Thanks for stopping by, for the comments and it's always a pleasure to have new followers as it's so nice to know who you are. You may be reading this for the first time and may be looking for some ideas to get you through hard times, to live on a reduced income, to live on a fixed income or to get yourself out of debt. Today's blog is all about debt repayment, how I did it, how I continue to do it. I did it the rough way, my family 'budget deficit' was eating up everything we had coming in and for so long that I couldn't see the benefit anymore. I went into frugal extreme but I will have paid back my debts in just a little over two years.
Previously, in my stupid life, we used our house as a bank. We borrowed against it in a 'rising market'. We believed that we couldn't lose. For a while we didn't. We had a house that was a money pit and we spent money on it to bring it up to the standard of everybody else's expectations. I've learnt and I've changed and I won't ever do that again. In future, if it's good enough for me, it's good enough!
However, I ended up with 45K of personal debt on top of a 217K mortgage. I've £8K of personal debt left to pay off. I've paid off 37K of debt since December 2009. The trigger for actually getting my life in order started when I maxed out my credit cards whilst trying to do up and sell off the house I'm presently living in. The credit crunch had landed! We sold our house but couldn't secure a new mortgage as the underwriters agreed that we had too much personal debt and we couldn't afford a mortgage at all. There was no option but to pay it all back. Initially, we looked at getting a lower rate consolidation loan and putting our debts in one place but after research we found that it would cost us a lot more. It was then that we took drastic action.
We stopped spending and bought nothing for a year. Not even a pair of knickers. What we had, had to last, there was NO money spare. Just by doing that, we managed to pay off nearly 20K a year.
1. MAKE A BUDGET -Look at your budget. We did the following. We needed £X to go to work every day. We needed £X for the mortgage and utility bills. We needed £X for car tax, insurance and maintenance. We needed £X for food. We needed £X for insurance. EVERY PENNY LEFT WENT TO DEBTS. We did not kid ourselves that we needed a 'treat' sometime. We couldn't afford it. We didn't kid ourselves that we needed anything more that what we had to survive on.
2. STOP SPENDING - We cancelled: a booked holiday, all subscriptions, gave notice to our mobile phone contracts, gave notice to our Sky contract, although we had to keep paying whilst we were still contracted to do so. We cancelled birthdays, Christmas, weddings, in fact we cancelled everything. Who is anyone trying to kid? If you have any personal debt, you can not afford what you bought! If you had to borrow to get it, then you couldn't afford it. Own up! You are skint, do something about it and live differently. For those with a job, then it'll only be temporary, for those without a job, then get real, that's it, you can't afford it!
3. OVERPAY DEBTS - We looked at our debts and put them in order. Most of our credit cards had balances of around £7K and we decided to pay off the one with the highest interest rate first. We paid the minimum payments on everything else and every penny we had on one of the cards first. At the end of the nine months, after the first huge debt went, it got easier. Now we Snowballed the huge payment onto the next largest interest baring account and added the two payments together. After 18 months, we restored our credit balance and gained a good credit score. Now we were able to move balances to 0% credit cards. We kept moving them and now, just by making the same over payments. We were able to speed up the end date. My end date was August 2012 but it's now January 2012, or if I can master it, before the end of the year.
4. GET TWO OR EVEN THREE JOBS - We earnt more money. I marked exams in November and June for all the time I could. I paid every penny of that as soon as I got it into debts. It was the extra income that meant I could get rid of some debts really quickly. I worked as a private tutor in the evenings and weekends. I used that money to live off and, whilst I had extra money, I paid off debts with my main income. I took in a lodger, again, I used this money to buy my groceries and, in term time, was able to pay off an extra extra debts. In the holidays, I cleaned caravans and used that money to save up and insure my car. Dearly Beloved embraced Ebay. He sold everything we didn't need and built up an ebay fund, we often used that to pay a big bill, such as the boiler repair or the house insurance. In short, if you don't earn enough money, do something about it. Get another job, sell stuff, dog sit, baby sit, clean houses, get a bar job. It might look like £25 here and £18 there, but do a few calculations, work out what that is a year and what the total can pay off or pay towards.
5. USE LESS OF EVERYTHING - To begin with, we just stuck to a budget. Then, as we got used to less, we lived on less and less every month. We cut back groceries by £1 a week. In three months, we were spending £10 less a week and were able to divert that money else where. We used less energy. We used less electricity and gas. We turned the thermostat down by one degree every week. Our winter heating is now set at 16 degree Centigrade and we cope happily with that, some warm socks and a couple of jumpers. We reduced our central heating time by a hour a week, now, in the depths of winter, it comes on for two hours a day. It makes a drastic difference to the over all temperature as we're used to the cold. We used the car less and less and now I shop on my way to and from work and don't make any extra trips. We use less water, gas, electricity, diesel. All of my utility bills, even with constantly rising prices are hugely reduced. In 2009, my combined gas and electricity bill was £150 a month, it's now £57. That gave me another £1000 a year to put towards debts.
We do spend money now. Things are easier. We have ways and means of getting what we need at the cost we can afford and tomorrow, I will tell you all about my frugal world of shopping and getting what I need at the fraction of the price.
Thanks to everyone who has become a follower, who has left comments, who reads every day and those who have read today for the first time. Thanks again.
Until tomorrow,
Love Froogs xxxx
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