A few people have asked me recently to tell again how I got out of debt – debt to the tune of £10,000 – in a year.
So, here’s the story.
Actually, I talked about it in one of our videos a while ago (see below) but it bears telling and retelling because it’s something everyone can do to get out of the misery of debt.
Hey, if I can do it, seriously, you can too. Here’s my vid about how I got out of debt and you can read more below.
How did I get into debt in the first place?
So, it was the end of the 90s, I knew nothing much at all about money management then (how times have changed!) and I owed £10K because…
a) I was freelance (and always had been) and my work and income was often a bit irregular. At that time it had been irregular for about a year. In other words, the money wasn’t coming in but I was still spending out because I assumed I would get paid soon (n.b. if you’re self-employed and reading this…never assume you’re going to get paid soon…you regularly won’t be). See here how to manage your finances when you’re freelance.
b) I’m ridiculously optimistic and, at the time, I thought that any minute now I’d get a well-paid gig and be able to erase my debts. Hmm, that didn’t happen for quite a while!
c) I had just done up my flat and, as is usually the case with these things, it cost a LOT more than I had expected.
d) I had just had a stint as an actress in a touring production of ‘Don’t Dress for Dinner’ (I played the mistress) which was paid at Equity minimum and didn’t even cover my mortgage let alone my other expenses.
e) Having generous credit card limits, I used them far too much to pay for the building works and then for my day-to-day spending. When I couldn’t pay the whole debt each month the interest mounted up until suddenly I realised I owed huge amounts on credit cards and on my overdraft too. Nightmare!
My first steps to getting out of debt
So, once I saw the nasty figures, I did a few things quite quickly:
- I faced the figures. I got all my statements out, added up the money and got a complete picture of the situation.
- I did a budget. That’s an important part of it because once I knew how much I had to spend each month I had a figure to aim for for ‘survival’. Any money made over that figure could go straight into paying off the debt.
- I spoke to my bank manager….well, I say ‘manager’…he was 22, called Darren and lived with his mum and dad in Bromley so he wasn’t really in a position to advise, but that’s the modern banking system for you. However, he did help by turning my overdraft into an actual loan which was cheaper.
- I looked through all my expenses and worked out what had to go and what I could get cheaper, including gas and electric, phone, insurance and more. It wasn’t so easy to switch then but I managed it with some of them just by phoning around.
Essentially, I woke up out of a spending dream.
It wasn’t nice but honestly, once I had faced the figures and created a plan for myself it wasn’t so bad. It felt like I was in control again – even though I was in debt.
That’s a good feeling!
How I got out of debt
There were quite a few things that I had to do to get out of debt, both in terms of earning more and spending less.
1. I sold everything I could find, including £1K of Halifax shares that I had gained when they were handing them out to savers. That helped to give me an initial push towards debt freedom. I went through books, CDs, clothes and anything I could find and sold them at the second hand shops round the corner. You can see here how to make money on your CDs, books, games and more.
2. I REALLY worked at getting work. I looked for all kinds of ways to make extra money including:
- Babysitting – a nice easy way to make some cash in the evenings. I took my laptop and wrote articles once the children were asleep.
- Focus groups – lovely easy wasy to make cash. Just a couple of hours in the evening here and there and they igive you food and drink!
- Mystery shopping – I mostly used this as a way to get free meals. Very handy at the time.
- Corporate presentation – i.e. handing out leaflets and generally entertaining at events. i joined a couple of agencies and they got me work here and there.
- Journalism – my main thing which I worked at big-time to get shifts at newspapers, magazines, TV and radio seven days a week where possible.
- Writing books – you can see a few of them here.
I didn’t buy anything more than I had to. For example,
- I only bought two items of clothing in the whole year and that was from Oxfam
- I dyed a load of clothes to give myself a new load in different colours
- I swapped a few bits and pieces with friends
- I used up everything and anything in terms of make-up, toiletries, food etc.
- I spent the year looking around my flat for bits and pieces I could sell at the second hand shop and used that money for my supermarket shop
- I didn’t go out unless it was a free event (there are lots of those if you look) or a friend was paying (quite a few were kind and helped as they knew I was struggling). Later on I took them out when I had some cash again.
Really, everything I saved went into paying off the debt. It was great to mark off the hundreds and then the thousands that I had managed to erode.
It’s amazing, actually, once you really go for it, how little you can live on. I do think it’s harder with children – I didn’t have them which made it easier – but even if you have a family, if things are explained to the kids they can join in the ‘saving money game’ which teaches them about money..
What i learnt when i got out of debt
Ooh, it taught me a LOT!
I got more work
For a start, it was while I was in debt that I started to work at the BBC Business Unit (again part of my drive to get more work) and working on money and business reports showed me how straightforward it can be to not only to get out of debt but develop wealth over time.
I learnt that i can live on less
Being forced to live on a LOT less showed me that I could do it and be quite happy on it. That’s not to say that I would want to do it year in, year out, but for a specific period of time (in this case, a year) it wasn’t too bad.
i paid off my mortgage quickly
Once I had got out of debt I carried on living on less than I earned. What I learnt when I was in debt helped me pay of my mortgage in nine years. I learnt that the faster I paid off my mortgage, the less money I would be paying overall so I put my money-saving and money-making knowledge into force with that and was mortgage free remarkably quickly.
it made me face reality
It showed me how worryingly easy it is to tip into debt and how important it is to have some sort of savings safety-net, particularly when you’re freelance. Once I got out of debt I determined that I would never be in that position again. Others had to pay me interest, not the other way around!
it put me off ‘stuff’
It helped to show me what a waste and a burden things often are. I’ve never been that interested in things but, even so, I saw all sorts of stuff around my home that I shouldn’t have bought. Without them I would have had more money and less debt. I can’t say I’ve completely learnt that lesson but at least I’m better than I was.
In fact, that’s one of the things that led me to set up the National Clear Your Clutter Day. I learnt then how much of a burden and a waste of money so much of our purchases are. If we can stop buying things we don’t even want, let alone need, we will be happier and richer.
Have you paid off your debt? How did you do it? How long did it take? How do you feel now you have got out of debt?
Tell me in the comments below 🙂