For lots of people who have debt, how they got there is a bit of a mystery. It’s like when you go to work and you’re really tired and you realise you don’t really remember the journey.
I had a fundamentally broken relationship with money. I didn’t understand what it meant to live within my means and I always felt that things would be ok when I earned more money – rather than finding a way to fix things as they were.
I had my first child when my husband was 24 and I was 25. We didn’t plan for that – then we got married and had a second baby. These are all things that take a toll on your finances. We also rent privately and have had to move (and pay letting fees) regularly. That said, I think all of that would have been ok if we had a handle on our finances.
It all culminated in a conversation with my bank last March where I’d been juggling small amounts of money from one account to another to try and plug all the gaps – then I realised it was the end of the rope. There was nothing left to move around; there was no more give. The person I was speaking to at the bank kindly refunded some account charges which took me back into an arranged overdraft and stopped me from incurring more fees. When I got off the phone I realised that this was as far as I could let the situation go. It was taking such a toll on my mental health, my relationship, and my work life. This is one of the biggest misconceptions about money – that it’s something separate from our everyday lives – and it’s not. It’s something that has its tendrils everywhere. But I also realised that if you are open and honest about your situation, people are willing to help you.
It can be a very emotional experience to lay all your cards on the table – it was for me because I’d had my head in the sand for so long. When I found out the extent of my debt, the scale of the situation felt like too much to deal with by myself – that’s why I started the (then) anonymous Instagram account @myfrugalyear.
Instagram, especially during my second maternity leave, had been a real source of emotional spending and comparing myself unfavourably with other people online. So it felt like poetic justice to use that same platform to change things. I thought I’d have maybe a couple of dozen followers, but it turned out that lots of other people felt the same way about Instagram and emotional spending so it gained a lot of traction. Quite quickly I had a few publishers get in touch about turning the experience into a book. The whole experience has been a testament to what can happen if you’re open and allow yourself to be vulnerable.
A budget is not a diet. No matter what your financial situation is, whether you’ve got debt, savings, or you’re somewhere in the middle. A budget isn’t like a diet, it’s not there to say no to you, be punitive, or restrict you. A budget should be something you live with and all it really means is you know what’s coming in, what your fixed expenses are, and it helps you decide what to do with what’s left over. This has been key for us and helped us feel in control, even though we’ve still got some debt. We use a spreadsheet with income on one side and outgoings on the other. If you’re not a fan of spreadsheets, there are lots of different apps you can use for this.
I use Money Dashboard which gives you an overview of all of your accounts so you can see your net balance. It also lets you set budgets for things like food shopping and treats so you can see where you’re overspending. You can also look back – one of the things that’s really handy when you’re just starting this journey is looking back over six months worth of spending and seeing where you could afford to cut back. We felt that we were doing all that we could but there were definitely things where, when we looked back, we could see we hadn’t got value. For some people, that’s not possible and, if your outgoings are more than your income and there’s debt involved, you should speak to an organisation like StepChange. Youneedabudget is also great – it’s a paid app, but people swear by it and the net benefit is really good. Emma and Yolt are both also great apps for keeping on top of your budget. I’d recommend downloading them all, seeing which interface works for you, and then sticking with that. Often if you feel out of control it’s tempting to flit from one solution to another – but it’s better to pick one and stick to it.
Another part of your digital toolkit should be saving. I’ve always been someone who struggles to save. Often, when you start working on a low salary, you think “I’ll save when I can afford to” – but for me this turned into “I’ll save when I can afford to buy absolutely everything I want.” If you struggle to save and want to save for something big like a deposit, having a standing order that goes into savings as soon as you get paid is much more effective than saving what’s left at the end of the month (as often there’s nothing left). If you just want to put away little bits here and there for Christmas and holidays, incremental savings apps like Chip and Plum are really good. They work by siphoning a little bit off every few days – I’ve been using Plum for a few months and haven’t noticed the money being tucked away. With any app, always check that they’re FCA-approved (as Chip and Plum are) as then you have the same level of security and encryption as you do with your bank.
As well as saving, it’s important to talk about investing. Women – and especially women under 30 – don’t tend to invest their money. With both Chip and Plum you can choose to invest a percentage of your savings and it’s very straightforward. Moneybox is another great, accessible app to learn about investing.
For me, the value of building something positive, even while you’re getting rid of something negative has immeasurable psychological benefits. Building something, even if it’s something small, while I’m still tackling debt and filling in the foundations of my financial situation has really shifted my relationship with money. As well as the psychological benefits of saving while paying off debt, there are a few practical benefits. If you’re putting all of your disposable income into paying off your debt, you’ll need to put any emergency expenses on a credit card which can be very demotivating. Your creditors can also slash your limit with no notice, which could leave you in a pretty tricky position if your boiler breaks, for example. I’d recommend you build up a small, easily accessible emergency fund.
