Today I made the final payment on my credit card. It felt scary to do it. I had all kinds of anxiety thinking things like “I’m going on holiday at the end of the month, do I have enough?” Well, the answer is yes, I do have enough. It’s a feeling I’m not used to having, but I have enough because I’ve sorted out my financial life.
There have been so many times in the past 6-7years where I’ve been struggling to get through the month, or worse just spending recklessly It’s deeply ingrained anxiety that I’ve lived with for years and now, finally, I have managed to break out.
Maybe the magnitude of what I have achieved has not sunk in yet, but I was expecting to feel different. People say it is like a weight being lifted. I agree it does feel that way. However, today the weight on my back was very light compared to the one in January of this year. I have been breaking chunks off every month since then and the weight of debt has been lightening. Today was the last piece and one I’ve been looking forward obliterating for a long long time.
Now I have done it and, yes it feels great. I must be 100% honest and state I am not debt free. I still have my car loan and at this point, I’m happy paying that out until it ends in Feb 2020 (I love the car too much) and the car is now worth more than the loan. But all the other debt is gone.
The road into debt
To mark the occasion, I would like to reflect on how I got myself into the mess I found myself in. As with any story or struggle, it is not one that happened suddenly, but gradually over time.
I took out loans for sensible things like education to pay for my law conversion course. I then borrowed a lot to take 10 months out of work to study for the Bar. All worthy endeavours, but expensive. Add to that a general issue with not saving enough because there was always pressure to spend to go to weddings, holidays, drinks and meals out with friends resulting in me struggling to save any money. I’m glad to say that those days are in the past.
Additionally, I had to take out loans to fund a project in the building I live in which is a leasehold property. Of course, the project overran and increased in cost. That has been a struggle and a drain on my resources, however, it looks like I won’t have to pay anything for a while now thanks to a court ruling. That has cancelled £7000 of money that was demanded by my landlord but I refused to pay. I’m only kicking myself that I paid anything at all as I could have not paid at all and been about £10000 better off.
In 2016, I lost my father and grandmother within 2 months. That also led to a spiral of spending pointlessly – I bought, or rather entered a PCP agreement to get a BMW to cheer myself up. It did cheer me up and gave me great freedom as I had not previously owned a car for 6 years. Sometimes you have to live a little… but yes I could get a cheaper car.
After completing my studies last year, and I started earning again in September 2018, I began to think about the debt. I couldn’t see a way out. I got a tax refund and paid off the rest of my government student loan (£2400) before I started the new job so it wouldn’t come out of my salary.
I then came across an article on FIRE in the NY Times which really inspired me. I heard about all these people, some younger than me, who had retired. I couldn’t believe it. How would I ever get there?
I started in earnest and made some rookie mistakes. I wrongly started investing in the stock market around November 2018. This was a mistake I realised when reading Mr Moneymustache’s post about debt emergency. The debt should have been my priority. https://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/. I cannot agree more with his philosophy here and urge you to do the same.
His philosophy changed my mindset completely. This was a blazing emergency and I needed to change my life no matter what. Over the course of a month, I started to add up all the cards, loans and overdrafts I had. It was frightening. I was about £39,000 in debt (£15,000 car loans, £16,500 unsecured, £1500 overdraft). This was unsustainable. I was paying around £800/month on loan payments alone.
I used the tools at my disposal and paid off one of the loans with my savings, then paid off a loan with a 0% credit card offer to save around £500 of interest a year. I also made a stretch plan to pay that card off by June. I cut my expenses back by hundreds a month. https://playingwithfire.uk/2019/02/
Every time I got paid, I put the money into the credit card (£1500-1800 a month) so I couldn’t spend it and held on tight for the rest of the month. There were some dark days as I had only a few pounds left in my account at the month’s end. I stopped going out, eating out and skipped holidays. I cooked meals at home (turns out I love cooking). It was not the best fun I have to admit. I viewed it as a sacrifice to get me out of the hole I had dug myself over the years. When things got tough I looked toward the day I would be free and that kept me going. The first few months were the hardest as they were during winter. Lots of PS4 games were played and thank God for Red Dead Redemption 2. As things got easier I allowed myself the odd meal out and the odd pub visit.
You probably want to know about the numbers. Well, I get £4005 a month after tax in salary, another £500 in rent from renting my spare room out (tax-free), and £500 to cover expenses from my girlfriend (she lives with me in London). My monthly expenses are about £2700 all in (and could be less, to be honest). I tried to put every spare pound into paying my debt. I never could find the full £2300 as I always overspent but I got close each month and maybe with the Emma app I will!
Here I am, still in June having achieved it. I have paid off £16,600 in 5 months and had a further £6400 of debt cancelled as it was unlawful. Gone. Done.
I thought it would take literally years to do this. But treating paying my debt off as a blazing emergency worked. All my efforts for these 5 months have gone into saving money and paying it down as soon as I got my paycheck.
It’s been an incredible journey and one I’m glad to have shared and held myself accountable to by writing this blog. It had kept me focused on the goal.
I couldn’t end this post without thanking my girlfriend who has taught me so much about frugality and self-discipline these past few months. She has supported me through this period of change and now we can have a healthier and happier life together.
The next stage could be to sell my car. Then I genuinely would have no debt (other than my mortgage). But I do like that car… no, I love it.. but selling it is the sensible thing to do. Let us see.
Next month I shall start building a buffer of savings of around 3 month’s worth of expenses. On my current budget that is around £7000-8000. I will target about 4 months to get there.