Life

Reducing My Debt and Financial Stress…

April 8, 2019
Photo of me sitting in the V&A looking at paintings with my back to the camera.

Waiting for my friend to arrive I have ducked into a Waterstones to keep warm.  Absentmindedly I pick up two books and a button pin.  The button pin is half price, £2, and says ‘what are you reading?’.  Cute and a bargain!  I continue to wander around the store looking at a variety of objects and books.  Then I stop.  What am I doing?  The rising anxiety creeping over me in this moment is because I don’t have the money for this purchase.  I have to consciously return the items, taking pictures to consider them another time.  Truth is this year I have been trying hard to break habits, reducing my debt and financial stress.  I have never been out of control but my financial behaviour vs what I want for future has been misaligned for some time now.

The last few years have been a roller-coaster when it has come to my money situation.  I earn a very decent salary, and this has meant I could purchase a home in London.  Fantastic!  However, the truth is I relied on my credit cards significantly.  Staying in the UK meant visa renewals that come with a price tag of £1000- £1500 each time.  A health scare that couldn’t be resolved on the NHS and a private doctors bill of £1500.  Worth spending as I was spiralling mentally and physically, but there was no rainy-day fund to cover the bills.  Flights to Australia for Christmas that can vary from £700 to £2500 depending on demand!  Each month I would put a chunk of change against the cards knowing they would be paid off soon, but it never really happened.

In January, walking back into work after three weeks in Australia, my colleagues told me that our department no longer existed.  Ok!  And. I. Panicked.  I had bills coming out my ears and no savings or back up.  In previous jobs, restructures happened incredibly fast and people were out within weeks.  My current job has only a 4 week notice period, so I expected impending unemployment to come fast.  It hasn’t been that fast and recently we found out we won’t be restructured, yet.  Thank goodness! 

For the past three months I have really knuckled down on my personal finances and been honest with myself.  I am half way through paying off the credit cards and these are the tough love stances I did with myself to get there.

Changed My Mindset And Ease To Use My Credit Cards.

Stopped using credit cards.  Every month I vowed not to spend on my credit card and then near the end I would add a couple of transaction.  Little things that I didn’t think would add up but honestly, they did.  When I reviewed my spending, these ‘little things’ could add an additional £100 a month.  Money I didn’t have.  I put my credit cards in a drawer at home and removed them from apple pay.  The only app they are still registered to is Uber because I never want to not be unable to leave a situation.  I have used my credit card to pay for my season train ticket, knowing next month I will get the money back from work.  That’s it and that was a decision made to get the avios points!

Moving my balance to a 0% interest free credit card.  It is something that everyone including Martin Lewis advises but I’ve never thought to do.  Taking out a third credit card when you are trying to reduce debt seemed counter intuitive.  However, one of my card companies sent me a balance transfer offer and as this was more palatable I said yes.  It is for 9 months and has meant that my payments across both cards have reduced, with extra money going towards the principal on one.

Reducing my limits to safeguard my future.  Having had one card since 2005 and the other since 2012, I am targeted for automatic limit increases.  In total I had a potential limit of £20,000 across both the cards!  A mind-blowing figure and one that would have put me in huge financial trouble with repayments more than my mortgage!   At the most I have owed £6,000 and that was enough stress.  I’ve opted out of automatic increases with both lenders and reduced my limits to £6,000 overall.  As I get to the end of my credit card debt I plan to have these reduced further to £2,000 on each card.  That figure is potentially two emergency flights to Australia if family is ill or worse, and really all I want to use my cards for in the future.

Started A Savings Pot To Reduce Financial Stress.

For the past couple of years with the focus being on paying off my credit cards my savings account has languished at near empty.  Not having something saved has stressed me but all the ‘gurus’ promote paying off your cards first.  This year I have shunned that thinking and started putting £70 away each month.  The relief that that has given me is immeasurable. 

How did I come up with £70?  My vacuum cleaner is 5 years old and making a strange noise!  To replace it with a fancy dyson or robot vacuum, the dream, I would need around £400.  So I looked ahead at my budget and decided to save this is six months, rounding the £66.67 up to £70.  Will I end up buying a fancy vacuum?  I’m not sure but I am glad the money is there when I need it for a vacuum or anything else.

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Made My Own Lunch For Every Day.

This is one that I have known all along, but circumstance meant that it was cheaper for me to buy lunch.  Until my tastes changed and the £5 budget was a £6 or £7 spend, sometimes stretching to £10, double the budget.  When I sat down and worked through the numbers this was where I was pushing my budget, snowballing with using the credit card at the end of each month.  I used The Roasting Tin to make two batch meals and froze them into 14 lunches.  Then each week I make a new meal replacing those eaten to create variety.  Instead of the £50 a week I am now spending about the same a month!

Unfollowed Brands and Influencers On Social Media.

I’d already unsubscribed to all my favourite stores newsletters, but I still knew what gorgeous products were available from Instagram!  Many of the people I follow receive lovely free items and I don’t begrudge them a freebie, but it was creating a sense of longing that wasn’t aligning with my budget. 

A recent study by University of California and University of Toronto confirms people are saving less as their impression of what others have increases.  This has been intensified by social media where users perceive ‘everyone’ to have a higher number of items then they do. Not limited to influencers, seeing your friends with new items also adds a pressure to spend. Brands are increasingly relying on social media to launch and create a sales momentum.  Leah Harper writes how this version of advertising is new and mixed in with your friends updates makes the user more open to influence.

This is how I ended up in the Waterstone’s randomly picking up books that I had seen others read and recommend!  I did a cull of who I follow on social media, sometimes just muting their stories but other times completely unfollowing.  It has helped immensely.

Reviewed My Budget and Made Some Much-Needed Cuts.

Reviewing my budget, I realised there were more regular purchases that could be scrutinised, budgeted for or removed.  I got into the nitty gritty and started keeping track of how often I bought my shampoo and conditioner, adding them as line items on the budget.  I broke down how much it cost per month to attend my pottery studio and added another line item.  Previously I had this down every three months as one large amount which was stressful.  Spreading it out over the three months makes it achievable.  Another line item for a fare to Australia has been added.  Truth is I seem to be going back yearly so it makes sense to budget for it.

I then got honest with myself and stopped attending my fancy gym classes, getting eyelashes done and taking an UBER home from social events.  I’m saving £250 a month and I can reconsider bringing these back into my life once the credit cards are paid!

Phew so there you have it.  All the things I have done over the past three months to reduce my debt.  It is working and this month I felt quite proud and happy to see the numbers reducing.  I am still working on my impulses to purchase. Recognising that I was doing it is the first step! 

Here’s to being credit card debt free by the end of June.  PF xo

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