Today is a momentous occasion for Dave and I.
Today we are debt free – Aside from our mortgage, a necessary debt really!
Dave and I have had credit card debts/car finance/loans for the whole of our relationship and most probably the whole of our individual adult lives.
How did we get into debt?
Zoom all the way back to 2003. I was 18, got a job at a bank, had to have a bank account with said bank and along with it they gave me a credit card. With a £4k limit. It was like having extra money without having to budget.
Back then I was renting a room in a house, taking home £800 a month and paying £450 a month for my rent. I didn’t have a huge amount of disposable income and soon that credit card became a buffer for me. Each Friday night, Saturday night and sometimes other nights too I’d buy a round of drinks on it, or a meal. 6 months later I decided I wanted to learn to drive – something that I don’t regret in the slightest – but I put all the lessons on this credit card – I wouldn’t have been able to afford it otherwise. At £20 a pop it wasn’t cheap and it took me 9 months to pass my test including a 2 week intensive course of 2 lessons a day! I also put the tests (I had 3 theories and 4 practicals!) on the credit card too. Then I passed my test and the bank gave me a loan for the car and first year’s insurance. At this point Dave and I had just got together, I’d had access to credit for just over a year and had in excess of £5k owing between a loan and credit card and an income of £13k a year – at the age of 19.
Dave will always tell people that his first credit card, at the age of 18, had an £8k limit. Luckily, he was better with money than me and didn’t spend up to that limit! But he did have a car loan, and was constantly in his overdraft – £1k overdrawn but £1k in savings. A lot of people have that misconception that they should have money in savings. Yes, but not if you have debts – debts will always cost you more in interest than you’ll earn in savings interest. Free up the overdraft or credit card and then in case of emergency you can turn to those options and use them for what they’re intended for.
Dave and I were like any young couple. 19 and 22, we went on dates, went on holidays and enjoyed ourselves. We didn’t, ever, worry about money or even really think about it.
Then in 2006 we decided to take the step of moving in with eachother. We didn’t want to rent so talked to mortgage advisors about buying a house. We soon found out that a) we had more debt than we realised and b) we wouldn’t get a mortgage paying all the credit payments that we were – credit cards, car finance and a loan. So we consolidated our debts and took out one huge loan… £25k and still had another couple of grand on balance transfer credit cards too – you can only take out an unsecured loan for a maximum of £25k. £27-£28k of debt accumulated by the time Dave and I were 22 and 25.
Looking back now I am so shocked by that. I cannot believe how carefree with money we were.
But we got our house! Amazing.
We had a huge mortgage payment going out every month of £1000 plus a loan payment of about £400. We now had a house and still we didn’t think about our spending habits. We carried on buying whatever we wanted as we still had access to credit cards and we both worked, so our young, naive minds must have thought we deserved to buy a flat screen TV, surround sound, games consoles, all on credit cards. We kept having holidays too. Money never became an issue for us.
What broke the spending cycle?
The turning point was when we got engaged in February 2008. I realised we had no savings to pay for the wedding. My parents weren’t in a position to contribute and Dave’s parents were incredibly kind and paid for our honeymoon. I was 24 and I wanted a big white wedding.
How did we start to pay off our debts?
From that point onwards we didn’t go out, we didn’t buy anything and all our spare money went into saving for the wedding. I was lucky and got about £8k in bonuses that year at work but the wedding cost £15k. Somehow we managed to pay for it, keep up repayments on our debts and at no point did we add to our debt to pay for the wedding. That is something I am immensely proud of. On top of that, we went to Rome 6 months before the wedding and saved enough to pay for that too!
After the wedding we decided to move house – that we wanted to move somewhere nicer before we even contemplated children. We knew that the only way we could afford the deposit on the new house was with the equity in the house we were selling but there wasn’t enough equity to pay for all the house buying/selling fees too. We had to pay stamp duty, solicitors fees, estate agents fees and mortgage fees. A grand total of £10k that, again, we somehow managed to save in the 18 months between our wedding and moving house without adding to our debt.
But, we came to a familiar problem. We needed a bigger mortgage, and yet again we had too many debt repayments to be eligible. So yet again we consolidated everything into a loan. Yet again we were stuck with a £25k loan. But, on the positive side, that was everything this time. No more credit cards!
December 2010, 26 and 29, owing £25k.
Reading that I could cry. What a mess!
But yet again – we had our house! This house, where we live now, is our forever house. We knew that when we bought it – we are never moving again!
