A few days ago I wrote that for every two steps I take forward, I appear to suffer being pushed back three. I could not see any way out of the situation I was facing, and it started to eat me up from the inside.

I am a naturally pessimistic person and automatically assume the worst of any given situation or list of potential outcomes. When the second “we don’t have any money” email came out from the Big Boss at work, I concluded that redundancy was only a paycheck or two away. It may well be, but I don’t know that. It could conceivably be a year or two away. Equally I may escape redundancy altogether. It’s entirely an unknown quantity right now.

I saw my goal of debt freedom within my grasp. After freeing myself from consumer debt, I had planned to speed-save my way to paying for my divorce when the bill finally comes in and then starting to save for my future. Everything was going to plan until those darn emails. Debt-freedom suddenly vanished.

If I paid my debt off in November when the spreadsheet said I could – but then get made redundant – I won’t be able to pay my solicitor. Net result: Still in debt.

If I carry my consumer debt but set aside a proportion of my savings  I have to pay my solicitor when the time comes – but then get made redundant – I won’t have enough to pay the settlement fee on my loan. Net result: Still in debt.

Whichever way I regurgitated those scenarios, I came out with the same result. This virtually demolished all the emotional building up I’d given myself over the past year in short order. I felt (and still do to a degree) like I was back in December 2008 again: Out of time, out of options, and despite all my hard work, still out of money.

Then I read an article over at The Simple Dollar while randomly surfing. I don’t remember which and didn’t have the presence of mind at the time to bookmark it, so I am sorry I cannot share the origin of my epiphany with you. But it provided an amazing idea to me.

If I carry my consumer debt but set aside a proportion of my savings to pay my solicitor – and then get made redundant – I can claim on my Payment Protection Insurance! I am uncertain if the cover lasts for 12 months of payments or “until employed again” (I need to read the small print), but either way, it’s a winner. If they will cover 12 months of payments then my end-insurance settlement will be somewhere around the £4,000 mark. I will have that in savings even after paying off the solicitor, with any luck.

My perception shifted.

My goal is now to become notionally debt free, even if I don’t make it happen the moment it becomes theoretically  possible. When (if?) I get comfortably beyond a positive net worth, then I will consider actually making the settlement payment. Until then, I will keep my final piece of consumer debt. The insurance on it may perversely provide a lifeline allowing the payment of another, future debt.

So thank you Trent for indirectly providing me with the idea of how to dig myself out of a hole that has not been dug yet except in my head. But having the rope and tie-off point prepared should it happen is very comforting.

The take-away lesson from this is, I guess, however bad things seem – with enough effort and help from your friends, there is always a way out to be found.

• 10 Economic Predictions for 2010
• Dig Yourself Out of Debt: Spend Less Than You Earn
• A Warm Welcome to BBC Radio Listeners
• Six of the Best! September 2009
• Credit Card Analysis: From Hell to Heaven

This is part 3 of the Meltdown Monday series. You can catch up on part 2 here.

My solicitor (it still feels weird saying that) gave me a bit of a grilling about my personal finances, and how stupid I’d been to have been taken for such a ride in the first place. I think he felt sorry for me in a way, and I’m glad he said what he did. I walked out of his office very depressed, but inside me something clicked. I suddenly became very determined to beat my debt situation and turn my life around. I’ve since discovered this is commonly termed your ‘Light-Bulb Moment‘, particularly by the folks over at the money forum I frequent.

When I got home, my drive was still there to do it. I went over my bank statements again, except this time concentrating on my own spending; Every month there was hundreds of pounds of unnccessary spending of my own doing on there. Expensive organic food shopping, premium diesel, takeaways, gadgets, insurances and more. I was also paying off 2 credit cards and 3 personal loans with wildly varying interest rates, so I needed to work out what I owed and to whom. I worked up a spreadsheet (budget) of my essential spending, and vowed to cut out everything else, trying desperately to spend less than I earned. I drastically cut spending even on essentials: my food shopping allowance to myself dropped from an average of £300 a month down to just £50, my diesel average spend had to drop from £250 as that was an insane amount of money just to spend on getting to work and back.

Then, it was time to attack my debts.

One credit card I’d ignored for the best part of 3 years: it refused to work in the petrol station one morning and I buried my head in the sand from that point onwards. I assumed that as I was paying upwards of £100+ a month on it, the balance must be shrinking. Instead – after biting the bullet, phoning them and resetting my access details for online banking – it turned out I was over my credit limit and had been incurring £16 fees every month for the privilege for the last 3 years! I was also paying interest on these fees every month, so my balance was going up not down, despite my payments. £120 was taken automatically from me every month, but after £90 interest was added, £20 Payment Protection added, and then a £16 fee on top,  my monthly repayments were not touching the balance at all.

Despite this, my credit rating was still good. I arranged an appointment at my bank with a financial adviser and went down with my tail between my legs a few days later in the frigid January morning air. I’ve been with my bank since I was 12, and I honestly believe in this instance, loyalty paid off. I explained my circumstances, was brutally honest, and despite the bank earning loads off me, the lady I saw was keen to help me. She consolidated my existing loans (one at 19% APR, the other at 12% APR) into one loan at a much more preferable 8%, and said I was also showing as pre-approved for the Barclaycard Platinum card that carried a 15 month 0% balance transfer for new customers. She said it was unlikely I’d get a great initial credit limit due partly to policy and partly my existing credit commitments, but anything would be better than nothing for transfer purposes. She also made a point of saying that I shouldn’t be tempted to spend on the card, as despite it having 0% on new purchases for 3 months, the terms of the card meant my balance transfer would be paid first, meaning I’d be stung for interest on the purchases all the while any transfer remained.

