A British Man's Take on Debt, Saving & Investing

My Financial Meltdown: Part 4

Posted on September 14, 2009 by Lee

This is part 4 of the Meltdown Monday series. You can catch up on part 3 here or start at the beginning with part 1.

I didn’t know it at the time, but organising your finances takes a lot of time and effort. I must have spent at least a week pouring over my bank statements figuring out where all my money was going. I had at least got to grips with who I owed, and how much I owed them. I didn’t know it at the time but this is the very first step to getting out of debt: Know what you owe.

I bumbled along for a few more months. In April I went on holiday to Cyprus with a friend because “I deserved it” and “I needed the break”. Looking back it wasn’t a bad look-after-me decision, but it was a bad money decision. I didn’t spend any money I didn’t already have, but it was money that would have been better put towards my debt. About a week into the holiday I promised myself that the £2,000 I’d likely spend in total was going to be my last conscious bad money decision.

When I returned home, I went spreadsheet crazy. I created a budget based on what I was spending having had my original thought to reduce my outgoings some months before. Then I went to see where I could save even more. By tweaking down the numbers and making myself think that was all the money I had, I started to spend even less. Money freed itself up for more and more debt repayment along the way and I could start to see debt freedom approaching. New Years Day was no longer an unattainable dream but a real possibility.

By the time I’d finished tweaking I had over £1,000 a month appearing as disposable income, based on my net take-home salary. If I stuck to my “do every piece that comes” overtime strategy for the year that would increase significantly. Not bad considering in November and December 2008 I was sinking fast into my overdraft and approaching the hard limit of the bottom.

I learned a few weeks later that my wife had, under the sheer pressure of her debt mountain been declared bankrupt. I suspect at that point my credit rating took a big hit as we were financially linked, courtesy of a joint loan we had taken out when we got married. That had fortunately been settled prior to us parting ways, but I needed to find out how to get the link between us severed before I applied for credit again. In all likelihood I’d get turned down for buying a chocolate bar on credit at this point, nevermind anything bigger.

I had mixed feelings about learning this. As much as I tried to be jubilant or consider it “revenge” as my friends and family encouraged, I couldn’t bring myself to feel that way. I was upset for her and what it meant for her in the long run. Going bankrupt is akin to financial suicide for a minimum of 6 years, and for life in certain respects such as buying a house. I would not wish that on my worst enemy, and certainly not someone I had in the beginning, loved very dearly.

And so we come to ‘now’. It’s approaching the middle of September 2009 and I’m on target for paying off my debt earlier than planned, if all goes well. I have paid off my Egg card entirely and have slightly over £200 remaining on my promotional 0% balance transfer. The loan I took out to replace the others is front-loaded, so I am saving like crazy to pay that off before my big day (in a high interest account of course). My divorce continues to rumble along in the background, rearing its head occasionally, courtesy of solicitor ping-pong.

And Five Pence Piece was born.

I had not intended to start a blog, and indeed didn’t until the middle of last month. I started to really get into some American Personal Finance blogs such as The Simple Dollar, No Credit Needed and Five Cent Nickel. These guys are all dedicated, hard-working folks who not only tell us their stories, their dreams and their hurts, but also try and educate us in the murky, difficult, confusing world that is personal finance. None of them claim to be experts (and none of them are), but they’ve all “been there and done that” and are willing to share their experiences along the way.

I wanted to try and so the same, but provide an insight into a UK journey of debt to prosperity, concentrating on UK products, UK issues and UK services. I want to help fellow British people get out of debt and free themselves from the consumer society we now live in. It’s almost never too late to realise that the things we own do not define who we are; who we are inside defines our outside. I want to be rich, but I know it’s a life-long road to get there and I’m not afraid of the hard work required.

As I say at the foot of every page on this site: Live according to your means, not up to your expectations.

You’re welcome to join me on my journey.

I’ll be honest when I make a mistake, to save you from making the same one. When I find a product, service or strategy that is useful, I’ll share it.  As you can probably tell from this series of posts, my first tip is contained within. Family finances should be discussed openly, honestly, and jointly. Agreement must be reached that both partners can live by.