When we moved our mortgage went up to £1200 a month. A massive amount – basically my salary! We kept making payments into our loan and this time I knew we had to pay it off. The trouble was that we had very limited disposable income because of the mortgage. But that’s an excuse really, everyone can save money somewhere if they try hard enough. So I have spent the last 2.5years trying my hardest to pay this loan off.
I did mystery shopping, paid surveys and other market research things to get extra cash. I’d allocate money to debts as soon as our pay came in – aside from bills, paying debts became a priority for the first time in our lives. We still didn’t go out, instead we rented DVDs and cooked nice but cheap meals. I sold everything I could on eBay and used sites like MoneySavingExpert to find money making ideas and places to sell things – old phones, DVDs, CDs.
When I went on maternity leave with LP, Dave and I realised how little money we could live off – SMP really isn’t a lot!
I went back to work for 6 months in between babies and we felt rich! Having three months at the end of maternity leave with no pay meant we really appreciated the extra income and we threw as much of it as possible at our debts.
Roll forward to October 2012. Our loan was still at £18k. 28 and 31 with a 1 year old and £18k of debt.
A big chunk of the loan was paid off with a maturing work share scheme soon after, £10k gone, £8k to go.
Since then, over the last ten months I have ebayed constantly and all our spare money has gone on the loan. Somehow though, we have managed to buy a new PC, a new stereo and new sofas, without getting into more debt – as well as overpaying the loan.
And today marks the end of that loan. The end of our adult lifetime of debt.
I am so proud of us for paying it off but looking back we should never have got into that mess in the first place. Sadly, so many young people get into debt and don’t realise it’ll take them a lifetime (11 and 14 years in our case) to pay it off!
You probably have so many questions: How to get out of debt when you are broke? How to get out of debt quickly? How to get out of debt on a low income? How to get out of debt with no money and bad credit?
If I have any advice for anyone in difficult financial situations it would be:
- Talk to someone about it. A problem shared really is halved. There are debt counselling and credit counseling services you can make use of.
- Get a copy of your free credit report and see what your credit score is. There may be obvious red flags there you can make instant changes to.
- Create a spreadsheet of all your income and outgoings, what’s leftover you can spend but don’t spend any more than that!
- Focus on debt management. Always try and pay more than the minimum payment on credit card balances unless its a 0% interest rate. This will pay off the debt faster.
- Always start to pay off the highest interest rate paying debt first.
- Always pay off debts with any savings you have as the interest rates on debts will be so much higher than any savings interest you may earn.
- If you have a lot of high interest debts it may be worth using debt consolidation and turning it into a loan. Remember – with loans you can now overpay!
- Earn some extra cash – I have posts about eBay and Quidco that you might find useful.
You need a get out of debt plan and you need to work out how to pay off debts that you have. Get some debt advice and taking that first step will make getting out of debt seem like a more achievable reality.
Lastly, MoneySavingExpert has always been, and will remain, like a bible to me! Martin Lewis knows what he’s talking about and the forums can be incredibly supportive – Debt Free Wannabe, Grabbit-While-You-Can and Discount Codes and Vouchers are particular forum favourites for me!
I’m always looking for ways to save money and like to blog money saving tips when I can. If you’re interested in reading future money saving ideas please subscribe to the blog over at the side of the page.
This is not a sponsored post – just an incredibly honest one.
31 thoughts on “Our Journey of Getting Into and Out of Debt!”
Wow well done. It’s so incredibly easy to get into debt. So pleased for you both. You’ve inspired me to get my ass in gear & make a change. Today! PS signed up for emails 🙂
I just wish I’d faced up to it earlier! I’m putting it down to the ignorance of youth…! So happy today!! Good luck with making your changes and thanks for signing up 🙂 Hope I don’t bombard you! x
Sounds a lot like my story, except I have a LOT of debt and the Other Half didn’t really have any til we bought our house. We’ve got another year to go to pay it off. Fingers crossed this day will come for us too!
A year will fly by!! I’m just determined now that I’m on SMP and then no pay that we don’t get into more debt! I look forward to your ‘debt free’ announcement 🙂 x
Thanks for sharing your story. I am fascinated by people’s finances (is that weird?!)
I was very “lucky” in that my parents spent most of my childhood in some form of debt, probably somewhere combined in the region of your debts, to the point where my dad left the country to escape his(!) so I vowed I’d never get into any debt besides a mortgage.
