‘How did you pay off your debt‘ has been the most frequently asked question on my Instagram page this year. So here is a round up of what we did to become debt free in one year, and what we’ve done since.
I started taking control of my finances two and a half years ago, going from £16,000 in consumer debt to consumer debt free, with a three-month emergency fund of £4,000. During this time, we’ve also cash flowed our wedding in New York City, had a few holidays abroad and paid for upgrades to our home. Most recently, we are financially preparing for the arrival of our son in March 2020.
Funding all of this seemed impossible to me before taking the plunge into tracking my finances 30 months ago. But we’ve done it, and so can anyone else. For most people, it’s a combination of balancing numbers, honing your mindset and changing your priorities. So if your 2020 resolution is to become debt free this year, then read on.
Where We Were Two and a Half Years Ago
Let’s start at the beginning. We started paying off our debt in July 2017. Back then, we had a higher household income than we do now, but we had less money. We were always spending. Whether it was on our home, ourselves, or the next thing that would magically improve our lives. We could always find something to spend on.
On top of this, we wasted a lot. Our grocery bill was high, and our expenses were out of control. We paid Busy Tax on our lives, meaning everything was expensive because we didn’t allocate time and focus to our finances. We lived month to month, ensuring that we stayed in debt, and always scraping by until payday.
Back then, it felt like we would never get on top of our finances. But two and a half years later, we did it. We paid off our £16,000 debt, and saved £4,000 for our emergency fund. And cash flowed our wedding, too.
Like many life changes, it all started when we got to rock bottom and got sick and tired of our situation. So what gave us that push to start taking control of our finances?
The Lightbulb Moment
Our Lightbulb Moment, i.e. the trigger that led us to start making a change to our finances, gathered traction slowly over a few months and then something disastrous happened that gave us the push we needed.
In the run up to July 2017, my mental health was really bad. I was anxious, not sleeping, and not enjoying life. Our debt repayments were nearly as expensive as our monthly mortgage payment, which stressed me out. Debt was a by-product of my issue; I was living life in a way that made me miserable, and sinking further into debt to fund it.
Back then, I believed that a pretty life was a happy life. We focused on on making our home look lovely, thinking this would make the people inside it happier. I was heavily influenced by social media, wanting to emulate the people I followed, believing I could have what they have if I bought into that lifestyle. I thought that success meant having lots of money.
There are two problems with this: a fancy lifestyle is expensive, and it doesn’t necessarily make you any happier.
When you get into debt to fund it, it can actually make you pretty miserable. I am living proof of this. But if you’d looked at my life back then, you’d think I had it made. I had a nice house, a nice car, and was spending like there was no tomorrow.
So for months, my mood was low, and I was sick of worrying about debt repayments. Then my partner’s job was put at risk of redundancy.
It was at this point that I panicked. Our car finance deal was coming to an end. We could choose to hand the car back and lock ourselves into another deal, or pay £5,000 to keep it. I immediately rang our home loan provider with the intention of topping up our loan by several thousand pounds (enough to clear our car finance deal and a bit extra to keep us afloat during redundancy). But something clicked on that call. I realised we were in a cycle of borrowing, which ate into the money we did have, and continuing to borrow. And we needed to break the cycle.
Thankfully, I hung up the phone. Within days, we came up with a plan to become debt free in one year.
Looking back, the redundancy was the best thing that could have happened to us. It forced us to take action, which enabled us to become debt free in one year.
The Plan to Become Debt Free in One Year
After the initial shock, we decided to tackle our debt head on. Our goal was to become debt free in one year, but how?
I started by calculating how much our total minimum debt repayments were. This worked out at £410 per month. It was the first time I took a real look at our debts and realised that each month it was two steps forward and one back. Every month we paid a ton of interest (for example, our £243 monthly home loan payment included over £60 in interest). Only paying the minimums, there was no way we’d become debt free in one year.
The situation looked pretty grim, and we also knew that we needed to find nearly £5,000 in five months to pay off our car. So we had to figure out how to increase our monthly repayments to clear our debt within the year.
To do this, we turned to our budget. It was the first time I seriously looked into tracking our finances every month, plotting how much we should be spending. To my surprise, our budget indicated that we should have had some money left over each month to put towards overpaying debt. Even though we never actually had any money left over, this gave us hope. We just needed to figure out what our spending issues were to get that money back.
