Getting the balance between paying debts and enjoying life

[JPWG2450]

Hi everyone
Long time lurker, first time poster.

I've been in debt for around 8 years now, a combination of overspending and an expensive house move that had a knock on affect with everything from that point on.

Around a year ago I decided to focus more on paying off the dent and have paid off around half of it, I do see a light at the end of the tunnel now, but I find myself constantly torn.

I want the dent gone ASAP, but at the same time I know it's unrealistic to not spend on anything, to never get a takeaway, or enjoy a day out etc

I just struggle to find the balance between paying down the debt and still enjoying life,

How does everyone else manage?

Give yourself a budget for treats. Yes, debt payoff is important but if you don’t look at it like a long-term thing, it’s like dieting - slow and steady better than yo-yoing between extremes.

So you accrued the debt over an 8 year period and you're now on track to pay it off within 2 years (if you stayed as you are?). That sounds fantastic to me, you should really give yourself a pat on the back. Halfway through does seem a good point to take stock and perhaps cut yourself a little slack (without ruining your hard work to this point), what does the debt consist of (loans, cards, overdraft etc) and what interest rates? Would you be in a position now the overall amount is lower to consolidate some into lower interest rate credit (move any expensive cards onto a loan for instance)?

I do think it would be reasonable for you to have a little money to enjoy life with, I have found with debt there can be a bit of a similar effect to a 'yo-yo diet' in that if you are too strict with yourself and 'crash' repay, ie live a totally frugal lifestyle while repaying, then when you suddenly have the freedom of having some spare cash again and access to 'treats' it's tempting to go wild. If you've now cleared the higher interest rate debts I would wean yourself very carefully back onto having some spending money, maybe allocate a small monthly amount (£50? £100?) and see how you go. If you are worried you'll overspend maybe withdraw it in cash and then when it's gone it's gone?

Another good habit to get into is short term savings, so putting money away monthly for non-essential but good to have 'events' like Christmas, holidays etc, so if you don't already do this maybe put a small amount monthly into an instant access saver (or some banks e.g. Monzo have a 'pot' facility within the account) for this purpose? Before I got into budgetting this kind of thing was always my downfall because while I could live within my means most months I had no slack really, and 'unusual' events like going on holiday always sent me into my overdraft/onto credit cards plus I then had a bit of a mindset that if I was going into debt anyway for the holiday I might as well spend whatever I liked. Now I save for/pay for everything in advance and so I know exactly how much I can spend and cut my cloth accordingly...

You'll need to have a think about rebudgeting once the debt is gone, like I say I would try not to think about all the money that you were spending on debt repayment being 'fun' money, I would try and put at least a significant portion into long-term savings (an emergency fund, pensions etc) and also make sure you are accounting for annual expected expenses like car MOT/service, any insurances that have to be paid annually etc and also setting yourself a reasonable budget for holidays, birthdays etc. Only after all of these are paid for do you have your 'fun money', so you could think about this as a guide, how much fun money you'll have after debt repayment to give you an indication of how much you could spend now?

How much do you owe? Who are the debts with?

I always recommend monzo and making sure you've got online banking on your phone for your current account. You need to be looking at those daily to begin with and have a good idea of your bills that are due and when they are due.

Also have a look at what else is coming up in the next 2 months (birthdays, car service, etc). These things can catch you out so it's good to be thinking ahead.

Once you are prepped (and this is why I use monzo so I can set up pots for birthdays, Christmas, etc.), you can calculate what you will have left at the end of the month. It is at this point I decide what to save and what to enjoy (I always make sure there is fun money though otherwise we wont stick to our plans). Once you see the figure, I find it easier to force myself to save a good chunk.

We've had some continuous debt for over 10 years (always manageable) and it was my mission to get rid. It feels very liberating. I've got a £5k emergency fund now (although target is £10k), a healthy Christmas fund & a holiday fund.

Each month, I do the above and make sure we are covered for extra bills such as the car service & mot this month and treat the monzo pots as bills to be serviced. I then move all of the spare money out of the current account and we decide what we would like to buy/ need for that month. We've even put together a list of things we want so we aren't too frivolous but still feel satisfied. This month we needed a new lawnmower so I picked that up on the weekend and didn't need to use a credit card.

It does get very addictive and the wait until payday to sort it all out again is long but I get great satisfaction from it all. I've become a little ruthless on saving and don't really like to dip in. We do still have meals out/ takeaways but restrict the number in a week.

Have a look at the Tiers of Freedom Facebook Group. It’s all about achieving financial freedom, with a very practical structure around budgeting and saving vs spending. Lots of people making big changes to their lives on there.

If I had debts to sort out then the very last thing I would be spending money on would be presents! While household repairs and bills (such as car repair etc) are essentials presents are not! Your friends and family need to understand that you have priorities. I would be looking at this with Christmas coming up. A good policy would be presents for only the DCs (set a strict budget) and let the adults know you wont be buying this year. Also cut down on the entertaining. The very last thing you need to do is waste money on booze and tat.

I'm like memberofthewedding, I grit my teeth and get rid of debt as soon as I can.

I don't cut back on things for my DS, but if we go out for a day I take a packed lunch, drinks, snacks, use vouchers etc.

I cut my own expenses down to the absolute minimum for clothes and toiletries, don't buy candles, magazines, luxury things, avoid branded groceries and make do & mend wherever I can. Probably a hangover from pretty drastic poverty as a child, I can't help it.

But it sounds like you are doing well at budgeting and being disciplined. Good for you.

I would give yourself a little leeway on things that are important to you and would make a significant difference to you but be conscious about it hat you’re spending at the same tome, if that makes sense? Congratulations on clearing half of the debt btw. That’s fantastic