Living in the black

Yellow_mango · 11 June 2019 at 9:49PM

Having lived with quite terrifying amounts of debt for many years, we were fortunate to have been able to pay off almost all of it last year following the sale of a property. Remaining is about £5k on a 0% credit card, and £3.5k on another credit card which is paid off in full every month.

We also recently bought a house and have an enormous mortgage.

I have recently realised that I’m just tired of living in constant debt. Even though we pay off the cc each month, we’re still living in debt. The truth is we couldn’t pay it off up to date right now. We have little to no savings (which are pretty essential as owners of a 100yo house) and no control over our spending. Every month there are “exceptional” circumstances that aren’t planned for. Although we make very good money and are not increasing our debt, it’s a very stressful way to live. And I’ve had enough.

So I’ve decided to ditch the credit card and move to a more cash based system. I’ve opened a new Starling joint account, which will be funded from what is left once bills are covered, and all spending will now be done from there. I’ve set up proper “pots” to save for irregular expenses, and keep that ringfenced and not available to spend. There is no overdraft, so when the money is gone for the month, it is gone.

I know it will be tough for a few months at least, as we try to pay off the last couple of months spending on the cc at the same time as funding current spending. Plus we have a holiday booked in July. So saving has been put on hold for a few months until we’re evened out.

I don’t really have anyone to talk to about any of this, so I’m hoping this will be a good place for me to think things out and record progress, even if no-one reads it!

GlendaSugarbean · 12 June 2019 at 6:46AM

Best of luck!

NeverendingDMP · 12 June 2019 at 7:27AM

Good luck x

sysadmin · 12 June 2019 at 8:07AM

I did exactly the same as you at the start of the year. I was fed up living off the credit card float and moved us to a starling joint account.

We're in a much better place with our finances now, and although its still tight. Its doable.

I'll be paying off the last of our debts at around christmas time but have pots of money saved for everything aside from emergency's. Once the debt has gone (about £5k) then we'll start bringing that emergency fund back up.

Our debts are not from silly things, but our wedding and needed a new boiler at the start of the year didnt help

Yellow_mango · 12 June 2019 at 8:21AM

Thank you all for dropping in! And I’m really glad to hear this is working for you sysadmin! I just suddenly felt so tired of trying to keep on top of things all the time, and had a need to massively simplify things.

MrYM is not convinced. He’s quite happy the way things are and doesn’t really like change. But he’s going along with it. All he has to do is switch the credit card for the new Starling card for all his spending.

So far I have transferred what I think we can afford for “discretionary” spends for the rest of the month into the Starling account, and set up a pile of “goals”. I have Car, Clothes, Holidays, House, Kids activities, and Xmas / birthdays. Of course none of them will have anything in for a while, but I wanted to get it all set up!

I also seem to inexplicably be having a week of NSDs since I set up the account. So there is only one lonely transaction sitting in there (a transfer to pay for my daughters dance lessons). Though it’s her birthday on Friday so I will need to go shopping today or tomorrow to get her a present and some sweets to take to school.

I’ve got a lot of birthdays coming up actually. My husband and my eldest daughters 21st in July, and my eldest son in August. So will need to build that into the budget. Have no idea what to buy for a 21st birthday. And she’s not giving me any clues...

Anyway. Better get off to work and earn some more money!

FootyFanDan · 12 June 2019 at 8:53AM

Happy new diary

and good luck.

Yellow_mango · 12 June 2019 at 10:28PM

Some more rambling for this evening. I’ve spent half of today playing with my spreadsheets. And to-ing and fro-ing about what should come out of where. I’m having slightly cold feet about giving up the cashback on the credit card. But I am decided that this is the right thing to do. There’s just no accountability with spending on a credit card.

I’m also getting myself stressed about retirement. No matter how I play it I can’t find money right now to save long term. Anything we do manage to save will be swallowed up by the house. It’ll need a new roof at some point, and we want to get an extension.

I really don’t want to be working after 60. But we have just got a 25 year mortgage, and I’m already 41. So unless I can pull something spectacular out of the bag, retirement is not going to happen any time soon :-/

Oh well. I’ll just keep plodding in for now. Hopefully things will be clearer once things have settled and I’ve started being able to fund savings etc.

lightbulbtime · 12 June 2019 at 11:11PM

Hi Yellowman,

Good luck on your journey and glad to see you're keeping a diary. I'm 47 and just started my 23 year mortgage last year, I'll be keeping an eye on your journey to see how it goes.