At the same time, I researched ways to make extra money. We were bracing ourselves for my partner’s redundancy at the time, and he started looking for new jobs.
So the initial plan to become debt free in one year was made up of three things:
- A focus on our budget to figure out where we were overspending, and how we could cut down
- Overpaying our debts
- Stabilising our income, and hopefully increasing it over time.
We knew that we needed to pay well over £1,000 per month off our debts to achieve our plan, and that didn’t seem likely. But then a couple of wonderful things happened.
Whether You Believe You Can or You Can’t, You’re Right
My partner started looking for new jobs immediately, throwing himself into sourcing better roles than before and prepping for interviews. He was determined to move forward. Within a few weeks, he managed to secure three job offers; one of which was at his current role and salary level, and two that were more senior and with a pay increase.
I believe that he got into this position by sheer determination and hard work, and I’m so proud of him for it. We are constantly told that jobs in today’s climate are tough to come by, but this is proof that when you set your mind to improving your circumstances, you can achieve it.
My partner was then able to take voluntary redundancy and we put the small payout (he hadn’t been in his role for a long time) towards our debt. Securing a new role meant that some the savings we had built up for emergencies weren’t needed, so we reduced our savings to an emergency fund of £1,000 and transferred the rest towards our debt.
Our Debt Free Journey: The First Few Months
With my partner’s redundancy payout and our excess savings (totalling nearly £4,000) in the bag, our plan to become debt free in one year became a little simpler. Our debt became £12,000, so we needed to pay £1,000 per month to achieve our goal. With our minimum debt repayments totalling £410, that meant that our overpayments would be £590 per month.
Our budget indicated that we should have a small excess of around £200 per month, but I couldn’t pinpoint where that money was going. My first task was to figure this out.
I started examining our habits. I realised that we did a lot of top up grocery shops, spent a lot on our home, and had a lot of payday YOLO moments. So I started being very intentional with what I bought, and cut down on my impulse spending.
At the same time, trawling through my internet banking history, I realised that we spent above average in lots of areas, such as food and clothes, and came up with the #BelowBudget challenge, which I documented on my early days on Instagram. In this challenge, I took a spending area each month and gave it my full focus, figuring out:
- How much am I overspending by?
- Where am I going wrong?
- How can I reduce the overspend?
We also cut down on our direct debits, cancelling or reducing what we could. We trimmed our budget, removing anything we didn’t need to spend on.
At the same time, we brought in a small income by de-cluttering our home and selling things on eBay and Gumtree. In doing this, I learned a harsh lesson. A lot of the things I’d been influenced to buy on social media for our home were just plain clutter, and a complete waste of money. This made me feel a little foolish.
Previously, I believed in the power of purchases, that stuff you bought has the ability to miraculously improve your life. And yet here I was, getting rid of it because it got me into debt, which dramatically reduced the quality of my life.
With this in mind, I spent those first few months unfollowing the social media accounts that influenced me to spend by subtly implying my life was inferior unless I owned this or that. I unsubscribed to email marketing lists that were always persuading me to buy. And I started leaving my credit card at home in favour of carrying cash. By the end of the first few months, we had dramatically reduced our food bill, and found lots of ways to enjoy life without spending money.
Within the first few months, we had paid off our car and had kept up the payments on our home loan at the same time. If felt like we had won the lottery.
Our Debt Free Journey: The Next Few Months
Getting through the next few months of our debt free journey felt metaphoric. It was a long, harsh Winter and outside, it was pretty desolate for a few months. At the same time, our progress had slowed down. We were focusing on reducing our expenses month after month, and putting what we could towards overpaying our debt. As you can imagine, overpaying our debt got old, fast.
When we cleared our car loan, that gave us back the £161 per month we needed to fund it. We used this to overpay our home loan every month. It was incredibly motivating to watch the interest payment on our home loan fall by about £5 each month, just by overpaying it.
Once the new year came, we started to focus on our upcoming holiday to Thailand. There is a lot of advice out there telling people not to book holidays when you are paying off debt, but this doesn’t work for me personally. I think paying off debt is tough, and you need to reward yourself. We were cutting down and making sacrifices left, right and centre, and needed a break.
