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How to get out of debt.

I’ve been in debt for a long time, but a few months ago I was able to make the final payment on my last loan and now I’m working on getting out of my overdraft and being debt free!!

As soon as my pay check comes through, I know all my wages have been swallowed up by my direct debits and I am already in my overdraft.  The rest of the month is just a waiting game until my bank refuses to give me any more money.

I’m sure this is very familiar situation for lots of people and like me you’re probably starting to eat into the little savings you have, just to top up what you don’t have. Once the savings are gone, I know I will be in serious trouble.  So I had to wake up and make some hard choices.

This is my plan to get out of debt and out of my overdraft.

The first thing I did was look at my most recent monthly bank statement.  It had been a long time since I was brave enough to do this.

  • I highlighted my incomings in green and listed them all into one column.
  • All my direct debits were highlighted in pink and again they were listed into another column.
  • Then I made a third list of ‘everything else’.  This is the list from where I make the first cuts.

The ‘everything else’ list was made up of cash withdrawals, food, clothes, petrol and miscellaneous stuff.

Food

I looked at what I had spent on food and slashed this by half.  This was easier than I thought.  Brand name items were replaced by store brands and impulse buys were cut out. I made better food choices and planned meals to help minimise the spend.  A (free) app called my supermarket was brilliant as it helped me find the cheapest price for products in different stores and stored my lists so I could access them easily.  I saved around £20 a week by shopping at both Aldi and Asda, rather than just Asda and both are walking distance from me.

Clothes

I don’t know why I was spending so much on clothes as my drawers and wardrobes (yes multiple), were already overfilled!   I decided no more clothes unless absolutely necessary.  That doesn’t mean, ‘I need a new coat because it’s on sale, or because my other three don’t match my outfit’, it means, I only buy a coat when I have NO coat.  I’m committed to this!

Petrol

I need my car.  But not for all the little unnecessary journeys I am making.  Spring is here, no more excuses for driving on the school run.  Chicco and I will walk more, and maybe I’ll even get fitter.  Double bonus!

Extra 

This was mostly random cash withdrawals so there was no real way of tracing it back to what it was being spent on.  The worst part was, this amounted to more than food, clothes AND petrol!

I took a tip from a friend who said she’s stopped using ATM machines and now at the beginning of each month takes out a limited amount of cash to cover each week of the month.  This sounded good to me.  I made a rough estimate of how much I should be spending in cash each month, and set that aside.  Each week, this pocket money was all I was allowed to spend.  Knowing I was limited meant I actually saved some money.

But here was another surprise.  Every morning I was withdrawing between £10 -£20 before work.  This was for more food!  £2.05 for a coffee and £2 for a breakfast roll.  £4 for lunch and £2.05 for another coffee.  That’s already over £10 and doesn’t include the days where I buy chocolate, a drink, a crisp or when I decide to have lunch out.  This had to stop.  I brought in everything from home; breakfast, lunch, teabags/ coffee, and snacks.  In one week I’d already saved a minimum of £50!  Small achievements like this are what keep me motivated!

Finally I tackled my Direct Debits.  These were staples like mortgage, water, electricity and insurance.  I made a note of when contracts ended so I could start fishing around for better deals.  But the one that caught my eye was my Sky package.

Without even realising, the annual increases and the additional services Sky were automatically signing me up for, my total monthly Sky bill had reached £69!!  The bulk of this was for my TV package.  I cancelled this immediately.  I don’t need Sky when I can watch most things online.  And not to mention there are still plenty of free channels available for both me and Chicco to enjoy.  I instantly saved £40!  A few weeks later Sky called offering me a new 12 month contract including 12 months free broadband.  I was planning on staying with Sky anyway and this meant I now saved an extra £10 a month! That’s a total of £50 saved a month!

All this is such good progress for me. I’m not particularly financially savvy, but these small changes and the act of facing reality means that things are definitely starting to look brighter.  I hope to be out of my overdraft in just over 6 months.  I will update you all on how this goes.

Adios for now!

 

 

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