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I've brought this over from my old blog. I'm going to add some updates throughout, as things have changed again.
Today I’m going to talk about something a little different. It is well known that I am personally in a lot of debt, £50000 to be precise! Currently I am over halfway to paying back my debt. So I thought I would share my strategies and tips, and hopefully it might help some of you. Whether it does help with your debts, or you use the tips to save extra money for a holiday or a house etc. thats up to you. This will be quite a long post, but i’m hoping it will be worth it.
So lets start by breaking down my debt, I’ve listed everything in a rough order of when I took them out, and with a brief explanation. Obviously I didn’t take all the debt out in one go. It is over the period from 2013-2018. It is important to note that I also have student loan debt from 2010-2013, but I will not be including that in these calculations.
If you don’t want to read my story, skip halfway down where I start talking about how I fixed it.
- Loan from Uncle for a second degree, to start paying back on completion of degree (£250 per month)–£14000
- Loan from Bank, I ran out of money during my degree as student finance do not support you in a second degree, 4 year loan–£5000
- Loan from Bank, ran out of money again, and needed to move house for a new job (on starting new job I was meant to receive £4500 in relocation expenses, which I could pay back towards the loans) 5 year loan–£7000
Here things changed, I had a problem with uni resulting in me failing my degree, which meant that I couldn’t start my new job, even though I had already moved halfway down the country. I had no real job and lived miles away from my family. Also did not receive the relocation fees because I couldn’t start the job. Fortunately the employer agreed to hire me anyway just into a student role, so they could put me through my second degree again. It meant that my salary was less, however I could just about manage to pay everything.
- Loan from mum, car service and repairs–£400
- Loan from Nan, not enough money to pay other debts, whilst waiting to start new job–£1000
- Loan from Nan, not enough money to pay other debts whilst waiting to start new job–£1500
Here I started living with my now ex-partner who paid some of the house bills.
- Loan from Bank, had to move house again, condition of new employment was that I worked in a different area than originally planned (5 year loan)–£4000
- Sofa Finance, new house needed a sofa, 3 year finance–£3500
- Laptop Finance, my old laptop was very slow, 22 month finance pay nothing for 6 months–£950
Here my ex left me for somebody else. He took half the sofa, and was paying me monthly for it. Also I had to move house again, to do this I borrowed the money from my mum for the deposit, and paid her straight back when the old deposit for the previous house was released.
- Money owed to Mum for paying off car. Mum actually paid for the first 3 years of finance too–I could not afford to pay it off, due to many problems, so my mum paid the rest for me to pay back–£5500
- Paypal finance, new mattress and various other items which are not included in my monthly budget–£1900
- Credit card, normal credit card for when I have unexpected expenses–£1600
- Credit card, 0% transfer of previous credit card debt–£1300
When you add all that up, and add a bit of interest, my total debt comes to roughly £50000!
So how do you go about paying back £50000 in debt?
- I would recommend making yourself a spreadsheet, add up all your monthly outgoings, things that you have to pay like your rent, bills, loan payments, I also include a budget for food shopping and fuel. Also recently I’ve been adding £50 for fun and odd bits that I need. I then compare this total figure to my monthly salary, any money above that figure I use to pay extra off one of the loans.
- I use an app that lists all my debts, and each month I knock off what I have paid, so I can see my debts reducing. It makes me feel better.
- You need a job, sorry to say it, but to follow my method you need a job that pays more than your expenses. To start with I had to work 5 overtime shifts a month just to break even. Now that I’ve had a couple of pay raises, and paid some of the debts off, I have been able to reduce the amount of overtime I do; the aim is to make your expenses less than your base salary, then if everything goes wrong you don’t have to rely on overtime, or a second job. But if you do get the extra money then you can use that to make an impact on your debt. I understand it's not easy to get a new job, or one that pays well, if you are concerned that your expenses are more than your outgoings, try some of my other tips then reevaluate.
- Change bill payment dates if you can. I have organized the majority of my bills to come out within the couple of days after pay day. That way you have paid the important stuff, and means you are less likely to overspend, as most of the money you have left should be for food and fuel. If you buy anything extra you should deduct this from your food budget, then you appreciate that you can’t always afford nice things, because you also need to eat, either that or you lose weight haha.
- Plan your food. Making a weekly food plan will help with your weekly shop, stopping you from overspending, also by sticking to your food plan it will prevent you from grabbing a takeaway or eating out, and by stopping most of that the saving will quickly add up. Maybe you could also use this to make some more healthy choices in your diet too. I frequently fall down on this one, I could take my own advice more sometimes.
