PH Debt-free wannabe thread!
Discussion
It is quite a nice feeling, knowing you're saving that extra money on your savings. For us, it's going straight into the mortgage. A more risky strategy, definitely, but with our interest rate at 4%, it makes sense to do so. Now our mortgage payment is £700, and our interest each month is 'only' £150. At least now we're actually paying some of the mortgage off, rather than it mainly being interest!
We bought our house 5.5 years ago, just before the market crashed. Lucky us, eh? We've still managed to lop off the majority of the mortgage though, since our wages have increased about 2.5x since then. Each time our wages increased, our outgoings didn't, so that extra goes into the mortgage. We don't consciously save as such - we just live a simple life and enjoy the benefits that brings.
One thing I would say is to not take it to extremes - which is actually harder than you may think. We still have nice holidays and a decent car etc, but even those we do on a budget.
We bought our house 5.5 years ago, just before the market crashed. Lucky us, eh? We've still managed to lop off the majority of the mortgage though, since our wages have increased about 2.5x since then. Each time our wages increased, our outgoings didn't, so that extra goes into the mortgage. We don't consciously save as such - we just live a simple life and enjoy the benefits that brings.
One thing I would say is to not take it to extremes - which is actually harder than you may think. We still have nice holidays and a decent car etc, but even those we do on a budget.
Firstly good for you to recognise the problem as your going to do something about it.
As one has said you physically could be debt free by Nov this year by paying off £1kpcm.
If I were you and given the contract currently is only until Sept this is by far the smartest thing to do infact if you could pay off even more than £1kpcm even better.
However the most important thing is to secure new employment as without income whatever debt you'll have will quickly increase which would put you in the wrong mind frame when looking for work.
Can you do weekend work between now and Sept might seem harsh to work 7 days a week every week for 5 months (maybe try to work every Sat or every other weekend). You'd be set free before the contract ends and possibly built up savings to pay for living for x months post sept which will allow you the stress free time to find the next role.
Good luck
Oh one big tip wrote out a weekly menu what you entend to eat every day - then bulk buy and cook say enough spag Bol from raw ingredients not jars for say a weeks worth of meals - freeze them do the same with curry/chilli etc you'll save a lot both in time but energy in preparing each meal and doing it this way you get efficiencies in purchasing.
Cut off sky and take up a library membership which is free they will have books in there 1 year after release
As one has said you physically could be debt free by Nov this year by paying off £1kpcm.
If I were you and given the contract currently is only until Sept this is by far the smartest thing to do infact if you could pay off even more than £1kpcm even better.
However the most important thing is to secure new employment as without income whatever debt you'll have will quickly increase which would put you in the wrong mind frame when looking for work.
Can you do weekend work between now and Sept might seem harsh to work 7 days a week every week for 5 months (maybe try to work every Sat or every other weekend). You'd be set free before the contract ends and possibly built up savings to pay for living for x months post sept which will allow you the stress free time to find the next role.
Good luck
Oh one big tip wrote out a weekly menu what you entend to eat every day - then bulk buy and cook say enough spag Bol from raw ingredients not jars for say a weeks worth of meals - freeze them do the same with curry/chilli etc you'll save a lot both in time but energy in preparing each meal and doing it this way you get efficiencies in purchasing.
Cut off sky and take up a library membership which is free they will have books in there 1 year after release
I purchased a house in 2010 and at the same time got a shiny new Focus ST on a PCP (cheap for what it was overall in fairness £5kish over two years) but i also had finance (0%) on a GSXR 750 i had and i went on to buy Triumph Speed Triple (between myself and my dad).........
After the house had settled i owed £2k for various bills as i put as much as i could into the house (bad decision in hindsight although it helped the LTV) plus £000's for the cars and bikes.
I went on holiday in early 2011, got a bonus shortly after from work which i used to buy an RS250 Aprilia all very PH (house, car and three bikes
) it then hit me a few months later that i would need to work my arse off for the rest of the year knowing i was never going to find the final payment of the PCP for my car due in April 2013.
I then got to the point where i knew i wanted a new car and couldnt pay for the one i had so i decided to sell the Focus ST in early 2012, Experian put my debt excluding mortgage at £17k
which reallty hit home.