This phrase conjures up the image that you’re in this deep dark hole with no way out. It’s definitive because you’re saying “I AM in debt.” It makes it sound like it’s a part of who you are. You don’t say “I’m in a mortgage”, you say “I have a mortgage”. For me, that tiny shift in language has been transformative.
It can be really easy to set yourself up to fail with a meal plan. If your meal plan says you’re going to make every meal from scratch every day, but you know in your heart that you don’t have the time, energy, or resources to do that, you’re going to buy food that you end up wasting. Since switching to a more realistic meal plan that reflects our actual life, our food waste has gone down massively. It’s natural to be optimistic when making changes in our life, but always remember that you’re the one who’ll have to implement these changes!
I would definitely recommend you use a specialist broker if you’ve got special circumstances. Vestpod is a fantastic community on Instagram for this kind of question. Halifax are also consistently flagged as one of the more sympathetic lenders.
I know lots of people who have got mortgages with a reasonable amount of credit card debt. However, I think lenders are going to be more cautious following the pandemic, so there could be a lower chance of getting a mortgage with credit card debt. It really depends how much debt you have and depends on your salary and affordability in general. It’s worth speaking to an advisor to see whether they think it’s worth using some of your deposit savings to pay off a certain amount or all of the debt and waiting a bit longer to buy.
If your credit score is ok, you might be able to get a 0% balance transfer. However, not everyone will be eligible for this (I wasn’t!). Usually there’s a small fee but it’s massively outweighed by the benefit of not paying interest. It involves taking out a new card, transferring the balance, and closing the old card. If you’re not feeling in control of your spending and you haven’t done the groundwork of setting a budget and assessing why you’re in the situation you’re in, you can end up maxing out the 0% card and continuing to spend as before.
Another thing you can do is call your provider and ask if there’s a lower interest rate available to you, or if they’d be willing to freeze your interest for a few months as a goodwill gesture. If you’re paying a high rate of interest and only paying the minimum repayment, you’re probably just paying off the interest and chipping away a tiny amount off your capital balance every month. If you can reduce the interest or get a reprieve from that it can be a nice bounce in the right direction.
When I recommended people do this on Instagram, lots of people fed back that they had their interest rates reduced – some from 25% to 6%! If they can’t reduce your interest, it’s worth pushing a bit more and asking what they can do to help you pay off more of your capital balance. Barclaycard have done things like freezing interest for two months or refunding a month of interest.
At one point, I had six different credit cards with different providers, who were all helpful in varying degrees. In my experience, Barclaycard’s customer service has always been top-notch and they always tried to do what they could to help. American Express and Virgin weren’t very helpful. Halifax were quite reasonable – I have my current account with them which sometimes makes banks more willing to help you. It can also depend on the advisor you get. If you feel like the person you’re speaking to doesn’t get your situation or is being a bit judgemental, don’t hesitate to ask to speak to someone else. Going into these conversations, it’s a good idea to write down what you want to say and what you want to get out of the conversation. These conversations can be very emotional so having a plan can be really helpful.
This is something I’m just starting to do with my five year old. It’s really important to me that my children grow up to have a better relationship with money than I did. My parents are fantastic but there was a definite gap in my upbringing in relation to financial education. Pocket money is a great way to teach children about money – it encourages them to save for the things they want and teaches them that they can’t have everything they want immediately.
This is a huge thing for lots of people and it’s a big section of the book. Spending on credit – whether it’s a credit card or something like Klarna – you separate the pleasure of buying from the pain of spending money. You can end up in dangerous financial territory that way.
Before you start scrolling online or before you go into a shop, ask yourself “Am I shopping to try and quell a feeling?” Lots of my emotional spending came from a place of anxiety – I was anxious about something I couldn’t fix, so I would look to buy something to fix that problem, or another problem, or a totally made-up problem. Be mindful about money. Ask yourself how you’re feeling and, if you are trying to solve a feeling, step away and try to solve that feeling first. The next question is: “Is the thing I’m buying now going to solve the problem?” If the answer is no – step away. If the answer is yes, the next question is: “Can i Afford it?” If the answer is no – step away. It’s a cycle – you feel awful so you spend to feel better, you feel momentarily better and then experience the negative effects of that – more debt, less savings, and then you feel terrible again. These questions are circuit-breakers and you can use them to stop you from progressing to the next stage.
Lots of people are feeling bad about themselves for not being prepared for this situation financially. No one knew this was coming so try to move past those feelings of guilt and shame over not having the funds to ride this out – because loads of people don’t. The concern about accruing debt is definitely legitimate, but banks have brought in 0% overdrafts up to £500 for people who need a temporary reprieve, also, if you have to take on a little bit of debt to get through this global pandemic, it’s not the end of the world. You will be able to pay it back when things return to normal. 11 million people have taken on extra debt since the start of this pandemic – you’re not alone.
You can stay up-to-date with all of Clare’s personal finance recommendations by following her on Instagram @myfrugalyear
Her book Real Life Money is also available to buy now.