- Subscriptions and memberships. Do you use Netflix, Now TV, Apple music, Amazon Prime, Experian. The answer is probably NO. If you aren’t using it, get rid of it! If you still want to enjoy Netflix why don’t you share with a friend or family, and agree to pay half the subscription. Now TV; if you go to leave Now TV, it will offer you a deal at a reduced price, either take that or leave altogether; choice is yours. Apple music, I had it for free for six months through EE, it was going to revert to a £9.99 a month membership, so I canceled it, and changed it to the student membership for £4.99 a month instead. Have a look around to see if there are any offers. Amazon prime, you shouldn’t be buying stuff from amazon if you're in debt anyway, however, I have had amazon prime a couple of times, as there are free trials that pop up every now and again. I’m currently on a six months free for students deal. I will cancel it when my free trial is up.
- Experian, this one you should just get rid of, no excuses. Because there is a free version! Money saving experts have what's called a credit club, join it and you can see your credit score for free, and it gets updated once a month. Absolutely no need to use any payable credit score sites.
- Gym memberships. Are you using it? no? then you need to do something about it. If tied into a contract, maybe you should start using the gym again, at least if you're at the gym you won’t be spending money elsewhere. If you aren’t tied into a contract, then maybe you should either cancel it, or, if you want to start going to the gym again, find a cheaper Gym. In some parts of the country you can find this for as little as £15 a month. Now i’m slightly a hypocrite on this one, as I do have an expensive gym membership, but I have been trying to use it, and I prefer the more up market gym facilities (you get what you pay for sometimes) I do get a 20 percent discount though, so its not all bad.
- Have a look at your bills, use comparison sites to get better deals. I know this seems like a lot of effort, but it took me about 10-15 minutes, and I saved me and my housemate about £50-60 a month between us.
- Council tax, make sure you are claiming the relevant exemptions. As I am a student again, we get 25 percent discounts. If your household only has students then council tax is free. If you are a single occupant then you also get 25 percent discount. See your councils website for full exemption list.
- Try to avoid nights out with work. Although its nice to be social, nights out cost money. Its probably better for your finances to choose the overtime shift over the night out. But it’s up to you. I’m not telling you to always be boring, but a few times definitely helps.
- Debts–I started by choosing a small debt to get rid of. So I chose the laptop. Each month I added extra money to the payments until it was paid off. This freed up an extra £50 a month. Next I paid off the remained of one of the first bank loan, as there was only a small amount left on this at the time. when I had paid this I consolidated the remaining two loans. By doing all this I manage to instantly save £200 a month. Next I applied that money to the sofa payments. In the end I paid off the sofa 18 months early. Now all my extra money goes towards paying off the consolidation loan. If all goes to plan, I’m hoping to pay the remaining £5k in the next 12 months. This is known as the snowball effect.
- Are you owed money? Get it back. My ex stopped paying me for his part of the sofa, and now owes me £425. I have filed for small claims. Yes this does take time, and you have to make an initial payment (£35 in my case), but as long as you win, you get the court fees back. I am still struggling to get any money back from my ex as he has since declared himself bankrupt, so we are now going through the insolvency service. I can't really talk about the circumstances, because he is under investigation.
- Credit cards. So if you’ve already got a credit card, then it might be worth transferring to a 0% interest credit card. I did this, and then made a mistake. I ended up having to spend on my original credit card again, so now I’m back in the same position before, just with an extra credit card. I should have not bought some of the things I did. I also had to use the credit card to pay for my car service, for some reason this cripples me every year.
- Paypal finance–this can be useful but also dangerous. PayPal has allowed me to buy things that I needed, but couldn’t afford, for example my new mattress. However, It has also allowed me to buy lots of new outfits, a laser hair remover, and other things that I probably shouldn’t have bought. But when you are in as much debt as me, it's all a balancing act, and a bit more debt doesn't seem like much compared to the massive mountain I am already climbing. I have made a decision not to pay off the credit cards of (apart from minimum monthly payments) until the other big loan has gone. This will stop me from buying things that I can’t afford.
- Never make an impulse decision. Especially with online shopping. My recommendation is to add items to your basket, then go through the basket and delete anything you really don’t need. Check out reviews of items, it might convince you not to buy them. See if items are available elsewhere for a cheaper price. Then leave the remaining items in your basket until the next day. You might decide not to buy them. Also some companies will send out emails with further discount to convince you to buy, worth waiting just to see.
That's all I can think of for the moment. If I can do it, then anyone can.
Currently I have about £15500k of debt left, so that's not bad considering I only started the snowball method 18 months ago. Another 14 months of hard work, and I will be in a much better position. As long as nothing else goes wrong.
I hope this helps others to feel that they aren’t alone in debt, and it is possible to pay it off, it just takes a lot of hard work and sacrifice.