Finally caved and went back on my vow when I was pregnant with Oliver; I needed a car and although I could afford the one we’d found (£1200 – not an extravagent new shiny car!) I wanted to space out the payments in prep for maternity leave so I took out a no interest credit card. I ended up missing a payment later on and got whacked with a £25 charge. Couldn’t believe it after having overpayed all the way through, and so in a flash of foreseeing my future with my head buried under mountains of debt (melodramatic much?!) I paid the rest off there and then.
We’re now trying to overpay the mortgage and get it paid off in 5 years although we’re slacking on that. I need a kick up the arse!
When we started saving to move house we started overpaying the mortgage too so that we’d be use to the bigger mortgage payments when we move. I’d love to start overpaying the mortgage again!
PS – Credit card and overdraft charges are ridiculous!!
Congratulations! 🙂 I got debt free in about 2008 I think. I had 3 credit cards by the age of 20 and one was maxed at it’s £6k limit for a while when I had a very low/no income. Thankfully, Dave was instrumental in helping me out of debt. He made me pay off as much as I could, which was a lot as I was fairly well paid back then. Not had credit since.
I won’t be having credit again either! Feels great to get rid of it, doesn’t it? x
It is an incredibly honest post. Well done and congratulations! I know where you are coming from and had some of your journey myself. Debt is a very heavy burden to carry. I am happy for you that you got rid of yours 🙂
well done you and fab advice to others!!! found you on the weekend blog hop x
What an incredible achievement! Well done 🙂 It is so easy to fall into debt and let it spiral. Banks are (or were) very irresponsible allowing their employees access to that amount of credit at such a young age. I hope you enjoy having more disposable income now you’re debt free x
Congratulations!! That’s a great achievement! We’re are a little behind you when it comes to being debt free and funnily enough, I posted my 5 year plan on my blog this morning. I’m determined to pay off our consumer debt within the next 4.5yrs (before I hit a ‘certain’ age).
Congratulations. I could have wrote this but we are still paying it off. We have until 2016, ten years in total, and we will be debt free. We should really think about trying to overpay the loan but it isn’t possible now that I have had to give up work. My aim is to just live and not get into anymore debt. I’m counting the days until we can join your club ;0)
Thanks for linking up with Small Steps Amazing Achievements :0)
Just stumbled across this post – what a honest post. There should be financial education at schools without a doubt. Many of us start getting debt at University, when we are given that overdraft and keep it throughout our studies. Then people get jobs but remain perpetually in debt because their salary only covers the overdraft. On top of that, as you said, there’s this culture of ‘I am working hard so I deserve x and x’ and credit cards etc. make it so easy.
I sorted out my debts from the Uni years a while ago and like you, it took a while – what seems like a few thousand in debt can take a surprisingly long time to actually repay! For the last 5 years I have lived without any form of credit and anything we need is paid for in full in cash. It means that if I want a treat, then I’m going to have to raise the funds for it because there’s no credit cards! It’s not a bad way to live.
I certainly want to be in the position one day to be able to help out my Children should they ever need it and not to pass on any financial burden to them.
Was so interesting reading this Donna, your situation sounds incredibly like my own. My husband had a credit card and overdraft before we met, and I had a small credit card (like £500) so when we got engaged we decided to take out a loan to repay all that and go on the most amazing honeymoon ever. Our honeymoon was about 7k and so extravagant, and a fair bit of it was paid for by this loan- we are still paying it off and will be for another year and a half. We also have a car loan and another credit card, all from when we were younger with no responsibility. I don’t regret it for a second though because we had the best time before our girls came along and we will never get those non responsibility years back. We have been living in our house for almost 5 years but when we moved in our mortgage was a 5 year fixed rate at £1100 a month- it just crippled us every month, as we obviously had our other loans and to live as well. But luckily we have just remortgaged in January and it’s now £500 a month. It feels such a huge difference to us, but now I am not on as much money as I don’t work at my old job and we also pay childcare so it’s not like we can be any less careful, but we can have the odd treat more nowadays. I can’t complain though, we are happy, do lovely things and have so much, both material and otherwise. I wouldn’t swap my ordinary happy life for any money in the world.
Haha this is such a long comment and it’s on my phone. Do I win a prize or something? 😉
Agree – I wouldn’t swap my ordinary happy life either! Some of the things we did before having kids were definitely worth the money! A £500 a month mortgage sounds amazing! x
As you say, it’s horrifying how young people can so easily get into debt.