The only drawback was that our budget was so stretched that it looked as thought we would have to pause our overpayments to cash flow our holiday. However, after a lot of research, we decided to try matched betting as a way to earn money from home. Doing this, we didn’t have pause our overpayments and matched betting funded the holiday. Matched betting is something I’ve tried and tested and can say that it’s one of the best side hustles out there. You can read more about it here. However, if you have any issues with gambling, it’s not something I’d recommend.
By the time Winter was over, I finally felt that I had mastered our budget. Focusing on one area at a time really helped to get an idea of where we were going wrong, and how to fix it.
It took about six months to go from complete budgeting novices to knowing how much we could cut our spending by without losing quality of life.
In doing this, we figured out what we wasted money on, and what was a worthwhile expense.
For example, my husband happily cancelled Sky Sports from our TV package when we started paying off debt. Then he realised that he spent more in the pub during match days than the subscription cost, so we re-instated it. Also, having this little luxury meant that he didn’t feel deprived by paying off debt. So we learned that spending a little, on the right things, keeps you from feeling miserable and quitting. The lesson here? Cut from your budget the things that don’t add value, but retain a few things that make you happy. That way, paying off debt becomes sustainable.
In early 2018, we were both lucky enough to get a small payrise. Instead of going out and spending on the strength of it, we put the extra money we were earning towards debt. In the past, we were guilty of lifestyle inflation, whereby when our income increased, our lifestyle became more expensive. Opting to put this money towards debt was proof that our mindsets were finally changing and our plan to become debt free in one year started to feel like something we could conquer.
Our Debt Free Journey: The Last Few Months
Entering Spring 2018, the end of our debt free journey was in sight. At this point, we had about £4,000 left to pay, and our debt felt a lot more manageable.
As a result, it was really tough to stay motivated to finish. At the beginning of our goal, we just wanted to feel in control of our finances. But before we’d finished, we already felt in control. Our budgeting skills were better, and we knew how to live well for less. We had a quarter of the debt that we started with, and we were tempted to quit.
Looking back, I was experiencing something quite common: Budgeting Burnout. This is when you’re fatigued with budgeting and want to give up. But we kept going, and I’m really glad we stuck it out.
I owe my motivation in part to my Instagram account, particularly because I waived my anonymity. It kept me accountable when I didn’t want to be, and helped me through the rough patches.
What I learned during those last months is that mindset is everything.
Paying off our debt would have meant nothing if we hadn’t addressed the reasons why we spend. We would be back in debt if we continued to live as we did previously. In paying off debt, you need to completely re-assess your values and goals in life. You need to re-write how life should look in your head. You need to re-programme your brain to view spending differently. There are many things you simply need to stop doing to pay off debt. Otherwise, the behaviour that got you into debt will keep getting you into debt.
Those last months felt slow. We just wanted our debt to be gone for good. Debt freedom consumes your mind like someone who is running a marathon stares intently at the finish line to get through those last few steps. So, we waited up until after midnight on 17th July 2018 to make our last overpayment. Pressing that button to transfer our last £1,000 was a tremendous feeling. We achieved our goal to become debt free in one year- two days early!
We celebrated the next day by taking a trip to the beach. Celebrating debt freedom is a funny one; no one quite understands the reason for your elation, except those who know the pain of what you went through to pay it all off in a short time. That’s why it’s so important to find your tribe, even if they are an online community, to celebrate with you. For me, the Instagram #debtfreecommunity clapped alongside me, and I was so grateful for that.
So if you have reservations about putting your own journey out there, please know that you can always make your social media accounts private and anonymous, and still get the benefit of that support system anyway.
Life After Debt
Life after debt took a surprising twist. We intended to start saving for emergencies, but we lost motivation and floundered for a few months. We didn’t know it at the time, but losing motivation is incredibly common. For so long, your focus is getting out of debt. So when you achieve it, you feel lost. And saving never feels as essential as paying off debt.
That’s why taking a break and changing up your routine is so important. Trying to remain in a “paying off debt” mindset when you have no debt is a common mistake (here are some others). It’s so much better to pause, re-assess your goal, and start afresh. After all, you’ve earned it.
