With my word of the year being more I really wanted to firstly earn more money and secondly pay off more debt. I have now come up with a really good plan to get myself debt free within 24 months with the majority of my debt being cleared by January 2020. I feel REALLY good about that.
Usually when it comes to money and debt I would pay the smallest amount as I was worrying about how I was making ends meet. Being self employed means I have unpredictable income and cash flow so but I also have a partner that works so I know that at the end of the month the bills will get paid and there will be food on the table. It was making more and more sense for me to focus my income in becoming debt free so that the part time wage I am currently earning is my money and actually covers what we want to pay out for, not what we have to.
I did a money makeover where I laid out all my income and expenses, got all my debts balances and worked out a plan on how much I’d need to pay each debtor every month so that I could clear them quicker. Some I was paying out just £5 a month which would take another five years or so to clear! Whilst the amount was small, unnoticable and affordable it was negatively affecting my credit file and actually my self worth was starting to suffer.
I urge anyone that is struggling with their finances to give themselves a money makeover. Get yourself a budget book and write down everything you spend. I split spends up into five categories. They are:
- Food – supermarkets, takeaways
- Bills – regular bills, debts and savings
- Travel – any travel expenses, fuel costs, travel/motor insurances
- Biz Expense – anything I pay out for my blogs
- Misc – covers unexpected payments, purchases or variable cash for that month. Ie things we don’t always buy
At the end of the month I go through and tally up the spends to see where we can save money. The biggest overspends for us are Food and Misc so I’m looking for ways to cut down our costs when it comes to feeding the family and I’m focusing on getting in the mindset of only buying what we need. I’ve got tons of cleaning products that I need to get through and then I’ll be making some more eco friendly and money saving changes. I’m also only buying toiletries when we’re running on empties and we are sharing things like shampoo and shower gel.
I’ve started cutting out on subscriptions we don’t use including two magazine subscriptions, Audible – although I can still use and listen to all the audiobooks I’ve got and my gym membership that I’ve not used since before pregnancy.
When it came to debts I started looking at the smallest ones that were all under £300 and I am happy to say that on 4th March I will be making my last £50 payment to one and in May I will be able to clear off two more. It’s really financially freeing to just pay those off and the burden that was weighing on my shoulders feels a little lighter knowing that it won’t be long until I will feel like I’m contributing to family life a bit more than paying off debts I’ve had since my early 20’s.
The thing is I have more goals that I want to achieve such as a trip to Disneyworld Florida that I need to save for. Paying off debts is like dead money so the quicker the debts are gone the quicker I can start saving for that dream holiday. My partner is also close to passing his driving test and that means a car, fuel, tax and insurance. Whilst he will be saving money not having lessons or using the train to get to and from University, that money will still be tied up in paying for a family car so the more disposable income we have prior to that, the better.
I’ve also set myself a savings goal and so far I’m sticking to it! I am using three methods of saving. The first was getting myself a private pension sorted as I’m self employed. I now pay in £5.50 a month which is a very small amount but again when I am debt free I can really ramp this payment up to make a substantial difference to the future and having an actual retirement fund. I’ve also been saving an increased amount each week so for week 1 I saved £1, week 2 was £2 and so on. I have just added another £8 for week 8 and it’s great to see that building up nicely. I am hoping that by November I’ll have almost £1,000 saved which can go towards loads of fun festive activities for Christmas including a break. The third way I’m saving is through automatic savings with an app called Plum which calculates your income and expenses and deposits small savings that you can access at any time. I am currently using that to save up a bit of spending money for our family holiday in July.
So here are my top tips for giving yourself a money makeover and getting yourself feeling financially free:
- Get a budget book and write down every bit of income and expense
- Categorise your spending to see where you are overspending
- Try to cut out any unused subscriptions or payments
- Focus on buying what you need rather than what you want
- If you can afford it, make an increase to any debt payments you are making including credit card bills rather than just the lowest monthly minimum
- Save something, even if it’s just £1 a week and leave it – an app like Plum can really help if you struggle with working out your finances
- Get your partner on board and involved so they can monitor the household spending too
- Make a plan that does not leave you not being able to afford to make ends meet but will ultimately get you a bit more financial independence in the next 24 months