credit of any kind. Well done on your achievement and hope you enjoy financial security henceforth:)

EssexHebridean

I would also suggest that you need to prove to yourself that you can manage without credit before even considering rebuilding your file. To an extent it will improve by itself anyway - but in your case I think your best approach is to live a credit free life (outside of a mortgage, if applicable) until such time as you feel absolute and complete confidence that you can control credit, without it ending up controlling you. Martin likens credit cards to fire - used well, they are an enormous asset. Used badly, they will burn. 

As for the surplus you will have when your DMP ends (and well done on getting it cleared!) why not allocate that straight to regular saver accounts? That way it follows the "pay yourself first" principle of saving before spending, and means that the money is going off to somewhere you can't access it just because temptation strikes. That will then leave you a good chunk of money that can be used for building your emergency fund further, and starting to build discretionary funds for planned purchases. Allocate yourself specific spending money each month as well, and if you know you have events coming up in a few months that will mean for example that May, July and August will be more expensive, consider putting money saved from spending in the less costly months into a pot to bolster those more expensive times so you don't have to dip into savings. Forward planning can really help you feel more in control of your finances. 

enthusiasticsaver

Some great tips here for you @champagne_supernova.  I would focus on living within your budget and forget about credit for a while.  You do not say whether you own a house or not or whether you intend to get a mortgage at some point but I would certainly not rush into applying for new credit cards until you have proved to yourself you can live within your means and start saving instead. 

Regular savers (as @EssexHebridean suggests) are a good start because it gets  you into the savings habit. Premium bonds is another option. 

ChampagneSupernova36

Morning & thank you everyone for their feedback & advice

I haven’t actually looked at clearing my DMP as an achievement…! Reading the replies has actually changed my mindset a little bit and I’m glad there are people who can relate to my story , I definitely don’t feel alone here and will give myself a pat on the back.

I know I can live within my means as I have been doing in my DMP, I was able to budget and stick to it and I know that once that money is spent there is no way of getting anymore so I just need to stick on that mindset and look at savings in the same way… the same way I put that £745 into a pot for the direct debit to take it I will lock it away in a pot for rainy day.

thank you @13thlegion for your uplifting reply, I was reading your thread and can really relate to growing up with very little and not really knowing what to do with money when it was available… I know now that it doesn’t burn a hole in my pocket and doesn’t all have to be spent straight away. I’ll be following your journey and wish you well! (I’d also like to see your spreadsheets as I hope to plan my finances the same way).

@enthusiasticsaver thank you for your reply , I do not get have a mortgage yet. Owning a property of my own is something I would like to achieve in the future but certainly not the very near future. 

I’m 32 so it’s something I would perhaps want to achieve come my 40s potentially, but I appreciate that I should really shy away from any credit cards etc until I know for sure that I can control myself and stick to my budgets as @EssexHebridean has suggested !

I will also take your advice @josephine82 because I’ve had to reign it in a bit on my DMP, I don’t want to undo all my hard work with a splurge because I don’t honestly need anything more than what I have… but at the same time it’s nice to be able to live a little (not above my means of course) but a meal out or a holiday every now and again would be nice!

I appreciate you all very much and thank you 

E x

EssexHebridean

I take it you have already opened a lifetime ISA, assuming you have not yet purchased a property? 

ChampagneSupernova36

EssexHebridean said:

I take it you have already opened a lifetime ISA, assuming you have not yet purchased a property? 

Hiya, yes I do have a LISA. I opened it about 4 years ago and it’s only got a very little amount in (I totally forgot about it until recently). Once my debts are cleared I will definitely be looking into saving more into it. No property yet but hopefully in the future, that’s my next life goal xx