After getting out of debt, we made some changes to our lifestyle. We both reduced our working hours. Ryan’s were reduced temporarily to help out at home following the illness of a family member. Mine were reduced permanently to help alleviate my anxiety and get a better work/life balance. I’m so grateful that debt freedom could facilitate the reduction in working hours, and income.
With free time on my hands, I started focusing on side hustles I enjoyed. My top side hustle is this blog, and I focused on building it up. I turned my own debt payoff into a plan that anyone can follow to get out of debt, and released it as an eBook and paperback (found here).
But anyway, back to saving. Instead of going straight into building a three-month emergency fund, we deviated. In September 2018, two months after getting out of debt, we decided to get married. Getting married was something we’d put off for several years, believing we could never afford it. However, here we were without consumer debt for the first time in our adult lives. It was now or never, so we chose now!
We decided to get married in Manhattan, NYC. We visited a few times previously, with very happy memories, and it’s relatively straightforward to get married there. Our wedding was just us two, which in hindsight was a very good decision (sorry, mum!). Neither of us wanted a big bash, or to feel stressed out by our wedding day, so to only have to take care of ourselves made the whole thing very relaxed.
Getting married cost just over £5,000, including a week’s trip to NYC, with decent flights and a nice hotel. Sharing my wedding plans on Instagram helped me to connect with a lot of people who don’t want a traditional “big day” for various reasons. Some people simply can’t afford it. Some don’t want to spend a fortune on getting married. Others felt it would be too stressful, and didn’t want to spend the day appeasing everyone else. We were a mix of all of this, so it was easy to relate. So if you’re reading this and nodding your head, go for a small wedding- you won’t regret it!
When we got back, we started married life without debt. Which I’m very glad to report. But the story doesn’t end quite yet.
One of my top reasons for starting our debt free journey was to start a family without the pressure of debt. So now, seven months pregnant, we have a whole new journey to look forward to.
Where We Are Now
Right now, we don’t earn as much as we did in our debt days, but we have more money, in fact we are nearly £1,000 per month better off. I owe this to paying off debt and focusing on budgeting each month. Our lifestyles are pretty simple now. We don’t spend a fortune on our home anymore except for necessary upgrades and repairs. We spend a lot less on takeaways and eating out. Days out are more likely to involve a trip to the beach to walk the dog rather than a day at the pub. Cutting our spending is something we’ve done intentionally, but never at the expense of our quality of life.
It’s an unpopular fact that no one tells you nowadays: being happy costs very little. Social media likes to tell us that our lives will be enhanced by buying this or that (#ad #spon). At the same time, many of us work in demanding jobs that can make us neglect home life and ourselves. So we fall into a cycle of spending to reward ourselves for working, and then needing to work to pay off the rewards. In many cases, those rewards become burdens that we need to find the money to pay off.
If this is you, it doesn’t have to be your reality. You can decide today to take control of your debt.
If You Want To Become Debt Free in One Year, Here’s My Tips
1.Get a budget
Every goal starts with a plan, so when it comes to budgeting, start with a budget! A budget can be as simple or as detailed as you like. The key details are income and expenses, and how much you have left over when you minus expenses from income.
To improve your budgeting skills, you need to be honest about your spending. You need to track every expense to get an accurate picture of what you’re spending, and particularly, where you are overspending.
The budget I use is available for purchase here. I use this via Google Sheets on my phone to track each expense as and when I spend. I can update on the go. My budget comes everywhere that my phone does. And best of all, my husband and I share it, and we can see each other’s updates in real time. But if another method suits you better, then do that. How you keep track of your budget is very much down to personal preference.
2. Create a realistic plan for the year
Now is the time to sit down with your bills and your bank statements and create a plan.
I find that goals are successful when you give yourself time-constraints and small sub-goals. So instead of simply saying ‘I want to become debt free in one year’, figure out specifics. This can be your total debt, how long it will take you to repay it and how much you can contribute to this per month. Start with this, and form your plan accordingly.
For me, I knew I had to pay roughly £1,000 per month towards my debts (once we factored in savings and my partner’s redundancy payment). We already budgeted £410 towards these each month in minimum payments. Therefore, my plan focused on how to top this up by £590 per month. Once I broke it down like this, becoming debt free in one year seemed do-able.
