I have a history with debt. I opened my first credit card when I was 18. That first trip to my university bank saw me leaving with a ‘free’ overdraft and credit card.
Of course, they weren’t free, but this was my introduction to borrowing and the start of my ‘buy now pay for it later’ lifestyle.
Over the next 20 years I moved in and out of debt of varying levels of severity. Bonuses would be a great help at paying off the debts I had built up. There was a time in 2012 after a house extension that went vastly over budget when there was credit card debt of £18k.
I cleared that with a very delayed inheritance from my parents dying 16 years earlier. Yes, my entire inheritance was swallowed up by a credit card, or 25% of a house extension!
I felt sick, defeated, with a huge weight around my neck. I thought about it constantly, worried about it ten times a day.
The latest debt cycle was realised in 2017. Bonuses and employment had ended. I had left the employed world in June 2015 to set up Mrs Mummypenny. My redundancy money had run out and debt was covering some of the monthly bills as my business wasn’t generating enough cash.
When I added it up there was £16k of debt with no foreseeable way of repaying it. I could just about afford the minimum repayments of around £200 per month. At this rate, the debt would take more than six years to pay back.
I felt sick, defeated, with a huge weight around my neck. I thought about it constantly, worried about it ten times a day. And then I wrote about it. I came clean and told my dirty debt story to the world via the Huffington Post.
I explained how the debt was built and how I intended to pay it back. Soon after the publication of the post, maybe karma kicked in, my business started to generate more regular income. But there was a long rollercoaster journey ahead.
I made good progress in the first year. My frugality plan was working. I had cut the monthly spend right back to the bare bones. No more takeaways, no more fun spends, Aldi shopping all the way. Every bill had been negotiated to the lowest degree. I was trying anything and everything to generate extra cash from mystery shopping to eBay to questionnaires.
I got cocky, I became too confident in my business and started spending money again.
By 12 months in, April 2018, I had got the debt to just £5k (that was the net of £8k on cards and £3k in emergency savings). Amazing progress in 12 months and I was shouting from the rooftops. I was even invited to write about how I did it by iWeekend, my first paid piece of my writing appearing in a newspaper!
But I got cocky, I became too confident in my business and started spending money. My emotional spending kicked in, I had money, so started spending it, rather than paying off more of the debt.
I invested money in the business before my turnover was large enough to carry the increased spending. I spent £4k in a few months on staff costs to fix admin on my website and build traffic for which I am only starting to see a return now in 2019. And I spent £2k on an attempt at a product launch that failed. Ouch.
Before I knew it, my savings were gone and I had put £1.5k back onto my credit card debt. By Sept 2018 I was back to debt of £9k.
This was the toughest time ever as I felt like a failure, that this debt was never going away. The light that I saw at the end of the tunnel had disappeared around a corner. I felt like I was back to square one.
Again, writing saved me, I told the world about how hard I was finding the debt repayment. I shared stories about my emotional spending and what mistakes I had made during 2018 with my cash flow, business expenses and personal expenses. This gave me the push I needed to go for it again to get the debt paid off.
My business came good in the last quarter of 2018. I was able to pay off a big chunk of the debt in January and got the balance back down to under £5k.
It is now nearly two years on from beginning my debt journey and I really can see it being paid off. In fact, I could clear it today with emergency fund money I have saved. But for the time being that stays in my savings account giving me reassurance that I have some money set aside if I run out of cash again.
If you are on this debt journey, it will have its highs and lows. You might even go backwards as I did, but don’t despair. Keep going, keep paying off as much as you can spare each month and track that debt balance falling.
Celebrate the big landmark numbers being passed. Getting that debt below £10k is a big one, then £5k and soon enough you will be at £1k…then nothing.
I am so looking forward to a celebration of being debt free and having extra money each month to invest, put into my pension and most importantly to have fun with.