Luckily i owed £10kish a few months before the balloon was due on my Focus and sold it for £12kish
with the £2k equity i cleared my credit card debts and my GSXR finance also finished.
This left me with £5k owing on the Triumph as my dad left it to me which i agreed too, which was a huge relief. I then decided i wanted a Z4M but waited 7 months to get it whilst i saved up a sizeable deposit so i could easily afford finance over 2 years with a view to paying it early.
Nearly a year later iv been on holiday, spent some money on upgrades and have overpaid enough such that it will be paid off in the next few months.
Being debt free (aside from mortgage) was a great feeling, interim bills like gas, electric, insurance, etc can be fully paid instantly and forgotten about with no added costs to spread payments. I look forward to contiuing down this path and starting to save again. When speaking to friends and family my advice is now to enjoy yourself but never overstrech for anything as it is usually better to be a little patient and then you will enjoy it more even more so for things like cars and bikes
After the house had settled i owed £2k for various bills as i put as much as i could into the house (bad decision in hindsight although it helped the LTV) plus £000's for the cars and bikes.
I went on holiday in early 2011, got a bonus shortly after from work which i used to buy an RS250 Aprilia all very PH (house, car and three bikes
) it then hit me a few months later that i would need to work my arse off for the rest of the year knowing i was never going to find the final payment of the PCP for my car due in April 2013.I then got to the point where i knew i wanted a new car and couldnt pay for the one i had so i decided to sell the Focus ST in early 2012, Experian put my debt excluding mortgage at £17k
which reallty hit home.Luckily i owed £10kish a few months before the balloon was due on my Focus and sold it for £12kish
with the £2k equity i cleared my credit card debts and my GSXR finance also finished.This left me with £5k owing on the Triumph as my dad left it to me which i agreed too, which was a huge relief. I then decided i wanted a Z4M but waited 7 months to get it whilst i saved up a sizeable deposit so i could easily afford finance over 2 years with a view to paying it early.
Nearly a year later iv been on holiday, spent some money on upgrades and have overpaid enough such that it will be paid off in the next few months.
Being debt free (aside from mortgage) was a great feeling, interim bills like gas, electric, insurance, etc can be fully paid instantly and forgotten about with no added costs to spread payments. I look forward to contiuing down this path and starting to save again. When speaking to friends and family my advice is now to enjoy yourself but never overstrech for anything as it is usually better to be a little patient and then you will enjoy it more even more so for things like cars and bikes
I've not been paid this month yet, so I won't know EXACTLY how its going until I do, which is this Friday, and hopefully it will be a 5 week payday (5 weeks pay instead of 4 going in), so I'm expecting £2,200ish to go in there this month. Currently I have £1,300 credit in my account.
I've sold a few bits of junk I have lying around. I've stopped drinking through the week and drink less on a weekend as well (I'm doing this as much to lose weight, and for health reasons, as much as the debt, but it helps).
However, its been an expensive month in other ways, I had to pay for a hotel for next year @ £90, I've had to pay for 1 years road tax on the Puma (£220), and it was me and the GFs birthday weekend, where we went to a posh restaurant and stayed in a hotel, which was an expensive night (£150 each), so I think considering these outgoings, I'm actually doing OK.
I've still been going out, but I'm spending less, and TBQH I can't stop having a life entirely, but I can manage this OK.
I envisage being able to chuck about £1K at this debt per month, as long as I remain in my present role (contracting, and could end at any time, but I'm expected to have until end of August at least). The car itself, barring any unexpected expenses, is now insured for almost 1 year, MOT'd for 9 months and taxed for a year, so that should be good for a while.
I'm just letting the money build up first so I make sure I'm not left short if I find myself out of work.
I've sold a few bits of junk I have lying around. I've stopped drinking through the week and drink less on a weekend as well (I'm doing this as much to lose weight, and for health reasons, as much as the debt, but it helps).
However, its been an expensive month in other ways, I had to pay for a hotel for next year @ £90, I've had to pay for 1 years road tax on the Puma (£220), and it was me and the GFs birthday weekend, where we went to a posh restaurant and stayed in a hotel, which was an expensive night (£150 each), so I think considering these outgoings, I'm actually doing OK.
I've still been going out, but I'm spending less, and TBQH I can't stop having a life entirely, but I can manage this OK.