If you break it down, and the amount you need to pay per month seems unachievable, don’t set yourself up for failure. Perhaps you need to make your debt free goal more realistic by giving yourself two years to become debt free. By the end of 2020, you’ll still have paid off half your debt, which is a massive achievement.
The point of the plan is to give yourself a realistic goal that you can achieve this year. Set yourself up for success.
3. Work on lowering your expenses
Lowering your expenses is a skill for life. Once you get a hold on your expenses, budgeting becomes a lot easier. And if you continue to live beneath your means once you’ve repaid your debt, you can start to build wealth.
Use the exercise of lowering your expenses as an opportunity to examine where you were going wrong with your spending. Examine your bank statements and see how much you spend on your major budget categories. You’ll be amazed at how your finances are affected by overspending.
My advice is to take one area per month and give it your full focus. Figure out how much you spend versus how much you’d like to spend. Look at any bad habits you have that encourages you to overspend in these areas. Often, overspending is emotional, not practical. So, to really make long term changes, you need to examine your habits and mindset to fix any issues that you have.
4. Aim to increase your income, but not at the expense of your budget
Giving yourself an income boost, which you can then use to transfer to debt, or to fund an expense that you don’t have room in your budget for, is a real bonus on your debt free journey.
There are so many side hustles out there, and which one you’d like to do is up to you. I’ve found that the simpler the side hustle, the less you make. This is why surveys that can be completed on your phone are usually the lowest paid. Higher paid side hustles such as matched betting or re-selling require more time, money and effort. And while the returns tend to be higher, they are a lot more work.
Something to consider is to not actually do any side hustles at all. I know this is not the usual advice in my niche, but it’s something I wish I’d heard when I started paying off debt.
I took on a ton of side hustles a few months into paying off debt. Within weeks, I was overwhelmed, tired and my commitment to budgeting had started to slip. If I had’ve continued with everything I was juggling, I most certainly would have quit my debt payoff. I was struggling to stay under budget, and felt so deprived by doing so many things at once that I wasn’t watching my expenses.
Your wealth depends on what you spend, not what you earn. So you can always earn more, but there is no guarantee that you’ll retain that money, particularly if you don’t control your spending. If you live beneath your means, you can guarantee that you’ll have money in the bank every month. Obviously there are exceptions to this rule. But for the majority of us, a good budget is better than a payrise when it comes to paying off debt.
So whether or not you decide to side hustle, do what’s right for you. Choose something that you have the time and resources to take on. Don’t beat yourself up if this means you can’t commit to anything. Budgeting is enough. And we don’t hear that enough.
5. Expect setbacks
When we hear the word ‘setback’, it conjures up feelings of failure, of wanting to quit, of something negative. Your challenge is to re-invent setbacks on your debt free journey. Transform them into opportunities to learn more about where you are going wrong and how you’ll overcome it.
When it comes to paying off debt, everyone falls off the wagon at some point. You might go over budget, you might spend on credit, you might even quit for a while. Everyone has a bad day, week or month, as paying off debt can be really tough. The key is to expect setbacks. Budget for a spending blip, or allow yourself to take a step backwards now and again. Don’t use it as an excuse to quit.
Regardless of how you deal with it, take it one step at a time. When you experience a setback, pick a point where you draw a line under it. Then re-start. Remember to see the overall picture of how far you’ve come, rather than focusing on a few bad days. Those setbacks keep us motivated. Sometimes that £100 overspend is all we need to overpay a few thousand pounds in debt over the following few months.
My advice? Embrace the setbacks as part of your journey. Learn from them, and grow.
Here’s to 2020 being your best year yet 🙂
Wanna be debt free?
My book, How to Get Out of Debt, has everything you need to become debt free. From increasing your income, reducing your expenses, building a budget and even changing your mindset with your spending habits, this book is your debt free plan.
Click here to purchase the book, or you can get the book for free by signing up as a new customer to Kindle Unlimited’s free trial using my Amazon Associate link(Don’t forget to cancel if you don’t want to get charged).
One year from now, you’ll wish you started paying off debt today, so take action now and get started 🙂