The mental side

Pumpkinmad

As the title says, how do people deal/cope with the mental side. I’m at the beginning of the journey 1st/2nd missed payments. I take responsibility for the debt although life’s dealt some tough hands which is a lot of it. But how to people deal with the idea of ruining your credit for 6 years? I’m saving the emergency fund etc but I’m in constant worry about 3/4 years time no one knows where life will be, what if the car needs completely replacing?, what if the boiler or something of that size needed replacing and you physically then cannot borrow the money but it’s such an actual need for life. Guess I’m just having a real panic about that future, reality is really hitting and feel I’ve totally messed up  

Brie

I find many people feel better when they talk to others about it.  That can be family or friends or even strangers on a website.  

But reality is that none of us know what tomorrow will bring.  I'm fortunate that I'm an optimist and believe that even if things don't get better at least they won't get (much) worse.  My OH is a pessimist so I've also learned to discuss things in a way that calms his fears - which has the knock on effect of making me calmer about things at the same time.  

Brie

Oh - and perhaps you could look at the mental health and debt guide that is linked at the top of the page!!

sourcrates

The fact is no one has an automatic right to credit, and I for one, no longer want my life choices to be decided by some banks computer, which is why its imperative to live within your means, and save an emergency fund.

Since becoming debt free about a decade ago, I no longer use credit, at all, ever.

Planning your life around "what if`s" can be very unproductive, but do plan sensibly, for example, I know if my oil boiler packs up, its just the burner that would need replacing, as the rest is just an empty space, under £300 quid.

A certain fast fit garage offer what`s known as "payment assist" if your car is in urgent need of repair, no credit checks, no interest, just an affordability check, it allows you to spread the cost if need be.

There will always be a way, you do not need a banks money just to get by, that is the hook and sinker they use to trap you into a lifetime spiral of debt, you don`t need it.

Rob5342

The thing is, if you hsve s lot of debt already then it's unlikely you can borrow more anyway, so having some defaults added doesn't make muxh practical difference. The way I looked at it was that defaults or not people weren't going to lend to me, so if I stopped started a DMP that included saving into an emergency fund then I was making things much better for myself. Now I have four defaults so nobody will lend to me, but a good amount saved to cover any emergencies. It's really about getting over the problem instead I f pushing it down the road all the time. 

RAS

Ok, your concern is justified. But it's three years down the line, so you need to plan for it.

We often suggest you set up an emergency fund, that ideally you have enough money to cover one month's essential spends, or a deposit and a month's rent if you rent. You start rebuilding the fund when you get the deposit back.

The fact is that you need to start from where you are.

And head towards where you'd like to be. Sometimes that means adjusting your spending, sometimes it means adjusting your expectations. That might mean something you do or buy by habit has to go (look at threads on latte habits).

First you need to stabilise your finances, just live within your means, no more credit and no paying off consumer credit in the short term, then get a bit ahead, which may allow you to choose more cost effective options. At the most basic, having a tiny bit of slack means you can take advantage of offers. Even at the tinned tomato level, if there's a good discount (know the expected price of the item) and you use it regularly, buy extra on discount. Put the money saved into your annual spending account or emergency fund. Yes, it's only £2 but do that a couple of times a month, and it helps. Get into it, and you'll 

Start by planning for the annual spends that are listed in the basic SOA. That includes car repairs, holidays, presents, clothing medical and dental. Insurance is often cheaper if you pay one lump sum? The fact that you haven't needed dental care probably makes it more likely that you'll need it in the next year. One twelfth of those costs are sent to a separate account after pay day. When the insurance needs paying, or Christmas come round, the money is there.

Then put the money you're not paying the creditors into an emergency fund, instant access saver. 

When you come to make DMP payments, do not strip your life and budget to the bone. I often suggest people only offer 80% in the first instance. Save that money. If you anticipate needing the money for a car, put it into a dedicated savings account just for that purpose, at least until you've got enough for a decent banger. You can always re-direct the money later if you need to.

And do come back here and review your situation, particularly if things change.

Pumpkinmad

Thank you all, overthinking is something I probably need to work on and thinking the worst. Seperately what do you do when you go abroad but can’t provide a CC for them to swipe at check in? We are very fortunate that my parents have paid for a big family holiday this summer but now I’m stressing how to get past this? I’ve asked on the hotel Q&A but no reply about debit card 

middlingditch

I understand your worry, but in my experience all establishments have been happy with a debit card and never wanted a credit card. [edited to say] My partner, who doesn't have a credit card and never has, has always paid for everything on a debit card and it's been fine (including handing it over for swiping at the beginning of the holiday).

