Plan to pay off CC debt

[CalypsoCuthbertson]

I’ve worked out that if I strip back to ‘essential’ bills (which includes reasonable grocery budget for a few treat foods now and again, and a couple of small entertainment type subscriptions, and a little money for bits like school uniform, birthday presents), I can free up £900 a month for paying off £12k credit card debt. Realise this is a very good position and very fortunate (I work bloomin’ hard for it too!)

This would mean I could power through the credit card debt in roughly a year (as will hopefully get an annual bonus to smash the rest next spring).

I don’t know why, but I feel twitchy about this plan… is it a silly idea to sink everything into debt temporarily? Have no one to sense-check it with. Also had a dream about seeing a plane crash last night which has set me on edge a bit - is my new or old approach the plane crash?! It means not saving for the next year. I currently have £1,200k in savings which will cover the next car MOT/service/emergencies, and more saved in work share schemes that I could access if I really needed to, and it means pausing saving for my DC’s life savings… but if I do this, next year I could top up all savings within 2-3 months instead.

The alternative is I use that £900 to do what I have been doing…. keep spreading it between things - chipping away at each credit card just above the minimum payments, and keep chipping away at building up savings. And worrying about switching credit cards to new 0% deals every time they expire. It’s taking me forever to pay debts off that way and I’m impatient to get rid of the debt.

Oh I missed that it was interest free. I thought credit cards had a very high interest rate.

Credit cards can have a very high interest rate but most people pay them off every month or have the balance on a 0% deal so never pay interest.

There's also many consumer protection and cashflow management advantages that have nothing to do with borrowing money (eg leaving car hire or hotel deposits, being compensated for losses if a supplier goes bust or does a shoddy job).

But MN is weird about credit cards, apparently viewing their sole purpose as being used for irresponsible spending of money that the feckless don't have.

I'm the same. I have some actual debt on 0%, but the remainder are continuous 0% BTs and MTs - often with absolutely NO fees of any type at all.

ALL my money goes in high interest savings, some fixed, some easy access @ between 4-5% - this way I am MAKING money.

Occasionally I will go for a 0% deal with a BT fee so low that when combined with cashback and the length of BT period eg: 32 months, I'm still raking it in.

All the money is saved / being saved, so that I can pay if off should I need to.

Agree with above poster using MSE advice / forums & eligibility calc.

This thread is an eye opener! Don’t want to derail but if you have the remaining couple of £k PCP on a car, can you technically get a cash transfer at 0% from a credit card and pay for the remainder car loan?

Thanks. Yep I do scan Money Saving Expert and Money Supermarket for deals every time a credit card 0% expires.

I literally just switched a credit card to Santander’s £3 a month card - really good deal - 0% for 15 months with zero balance transfer fee! I’ve mapped out my plan to pay off £900 a month and would actually clear ALL my debt just before this one expires!

Previously that chunk was with NatWest, which was 0% for 13 months with no transfer fee either. So pretty good.

Often wonder if it’s actually better to overpay the mortgage first as by the snowball method, a 4.99% interest mortgage (25yrs to go) would be priority over a 0% credit card. But that doesn’t seem quite sensible for some reason.

I don’t see why not. You’d need to look for a ‘money transfer’ credit card though which I think tend to be a little more expensive than a balance transfer. Definitely worth exploring though - easy to do quotes and eligibility checker without affecting your credit score on Money Supermarket etc.

Good question thanks, worth reflecting on! I’ve explored motivation (or rather, lack of) a lot in therapy, and have previously have had a bit of a shopping addiction that I seem to have worked through. I just don’t feel a pull to it anymore and have also got to stage of life where I have everything I need in terms of house/wardrobe etc - and I’ve always hated clutter.

Emotional regulation… I think a lot of sticking to this plan will be down to emotional regulation - learning to feel feelings without acting on them or being impulsive. Learning not to hit the ‘fuck it’ button, but noticing the urge crop up and letting it pass.

Gamification… I’ve already spent a consistent year not adding to the credit card debt and making just over minimum payments, so I trust myself to stick to a plan a lot more than I used to. I’ve turned it into a game - gamification I guess - tapping into that addictive, anxious, perfectionist part of my nature by tracking all payments and balances on a spreadsheet and colouring things in green each month as I tick payments off! Seems silly but works. Replaced the shopping addition for a spreadsheet addiction!

Having a clear goal… I’ve written out in a spreadsheet what my balances would look like each month if I stuck to this plan. It looks SO good and exciting that I think the thought of completing it might be enough to make me say no to buying silly things I don’t need! Before I heard of Dave Ramsey’s approach I was hoping to be down to £10k debt in about a year’s time. This way I would be down to £0 instead!

Keeping occupied with healthy stuff and routines… I used to go out shopping, to cafes etc a lot craving the presence of people (have quite a monumentally shitty family/past which has fuelled my loneliness and low-level addictions in the past). Easily spending £10 on parking, £10 on a cafe trip, £20 buying a little treat item to make myself feel better etc per trip - it all adds up to a frightening amount with not much to show for it. I’ve invested a lot of time at home instead in the last year, just getting more okay with being alone, occupying myself with low cost things like journalling, gardening, cooking, enjoying the simple routine of housework, taken up running again… a promotion recently means my work is much more busy and challenging too, which keeps my mind and time more occupied than my previous job. No more weekday lunchtime shopping sprees to quell the boredom at work - I just don’t have the need/time/inclination anymore.

