Becoming debt-free and staying debt-free; Top Tips

MaggieBear

This is a wonderful thread!

Keeping a spending diary - an actual diary that I got free from work that lives in my handbag - has been wonderful for me, it really makes me think twice about spending, and I've been better at keeping track of all sorts of things.

Also changing to cash from plastic (even debit plastic) has made me much more aware of the health of my bank account and not wasting money on rubbish. I get a ministatement every time and match it up to my bank statements. I need to get more of a handle on when exactly my DDs come out so I can tell what my balance is liable to be doing in the near future, but even just getting regular ministatements is a help.

This week I'm going to get internet banking sorted out so I can keep an even tighter reign on it all - not being scared of my bank statement, knowing what all the transactions are for and making sure there are no erronious ones on there is very empowering.

Telling people that something isn't in my budget for this week - rather than that I plain flat out can't afford it - has been good, too. I've also become a great deal more honest with some of my closer friends and we're all helping each other not waste money on nonsense; socialising at each others' homes and not going out for no good reason.

karren

the spending diary is fantastic, i cant lie to myself how much things are anymore as its in black and white.
i leave the credit card at home now unless im food shopping or need petrol.
lists for everything, its fab ticking them all off when they are accieved.
I dont "do coffee" all the time , or if i do i make out im cutting back on caffine which is no lie.
i keep track at the end of the month what ive sopent and have goals to save towards ie paying off a bill, hols, and have splinter accounts off the main one and juggle that way.
this site has made me rethink my spending, o have fallen off the saving wagon once or twice but i get on with it mostly.

masterkay

MaggieBear wrote: »

This is a wonderful thread!
Telling people that something isn't in my budget for this week - rather than that I plain flat out can't afford it - has been good, too. I've also become a great deal more honest with some of my closer friends and we're all helping each other not waste money on nonsense; socialising at each others' homes and not going out for no good reason.

All greats points from maggiebear but I pick out the one about telling people it is not in your budget. This is a great idea. I think many people fall off the wagon due to peer pressure and not wanting to admit they cannot afford to do something. Budgeting makes it sound better and easier to use. Also we are saving for XYZ may be another one to use.

poppett

My dream is to be able to afford a lovely holiday, somewhere hot and exotic with palm trees, clear seas and the sound of kettle drums playing in the background. I found a picture on the net that looks like my dream holiday, I printed it off and it now sits in my purse. Each time I open the purse I see the picture and it reminds me to think twice about my purchase. I have put many a coin in my sealed pot this way. One day I WILL be on that dream beach!

masterkay

poppett wrote: »

My dream is to be able to afford a lovely holiday, somewhere hot and exotic with palm trees, clear seas and the sound of kettle drums playing in the background. I found a picture on the net that looks like my dream holiday, I printed it off and it now sits in my purse. Each time I open the purse I see the picture and it reminds me to think twice about my purchase. I have put many a coin in my sealed pot this way. One day I WILL be on that dream beach!

Nice one. Or put the picture as your desktop on your computer. I know some people do this when trying to lose weight. Put a picture of a dress they want to get into or a picture of them a bit thinner so every time they go to snack they see it.

pinkkaz

masterkay wrote: »

Nice one. Or put the picture as your desktop on your computer. I know some people do this when trying to lose weight. Put a picture of a dress they want to get into or a picture of them a bit thinner so every time they go to snack they see it.

Ha! That's a good idea, but I'd be so embarrassed if someone saw it...

masterkay

pinkkaz wrote: »

Ha! That's a good idea, but I'd be so embarrassed if someone saw it...

Maybe a chain and padlock on the fridge to stop people looking in it and it would take you longer to get in so you will have thought about your snack "purchase" before going for it.

viktory

masterkay wrote: »

Do not have savings if you are in debt. Lots of people I know keep savings for a rainy day yet are up to their necks in debt. Generally the interest on your savings will be less than you are paying on your debt unless you are stoozing.

I don't agree with this one. Whilst paying off debt should be your first priority, some savings are essential. For example, what would happen if you had no savings and the washing machine (for example) broke down? You would have to get in more debt to get it fixed or buy a new one.

masterkay

viktory wrote: »

I don't agree with this one. Whilst paying off debt should be your first priority, some savings are essential. For example, what would happen if you had no savings and the washing machine (for example) broke down? You would have to get in more debt to get it fixed or buy a new one.

That was a general rule and is to be combined with everything else and I think you took it out of context.

I say have pots of money for everything. I pay my car tax once a year but I work out what it is monthly and put that aside each month in a high interest savings account. You can call it savings if you want but I don't because it has a specific purpose so I don't think it is savings. I also have an emergency something dies fund which I work our what my electrical things dying will cost and the cost to fix things each year and put it aside each month. If this gets to high enough figure the money should be moved elsewhere.

I think it is semantics. Yes this is technically saving but I call it budgeting.

I will rephrase the above and say that saving is when you are putting money aside for something other than daily life, must have essentials and emergencies. I was meaning the people who continue to have ISAs when they are deep in debt. It makes no sense to have 3K in an isa and 25K debt.

masterkay wrote: »

People who insist on keeping their savings for a rainy day and not getting much interest while paying crazy interest on credit cards by using cash advances to live or on loans. The rationale is they may need it one day. Surely if you are struggling to get by the rainy day is now. The other excuse is that it is an isa. I actually heard this one from a friend using the old you can only put 3k in it a year and taking it out would be silly. They had less than 3k in it from the previous year and had put nothing in it this year and were using their credit card to take out cash and not paying the bill in full each month.

Obviously there is a few exceptions for example, stoozing on 0% deals and putting it in savings accounts.

Generally if you have debt and savings you should put the saving towards the debt/living/not getting into more debt.

Just to give my original post and the context I was talking about. I don't consider a rainy day fund as an emergency washing machine fund I would consider it a "we have some extra money lets do something nice". The post was meant to taken don't continue to have huge pots of savings when you could do something better with them.

Also I said generally speaking and there are exceptions to the rules.

One other thing someone posted today about having £600 in an isa and a £800 OD at 16% and my advice was to pay off the OD and I stand by that. Say he manages to pay off £600 of that OD for 9 months but then needs to use the OD again for an emergency OK he's getting into more debt but he will have saved money when he was in less debt. Technically speaking in the 9 months he should be in a much better position anyway.

I don't think this general rule can be clear cut either way but I would say more often than not there is no point having savings only budgeting. I think it's up to each individual to decide what is right for them.

kipwilliams

viktory wrote: »

I don't agree with this one. Whilst paying off debt should be your first priority, some savings are essential. For example, what would happen if you had no savings and the washing machine (for example) broke down? You would have to get in more debt to get it fixed or buy a new one.

think about it some more. if you had a £500 'emergency fund' earning you 5.5% a year in interest in an ISA it'll earn you £27.50 a year in interest.

if you have £5000 in debt on a credit card you will pay approx £1200 a year in interest.

If you used the £500 savings to pay off the credit card then you will only pay about £1100 for the same year, (as you only owe £4500 on the CC) saving you £70. Worst case, if you need to spend £500 on a (very expensive) washing machine then you are no worse off than you would be if you'd bought it with the £500 savings - you'd still have £5000 on the credit card and no savings at the end of it all, but you would have paid less interest to the credit card company in the mean time.

Obviously the numbers above are simplified a bit and i haven't taken repayments in to account, but there is no sound financial reason to save and have debts, as long as you have the discipline to hold the card and not spend on it....... I like the suggestion i've read on here about freezing the card in a big block of ice so you can't use it unless you really need it