Honest advice from a bank – how terribly refreshing!

I walked out instantly having saved £55 a month in loan repayments, and shaved 12 months off the term. Even better was the payment holiday the loan gave me to begin with; 2 months with nothing to pay. I needed this, as it helped me work out where I was without worrying I would end up in my overdraft again.

Shortly thereafter my new credit card arrived with a £1,000 limit. Not great, but £1,000 at 0% is better than £1,000 at 16.9%, so I transferred what I could off my old card onto the new one, and planned to pay off the remainder as quickly as I could. The other credit card I paid off and closed instantly, as it had a surprisingly low balance already. I upped my automatic payment to £400 every month, and made an immediate one-off payment to get me just under my credit limit again to stop the charges. For the first time in 3 years, my credit card balance would reduce on the next payment!

I felt terribly alone at this point. Despite having a good relationship with my family, it’s not a topic I personally feel comfortable discussing with them in great detail. I wanted to feel part of a group in my fight, and to know I wasn’t alone. I mentioned debt to a trusted friend at work and he introduced me to Money Saving Expert (or ‘MSE’ to its friends). The website is a goldmine of information, but the forums are the real feature; Thousands of helpful people from all industries, sectors and walks of life combine together to cut bills, reduce outgoings, help the environment, help each other and play big corporations at their own games. I was hooked instantly – I felt like I belonged – and with their help, I planned my way out of debt for good.

Quite arbitrarily, I set my Debt Free Day as New Years Day 2010. I knew I would struggle to meet that goal, and struggle a lot. I owed £16,000 (if I included my overdraft), or potentially £20,000 (if I include my projected divorce cost), but the difficulty of it is in part why I chose it. I work best under pressure, and it was a significant date, too. It was almost exactly a year after I moved out of my old home and back in with my parents, and it also signified a new beginning: A new year, a new decade, and a new, debt-free me.

Since that moment, I have been working every possible hour of overtime humanly possible, and saving every penny after paying off my debts according to my own plan.

Continue to Part 4…

• My Final Credit Card Payment Coming Due
• The Importance of Redundancy Planning
• Credit Card Analysis: From Hell to Heaven
• 7 Reasons My Friend is Poor
• Is Debt Worth It? Does It Matter?

This is part 2 of how this blog came into being. You can catch up on part 1 here.

As I sat in the empty house alone, I was so close to jumping in my car and using the remaining quarter-tank of diesel to get to Beachy Head (see inset picture) to jump off and end it all that it still scares me today. The one thing that kept me from doing it was my mum.

I used to have a fantastic relationship with my natural parents, but since getting married in 2005, both relationships had taken a tumble. It wasn’t that I loved them less, it was just visiting them would cause arguments with my wife. In the end, it was easier to not visit. This sounds terrible now, but it made sense at the time; I don’t think I actually spoke to my dad for almost 2 years towards the end of my marriage. What kind of son did that make me?

Mum kept in contact by text message, and I’d pop round in secret occasionally, while my wife slept. When I told my mum where I was on that cold winter day: practically homeless, a marriage in tatters, up to my eyeballs in debt and wondering about the purpose of life, she saved me there and then. “Come home, you’re always welcome here”.

And that’s what I did. I boxed up the few possessions I had, and moved back home.

My mum and step-father made me visit a solicitor a few days later to discuss my divorce and my financial matters. As it was I didn’t know how much I owed, to whom, or on what terms. All I knew was that according to my wife, I never earned enough and I was always in my overdraft not long after being paid. This was always a shock; I’d work more and more overtime to try and get ahead, and always end up with the same result. One month I cleared almost £3,000 after tax, yet still kept falling backwards.

Perhaps I should have taken charge, demanded to see my account for myself, but I didn’t have any reason to believe what my wife was saying was anything but the truth. Marriage is about trust, after all.

It was only after I moved back in with my mum that I cracked open a small pile of bank statements I’d found while moving out, checked online banking, got to grips with my credit card bills and loans that I managed to take stock. I owed personally, just over £15,000. Fifteen thousand pounds. That was a massive shock. But, by all accounts I was in a better position than of my wife; it seems she must therefore have owed £35,000 if our joint was somewhere around the £50,000 mark. But the true horror came as I discovered for the first time why, despite being on good incomes, we were so immensely in debt.

My wife was an online gambler. I knew she played the odd bingo card online, but I didn’t know the precise level of her play. It appeared that when she had emptied her account she’d start on mine, or vice versa. I was finding hundreds upon hundreds of pounds leaving my account to various gambling-related websites month in, month out. When we didn’t have any money left, she’d use my credit rating to get loans and credit cards to top us up. And so it continued and continued until both our paychecks were going on servicing interest payments and nothing else. No wonder our relationship failed, in hindsight.

And worst of all, until that point, I didn’t know why it had failed.

So, on advisement, I registered my separation with my solicitor in January 2009 and began divorce proceedings. It hurt to do it, but felt good at the same time.

The first positive, forward step I had taken in my life for a very long time.

Continue to Part 3…

• Dig Yourself Out of Debt: Cleaning Up
• A Humble Return
• My Net Worth Update - Sep 2009
• Why Rate Chasing is Worth It
• The Credit Crunch Has Positives