In the past, car hire firms always wanted a credit card, but recently I've noticed that more are accepting debit cards and I would expect that to become the norm too.

DankVielen

Hi Pumpkinmad

I think it is very wise of you to consider the mental side, it is one of the reasons I have a fair amount of contempt for some aspects of the debt industry.

The first thing you you need to know is that none of this is your fault.

You did NOT mess up, you were lured into a leech trap, no matter how strong you are at managing your finances life is like a roller coaster, so at some point you are going to be on the down and all they have to do is make it difficult for you to make the up. Often there are series of bad hands so your first response to be more desperate to keep afloat, this triggers further anxiety, sometimes diving into even more debt.

When companies offer zero percent (usually increasing the credit limit while they are at it) they are not being altruistic, their goal is to give you just enough rope to almost strangle yourself, i.e. get you in a place where you can afford to service the debt but you can't pay it off.

They have all the metrics to potentially prevent this, but they are not going to write to you and ask if everything is OK and would you like to speak to one of their in-house debt counsellors (who probably do not exist).  In fact when they issue those first cards either while you are at Uni or when you start your first job, they are able to measure your potential for being locked into debt.

My father had a gambling problem on the horses and my Ex had a compulsive spending problem, while my brother has a far worse gambling problem. I have been able to view these up close from the "impact" point of view, however your average person does not have these issues. So what happened to the rest of us? 

First of all we live in a world of aspiration, a nice lifestyle, several holidays a year, a nice car every 3 years, we are fooled into thinking these things are important measures of success, some people call them trappings. Basically we are encouraged to spend money we do not have so living beyond our means. Wealthy people I know have something similar, it is just that the items are big ticket.

We are all invested in this "system" so we learn to worship the credit reference score, while the money lent is being invented on the computers of lenders with virtually no asset secured, it all comes down to CONFIDENCE.  For the lenders they eventually build their own asset of the debt itself because DEBT = EQUITY.  It is written there on the bank note, "I promise to pay the bearer on demand the sum of " they just don't need notes or gold anymore.

So the lender can't lose, the money never existed in the first place, their basic fees cover their overheads and all interest is profit. If things go wrong they sell it for pennies in the pound but the full amount can still be sought by the purchaser.  They argue that this is the deterrent needed otherwise everyone would DuMP their debt, there would be no confidence in the system and the world would end.

I was like you, I was worried about ruining my credit record, but then I realised, it was already ruined the trap was sprung and it would take six years anyway. So decided I no longer wished to participate in this "system" and looking back I have no regrets, except for paying so much interest before I figured it out. 

The mental side mirrors the process of loss; Shock, Denial, Negotiation, Anger, Sorrow, Depression and Acceptance.  Being able to reflect on where you are in these stages helps you deal with the impact to your mental health.

Like any goal, you need to figure out the destination, how it will work and the simple answer is you will fund everything yourself and not spend any money on things you don't NEED rather than WANT.  This will allow you to save more towards the emergency fund which will act like an insurance policy, even now I regularly move money to savings as out of sight is out of mind.  

I managed to keep my overdraft which is some sort of miracle considering the amount of debt I had.  When my Bank increased the interest rate to 39.9% I offered family 10% when base rate was 0.1% (during Covid) to lend me enough to pay it off.  They said they would do it for free, but I insisted and it felt so good to see the debt to them reduce in line with my spreadsheet predictions.  I was able to this because I had no other debt with my bank, so I did not need to change banks, my bank is a mutual and whilst they did reduce my overdraft it is still there for a real emergency.  I am a nut for self discipline, so having the overdraft and not spending a penny of it reinforces my mental strength and motivation.

A self managed DMP is well covered here in the sticky posts, the only difference I had is that I was aiming for 60% off, but by the time I got 60% off I was so annoyed with all the letters that I decided to pay nothing, not a penny.  

When the letters became too much I stuffed into carrier bags unopened, guess what, nothing bad happened.

