DM of the Week: How Did You Get Started on Your Debt Free Journey?
I’m tackling a DM per week on my blog to address some of the questions I get from my lovely Instagram followers. Please feel free contact me to say hi, or ask any debt/matched betting/money questions or have a chat about anything else at all, and anything that I’m being asked for tips on consistently I will put into a blog post for reference 🙂
One of the questions I am consistently asked is, how did I get started? For many people in debt, you’ve convinced yourself it’s a lost cause, so no wonder we are so overwhelmed by actually starting to snowball our debts.
My partner and I decided to get out of debt when he was put at risk of redundancy in his job, because it made me realise we had over £400 per month of minimum debt repayments; nearly as much as our mortgage each month. This added so much pressure to us financially, and considering it wasn’t a necessary expense, I wanted it gone. Luckily, my partner quickly found another job and was able to take a small voluntary redundancy payout that went towards our debt. The other £14,000, we have spent a year paying off.
How to Start
A good starting point for debt repayment is to assess your current financial state. Add up your debts. Add up your savings. See where you are with both.
If you are lucky enough to have savings, you might want to use some of these to reduce your debt and leave yourself with a small fund, for emergencies only. We aimed to have £1,000 in savings as a starting point, which we then didn’t touch unless something in the house blew up (which thankfully didn’t happen, but our car needed repairs and this covered them). But if you feel you need a larger or smaller fund, and you are totally honest with yourself and realistic about your reasoning, that’s fine too.
Then, tackle your debt. Firstly, you will need to draw up a budget if you don’t already have one, being as realistic as possible about what how much you can live on. If you have a surplus, this figure can be allocated to debt. I do my budget around payday and transfer the surplus straight to debt as soon as I get paid so I don’t have an opportunity to spend it. This might work for you, but if you are concerned that this will leave you short, you can transfer half now and half later.
My personal opinion is that it is best to pay your debts in order of expense, i.e. you pay the one with the largest APR first, then work your way to the smallest APR. The Dave Ramsey method suggests paying them in order of size, starting with the smallest, in order to keep motivated and gain momentum. To be completely honest, the most important thing is paying off debt and if one method keeps you more motivated than the other, you should go for that.
If you don’t have a surplus, you need to start looking at ways to up your income, such as matched betting, selling some of your stuff you no longer need, downsizing your car etc.
Like any goal, it is best to start slowly and build momentum. It will be tough to ignore the enthusiasm to sign up for lots of overtime, live off practically nothing or deprive yourself as you start your debt free journey. Just like you wouldn’t be able to sustain weight loss by starving yourself indefinitely, it will be much harder to maintain your debt free journey if your self-expectations are too high.
Within a first few months, you can re-visit your budget and make tweaks as you learn to cut your expenses, and you will; it just takes time to learn how to live simply and frugally. Remember to re-adjust your figures as you go.
And one last tip for anyone at the initial stages of your journey- celebrate your achievements, no matter how small. When we made our first £100 over-payment, we toasted with prosecco. When we paid off our car, we went out for cocktails. When we fully funded our holiday from side hustles, we celebrated with banoffee pie and a movie. Those little things that cost a few pounds, make such a difference in helping you develop a positive mindset that ultimately makes the difference in the long run in determining whether you give up or achieve your goal of debt freedom.
If you are just starting out, I’d love to hear how you are getting on below or over on my Instagram page.