I envisage being able to chuck about £1K at this debt per month, as long as I remain in my present role (contracting, and could end at any time, but I'm expected to have until end of August at least). The car itself, barring any unexpected expenses, is now insured for almost 1 year, MOT'd for 9 months and taxed for a year, so that should be good for a while.
I'm just letting the money build up first so I make sure I'm not left short if I find myself out of work.
I run a spreadsheet predicting when I will be debt (and mortgage) free. Its currently shown my debt free date of January next year....at the ripe age of 48.
My income can be varied, and I've bought and sold property a few times over the past few years, so the date has been a bit varied. It always gives me a boost when it shifts by a month or so in my favour
My income can be varied, and I've bought and sold property a few times over the past few years, so the date has been a bit varied. It always gives me a boost when it shifts by a month or so in my favour
I really wish I'd got on the property ladder at a young age, I am still not on it (living with my girlfriend in her flat) and I'm 34, no prospect of it happening for at least another 18 months either I would say. In that respect, I can't see me ever being debt free completely.
I was originally very pro-renting, but nowadays, it seems actually cheaper to get a mortgage, and to some extent, it is like a saving plan, so now I'm more pro-mortgage.
Hindsight is a wonderful thing, but I've basically wasted the first half of my life, and will pay for it for the rest of my days (but I had fun!).
I was originally very pro-renting, but nowadays, it seems actually cheaper to get a mortgage, and to some extent, it is like a saving plan, so now I'm more pro-mortgage.
Hindsight is a wonderful thing, but I've basically wasted the first half of my life, and will pay for it for the rest of my days (but I had fun!).
I've got a question, what would you do in this situation, I'll keep this brief.
1. Save money into a savings account, and just continue paying the loan until nearer the end of the loan; I calculate I have at this time (8 months into a 48 month loan) that I have already been charged for about 1/3 of the overall amount of interest for the entire loan, so it will cost £1000 extra over the next 3 years and 4 months. The interest would on the savings would at least partially compensate for some of the interest paid on the loan, though. This means I have an emergency fund if I'm out of work for any length of time
OR
2. Over pay on the loan, but have no emergency fund. Less interest paid, will likely save me £1,000+ over the 3 years, but then be up s
ts creek if I can't find work straight away, and the contract ends.
Conventional wisdom always says pay debts first and don't save, but I can genuinely see a case for both. Any thoughts?
- I'm currently contracting, this may end at the end of August, but it may also be extended (for 3 months at a time)
- Take home pay approx £1800 per month.
1. Save money into a savings account, and just continue paying the loan until nearer the end of the loan; I calculate I have at this time (8 months into a 48 month loan) that I have already been charged for about 1/3 of the overall amount of interest for the entire loan, so it will cost £1000 extra over the next 3 years and 4 months. The interest would on the savings would at least partially compensate for some of the interest paid on the loan, though. This means I have an emergency fund if I'm out of work for any length of time
OR
2. Over pay on the loan, but have no emergency fund. Less interest paid, will likely save me £1,000+ over the 3 years, but then be up s
ts creek if I can't find work straight away, and the contract ends.Conventional wisdom always says pay debts first and don't save, but I can genuinely see a case for both. Any thoughts?
I've been completely debt free for 2 years now. I made a concerted 4 year effort to achieve this goal. Earlier this year, the company I work with / for, experienced the first, and worst, downturn in it's history. As a result, 2 posts were made redundant. That really pushed the fact that no one is ever 100 percent 'safe'. I did some calculations on how screwed I would have been, had my post been made redundant, and I had my previous level of 'serviceable' debt. I would have been homeless and right royally fked within 3 months, by my reckoning 
.
ked within 3 months, by my reckoning .TameRacingDriver said:
1. Save money into a savings account, and just continue paying the loan until nearer the end of the loan; I calculate I have at this time (8 months into a 48 month loan) that I have already been charged for about 1/3 of the overall amount of interest for the entire loan, so it will cost £1000 extra over the next 3 years and 4 months. The interest would on the savings would at least partially compensate for some of the interest paid on the loan, though. This means I have an emergency fund if I'm out of work for any length of time
OR
2. Over pay on the loan, but have no emergency fund. Less interest paid, will likely save me £1,000+ over the 3 years, but then be up sts creek if I can't find work straight away, and the contract ends.
