Debt Free Case Study: Clearing 25k In 4 Months

Welcome to our debt free case study. We are on this journey to clear debt because we owed over £52,000 at the start of February 2018. 4 months later and we had reduced that total to £27,000. Find out how below (may contain affiliate links).

The Beginning

I met my husband in 2002 and we had a whirlwind… shopping spree!!! Ha… and the romance was in there somewhere too. We both worked in the City (London) and lived at home so all of our money went on exotic dates, gadgets, clothes, cars and holidays. When we ran out of money we simply put it on credit. When we ran out of credit we refinanced; and then we spent it all again. You can see where this is going! Sadly I couldn’t. I was blind to our habits for over 15 years. F I F T E E N  Y E A R S!!!! I’ll let that soak in.

Imagine how much interest and payments we made and how much money we have essentially wasted for so long. It is sickening. If we had invested that money for our retirement we would be financially independent by now and still enjoying all the holidays, but this time while being permanently on vacation and debt free. There is so much that I wish I could tell my younger self (a topic for a different post) but this story still has a happy ending.

The Awakening

My ‘ah-ha’ moment came in February 2018. I am essentially a SAHM who does some work at home on the side but it takes up very little of my time. We are lucky that my husband has a great paying job that allows me the luxury of being with my kids at home while they are small. We have more than enough money coming in to pay our way but every week I was struggling to make ends meet. I couldn’t do the math. I spent six months using an online budget app and I still could not work it out.

Until one day I was browsing Instagram for food (another weakness) posts and I noticed that the writer belonged to something called #thedebtfreecommunity. I followed for a while until I finally got around to reading their bible: Dave Ramsey’s ‘Total Money Makeover’. It finally clicked! The money was not the problem… we were! On my part I was spending extraordinary amounts of money each month trying to make other people happy, but all the while I was making myself miserable. Something had to stop and it did.



The Resolution

From that day forward I go over every penny spent with a magnifying glass. We have tight zero based budget (all spare money goes to debt) and food plans (no more waste and multiple takeaways). What made the biggest impact however was actually talking to each other about money. It was very un-British and awkward at first. I carried a lot of guilt about not contributing enough to the household income. I totally devalued the vital role I played and actually the money I saved us in childcare each month. Once my husband was on board we pulled resources and were able to eventually live off half of our income each month. This meant that the other half of our income could be thrown at our debt. At the beginning of February this year we still owed over £52k. 4 months later and that figure currently stands at £27k. Amazing right?

So how did we do it?

  1. Read “The Total Money Makeover” by Dave Ramsey.
  2. Worked and saved hard = 8k
  3. Applied a maternity tax rebate cheque = 2k
  4. Sold our first car = 1k
  5. Returned second car on loan and exchanged for a lease vehicle (slightly controversial, but once again a topic for a different post)= 14k

 

You Can Do It Too!

This is the best news. Anyone can and should start their debt free journey. Once you have worked out where your money is going versus where it should be going, the first vital step is to create your budget. Next you put some money aside for an emergency so that you are not forced to spend on credit on the journey. Then you start crushing the debt, typically smallest first, and snowball those payments until you too are beholden to no one. Once all is done, invest that money into your retirement… then sit back early and enjoy the fruits of your labour.

For further information on how to apply Dave Ramsey’s principles to a UK budget, please check out Charlotte Musha’s helpful blog posts on the subject