Hello peeps! Hope you’re all surviving out there!
Today’s ponder heads into scary territory. Territory that for some is frightening, for others it’s avoided. For many it keeps them up and night, and for the few it’s a case of the more they have the more they want. We’re talking about money. Personal finance to be precise. More specifically mine and my partners finances…
This blog serves as an introduction to (likely a series of blogs) why I believe personal finance should be compulsory in school. This is part one. I like to think of myself as a reasonably intelligent and responsible person, however, as the blog will outline, choices have been made that weren’t the best. And now I’m paying for them. With interest. But first, a short disclaimer…
As I’m sure you’re aware by now, the blogs I post are all personal and all rooted in learning, improvement, and empowerment. Todays is no different. Today is about the financial overhaul that Ade and I have implemented and an insight into what we’ve learned so far. Before I go on though, I want to acknowledge that I know we are in a privileged position, but also that we’ve both worked incredibly hard to get to where we are today.
Let me set the scene.
If you’re a regular follower of the blog, you’ll know that Ade and I are two lucky few millennials that managed to buy our own house ourselves. Between the sale of Ade’s previous house and our savings we were able to upsize to the house we are now in. The house we consider to be our forever home.
From the outside looking in, we are a successful couple, who have a large house, who have two cars and three motorbikes. We holidayed regularly and make time for adventures when we have time off together.
The reality is that as of October last year, we had £34,100 of debt, (not including the mortgage), we bought a house at the top end of our budget, and we didn’t consider needing money to do the house up to how we want it or accounted for having money for emergencies.
It all started back in September last year (2021). We’d been in the house since the April. Mortgage, bills, and utilities were always split down the middle, with food costs and things for the house coming mostly from my account. Since living together we have always had a joint bank account. However, in the September, Ade got to the middle of the month and got hit with a £500 car maintenance bill which was unexpected and left him skint. I was usually ten days tops into the month then I’d be skint. So, being skint was the norm for me. And by skint, I mean a couple of pounds if that, left from our wages. Although being skint was the norm for me, it wasn’t for Ade. This was a scary moment for him that started a shift for the better. He decided he didn’t ever want to feel like that again.
Here’s our top tips to kick start the financial overhaul.
This is what we did.
- We wrote down all our debts. Everything. Vehicles, phones, credit cards, overdrafts, loans etc. It was scary and it was eye opening. It’s all good and well things ticking over, but it really hit home seeing everything laid out in front of us.
- We started a budget. Ade put together an excel spreadsheet with all our income and outgoings. It also had a sheet that showed all the debts in ascending order. It’s an active document that we update regularly. More on that later.
- We combined our income to make it collectively our money. For us, it’s the right thing to do. We aren’t housemates, or friends bunking together. We are a family planning and working towards our present and future life together. All our wages (minus the debts that come out of our own accounts) goes into the joint account.
- We made the decision that all debt is now collectively our debt. Again, this is something that may feel risky. A lot of trust is needed to know that your other half isn’t just going to bail once you’ve helped them become debt free. Ade and I are in it for the long haul. He’s my lobster. For me, because the first couple of debts we cleared were mine, it took me time to not feel guilty that he was helping. It’s just about reminding myself that we are doing this for the long-term benefits for both of us.
- We started to research personal finance strategies to become debt free. Cue The Snowball Method (shout out to Dave Ramsey!) The Snowball method hacks into the emotional psychology of paying off debts. You start with the smallest first and work up to larger debts. That way you are able to see quicker progress as debts are clearing, rather than chipping away at a larger debt and feel like you’re not getting anywhere.
- We created an emergency fund of £1000. Dave Ramsey, who you can find on YouTube advises that before you start paying the debts, you save £1000. The idea being it’s there for emergencies and to ensure you can still be paying off debts each month. We were glad we created our emergency fund because two months later we were hit with a leaky roof and a washing machine that blew up. Expense central.
Since starting this work in October of last year (2021) and in using the above strategies, to date we’ve paid off £4904.27 of the £34,100 starting debt (not including the house). We are well on our way, and although it’s tough, it’s our choices that have got us here. So now our choices are going to get us out.
How many of you have an active monthly or weekly budget file that you work with?
If you’ve gotten yourself debt-free what are your top tips for those on debt paying journeys?
Comment below or share with me on the socials!
The biggest learning curve so far has been about how little we know about personal finance and investment. Thankfully though knowledge is just a search engine away.
For us, as best as our parents did, there was a gap somewhere in our comprehension of what ‘debt’ is. It wasn’t until we wrote it all out that we got the shock, and of course step one is always to face the issue. The scariest step most of the time. For example, car on finance – a debt. Phone contract – a debt. As well as loans and credit cards etc. In most of the cases we’ve bought things based on being able to afford the monthly payments and not seeing the big picture of a) how much more we are paying per month and b) giving in to instant gratification. Both have led us to where we are today.
If you are interested in learning more, I’d suggest checking out these people on YouTube:
My intention with these blogs around finance is to share our story to help guide others away from making the same mistakes we did, or to help those of you who find yourself in a similar situation.
What do you wish you got taught in school relating to money and finance?
Let me know!
I think that’s quite enough for today’s ponder. However, I’m sure more around finance and what we’re learning will be in print soon.
This has been a SmartPonders.
Thanks for reading!
Steph x
SmartPonders 