Of course what I should have done is get just one lever arch file, use dividers for each original debt and then store the letters for each debt in chronological order.   When I first got letters they were scary, but when I finally opened all these letters I realised they were automatically generated.  Sometimes I saw the same exact letter from a different debt sold to a different firm, it got to a point where I could predict the next letter and that the Debt Collector being fired soon after.   I realised it is just a process and you can be sure that the senders of the letters were not losing any sleep, suffering from any anxiety, they are simply interested in scaring people into acknowledging or paying something, no matter how small (to extend the 6 years).

You are in the very early stages, you can speed things up by writing to the lenders and saying

"Due to a change in my financial circumstances I will no longer be making any payments towards the debt with the reference number above"

You do not need to explain, you do not need to provide them with an SOA and there is no point paying £1 a month because it stops the 6 year limit running down.

The sooner they default the sooner you get through this process, you never tell them you are waiting for an offer, just operate a DO NOT ENGAGE policy.

Try not to worry about 3/4 years time, it has not happened yet and it may not even happen, by the time it rolls around you will be expert at this.

None of us knows where life will be, I had a family member who did everything right all set up for financial independence and taken by a very aggressive brain tumour. As for the car, you can either save to pay off the finance or if that is not possible you buy a second hand car that hopefully does not have too many problems. You live within your means which will probably be far easier with none of the unsecured consumer debt you are dumping.

Boilers can be repaired, if you are really worried then you buy an insurance/service policy or you fund one yourself by cutting back on your costs and having a boiler pot .  My brother was in a serious bind when his boiler was condemned, he ended up getting one off Freecycle and paid a Gas Engineer from British Gas to install it.  A lot of people are moving to Eco Boilers so if you put an ad on Freecycle looking for a boiler you may find you can get one for free.  The one my brother got was only 18 months old, it had been replaced under a service plan of the person who gave it to him.

I am not dismissing your very real anxiety, but trying to show you that solutions are out there and you can prepare for them.  Freecycle has been fantastic for me, previously I would have paid over the odds on eBay or Gumtree, ironically some of the stuff I got from Freecycle was advertised on Gumtree until they gave up and just wanted rid of it.

The main MSE website is another godsend, there are all kinds of way to help you get better deals and cut your outgoings. I am blown away by this community, you can learn what deals are best, you can get help dealing with a specific lender or Debt Collection agency or a specific threat they make.  I would not go back to that rat race again, even if I won the lottery.  I would not change much as possessions mean nothing to me now, I am 100% practical because with Freecycle it is just to keep me going until something better comes along.  The only cost is collection, it is more fun than eBay and I gift back anything I have "upgraded".

I don't buy new mobile phones, I have enough saved up to buy my next reconditioned one and I now have a cheap Lebara Sim costing a few quid a month. 

Think of it like this, you used to swim in different waters, there were big predators there who were leeches, now you are in calmer waters, there is not so much around but life is easier and there are no leeches.

That is the reality, it may take a while to get to acceptance but the fantastic people on this forum will be there to support you through it.

MattMattMattUK

Pumpkinmad said:

Thank you all, overthinking is something I probably need to work on and thinking the worst. 

If you are really struggling, you could potentially speak to your GP about help with anxiety or other mental health issues, if they are weighing on you then you would likely gain from professional help.

Pumpkinmad said:

Guess I’m just having a real panic about that future, reality is really hitting and feel I’ve totally messed up  

We all make mistakes, do not sweat them, you cannot change the past so the key is to learn from them. 

Pumpkinmad said:

Seperately what do you do when you go abroad but can’t provide a CC for them to swipe at check in?

You would have to use a debit card. 

Pumpkinmad said:

We are very fortunate that my parents have paid for a big family holiday this summer but now I’m stressing how to get past this? I’ve asked on the hotel Q&A but no reply about debit card 

You can use a debit card, but the amount that they will pre-authorise on the debit card will be locked until they release it, which should be on checkout, but can take longer. 

RAS

Pumpkinmad said:

Thank you all, overthinking is something I probably need to work on and thinking the worst. Seperately what do you do when you go abroad but can’t provide a CC for them to swipe at check in? We are very fortunate that my parents have paid for a big family holiday this summer but now I’m stressing how to get past this? I’ve asked on the hotel Q&A but no reply about debit card 

You probably need to talk to your parents. Things might be OK, but it's better they know there could be an issue rather than putting them on the spot during the holiday.

Stop paying towards you consumer debt and build a little buffer in your bank account.