The start of the challenge
I’m Sam. I’m 30 on Sunday, married, and seriously in debt – have been for a while. My husband, CJ, and I have finally got serious and this year we’re going to do everything we can think of to pay off our debt. I thought having a blog detailing our efforts would be a great motivator; and it gives other people a chance to learn from our attempts and also help us out if you’ve got any ideas we haven’t tried yet! Plus I love writing, so I finally braved it!
So… the scale of the issue… the big confession. We’ve managed to hide the rather huge figure from our parents, nearly all our friends – even ourselves at times. We didn’t really ever buy anything seriously expensive, it was more a gradual overspending build-up; which is the most annoying thing – and the most problematic debt I believe (having seen lots of programs and read books on the subject!). It started off simply not being able to afford to live when CJ (who’s South African) married me (a Brit) – we lived in London and while CJ’s visa was processed he wasn’t allowed to work. I certainly wasn’t earning enough for 2 people to live off in London, so we used credit cards for food, council tax etc. We thought it would just be a short-term problem… 8 months later he was refused his visa and had to return to South Africa (at our expense obviously). We then had 4 months with me in London, and CJ in SA where, with unemployment around 40% he couldn’t get work. Finally we got his visa, but a year of living off credit cards had added up fast, plus international flights, plus visa application fees, plus a bit of money we owed my parents for our wedding. I’ve also studied a lot so I’ve also got a student loan, and money my parents lent me to do a MSc. We worked for a bit but in 2005, perhaps a bit stupidly, I wanted to do a PhD so I became a student again; not a way to earn enough money to be paying off debts. Overall, therefore, we’ve paid 3-4 years’ of minimum payments i.e. paid lots of money to get nowhere.
All a bit daft really. By 2008 our debt problem was really hitting home – frankly, we were terminally bored of being poor the whole time! It really makes you feel like a boring friend to be always turning down weekends away, holiday invitations, nights out, exciting excursions etc because you can’t afford it – I think my friends must be really tired of hearing this as my reason for non-attendance too. I had to end my PhD after my first year because we couldn’t afford my fieldwork, and we want to go into property development (and build our own house) but we would never get a mortgage with our level of debt. To put it bluntly, we finally both grew up and stopped our favourite ‘head in the sand’ approach. 2009 is the year of a more mature, responsible us; it’s time to tackle our debt head-on, pay it off and then we’ll be able to have some fun, build our house, go travelling… 
OK, so that’s the background. Now for owning-up on the figures. On Janurary 1st 2009 we owed… (drum roll please) around £36,362.64. It’s approximate because a couple of our loans aren’t exactly clear on the precise amount we owe them. To be honest, it’s really shocking it’s got this out of control – our minimum payments are around £900 per month, which is just insane; almost half our current combined earnings after tax. The APRs aren’t good either - we used to juggle 0% credit cards but with the credit crunch we can’t get new cards anymore (kind of serves us right actually – and good for facing up to the truth), so although most of our debts are below 10%, our worst card is 34.9%. Ouch. Over £1,000 interest per year. Just ludicrous. That’s got to be the first to go.
£36,362.64 is a lot of money to pay off, but we’re going to give it a go. Actually, the ultimate aim is to be debt-free, have £10,000 savings in the bank and a £30,000 deposit, but the £36,362.64 is a good target to begin with!
The first key is to stick to our budget. I’ve nearly always drawn up a budget – we just never stuck to it, thus rendering it completely pointless. I have to say though that our new-found committment is working well in 2009 (and today is Day 26), and we have stuck to our January budget (be a bit of a worry if we’d already messed it up). I have even drawn up a debt totaliser for our living room wall (very Blue Peter) – shame I have no idea how to put it on this blog; it would be a great feature (anyone got any ideas?).
I’ve worked out that if we keep up our minimum payments we should pay off somewhere around £10,700 (conservatively) over the year, which is a great start. I’m also working on getting the interest costs down, which would be another big help – no point paying money if half of it is actually paying off interest so overall you’re getting nowhere.
The next obvious point is that we need to increase our earnings. I have lots of ideas, so we’ll see how these pan-out over the year.
We were hugely aided in our endeavours by a letter that arrived from Egg (who I have a loan with) last week. Months and months ago I followed Martin’s advice (www.moneysavingexpert.com/ - full of very handy tips, with a great e-newsletter) and wrote a letter to them regarding my PPI. I’m not really too trusting of banks and loan companies – in my experience they seem to just charge ridiculous amounts to people who clearly already can’t afford things; otherwise they wouldn’t have gone over their overdraft limit in the first place (yes, I realise I got myself in this situation so it is my fault in the first place when I go over my overdraft, but it’s very frustrating when you are doing your best to stick to the limit). Anyway; so I was positively leaping around the room when I read they have refunded my entire PPI – £1,840 of debts gone away in one fell swoop! It was an amazing feeling. A great start to the year’s efforts, and it gives January a very healthy look, which is really encouraging and motivating.
So that’s about where we are now, and a bit of background information on me and what the blog will be about. Hope you enjoy it, and maybe even find it useful.
Sam
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