Conventional wisdom always says pay debts first and don't save, but I can genuinely see a case for both. Any thoughts?
Definitely 1). Too much risk involved in 2), as a contractor. It can be a pain to be paying far more interest on a loan than you are receiving in interest on savings, but until you have a permanent contract (I would say "secure", but nothing is secure at the moment - I have a permanent contract, but we will be putting the company into liquidation in just over a month!), you need to have cash on hand.OR
2. Over pay on the loan, but have no emergency fund. Less interest paid, will likely save me £1,000+ over the 3 years, but then be up s
ts creek if I can't find work straight away, and the contract ends.Conventional wisdom always says pay debts first and don't save, but I can genuinely see a case for both. Any thoughts?
If you were in a position of having enough saved up to pay the loan off completely, I would say to pay it off - you can always borrow it again later - but if you have to keep making payments, then your overpayments will effectively be "dead" money to you in the short term, as you cannot get it back if you need it.
You seem concerned about cashflow and £1000 over 40 months is only £25 per month - so I think you should keep the overpayments to one side should you need them. The peace of mind will be worth the £25 and if the worst doesn't happen and you stay in work you can overpay later as it'll still be in the bank. Good luck!
Pulse said:
With our house, we use option 2, but then we have no debts and our mortgage payments are peanuts.
Long run this is best however it'll be more comfortable for this guy to do slightly differently in this case. Make the overpayments into a separate account to be paid off should it be viable and don't spunk it on hookers and coke!
TameRacingDriver said:
I've got a question, what would you do in this situation, I'll keep this brief.
1. Save money into a savings account, and just continue paying the loan until nearer the end of the loan; I calculate I have at this time (8 months into a 48 month loan) that I have already been charged for about 1/3 of the overall amount of interest for the entire loan, so it will cost £1000 extra over the next 3 years and 4 months. The interest would on the savings would at least partially compensate for some of the interest paid on the loan, though. This means I have an emergency fund if I'm out of work for any length of time
OR
2. Over pay on the loan, but have no emergency fund. Less interest paid, will likely save me £1,000+ over the 3 years, but then be up sts creek if I can't find work straight away, and the contract ends.
Conventional wisdom always says pay debts first and don't save, but I can genuinely see a case for both. Any thoughts?
I am in a not too disimilar position to yourself. About two years ago I owed:- I'm currently contracting, this may end at the end of August, but it may also be extended (for 3 months at a time)
- Take home pay approx £1800 per month.
1. Save money into a savings account, and just continue paying the loan until nearer the end of the loan; I calculate I have at this time (8 months into a 48 month loan) that I have already been charged for about 1/3 of the overall amount of interest for the entire loan, so it will cost £1000 extra over the next 3 years and 4 months. The interest would on the savings would at least partially compensate for some of the interest paid on the loan, though. This means I have an emergency fund if I'm out of work for any length of time
OR
2. Over pay on the loan, but have no emergency fund. Less interest paid, will likely save me £1,000+ over the 3 years, but then be up s
ts creek if I can't find work straight away, and the contract ends.Conventional wisdom always says pay debts first and don't save, but I can genuinely see a case for both. Any thoughts?
- 11k personal loan taken out to buy an m3
- 1.5k to my wife (difference in deposit put into our mortgage) (this probably sounds like a really weird arrangement to some)
- 3.5k finance agreement on the carpet in our house
- circa 6k in unspecified credit card debt (car servicing, engagement ring, etc. etc.)
- Total of somewhere in the region of £22k while in a 35-40k pa IT management/developer position
The debt was manageable but hung over me like a massive weight. At the back of last year I took voluntary redundancy after some rather nasty office politics and back stabbing and decided to start contracting. I sold the m3, bought a focus ST and released about 5.5k in equity to see me through a couple of months and give me some startup capital.
I'm 7 months into my first contract with 5 to go and am now looking at being in a position to pay off my only remaining debt of 6.5k personal loan in about a month, it feels great.
Anyhow, I probably wont actually pay off the loan for a further month or two to ensure that I some cash floating around in the business in case my contract comes to an end prematurely. I have few worries about being able to find another contract even if it means dropping my daily rate to make sure I get some cash coming in.
