Back in January this year I was asked to be a guest on BBC4 Money Box. I was invited on to talk about credit card debt and what having that meant for me. They wanted a personal story to get into the nitty gritty of why people are getting into so much debt. One of my fellow guests was Daniel Kelly from Christians Against Poverty, and I got to learn about what they did to help people. It was my pleasure to write a post for CAP after such an insightful radio show.
April 2017 was my crisis month, the month I added up all my credits cards and faced the total. I remember previously burying my head in the sand for a few months, desperate to celebrate my 40th birthday in style with a party and a nice holiday to Las Vegas. I wasn’t going to let lack of money stop me from celebrating this big milestone.
I had started my own business, Mrs Mummypenny, during 2015 and needed some finance to fund the business in the first year of trading, that went onto a consumer credit card. We went on a family holiday to Spain during 2016. All these events combined culminated in a total debt of £16k. A scary big number that, to be honest, felt too big to face when I added it all up.
I had taken redundancy in 2015 and found it difficult to adjust to a life where I had to spend less money. If we had cut back straight away and adjusted our life to a lower income we would not have found ourselves in this mess. Hindsight is a wonderful thing.
The amount of £16k really did feel like the biggest mountain to climb and a real stress and weight on my shoulders. I thought about it several times a day. But I had belief that it could be paid off. If I kept chipping away using the strategies to be described, then I would be able to get that debt down to nothing.
Something shifted in my financial brain. I no longer wanted to live life with a constant credit card bill and monthly repayments, as I had done for my entire adult life. I wanted freedom from debt and I wanted to start saving. How good would it feel to pay for bigger things before we got them? How amazing would it feel to have an emergency safety net of funds just in case the boiler breaks down, or the roof suddenly starts leaking.
These were the stages I went through to start the process of repayment of the debt.
Move the debt to as cheap an interest rate as possible
The first task was to refinance the debt to ensure as much of it was on 0% credit cards for as long as possible. Most of the debt was moved to a 0% credit card, I was fortunate to still have a strong credit rating. I had one balance of £2k on an interest paying card, it was priority number one to clear this card first.
Saving money mission
We went back to basics with our monthly budget, I recommend everyone does this every few months. Everything we spent money on was written down and then I went through every line to strip it back. I looked at everything from our energy, mobile phones, broadband, TV packages, insurances to mortgage. Pots of money were set aside for all those non-monthly irregular bills, car servicing, school trips, haircuts, dentist. Every single direct debit was questioned if it was an essential. Savings were cancelled, charity donations were cancelled, Netflix gone, non-essential insurance was gone.
Our food spend was too high, despite having already shifting our grocery shop from Tesco to Aldi a year prior to this crisis point. This had already saved us £40 per week. The takeaways had to stop, and my focus shifted to good old-fashioned home cooking. Takeaways were costing around £30 each time so you can see how easily the cost would add up, five per month was £150. We would always make sure there was easy to cook food in the freezer, like pizzas for days like those. Meal planning is a great idea to plan for the week and then write your shopping list afterwards. Go through your freezer regularly to see what food can be used up.
We had two months during 2017 where we had no spend months. A no spend month means no spending on anything non-essential, groceries, petrol, business travel were still allowed. Not allowed were nights out with friends, no café coffees, no days out with the children that cost money, no bacon butties for breakfast at football. It’s tough to do it but honestly give it a try and you will be surprised at how much you save. Each month we did it we saved an extra £300 per month.
Keep a spending diary
This is such a way to get in control of your spending and you will be surprised at all the little things you forget about that add up. At the end of each day I write down what I spend in a notebook and reflect each week on what I won’t spend the money on the following week. I write everything in here, from petrol and groceries to coffee, lunch, parking, magazines. It helps you to be mindful of what you are spending.
Making my business work harder
I run a website, Mrs Mummypenny, where I write about money. I write about debt, savings, pensions, investments, budgeting. Everything money, but written in a simple, easy to understand way. By 2017, my business had been trading for two years and has turned that magic point where I started to make decent money. I worked hard to earn more income than I needed to pay the monthly bills. This extra income was split 50% into the creation of an emergency fund and 50% into my debt repayment. Once my emergency fund had reached a couple of months’ worth of safety net, I started pouring more money into debt repayment. I was able to pay off bigger chunks.
Declutter and sell as much stuff as possible
This is not my favourite thing to do but it’s so worth it. Make money from all the clutter sat around your house. I sold some branded clothes that no longer fitted and made around £300. I sold off a few bits from the garage, lawn mower, hedge strimmer for another £100. I sold some unused kitchen equipment for another £100.
I did many mystery shopping assignments and earned a few hundred from them. I mystery shopped at the big supermarkets, banks and gyms, sometimes a few a day. I even did a spa mystery shop (my favourite, a free day at the spa including treatment and I was paid!) This made me around £500 over a few months.
An update to the debt story
One year later, May 2018, and I have £5,000 left to repay. I am so proud of what I have achieved to repay this debt and to have cleared more than £10k. But its been hard, or maybe its been different. We have focused on treating the boys with things that are free or cheaper, trips to the park, baking cookies at home, creating adventures in the garden. But it will all be worth it when that debt is gone.
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Lynn James is a personal finance blogger living in Hertfordshire with her husband and three young boys. She is the founder of Mrs Mummypenny, a personal finance and lifestyle blog. Her content focuses on healthy wealth, body and mind. She spent most of her career until 2015 in the corporate world working for companies like Tesco, HSBC and EE.