I managed to rack up a pretty big debt when I was in my 20’s. I had a sizeable bank overdraft and credit card debt to my name and was wearing a pretty big - albeit stylish - pair of blinkers about the whole thing. Why would the bank give all this credit to me if they didn’t think it was ok?
What started off small, snowballed over time. I thought that as long as I made the minimum payments, I was managing things ok but in reality, I was barely making a dent in repayments
My big wake-up call was when my partner (now husband) suggested we go on our first holiday together. The delight at being asked subsided into panic when I realised that unless we were planning to get there on foot and stay somewhere for free, I wasn’t going to be able to afford it.
Facing the issue head-on
I had to own up to this and it led to an excruciatingly embarrassing conversation. I was working full time in a good job, and based on all outward signs, had money to my name. I treated money like an infinite resource. No shortage of clothes, going out as much as I liked and basically buying anything I fancied.
Even worse, I haven’t kept any of the stuff that created my debt. So not only did it cost me more at the time because of all the interest I accumulated, NOT ONE ITEM has been kept. I didn’t buy anything of lasting worth that is still useful today.
Ok, so it was a long time ago, and arguably I wouldn’t expect to have kept absolutely everything. But the point is, some of the items weren’t even kept for as long as it took me to clear my debt, which took around 6 – 8 months to fully pay off! It seriously makes me question my own common sense and motivations at the time.
Changing my mindset
So, what changed to get me out of debt? The mindset and behaviour that got into me into debt was not going to get me out if it. I needed help, even though I didn’t realise it at the time. It was easier to ignore/accept things and keep spending the way I was rather than confronting anything. To be honest, I didn’t even see it as a huge problem, until the subject of going on holiday was raised.
What changed was someone else getting involved. Someone with a different attitude and behaviour around money, who helped me by coming up with a simple, workable plan I could stick to and giving me the motivation and support to carry it through.
The card got cut up. I worked in a job where I could apply for overtime and I put my hand up for all the weekend shifts I could and put all the extra pay against my debt. I was also really lucky that my dad was able to give me an interest-free loan to pay off some of the debt, plus some breathing space before I set up the automatic payments to pay him back.
I also cut back significantly on day to day spending and put most of my fortnightly pay against the debt. It was a pretty lean time for a while, but it was absolutely worth it in the long term. In fact, it totally changed my outlook on budgeting. The three key lessons I learnt from this situation were:
Before I committed to following the plan, being in debt felt like such a natural state, I couldn’t imagine being able to afford to do stuff with my own money. But then, with some discipline it felt like magic – I was paying back debt AND slowly but surely starting to save up for cool stuff (like going on holiday).
Managing my spendy ways
I’ll admit, I still haven’t totally scrubbed out the mindset that got me into trouble in the first place. But having experienced the amazing results that can be achieved if you have a solid financial plan in place, a support person and ability to stick to it, I now make sure I have strategies in place to manage my spendy ways.
Yes, I was lucky to be able to earn some extra money and get an interest-free loan to pay off my debt faster. But even without them the plan would have worked. I fully recommend getting help from someone you can trust, who knows what they’re doing and cares about helping you. In fact, my real lucky break was having someone who could, and wanted to help me, in my corner. I didn’t have the right mindset to sort it out myself, and the ongoing support and help I got from my partner was what made all the difference. And it still does.
If your story is similar to mine, there’s no shame in asking for help. If you don’t have a friend or partner who can help you, get in touch with a professional financial adviser or mentor. Get help to come up with a plan, and then stick to it. It can make all the difference in the world.