How we saved £9000 in the last 18 months & are now debt free (Debt Help in General)

Member Name: bruffyboy

Product:	Debt Help in General
Date:	25/02/09 (268 review reads)
Rating:

Advantages: we are debt free today!

Disadvantages: self control

Today (25th Feb 2009) is our debt free day: we have cleared £9000 of debt in the last 18 months, and here's how we did it!

I recently saw a statistic that said it takes an average of 5 years before over-spending really catches up with you: for me that was spot on.

At the end of 2007, I had been financially independent, renting a house with my wife, for five years. With £9000 of debt that was building up interest, and being refused consolidation loans and the like, we took a long hard look at ourselves, and decided it was time to get out of this mess the hard way! I was earning a net income of £1250 a month at the time, and that was our only income, so there wasn't a lot of money to be playing with.

The first step was to get educated. They say ignorance is bliss, but I now think ignorance is one of the main causes of financial problems. I spent days trawling through the 'dealing with debt' and 'living below your means' forums on Motleyfool.com. Here I found that there were a hundred ways of saying the same thing: the only way to get rid of your debts is to cut your spending to the point where you are spending less than you have coming in, then use the surplus to chip away at your debts (that is the simple answer to the rest of this long post).

The first thing to do was to get a proper idea about where my money was going, so I checked through a few months of online bank statements; talk about depressing, we were spending loads more on things than we thought we were, and this was a real eye opener. For example, our monthly shopping bill, which we thought was such and such an amount, was twice that when you added all the little trips to the shop mid-week.

The next thing to do was to break down everything we spent money on into four categories - essentials that we couldn't save on, essentials that we could save on, non-essentials that we were locked into contracts on and non-essentials we could get rid of right away. The results looked something like this:

1) Essentials that we couldn't save on: Rent, gas, water, electric, credit card payments, interest on overdraft

2) Essentials that we could save on: Shopping budget

3) Non-essentials that we were locked into contracts on: mobile, internet, telephone, TV license, gym membership

4) Non-essentials we could get rid of right away: Car(!)

So, the next step was to look carefully at the things in the last 3 categories, and come up with a plan of action.

Our original plan changed through time, and what we actually ended up doing (that worked) was the following:

1) LOWER YOUR SHOPPING COSTS - saving £175 a month

Taking immediate effect, we halved our shopping bill by planning and writing out a cheap menu for the month. We found we were spending so much more on food than we needed to as we didn't have any sort of plan for what we were doing with it. The basic principles were that I would have beans on toast for lunch every day, and we would rotate 10 cheap evening meals 3 times a month. Our shopping bill went from £300 a month to £125 a month, a huge saving! Over time the cost rose as we now have 2 kids, and food prices have gone up anyway, but the basic principle is the same.

2) SELL ANYTHING WE DON'T NEED - saving £100 a month on average

Over the next 18 months we practically lived on Ebay, selling everything and anything we could do without. We made a couple of grand all in all, and still have everything we need. Our house still feels full of clutter, and it's amazing we have made a couple of thousand pounds from stuff we don't miss.

3) CUT ENTERTAINMENT COSTS - saving £40 a month

The next thing we did was to get rid of TV/internet and home phone (mobile was locked in contract and would be used for calls). All 3 of these were coming up for renewal, and so we simply did not. It was a shock (as you can imagine) but yearly savings would be around £500 minimum, and we were willing to do it.

As it happened, we stuck to this for around 6 months, then got the internet and phone again (as I got extra work that needed the internet). However, we still don't have a TV and I have to say it's one of the best moves we made. The time we save from watching TV is now used (among other things) to make more money (more about that later).

4) GETTING RID OF THE CAR - saving £200 a month

No matter how you cut it, cars cost a fortune, and I was spending around £3000 a year on my crappy old Skoda. Because of circumstances that led to our current house being unsuitable, we took a big decision, ditched the car, and moved near to work, Church and friends. With no car, we walk everywhere. At first, this was unbelievably tough, and my sluggard of a body struggled like mad. To get this into perspective, it's 5 minutes to work, 40 minutes to Church once a week, and 35 minutes into town once a week. Come rain or shine, we pushed through, and got walking. In high wind and freezing night rain, we just did what our bodies are able to do, and walked. We became fitter and richer!

5) BUDGETTING OUR 'TREAT' MONEY - saving £50 a month

As crazy as this sounds, we started to give ourselves pocket money of £2.50 a week each! We spent all our treat money on sweets and takeaways anyway, and this way limited it to one night a week getting a bag of sweets each and scoffing the lot. Having some boundaries and self discipline was new to us I can tell you, but we soon fit into this plan and started looking forward to pocket money day!

6) QUITTING THE GYM - saving £80 a month

Should have put this earlier, but forgot! We quit the gym, saving a bundle.

7) EARNING MORE MONEY- using my job experience - saving £200 a month (averaged out)

As a teacher, I looked at every way possible of using my skills for earning more money. I applied to mark the SATs, and took on as much as I could (twice the general allocation), I also put my name down for extra teaching days our school runs in the holidays. It took months to get accepted and trained for the SATs, and I spent my entire holiday doing 12 hour marking days until I felt like I was going mad, but I made a few grand for a couple of weeks insanely hard work, and (after treating ourselves with some of it) saved about half.

8) EARNING MORE MONEY - using my life experience- saving £200 a month

Only recently have my wife and I begun writing for online review websites www.dooyoo.co.uk, www.ciao.co.uk and www.comparedby.us The sites pay varying rates, but for around an hour's work each evening we easily make £150 a month. On top of this my wife does online reviews at onepoll and lightspeed, which make a few quid too.

9) GETTING RID OF MOBILE PHONE - saving £18 a month

When the contract finally ran out in November I got rid of it right away. For emergencies, I bought a PAYG phone brand new from Carphone Warehouse that was £30 with £31 of credit on it (go figure!)

LESSONS LEARNT ALONG THE WAY:

a) Doing the things we did (1-9) really worked!

b) Don't beat yourself up if you lapse every now and again. In the last 18 months we've had two dozen take-aways and a few meals out yes, but before it would be 100 by now. And yes, we've splashed out here and there on expensive clothes, but we got there still, just a few months later than if we had been perfect!

c) Don't be tight - don't let your LBYM lifestyle prevent you from being generous with people. My wife and I feel very strongly that we must be generous and giving as we feel led. I've always been a tight ass with other people, and this new move has been a real change of heart for both of us, yet we have 'reaped what we've sown'.

d) Ignore the negative comments from people who criticize you, just do it your way! I got torn to pieces for some of my decisions (particularly the beans on toast for lunch every day which lasted 12 months I am proud to say, all the way up to the microwave being removed from work). Ignore negativity, but take on board constructive advice (finding the balance is a challenge I admit). The negativity I found on fool.co.uk just spurred me on to prove myself right.


If you put all of these things together, and fast forward to 18 months later, you've got a total savings of £9000 and a family that is debt free for the first time ever, and now living a lifestyle where we can comfortably save £800 a month!

I have to say that God has really blessed us along the way, and my income is now twice what it was to begin with; adopting Biblical principles of blessing others, whilst having self control in our own spending, have been at the heart of this endeavour, and reaping what we sow has proven a true blessing.

So what next? Stage two of the mission begins now: £800 a month is now being saved towards our emigration to New Zealand! Here comes the future!

Summary: do it!