How We Went From £16,000 in Debt to Living Debt Free in a Year
It’s been two years since we started living debt free, and life in those two years has been wonderful. No credit card repayments, no loans payments hanging over our heads, and goodbye, car finance!
The question people ask me most frequently is, ‘How did you get out of debt?’ There are so many people out there with the same debt repayments I had that want to get rid of debt. To stop worrying about money. To start living again.
Is living debt free worth putting in the hard graft for?
Yes. 100%. Absolutely.
I started my debt payoff three years ago, going from £16,000 in debt to debt free in one year. A year later, my husband and I cash flowed our wedding in New York City and started married life without repayments. Within a few months, we had a fully funded emergency fund. We became about £1,000 per month better off. I reduced the hours I work. Along the way, I even turned my debt payoff strategy into a book that anyone can follow to completely pay off their debt. I truly believe that getting out of debt was life changing for me.
And well, you get the point.
Paying off your debt and living a simpler debt free lifestyle is hard, but it is so worth it. You will get your life back.
How My Life Looked Before Tackling My Debt
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, scraping by and counting the days until payday.
Back then, it felt like we would never get on top of our finances.
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 working towards living our debt free lifestyle?
The Lightbulb Moment That Started Our Debt Payoff
Three years ago, I believed that an expensive life was a happy life.
I focused on my home, thinking that if we had lots of fancy things, we would have a happy home life.
Social media heavily influenced me. I believed influencers when they said this product or that item was the secret to their amazing body/skin/life/hair. It didn’t occur to me that they were peddling ads.
I thought that success meant having lots of money. So I spent the money we had, trying to make it look like we had more of it.
Behind the scenes, my mental health was deteriorating. 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.
There were two major problems with the way I was living. It was incredibly expensive, and I was paying way over the odds to be miserable.
So for months, my mood was low, and I was worrying about money. And it was about to get much worse.
My husband’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 decided to consolidate our £11,000 home improvement loan with more borrowing to pay off the car. Perhaps, I thought, I’ll borrow a bit extra just incase.
Within hours of being told of the possibility of redundancy, I had talked myself into a £20,000 loan at a time when we were facing dropping to one income between us.
But something clicked as I called the bank. I realised we were in a cycle of borrowing, which ate into the money we did have, which meant we would need to keep borrowing. 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 a blessing in disguise. It was the first step on our road to debt free life.
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 pay off our debt in one year and start living debt free, 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 husband’s redundancy, 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, then 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 Get Out of Debt, You’re Right
Firstly, my husband threw himself into sourcing jobs, particularly ones that were a step up from his current role. Within a few weeks, he managed to secure three job offers. He opted for the one with the biggest salary bump.
Then he took voluntary redundancy from his then-job. We put the payout towards our debt. As he hadn’t been in his role for long, the payout was pretty small. But enough to get us started in our goal of being debt free in one year.
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.
I believe that he got into this position by sheer determination and hard work, and I’m so proud of him for it. Jobs are hard to come by in today’s climate, but when you are determined to improve your circumstances, it’s just a matter of time before you see results.
The Pursuit of Living Debt Free: Our 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. So, I 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 spent.
At the same time, we brought in a small income by decluttering 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 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 lots of social media accounts. Particularly, those that influenced me to spend. 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.
Overpaying Our Debts: The Slump
After a few months of making overpayments, our progress started to feel slow. 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 quickest ways to increase your income out there. You can read more about it here. However, if you have any issues with gambling, I wouldn’t recommend it.
Our slump passed after about three months. We focused on our holiday as a reward for our hard work, and it kept us going. Paying off debt is hard, but be consistent, and it won’t last forever. Remember: debt payoffs are temporary.
By the time we were six months in, things turned a corner. One day, everything clicked. The reliance on credit. The urge to spend. In focusing on paying off our debt, they were gone.
In their place, we figured out how to budget.
It took about six months to go from budgeting novices to mastering our budget.