If you’re not honest with each other then any relationship is destined to fail before it even gets going.

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Did you enjoy reading this series? Did it teach you anything? I’d be pleased to engage you in the comments.

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Category Debt, Family, Money Management, My Meltdown
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10 Comments to “My Financial Meltdown: Part 4”

  1. Jen says:

    Lee,
    You were right about bankruptcy. It makes you ineligible for any major loan for at least the next five years, and it is a very embarrassing situation to be in. Did you finally sever your finances from your ex-wife’s? Was the process complicated?

    • Lee says:

      Hey Jen,

      I did manage it in the end, thankfully. I’ve put together a little “howto” for the 3 main Credit Reference Agencies in the UK and it’ll be published tomorrow, as the process wasn’t entirely simple!

      Regards,

      Lee.

  2. Hey Lee,

    If you don’t see your site up on my blog roll by Wed, pls shoot me an e-mail and remind me!

    Thanks for sharing your history. It’s great that you are on track to pay off your debt faster than expected!

    This is the article I was referring to on MoneyNing “Property Makes People Think Irrationally”

    Cheers

    • Lee says:

      Cheers Samurai!

      Thanks for the link to the post concerned. I left my thoughts, but it boils down to “he’s mad”. Sometimes the pull of consumerism takes over any sense of restraint, even for PF-addicts it seems.

      Lee

  3. Hi Lee,

    Great story (or not as the case may be!). This is a story which is being played out in thousands of households up and down the country.

    It’s a valuable, although painful, lesson and I am glad there is light at the end of the tunnel.

    Don’t put all efforts into just clearing your debts though – make sure you have some “me time” and treat yourself occassionally.

    Simon

    • Lee says:

      The way I look at it Simon is there is no time to be resting, treating yourself or having “me time” when you owe other people money and want to get out of that situation. When you have no debt (excluding a mortgage) then that is the time to be able to rest and relax!

      I’m an “all or nothing” kind of chap so this is the method that works well for me. It may not work for everyone, so those who need time out can budget for it if there is sufficient surplus to do so.

      Welcome :)

  4. Ame says:

    In a weird way debt helped me to become a saver.
    I set up the smowball spreadsheet for my small credit card debt – thanks to MSE debt forum too.

    1. monthly payments that I was comfortable with,

    2. irregular payments (money saved from food shop specials,also
    paying the months cc interest figure and rounding up the pence etc.)

    3.A smaller amount as an emergency saving fund (essential IMO to stop using credit).

    Then when cc was cleared used the same method to build up various savings.

    Making payments as fast as you get the money reduces the interest charges.
    Give yourself permission for a small treat when you reach a specific target
    - you do need to be sensibly kind to yourself. There is a lot of help out there
    - and don’t forget to pass the info on to your friends.

    Good post Lee

  5. Lee says:

    Hi Ame :)

    Isn’t MSE great? I’m not sure where I’d be now if it wasn’t for Martin, to be honest. “Passing it on” is one of the reasons I started this blog – I love helping others and telling my story helps set the scene.

    I’m glad your ‘LBM’ turned your finances around for the better!

    Lee

  6. Ame says:

    Thanks Lee,

    I have so much respect for those who have cleared their frighteningly high debts and those who are still slogging away at them. They need all the support and insights they can obtain. I know from my reading of various blogs like yours and forums how helpful the information can be. Seriously, as you yourself wrote desperation can make people think the unthinkable – one good word can sometimes be the catalyst to turn that persons life around. Kudos to all.

    You can cook too I see :)

  7. Lee says:

    You’re spot on Ame – it just takes one sliver of hope to make all the difference. Looking back at those times, I can’t even begin to make sense of where my head was. The thought of suicide makes me shiver now, it just isn’t something I’d ever consider. Back then though, it seemed a logical way out. Scary. Very very scary.

    As you might have noticed, I love cooking! :) I must post up some new recipies, I’ve been working on some fun ones lately! Watch this space.



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