I was lucky in that my mum drummed it into us about saving up for things we wanted, and not spending outside our means. Any debt I’ve had (1 year of student loan for driving lessons, small personal loan to buy my first car), I’ve paid off responsibly and quickly, but that was in the days with no uni tuition fees and uni grants. Now it’s going to be so much harder for people to pay off any uni debts. But I do think it’s so important to do so.
My OH and I don’t combine our finances, but the house is his and I pay for everything else although I did pay a chunk into the mortgage. He has an overdraft which in my view is horrendous, thanks to farming and it seeming to be the norm. Horrifies me to think he’s likely going to still have that overdraft for the lifetime of him farming.
You guys did a great job of paying your loans off, and I think a lot more people with the recession have become more savvy. It would just be nice if we savers could get something back!
I liked following your story. It’s so honest and shows some practical ways to deal with debt. I’d recommend anyone in debt check out Dave Ramsey. http://www.daveramsey.com/home/ He’s American, but the general advice is universal. I really like the debt snowball. The basic idea is to make minimum payments on all but your smallest debt. Budget an extra amount to pay on that one each month (maybe something like £20). So if your minimum payment is £15, you’d pay £35. (And you can apply extra earnings like bonuses and ebay sales to paying it off even sooner.) Once you pay that off, you take the full amount you’ve been paying on that loan (i.e. £35) and add that to your new smallest debt. So it that was a £30 minimum payment, you now pay £65. Keep that up until all your debts are paid off. You’re already used to that money not being available, so your standard of living doesn’t change at all.
That’s a really good idea. I love hearing how people manage these sorts of things x
Congratulations on being debt free! It really is scary how easy it is to get into debt. I was given a ridiculous credit card when I first applied for one when I was about 21 – I have always used it to buy everything and then paid it off in full at the end of each month – it was a way for me to keep track of what I was spending. but if I had got in to the mindset of thinking that the credit card limit was my money it would have been very dangerous indeed!
I think that’s the trap many young people fall into – me included up to a point. Now though we have Tesco credit cards and use them for everything, paying off in full each month, purely to get Tesco points! x
Wow well done you!! Having debts is such a scary place to be and although I haven’t had as much, I’ve found myself in places where I’ve had 10K of debt and it’s been so worrying. But as you say, everything is a choice and if you want to save and get rid of it, it’s always possible with possibly some sacrifices in other areas. So worth it though, well done!! Xx
It sounds like you have a great outlook on spending and it’s definitely the way I am now. We have stayed the same way as when I wrote this post although we do have a manageable car loan now through necessity. No reckless spending on credit cards ever again! x
Congratulations! It’s so easy to get into debt – and so difficult to get out of it. My dad slipped a disc when I was about ten or so and we went from having whatever we wanted to being totally, totally skint. I’ve always been terrified I’d find myself in the same situation but sod’s law dictated Anthony lost his job almost as soon as we moved in together. Luckily our only debt is my overdraft, discounting student loans because I really can’t imagine earning over the repayment threshold any time soon! 🙂 x
I’d consolidate it all into a personal loan or balance transfer it to a 0% credit card if you can. The APRs on catalogues are often shocking!! x
Well done, such an achievement. We’re currently saving for a house and feel like it’s taking forever.
I’ve also been doing driving lessons and am at the point of thinking I should just splurge on one of those intensive courses and get it over with. arrrgh. xx
Thanks for your honesty in posting this and well done on getting out debt free on the other side! I am in a pretty horrendous situation at the moment but reading this has made me realise it’s high time to get my head out of the sand and do something about it once and for all. I’m looking forward to reading your ebay tips and hopefully de-cluttering into the bargain 🙂
I’ve found this really interesting Donna, what a brilliantly honest post.
Thanks Emma – it’s a couple of years old now but we’d never get into that position again. It taught me so much and I hope writing about it helps other people x
Very inspirational! Thanks for sharing so openly! We also have quite an amount of debt. I have been lucky that I have picked up some good freelance work recently that pays a decent chunk on a monthly basis. I’m putting all of it into paying my debts off and it’s starting to really show. Huge relief! Well done to you! Still a way to go, but I’ll get there 🙂
I think sometimes it really helps to hear other people’s experiences. This was a fair few years ago and we have a loan again now – to buy a car – but it’s a manageable debt and I overpay each month. I think our situation really helped me put our finances into perspective and really understand what we can and can’t afford. You’ll definitely get there Kat, keep going! x