Despite being debt free for a few years now, I realised that I have never written about how we got into £15,000 worth of credit card debt, and more importantly, how we paid £15,000 worth of credit card dept off.
Getting into debt
Getting into debt in the first place was a combination of just not having enough money for our outgoings but also a bit of frivolous spending. As soon as I got my place at university, my bank gave me a credit card and an overdraft. As you may know, I was really fortunate enough to buy a house in my university city. However, it needed to be furnished and that is where my very first piece of debt came from. I hardly bought anything new, most of it came from charity shops or secondhand places but, it still needed to be paid for.
Combine that with the general living costs at university along going from a tiny village to a university city, I quickly found myself maxing out both my credit card and my overdraft.
I knew that I was living in a deficit and that something had to change, so I decided to get a job. I ended up getting a part-time job a credit card company, and do you know what happened? They approved me for one of their own credit cards.
At the end of university, I graduated into the recession and I couldn't get any job at all. Not just within the field I studied, but any job at all. With my mortgage still to pay, a lot of my day-to-day spend had to go on credit cards. Then throughout the year, some other life circumstances came up.
I met my now husband.
I was barely earning above minimum wage.
We moved in together.
He was unemployed for six months, then I was unemployed (thankfully only for six weeks).
Before I knew it, we were in £15,000 worth of credit card debt. At the time we were still able to keep up with the minimum payments, but there was a lot of money shuffling going on. We also had to live on a very tight budget.
My Wake Up Call
I came across this online calculator that told you how long it would take to pay off your credit cards if you just kept up with the minimum payments. It actually would have taken us over twenty-four years to pay off the credit cards if we just continued making the minimum payments.
Bear in mind, most people get a mortgage for 25 years, so this was just insane. This also isn't accounting for the interest built up over the twenty-four years. It would end up totalling over £20,000, which was more than the debt itself!
How We Got Out of Debt
Getting out of debt was not an overnight thing for us. It took a lot of planning, scrimping, sacrifices and we also had to make extra money where we could. The very first thing we did was get an overall picture of how our money was doing, aka what our financial situation looked like.
We got all of the balances and all of our credit cards and figured out:
- How much interest we were paying
- Whether there were any promotional periods
- What the minimum repayments were every month
Once we got all this information, we then figured out how much money we had coming in each month. Sometimes this could be really complicated, like when Tony was out of work. On paper, we weren't even making enough money to cover our outgoings. Once we had these numbers, we then went onto doing a few things…
First of all, we looked to see where we could make savings on our overall spending and there were really obvious heavy hitters. Things like switching our gas and electricity supplier and cancelling our TV subscription. Despite doing this, it still left us with very little wiggle room. This left us with our next task to focus on which was bringing more money into our household.
If you need extra help you might want to consider an arrangement to pay.
How we brought in more money
The easiest way was to work a few hours overtime and I was also earning extra money through side hustles. I would do things like sell our unwanted things on eBay, online surveys and even delivered BT Phonebooks. We just did anything we could to get some extra money coming in.
We also switched to 0% transfer offers where we could. This meant, during that promotional period we weren't paying interest on those debts. So any money we were paying off went to the debt and not the interest. As for paying off the debt, we used something known as the avalanche method. This meant we took the debts with the highest interest and we paid those off first. We did this so we paid less interest overall and more money from the repayments would go towards the actual debts and not interest.
You could also do something like the snowball method, which is where you take the smallest debts and you pay those off first. This creates a ‘snowball' effect and you then take those payments that you're making to the smaller debts and add them to your bigger debts. This is really great for your mindset and making you feel a sense of achievement as you're paying off your debts.
How we Tracked our Debt Repayments
There are so many ways to track your debts and to track your repayments. You could use apps, you could use spreadsheets but I actually went really old school with this. I kept a notebook and every month I would write down the name of the debtor, how much debt was outstanding and then total these up.
Since I was on a computer all day for work and then coming home and running my blog, I just needed something away from a computer. I also felt that through writing it out every month that I actually connected with it more and I wanted it gone. It also gave me more ownership of the debt. There was something really powerful about writing the amount out physically. Towards the end of our debt free journey, it was amazing where we could find extra money.
It's so much easier to for-go something or spend less at the grocery store when you know that you're so close to your goal.
And that's how we became debt free!
It actually took me six years after graduating from university to become debt free. Sometimes this feels like a lifetime and sometimes it feels like a really good achievement. However, some months along the way we were barely able to make any minimum payments. We did always make sure they were paid so we didn't get any more fees. But there were months where we made more money or we cut back more so we could pay more of our debts off.
The single most important thing that worked for us was finding out where we stood financially. We needed to know exactly what our debts were and exactly what we were earning. In our case, what we were earning wasn't covering our outgoings. Facing up to this dark reality was not easy but if we hadn't, we would still be paying off our debts into our fifties.
So many people are in debt but no-one really talks about it. I had no idea so many friends from my university found themselves in the same situation with a lot of debt. And that's before we even talk about student loans!
I really hope this blog post has helped encourage you to not only talk more openly about money but also to tackle the debts you have.