How I paid off £16,000 in credit card debt in just two years

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Two years ago, I looked like I had a perfect life. I had taken a layoff from the world of finance, where I had worked for 16 years, to set up my own business. I had a beautiful, recently extended house in Hertfordshire. A happy family with three young boys, we wanted little.

But I couldn’t sustain this lifestyle. Having been the main breadwinner, I no longer earned my previous salary and bonuses. Eventually my severance money ran out and my new business wasn’t earning enough. So I borrowed to fill in the gaps. Two years ago, I finally faced my fears and added up the balances of my four credit cards. I had £16,000 in credit card debt.

Debt has been a recurring story throughout my adult life. I opened my first credit card at my university bank when I was 18. It was like free money. “Lynn, grab that free credit card and go spend” is how I interpreted it. I had very little financial education in the 1980s and 1990s. Money was not something we talked about at home.

I’ve been in credit card debt my entire adult life, going from one 0% offer to another, or opening store cards to get a little discount. However, there had always been a way out – a bounty to come or an inheritance to pay for it all. But then it would come back up again. After being in debt for years, this time there was no way out.

This time it was different

I revealed my debt problems to the world through my blog, Mrs Mummypenny, where I write about money matters, how to save, and plan for the future. Over the past two years, I have regularly updated my readers and shared my progress. The support I received from day one has been incredible. The internet world, especially Instagram, can be a wonderful and positive place, especially when I’ve shared my vulnerabilities and my intention to repay that debt. So I was responsible to my audience.

I started by restructuring part of my debt. I had £7500 on a 0% interest free credit card for just three months so I changed that to another 0% deal to give me some breathing room without paying interest. I paid a 3% fee (£225) to do this.

I had another credit card with a balance of £5,500 interest free for another 18 months. Additionally, I had two smaller balances on two cards totaling £2,500 which carried an annual interest rate of 18%. My priority was to pay off those cards first, while making the minimum monthly repayments on the interest-free cards.

To reduce debt, I knew I had to limit my spending. Unfortunately, 0% card issuers try to tempt you with a promotional period of 0% spend – but I swore to myself not to fall into this debt trap.

Once my two most expensive cards were paid off, I set up a monthly charge of £200 on one of the larger interest-free cards and paid bigger chunks when I had excess funds. At the same time, I started building up an emergency fund.

Lynn James with her sons Jack, Josh and Dylan © Anna Gordon/FT

I started my debt-free journey with enthusiasm and motivation. I sat down with a friend without judgment and ripped up my family budget. We found huge monthly savings. Each bill has been renegotiated and reduced to the essentials – energy, broadband, mobile telephony, insurance. All non-essential direct debits have been cancelled. All were arrested while the debt was being repaid.

We stopped the weekly takeout and focused on home cooking. I managed to have two spending-free months where all non-essential spending ceased – no lunches or coffees with friends, no nights out or going to the movies. It was tough, but I thought it was worth it.

I was fine, but then. . .

By June 2017 I had repaid £6,000 and my debt was down to £10,000. In fact, I was doing so well that both of my credit card providers increased my credit limits. I didn’t ask for this – it happened automatically. They saw that I was constantly paying off my debt, so they thought, well, why not give Lynn a little more credit to spend?

But then the summer months hit. It’s a slower period for my company’s turnover. Besides, six weeks of summer school holidays with three boys is expensive. I experienced “mommy guilt” and desperately wanted to take the boys on vacation. Soon my debts rose to £14,000.

The frugality started again from September 2017. My business income went back up and I was able to control my expenses better, getting into the habit of systematically repaying bigger chunks. By April 2018 my debt was down to £5,000.

And then I backed off again. My business was doing well, but I made big mistakes with expenses and cash flow.

With my debt repayment going well, I looked at my business account earnings and decided to invest in the business. But I was so wrong that I almost gave up the business that had taken me five years to build and was forced to return to the world of finance.

What drives my desire to spend when I have money in the bank is a complex question, perhaps related to the loss of my parents as a teenager. You might call it emotional spending.

I bought a new laptop, hired an assistant, and paid for unnecessary business coaching. We had resisted buying a second car for 10 years, but I bought one. Before long, my supplies ran out.

Then the summer holidays came, and the same thing happened as the year before – higher expenses and lower income. Why didn’t I prepare for this and learn the lesson of the previous summer? Feeling guilty, I decided to take the kids on vacation.

By September last year my credit card debt had risen to over £10,000, and I was using my overdrafts on personal accounts.

But I had faith. I knew my business was strong and I had a support network. That month, I signed two big contracts. All I had to do was wait for the bills to be paid and I would be debt free.

I had cleared overdrafts in November and started paying off large chunks of debt starting in December. I made my last repayment of £1099 at the end of April 2019 and became credit card free – for the first time in my adult life.

I feel like I can breathe again. I no longer have that £250 monthly refund coming out or those big chunks of overpayment to settle the balance. Now is the time to focus on building my wealth for the future.

I’m proud to say that I’ve covered the summer of 2019 – our vacation abroad has already been paid for and pocket money put away. Also, I worked hard to build up a decent emergency fund to cover disasters. I will no longer fall into credit card debt.

My advice to anyone in a similar situation is to be brave and face your debts. Add it up and calculate in total what you owe. Then you need a plan, just like me, to pay off that debt. You must recognize that the money must be returned. Once you are debt free, let me tell you, the feeling is amazing.

Learn more about Lynn James on her website mrsmummypenny.co.uk or follow her on Twitter/Instagram: @MrsMummypennyUK

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