Tuesday, 28 May 2013

Day 28: Debt, and how I pulled myself out of it

Via weheartit

The worst advice I ever received?  That's easy.  It was when Natwest sold me a loan to "consolidate my debts".  Never listen to a bank salesperson, because they will lie to you or twist the truth for their own ends.  I wish I'd realised that ten years ago.

I'd got myself into a financial mess at university and in my early twenties, but by that point had managed to pay off a lot of one student overdraft and most of the sole credit card I possessed.  My Natwest graduate overdraft was large, yes, but manageable.  However, the idea of having just one loan to pay off, rather than three small piles of debt, appealed to my sense of order.  I agreed a loan of a little over £3,000.

Problem was, once I realised how easy it was to get credit, it was always too tempting to add to it. 

Maybe I'd find a new loan at a lower interest rate and take that out, of course adding a bit more to the total amount so I could buy x or y.  Maybe I'd put a flight on my credit card, promising myself I'd pay it off, but never doing any such thing.  Maybe my boiler broke, and I had no savings to speak of, so I added to the loan.  I don't even want to think about how much debt I've accrued by doing this, but would estimate the total over the years as being around £20,000.

My total debt now?  £6,000 on two 0% credit cards.  No overdraft.  No loans.  Nothing but easily managable monthly payments on which I pay no interest, and enough surplus income most months that I am building up a nice cushion in my savings account.  And all this in a year when I'm spending obscene amouns on travel because of my long distance relationship.

So how did I do it?

The Not Buying It experiment was my first step to taking back control of my finances.  For two months in autumn 2011 I bought absolutely nothing beyond the essentials (food, drink, petrol, The Guardian!).  By stepping off the consumer treadmill I was able to reassess what was important to me in terms of spending.  This impacted on me long-term: I definitely make less frivolous purchases now than I used to.  I was also able to clear £1000+ of credit card debt over the course of the two months, which just shows what a stupid amount of cash I usually spend.

I'd enjoyed the challenge of a spending ban, so last autumn saw the beginning of the £100 Challenge, in which I endeavoured to limit all spending (after bills) to £100 a week.  This time I kept it up for three months, and it was responsible for seeing off another £800 credit card.  This time, I also remembered to close the account so I couldn't rack up the debt again! 

Since completing the £100 Challenge I use a spending app on my phone to keep track of every single expense: without this, it is all too easy to 'forget' about the £2 I spend on a magazine, the £8 I spend at the corner shop, the £11 I spend in the pub, and then to wonder why I don't have any cash left.

And finally, I cannot praise the Money Saving Expert website enough.  Over the past two years I've used their advice to change pretty much every utility and service provider, bringing my monthly household expenses (including mortgage) down from £1,100 to £770 a month.  Every time I switch anything I also check Quidco to see if I can get a cashback deal: I've received £300 in cashback over the past 12 months, after changing my mobile phone, my car insurance, my house insurance and my home broadband.

I'm obviously not there yet, but the past few years really have seen me take some positive steps to reducing my debt.  I don't think I'll ever be brilliant with money - I have too much of a Veruca Salt "I need it NOW" side to me to ever stop spending - but I've got myself to a point where I no longer feel sick about checking my bank balance.  Where I'm no longer scared of bailiffs knocking at my door (this did actually happen to me once, and was one of the worst experiences of my life). 

Come September I am keen to begin a new spending challenge: if anyone has any suggestions on what it could be, I'd love to hear them.


  1. That's really admirable how you've managed to take control of your debt, well done! Xo

  2. Well done on getting your debt under control. I had a similar experience with credit when I left Uni, I guess easy credit was a sign of the times at that point. Looking forward to reading about your next spending challenge - I love things like that!

  3. It was far too easy for our generation to get credit at young ages and nobody was teaching us to avoid it - at least not that I saw. Well done for getting it sorted!