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. In doing this, he realised that 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. And living debt free is permanent, rather than something you quit when it becomes too much.
In early 2018, we were both lucky enough to get a small payrise. Instead of spending it, we put the extra money 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. Our plan to become debt free in one year started to feel like something we could conquer.
Debt Free Living: Finally In Sight
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 burn out. This is when you’re fatigued with budgeting and want to give up. We stuck at it, knowing we only had a few more payments to make.
When it comes to paying off debt, you’ll have moments when your motivation is gone. But the mindset you’re in, and the action you take, makes all the difference.
There is a lot of advice out there about paying off debt to just suck it up and make overpayments.
But if it was that simple, why aren’t we all living debt free right now?
I believe that when it comes to tackling debt and living a debt free life, your mindset is the most important thing. Many of us get into debt because our money habits are destructive. Or our mindset is focused on spending, not saving. And until we address these issues, debt free life is temporary. We will keep making the same mistakes with our money over and over again.
During those last few months, I figured out my debt triggers (social media, trying to keep up with others, thinking I could buy happiness). I worked on getting rid of a mindset where debt was inevitable. And curating one whose goals were to get out of debt, save and build wealth.
Now, two years after paying off my debt, I haven’t went backwards. I went on to save and build wealth, thanks to working on my mindset and ironing out those bad habits. They are so important that my debt payoff strategy includes chapters for both mindset and addressing bad habits. Get these right, and you won’t just get out of debt, but you’ll stay out of it for life.
Hello, Debt Freedom!
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!
The Instagram #debtfreecommunity clapped alongside me, and I was so grateful for that. Finding a tribe of like-minded individuals really helps to achieve your goals. I’d recommend this community to anyone who is starting out on their debt free journey.
Debt Free, Now What?
After paying off debt, we started to reap the benefits. We got £410 back in our pockets each month by paying off debt. It was like someone handed me a £5,000 payrise on the spot, because that’s how much money we recouped by getting out of debt.
Not only that, but budgeting effectively meant that we now had an extra £500+ each month from learning some simple tips to decrease our spending. My number one tip: bulk cooking!
I swear by bulk cooking that I created a whole website about it. In it, I share all of my recipes to eat well for less. If you spend too much on food, visit the site and start saving.
With a lot of excess money in our budget, we reduced our working hours. I started building passive income streams that I enjoyed, and that benefitted my audience, like my blogs and book.
Once you cut your debts and bills, you have more money. Which means you have more options. You can work less, go on more holidays, or simply continue as you are, but with more money to play with.
Without debt, the world is your oyster. You don’t have to make repayments, or overpayments. Your money is yours, to do what you want with it. Your time is freed up, and you can choose to work less because you don’t have as many bills to pay. Living debt free will completely change your life.
If You Want To Pay Off Your Debt, 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. Particularly, where you are overspending.
My budget is available here. This budget is Google Sheets compatible, so it will go everywhere that your phone goes. You can update on the go, and share it. So if you have joint finances with your partner, this is a great way to maintain a budget that both of you can access and view updates in real time.
Budgeting is absolutely essential in paying off debt, but good news! Curating good budgeting skills will save you thousands over the course of your life. So it’s well worth focusing on.
2. Create a realistic debt payoff plan
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. Simply re-adjust your plan until it works for you.
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. 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.
When I started paying off debt, I took on more side hustles than I could maintain. Within weeks, I was overwhelmed, tired and my commitment to getting out of debt started to slip. So I quit them all for a while, and went back to budgeting. Within days, my debt payoff was back on track.
The morale of the story?
Side hustling doesn’t always lead to getting out of debt. But budgeting, with a focus on overpaying debts, will.
So my advice is this: side hustle if you can, but don’t do it at the expense of your debt payoff.
5. Expect setbacks on your debt free journey
When it comes to paying off debt, setbacks are inevitable. But they are necessary to get over in order to complete your debt payoff. Setbacks are always going to be a part of your journey, but you have two choices. You can either allow them to define your failure, or use what they teach you to achieve success.