Lightbulbtime.

Yellow_mango · 16 June 2019 at 10:40AM

Nothing really to report so far, just thought I’d drop in for a quick update.

My Starling account is up and running :-)

We’ve had a few “unexpected” expenses (dh’s motorbike needed a new battery and a service - that was £275 all in). Plus my daughters birthday. All things that will hopefully be properly budgeted for and covered by savings pots next time they happen.

So I now have £364.13 left in the Starling account for the rest of the month. I would really like to stick to this, but it needs to cover 3 weeks of groceries, and a takeaway this evening. Plus whatever else the month has left to throw at us! I’ll do my best!

Last spend on the credit card was a week ago. There is a balance of £3113.98 on that card that will be due on 10 July. I also have final payments to make for a holiday of around £900 that will come off that card after the June statement date and so be payable in August. I’m not quite decided how to approach this yet. I was planning to just pay it off in full as usual, adjust as much as possible by not saving for a couple of months, and deal with the inevitable overdraft. Now I’m wondering if I should drop it to the minimum payment and treat it like another debt. Which would have the advantage of allowing me to budget a couple of months earlier, but would mean I’d be paying interest (at 15.95%) for a few months. Or I could balance transfer it to my virgin card at 0% (1.9% fee). That’s probably the cheapest option. Need to have another play around with my spreadsheet I think!

enthusiasticsaver · 16 June 2019 at 11:09AM

I think your problem has probably arisen due to fairly uncontrolled spending on your monthly spends card. You do not say what that £3.5k was spent on but it was obviously more than just normal day to day stuff. Even with three kids that is a large monthly spend so it is unsurprising you are uncomfortable with that. I would and the reason we stopped using credit cards for everything was by the time we had paid off the credit card in full and paid direct debits there was nothing left in the bank meaning we were forced to use the credit card again. It is a vicious cycle.

A middle ground is the one we have taken and that is to only use the cashback credit card for food and fuel. We both have a card but it is monitored carefully. We also set a limit on the amount we will put on to the card which in fact works well as a budgeting tool. That means that when our pensions go in (we are early retirees) we allow enough to stay in there for direct debits/standing orders and an amount for joint entertainment, gifts, annual bills and household stuff plus a bit of leeway for miscellaneous. We have a savings account for car and house and holidays and an emergency fund which we don't pay into any more or draw out unless in emergency. We also have a personal account each to pay for clothes, haircuts etc and personal items. We both get the same and that restricts my DH from spending too much on his hobbies and me from going mad with clothes/shoes/books/make up and theatre tickets. You could do a similar system but also have an account for children's expenses like dancing lessons, birthday parties etc etc.

I think moving to a cash based system is a good one for you but question whether you can eliminate that £3.5k in one month plus put aside your normal living expenses to live off. I would go hardcore for 3 months I think and pay it over that 3 months and maybe use the 0% offer to transfer it over so you don't have interest on it, only the BT fee.

You probably need to get into saving more for things like holidays, car and motorbike expenses and birthdays. Was the credit card payment high because of putting a holiday on it or is £3.5k fairly standard for a monthly spends amount?

Doing a proper budget and having more tight controls over spending will help with overpaying your mortgage and paying more into your pension, both of which will help you in the future.

Yellow_mango · 16 June 2019 at 12:08PM

Thank you! You’re bang on about the uncontrolled spending on the credit card.

The £3.5k is a combination of day to day stuff, plus some holiday stuff, plus some DIY / new house kind of stuff. But if I’m honest that level of monthly spending is not that unusual. There’s always something “unexpected” to cover.... plus we spend a crazy amount on groceries and eating out / takeaways. With 3 kids that all eat like adults it really adds up fast. Getting that under control is a really high priority. I’m hoping that the Starling “cash” system will help limit that.

I’ve set up a detailed budget which I think is achievable and I hope should cover everything, with some saving pot goals so hopefully we will have less “unexpected” costs.

My budget suggests that we should have around £500pm to throw at the debt, including the cc. So you’re right that we won’t be able to cover it in one month, even cutting as hard as possible on regular spending.

I have thought about it, and I think the best thing for me is to continue paying it off in full, effectively moving the debt to the overdraft. That will keep it most visible and motivate me to get rid of it ASAP. The overdraft is fee free for the first £1,000, and I think I should be able to keep within that, although it will take a few months before it’s gone and I’m back fully in the black and able to attack the other debt.

Living in the black

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