When I restarted this blog back in March I was in £5000 of consumer debt. I never saved any money and blamed it on my low wages and the expense of living in London. Put simply, I just spent more than I made.
I was finally caught out by my ‘have fun now, pay for it later’ mentality. I kept finding myself thinking, ‘I need to have as much fun as I can NOW before I have any children!‘ Unsurprisingly, this spiralled out of control with shopping trips, meals out, drinks, holidays and weekends away. Whilst this was lots of fun, the time had come to sort it out.
I have to thank my husband for starting me on this journey. After we got married I suggested that we open a joint bank account. I was shocked to find out that he wasn’t keen because he thought I was irresponsible with my money. This was news to me! I was suddenly face to face with the reality of my situation, and I didn’t like what I saw.
He is by definition more of a natural saver. We agreed that I needed to prove to him that I was financially responsible before we would join our finances. The first step was clear; I needed to pay off my debt!
How did I get myself into this mess?
In the UK most people are paid monthly. I would get paid at the end of the month and usually blow the whole lot within 10 days to 2 weeks. This made the beginning of the month a dream with a few cheeky shopping trips and meals out with friends. The last two weeks should have been a nightmare with me wondering how I was going to get the tube home. Lucky for me, my credit card kindly stepped in to relieve the pressure. As my favourite Barbie girl knows… ‘Life in plastic, it’s fantastic!’ Spending on my plastic became the new normal and I quickly racked up a hefty bill.
I’m sure it’s not surprising to hear that, yes, I struggled to pay off my credit card in full each month. Things went rapidly downhill. I told myself that I had everything under control… I didn’t.
How I paid of my debts
So how did I get myself out of this mess? Well, there were two ways that I did this:
1. Paid myself weekly
I know that other people have successfully used the cash version of this. They would have a budget for the week, take out cash at the beginning of the week and make it last. This can work as you can physically see how much money you have left in your wallet at the all times. As a millennial Londoner I rarely use cash so opted for the digital equivalent. This has been the most successful remedy to my spending habits.
It was at this point I found out that you can set up a standing order from yourself to yourself *mind blown*. I set one up to pay myself £150 every Monday from the account into which I was paid my wages into a new current account that I named ‘Everyday’. I labelled this card “EVERYDAY” to remind me to only use that one every day.
This idea revolutionised my spending habits. Previously I would have mindlessly gone through weeks of spending whatever I wanted only to be left at the end of the month wondering where it all went. With the new system, I know that if I go for a meal out at the beginning of the week that I will need to be frugal for the rest of the week. Likewise, if we are hosting a barbecue at the end of the week, I need to be frugal for the beginning of the week.
The unexpected results of this have astonished me. If I want a new item of clothing then I find myself waiting for a suitable week to buy it. Often that gives me the time and space to really evaluate the purchase I would have made on the spot before. Now 9 times out 10, I end up not buying said item at all.
Likewise, I have been much more inventive with my food shopping, planning ahead about what I will eat during the week and taking lunches into work. I’ve started batch cooking things such as Dahl or vegan chilli that can last several meals and costs very little. This enables me to not worry about eating up so much of my budget for the week.
Starting the weekly allowance also meant I was able accurately predict exactly how much money I would spend each month on commuting, eating, clothing and fun (£600 or £750 depending on if there are 4 or 5 Mondays within that month). Any recurring monthly costs such as car insurance and phone bills are dealt with separately which brings me onto my second method.
2. Reduction of recurring monthly expenses
This seems pretty obvious when thinking about how to save money but most people (including myself) don’t do it. If you reduce your monthly outgoings as much as possible, the overall impact on your finances is a net gain! *mind blown again*
I was urged to be militant about this after reading about the Aggregation of Marginal Gains. This is a concept used by the British Sky cycling team who went from being average at cycling to winning the Tour De France and dominating at the Olympics. The idea is that if you make lots of small changes, then they will add up to a much bigger change.
I went through all my bank statements to find out exactly what was coming out every month. Here is quick summary of some of these:
- Expensive phone contract (£62) – convinced myself that I needed the ‘best phone in the world’ last year but couldn’t afford to pay for it up front
- Spotify premium (£9.99) – because every afterparty definitely needs my Funk & Soul playlist
- Fancy yoga studio membership (£100) – fresh towels post-workout ain’t cheap
- Adobe Stock images (£25) – a previous accidental sign up for a 1 year membership
- Sofa payment (£115) – again I couldn’t afford to pay for it up front but the sofa is mega
- Overdraft fees (£6) and credit card fees (£ horrible interest) – it turns out ‘free money’ isn’t REALLY free
I input these into a spreadsheet and totalled them. Staring back at me was a larger than expected number. It drove home the aggregation of marginal gains concept in the reverse. All of these smaller numbers added up to one big scary number.
I vowed then and there to make that big number into a little one and got to work. I looked at each item and assessed its worth in the wider context of my debt. ‘How useful was this thing? How much value was it adding to my life? Was it a complete waste of money?!’
Luckily some of these payments were close to reaching the end of their payment plans (sofa and stock images). I made some lifestyle choices too. I decided that I could deal with listening to a couple of ads to save money on Spotify. The knock on affect has been that I listen to more podcasts now, which I love. The yoga studio membership has been difficult to give up as I love going there, however I have learnt so much since being a member there I felt confident practicing at home and signing up for the odd class instead of the full membership.
Since adopting this method I have cut down my recurring monthly expenses by more than 60% (not including housing costs).
The cumulative effect of using these two strategies has meant that within 5 months I have been able to pay off my credit cards and overdraft (£5000 in total). Previously I was overspending every month and struggling to keep up with my credit card payments. Using these two methods meant that I was able to dramatically reduce my monthly spending leaving enough to pay off these bills. At first I was paying off around £800 a month but by the end this rose to £1200 a month.
I now have the tools to move forward and save money for the very first time. This month I was able to pay off my phone and switch to a £13 a month contract. I also saved my first £500.
My husband now trusts me with money and it has been amazing for our relationship to be on the same page about our finances. He is even starting to take money saving tips from me such as moving to a cheaper phone contract. We’ve started building frugal habits together such as always taking public transport instead of Uber and trying to cook together and host dinners for our friends instead of going to expensive restaurants.
These past 5 months have made me realise you don’t need to spend money to have fun. The best part of this – it feels AMAZING! I feel like I have regained control over my life again. It has made me look at the world completely differently. I have learned lessons of restraint and it has made me be very deliberate with my consumption. I am reevaluating my relationship with money and looking forward to sharing more about this journey on this blog in the future.