Having a plan for rough moments… I know I might have tricky points where I feel tempted to say ‘fuck it’ and fritter… my way of dealing with that will be to be compassionate with myself about it and get back on track again the next month. Pre-therapy, a hiccup would have made me feel ‘everything is ruined, there’s no point’ and I’d completely give up. That’s not me anymore!

Accountability… I might come back here to post too - keep me accountable! I do feel like I’m lacking social interaction in life. When I get enough of that, I feel less inclined to turn to shopping/eating etc. Maybe Mumsnet can help a little bit with that! :)

Sorry that was long, and feels a bit navel-gazing, but was useful for me! And there’s such a lot I’ve learned in therapy - i’m going to post as might be useful to others :) Makes me realise how complex getting into debt and getting out of it again can be.

Oh @OpenPalm - don’t forget to check if there’s any fees for paying off your PCP early.

@herbetta that is very clever!

Sounds like you have a really solid plan and have some great strategies for keeping on track. Good luck OP!

Sounds a good plan and like you have done a lot of work on yourself and the motivation for the previous spending!
I've not been in this situation but did have to write an 80000 word dissertation for my PhD thesis and I had a document for keeping track of my total and it really helped!

I'd possibly add in some wiggle room to your plan or maybe have two sheets, one with the goals and one with the progress as if something crops up it might be demoralising to not be quite making the progress you had hoped for.

Overpaying the mortgage is an interesting one, your right it might be prudent to make overpayments. I think it would be quite therapeutic for you to clear these credit cards and signify a new start free from your past demons so I think I would start with the plan to clear the cards. Once you have made a dent on the cards and say are down to one card to pay off it might be worth splitting your money and paying most off the credit card but start overpaying the mortgage. A chance to start looking to your future financial management.

No get rid of the CC while you still have the 0% deals
As Pp said snowball so either pay the one expiring in August first
So minimum payment on the other 2 then what's left onto that one plus any extra you get from refunds/ payrise etc
Or if you only have a tiny balance on one of the others just quickly get rid.
Paying something off gives you a great boost and mentally that can help.

Paying off the Mortgage first might seem like a good idea but CC are unsecured so get rid of them first- what would be your plan to clear them if you paid more into the Mortgage?
Then save a 3-6 month buffer
Then consider long term saving/ Mortgage-once it's in the mortgage you can't take it out
Then consider saving for your children.8

It's like building a wall of financial security for yourself
You build from the bottom up

I promise you, you need Dave Ramsey.

A year ago I was in a pile of credit card debt, having been in credit card debt my entire adult life as if it was normal. Never really had "savings". Never really knew where my money was going other than I never had enough of it.

Then I heard about DR on here. I read "Total Money Makeover" (Free audiobook on Spotify if you have it!) and genuinely my life changed.

I am now ONE PAYDAY away from being out of credit card debt. I know where EVERY single penny goes. This year has been tough, but tbh no tougher financially than how it would have gone before, with me frittering on stuff, maybe having a couple of weekends away and not having anything left bar more debt to show for it.

I will then build up a full emergency fund of 6 months outgoings, and then think about how to pay off the mortgage before I'm 70.

Honestly, read the book, go Gazelle Intense for a year, make a zero budget and be a new woman in a year. It's like AA (!), the steps WORK if you work them.

Which ever way you do it Op set a budget
Write down everything including monthly, 3 Monthly and Yearly expenses.
All too often people "forget" yearly stuff like Christmas -huh!?
It comes every year!
Ditto car insurance etc

I'm not a huge Dave Ramsay fan as once I had set up my own budget I realised I didn't need to pay for his.
Plus others like Alvin Hall tackle emotional spending much better.
Jumping straight into saving for your DC is emotionally driven also
Put your lifejacket on first !

@FeatherDawn you don't need to pay for DR! He does sell a budget app but there's no need to use it. I make my own in Excel.

Wow, congratulations @LividRah! I want to be you in a year!

thanks for the tips and encouragement everyone :)

Pay off the debt. It must be really stressful for you having it hanging over you all the time. A year will soon go by.

Well done. You are well on the way to putting yourself on a firm financial footing.

Bloody hell, don’t do this!

If you’re slowly chipping away at it, you’re not paying interest, and you’re enjoying your life - then the extra is better in your pocket than theirs. Why don’t you put the money into a high interest savings account, that way you can pay off the debt and get some interest for you. Or, just keep chopping away, pay no interest (keep changing to 0%) and enjoy life!

If you can get zero interest CCs, do so. Pay them, and the mortgage, off steadily, but do not neglect investments. Take the long view and take advantage of tax efficient vehicles like pensions and ISAs.

Educate yourself about investment returns and compound interest. I started out with literally nothing but in my retirement I am really well off. All because of slowly but steadily investing since my early thirties.