I've got my eyes on new cars again now but I'm trying really hard to rein myself in because i know that if I just stick with the focus (which I really have no particular love for) until early next year I'll probably have over 10k in cash to splash on a new car plus whatever I get for my current car (though knowing how my brain works if I have the cash I wont want to spend it). A few months can make a massive difference!
Obviously my advice would be keep the debt until you have a little cash saved up to tide your over for a couple of months if your contract ends as thats what I'm doing.
Good luck!
TameRacingDriver said:
I am also contracting, it keeps being extended but it could end at any time, which was also an uncomfortable feeling.
I now have £7250 debt
I take home about £1850 a month, but only pay £200 rent, £12 for my mobile, and apart from that the rest is food, beer and petrol money.
have something to fall back on in case I lose my job.
So that's my plan, anyone else embarking on a plan to become debt-free?
Okay you are contracting ? PAYE ? Umbrellor or LTd ? if you can get OUT of Paye then travel expences are tax free 45p a mile. I now have £7250 debt
I take home about £1850 a month, but only pay £200 rent, £12 for my mobile, and apart from that the rest is food, beer and petrol money.
have something to fall back on in case I lose my job.
So that's my plan, anyone else embarking on a plan to become debt-free?
You also use the words "lose my job" . Wrong mentality. The Contract ENDS. You have to get it into your head that you only work 9 months of the year and if you do more it's a bonus.
If you only have £200 rent, and £1850 a month take home, you should be able to save £1200 a month EASY.
You need £600 a month to live on, and I work on having 6 months buffer in my business account. Call it £4K
The debt you have could be put on a zero interest credit card, so that you build the buffer in an interest earning account. Once you have the buffer, start paying the interest free debt off.
I'm contracting, have been for 4 years, and have built up a £45K buffer, but pissed off that I've been promised a new contract, but start date keeps moving, so It looks like 5 weeks without work by the time it starts.
The best way to keep debts within comfortable limits is to have a plan.....
My plan has always been not to let a credit card bal get beyond 10 times what I can pay monthly.
So for me that is 3,000 /300. Everyones levels will be different of course.
(BTW that card is a 2 year int free, nearing the end of the two years)
I do not put food on this card, anything that has a shorter life than the created debt will put you on the road to ruin. Although I do stick Restaurants on there if wallet is understuffed.
Never go out on a limb to buy a car that you think makes you look good. It doesn't.
I've never bought a new personal car, always two or three years old. Have bought new for business, that's different.
Somrtimes debt can be an advantage, I operate with manageable debt because I have variable income so I need it to smooth out my cash flow.
I also carry a three month cash reserve in my int bearing current account, which makes for very relaxed living. (Which of course is larger than my debt, but that's the way I prefer it.)
No mort or car loans, but I have Real Estate taxes that are almost the same as a Mort. The Joys of choosing New Jersey.
My plan has always been not to let a credit card bal get beyond 10 times what I can pay monthly.
So for me that is 3,000 /300. Everyones levels will be different of course.
(BTW that card is a 2 year int free, nearing the end of the two years)
I do not put food on this card, anything that has a shorter life than the created debt will put you on the road to ruin. Although I do stick Restaurants on there if wallet is understuffed.
Never go out on a limb to buy a car that you think makes you look good. It doesn't.
I've never bought a new personal car, always two or three years old. Have bought new for business, that's different.
Somrtimes debt can be an advantage, I operate with manageable debt because I have variable income so I need it to smooth out my cash flow.
I also carry a three month cash reserve in my int bearing current account, which makes for very relaxed living. (Which of course is larger than my debt, but that's the way I prefer it.)
No mort or car loans, but I have Real Estate taxes that are almost the same as a Mort. The Joys of choosing New Jersey.
Can someone explain how you managed to justify getting into debt? I just can't understand why you'd choose to go down that road.
If you have no choice but to go into debt, fair enough. But going into ££££'s of debt for a car?!
I felt quite remorseful after spending £4k of £6k savings on a new car, I'd feel very stty to put myself in serious debt for a luxury item.
If you have no choice but to go into debt, fair enough. But going into ££££'s of debt for a car?!
I felt quite remorseful after spending £4k of £6k savings on a new car, I'd feel very s
tty to put myself in serious debt for a luxury item.Gassing Station | Finance | Top of Page | What's New | My Stuff