My first post begins by talking about getting out of debt and the plan I have selected to achieve this goal. In this post I will cover the following: –
- An overview of how I got into debt.
- What my debt is made up of.
- When I realised my debt problem was serious.
- How I am managing my debt.
- What my plan is for getting out of debt.
How did I get into Debt?
You don’t end up in debt for nothing. There is always a reason behind debt. Sometimes these reasons are beyond your control and sometimes they are of your own making.
My problem with debt started when I was 18. I was new to the world of credit, and I had no concept of interest charges and how to manage repayment sensibly. I took the attitude of buy now and think about the consequences later. This attitude continued for a while and before I knew it, I owed just under £20,000.
I managed to repay this debt and was quite proud of my achievement. This was only short-lived though and I had not learned anything from the experience. Three years later I was back to square one and back in debt again. However on the second occasion, the problem is much worse because I owe a lot more money this time around.
The causes of my Debt
Two things caused my debt, gambling addiction and being irresponsible. Is it my fault that I am in debt? Yes it is, I caused the situation and now I must fix it.
The gambling contributes to around half of my debt, maybe more in an indirect way. I would spend many hours gambling on casino websites chasing my losses and hoping for that one big win to fix everything.
I never won but I thought I could win so I just continued with gambling money that I did not have. The amounts soon added up and I was borrowing money from wherever I could to fund my addiction.
My attitude towards money had not changed either. I could not understand or appreciate the value of it. So what if I am borrowing money to buy that latest gadget. I will pay it back one day. I never did though, but I will now.
It is only now, as I approach the age of 30 that I realise my attitude towards money has to change if I am going to enjoy my life.
What is my Debt made up of?
Now that is out the way, let’s start by getting an overview of my debt. I have included the pie chart from my about page which provides a breakdown of the types of debt I have, along with how much I owe.
So now that you have an overview of my debt, you can see how much I owe. The total is nearly £60,000 in case you are wondering. Quite a lot if you ask me.
Seeing how much I owe means I now have a target to aim for. It also allows me to see my progress as the balance starts reducing. This is quite helpful when you are in debt, as you like to see that you are making some progress, now matter how slow it is.
When did I realise my debt problems were serious?
It was in January 2010 when I realised that I needed to start sorting out my debt. I knew I couldn’t continue on my destructive path and had to do something to put things right. The fact I had nothing to show for my debt was also a sign that things were very bad.
It was also the last time I gambled. I can remember the night quite clearly as the start of sorting out my life. I had spent most of that evening gambling on the slot machines at the online casino. I had managed to spend my entire monthly wage in four hours. Not to worry though, I can just take out a payday loan to keep me going.
I took out a £1000 payday loan from a well-known lender and had the money 15 minutes later. I continued gambling and lost that as well. I can remember the utter feeling of dread, emptiness and panick as I realised that I had no money and bills to pay. At this point I was up to date on all my debt payments.
After going to bed that night I woke up the next morning promising myself two things: –
1. I would stop gambling.
2. I would start sorting out my debt problem.
The most important thing for me was to stop gambling as that was causing me a number of issues from affecting my work and home life to my social life as well.
The gambling was hard to stop because I just kept thinking, “it will be my turn soon to win that one big jackpot. It will solve all my problems”. Thinking back now, the fact was chasing that very jackpot had contributed to my debt problem in the first place.
I had also decided that I would default on my debts. I knew my credit rating would be ruined and I could live with that. I also knew that once the accounts had got to the debt collectors, I would be able to start sorting out a repayment plan.
For the next two years I made payments on and off to my debts but I didn’t have any kind of plan in place. After the two years had passed, all my debts were with a debt collection agency.
How am I managing my Debt?
Despite the seriousness of my debt, I can be thankful that none of this debt is priority debt. Priority debts are the types of debts that carry penalties such as fines, imprisonment or bankruptcy.
I have elected to use a self-administered debt management plan. In a nutshell this is plan that means you make payments to your debts, and that the payment is calculated so that each debt gets a payment proportionate to the amount owed.
I currently have a spreadsheet set up with a list of my debts, including the balance I owe and monthly repayment. This means I can always know where I am up to with my debt repayments.
Dealing with 20 different debts is a challenge, but it can be done with a little organisation. Once you are up and running it is not too bad but the initial set up takes a bit of time.
In the helpful links section of this blog, I provide links to various organisations who can help you with managing your debt. I did consider using the Consumer Credit Counselling Service, but felt I was confident enough to sort out my debt problems on my own.
What is my plan for getting out of Debt?
As I mention above, I am using a debt management plan in order to sort out repayment towards my debts. This means that so long as I keep making my payments on time, I shouldn’t get any hassle from the debt collection agencies collecting the debts.
On top of this though, my aim is to tackle some of my smaller debts with a larger payment. I owe money to 20 different companies so reducing this number will help as it is quite a lot of work managing and tracking everything.
I also try to make savings on my monthly expenses where possible, and use these savings to pay towards my debts. I estimate that it will take me around six years to repay my debt.
Over the coming months, I will share a lot more information about debt on this blog and I hope it is useful to you. In the mean time, thank you for reading.