Paying Off Debt – Update

Back in March I wrote about how, as a family, we are doing all we can to pay off debt, improve our financial situation and improve our credit for the future. In November 2018 by debts with collection agencies was £4,060 and credit card debt was £930. We were also in arrears with our rent of about £300. The situation was looking pretty tough to be honest.

Then in March I noticed there was an improvement in my credit because I was able to get out another credit card and one of my lenders increased my limit. I know it’s not smart to rely on credit cards however I also know having them increases your credit in other areas when you’re responsible with them. I have not been in the past and I am determined to change that. March and April actually ended up being pretty tough for us as our tax credits and housing benefit were both temporarily stopped again because of overpayments which have now been corrected so thankfully those credit cards helped out a lot. Adam’s student finance payment in May has also helped out a lot for clearing the rent arrears that amassed during March and April.

At the start of March I felt really good because a couple of debts had been paid off, our tax credits were coming in and our council tax bill was paid on time and in full. In fact they even issued a refund. Then I had a collection letter from a magazine subscription that I’d cancelled, our rent increased by £40 a month and our benefits were stopped because of an overpayment when Adam changed jobs and my tax return was completed in January. I also had a sky bill come up despite not being with sky for around 4 years. This was for £37 so I just paid this off in one go because I didn’t want to drag the payment out. It was stressful and frustrating and difficult so the credit cards were overused to buy food, sort Felix out with a new pushchair and pay off the rent arrears. We also used credit to finish paying off our holiday in July.

I was devastated that I had to use my savings. I only had £70 but I am so terrible at saving money that I really felt like I could have a good amount saved for Christmas. That’s now gone and I have been unable to save anything since. I have continued to pay into a private pension but have reduced that to £5.50 a month and once my debts are cleared and my minimum credit card payment is lower I will look at raising that to a significantly higher amount.

Our steps for building a financially stable future by paying off debt.

However, I do have some good news as I have continued to make substantial payments to my debt collection agencies which has seen a nice big drop. One, however, is a little frustrating as its with the water rates. Every year the water company pass on my bill to the collection agency and it gets added to there bill so on of my debts despite paying £50 a month, the reduction is not huge.

Debt 1 – (was debt 5) was £350 I owe £95. I will clear this by the end of June 2019.
Debt 2 – (was debt 1) was £570 I owe £377.50. When debt 1 clears I will increase this back up again from £20 a month to £63 a month so that this will be cleared within 6 months.

Debt 3 – (was debt 7) was £750 I now owe £433.53. I currently pay £20 a month on this. In December with both Debt 1 & 2 clear the balance will be around £314 so I am hoping over the course of the next six months I can make a few larger payments on this debt to bring it to an affordable amount by December 2019. My aim is to close debt 3 by February 2020. However, my aim is to be debt free in 24 months so I want to be clear of debt by January 2021 so should any financial situations change again I still have plenty of time to get rid of this debt.

Debt 4 – (was debt 6) was £1750. We actually manged to get this to £1300 until the water rates were added back on. I now owe £1550. I pay £50 a month however I am hoping, as this is a shared debt that happens to be in my name for the flat I share with Adam, that in September and January he can make a few larger payments from his student finance so we can really get this balance much lower.

Thankfully though, that is it. I have reduced 7 debts down to 4, very soon to be 3. Each time I pay one off part of me thinks to hold on to the money but then the relief I feel actually clearing a balance and seeing ‘account closed’ makes me feel so much better. My combined agency debts are now £2,456.03. Since November 2018 I have paid £1,603.97/£4.060.

Credit cards are a different matter though as I now have three. I am going to continue paying as much of the balance I can and using them responsibly to work on getting the balances down. One thing about credit cards is that if it’s money I need, I can still access it. I can’t access a payment on a debt. So the goal is to just keep making bigger payments than the minimum owed and interest so that the monthly minimum comes down.

Credit Card 1 – was £290/£300. I very nearly cleared this and then the credit limit increased and then we had all the problems so it was used quite heavy handed in April. The balance is now £1,253.93/£1,550. The minimum payment was £46.63 but I managed to make a boosted payment of £83.48 this month. I will wait and see what my statement says for next month but I have a direct debit set up for £50 a month regardless.

Credit Card 2 – was £640/£700. Balance is now £577.99/£700 and I will continue to pay £40 a month. As this card is my lowest balance I am trying to make extra payments as and when I can to try and clear the balance quickly. This month I was able to pay an extra £50.

Credit Card 3 – £779.18/£1000. Another high balance because I used it a lot in April to clear rent arrears and basically live on. I really didn’t want to use this card as much as I have but needs must. I have a direct debt of £50 set up for this account. I also have a card set up so when the interest is debited from the card of around £20 I try and pay that back straight away.

My total credit card debt has increased to £2611.10/£3250. My aim for this is to get my credit card debt to £2,000/£3250 by December 2019, £1,000 by December 2020 and by January 2021 I want to be using my credit cards for small, regular purchases that I can clear within the next statement month.

So despite the amount I owe increasing since March 2019 my credit score is improving, more accounts are being closed and things are looking pretty promising financially. The credit card debt is high but I think I have a good plan in place to get that to a smaller amount by the end of the year.

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