How one family plans to 'kick debt's butt'
Just over two years ago, Ricky Willis and his wife Naomi finally realised they were badly in debt. But rather than go under, they set about dragging themselves out of the situation and turning things around.
Here, Ricky – also known as Skint Dad from his popular blog – describes in heartfelt detail exactly how much he owes, what the family’s current financial situation, is and how they plan to become debt-free as quickly as possible.
It was September 2013 when my wife Naomi and I finally sat down and worked out that we had £41,000 worth of debt. For a number of years we had struggled to control our finances and although there were two wages coming in, we had been living pay cheque to pay cheque, borrowing money most months to get by for as long as we could remember.
Redundancies, bad decisions and perhaps a bit of bad luck had brought us to this point which, if it had got any worse, could have meant losing everything.
It was at that moment in September – when faced with having it all taken away – when we decided enough was enough. We wanted a better life not just for us but for our children as well. We didn’t want to be in this situation, we didn’t want to just survive.
Over the past two years I have been trying my upmost to improve our financial position. It’s not all been plain sailing but, from September 2013 until today, we’ve managed to reduce our debt from £41,000 to around £18,000.
With £18,000 left, there is still a long way to go but I want to share with you our plan to clear the remaining debt.
I really will lay everything on the line here – the good, the bad and the ugly of our personal finances to the penny. That means every penny we make, every penny that we pay out, what we have left and what we are really paying on bills.
With every month that passes, more debt is being paid off and, yes, that feels great, but it’s just not enough. I don’t want to be in debt anymore. I want the money we earn to work for us, to build a bright future for my family.
It’s so frustrating. I look at my children (pictured above with Ricky and Naomi) and feel so guilty. Guilty that we can’t afford the occasional holiday, a family car, even days out at the seaside because money is needed elsewhere. I feel guilty that our children are missing out on these things because of silly mistakes and choices that their mum and dad made in the past.
I could be positive about this and point out that things are getting better (and they are), but we still have a long way to go. The problem is I don’t want to still have a long way to go. I want to get this sorted now so I can give them a childhood that isn’t remembered for struggling just to make ends meet. I don’t want our children to wait another three or four years for us to have cleared our debt, saved a bit of money and finally be in a position to live a little easier.
Chloe is almost four and Daniella has just turned 11. Realistically, if we carry on the way we are and it does take four years – it could be a lot longer – Chloe will be eight and Daniella 15 and that’s not good enough for me.
I want to give my children a life full of opportunities, fun, laughter and love. I’m not a materialistic man but I still want nice things for us. I want a nice house, car, holidays and a bit of cash in the bank for a rainy day. That’s achievable isn’t it?
So I know what I want to do but how can I achieve that in the shortest time possible? This is something I’ve been thinking about a lot recently and it really does come down to us doing two simple things.
Clearing debt quicker really is as straightforward as spending less money and earning more money. For us to reach our goals in the shortest time possible I need to assess our situation once again, like we did many months ago, and put an aggressive plan into action.
No more excuses. No more putting it off. No more floating along, slowly clearing it bit by bit. Action needs to start today.
But before I create any more plans, our current financial situation as it stands needs to be assessed. This means looking at what we owe in debt, what money we have coming in and what money we have going out. Once this is established, I can look at what needs to be done to really start taking some action.
As at 31 October 2015, we currently owe £18,020.13 if debt. It is made up of amounts due to 12 different creditors. There will be no interest added to this amount as all 12 accounts are frozen and can only be reduced.
With the 12 accounts outstanding, we have arrangements set up to pay back minimum amounts, which I will include below in outgoings.
We currently have three sources of income. My wife’s wages, income from my blog SkintDad.co.uk, and earnings from my freelance writing.
With my wife’s income, we know what the amount will be every month as she is salaried. With my income, it’s a little trickier as the amount varies quite a bit month to month. For ease, I will look at what I’ve earned since August 2015 from both the site and freelancing, and show an average over three months.
Also, I need to have realistic amounts for this to work and would rather base it on a lesser figure than take months where earnings were slightly higher but may not be repeated.
My wife’s monthly income after tax = £1,815.64
My average monthly income minus 30% for tax deductions = £1,050.00
Child benefit = £136.20
Total monthly income = £3,001.84
This is everything we fork out for on a monthly basis, including household running costs, debt repayments and costs for running my website.
Council tax: £125.08
Gas and electric: £80
Water rates: £41 TV,broadband&phone(including TV licence):£46 Mobile phones: £48
Groceries and cleaning products: £300
Travel (Naomi’s work): £83.70
Running costs of Skint Dad: £60
Maintenance payments: £200
Emergency fund: £50
Total outgoings = £2,223.78
Current monthly minimum debt arrangements: £295 Total + debt repayments = £2,518.78
I’ve tried to get as close to the real figures as I can. Groceries, clothing and entertainment do vary each month, but not by much. I’ve averaged out our energy costs, so the amount covers summer and winter months.
Our emergency fund is something we started in April. The feeling was that the money could go towards debt but we don’t have any credit cards so if there was a real emergency we would need a fall back.
With the figures laid out like this, I now have a clear picture of where we stand. Compared to September 2013, when we were drowning in debt, not knowing how or where to start fixing the problem, we have turned things around.
We are in a position to take what we earn each month, pay all the bills and even put some aside for a rainy day on top of paying a big wedge of debt. Fantastic. Or is it?
Going on the basis of those figures remaining the same for the next few years (which, in my opinion, is very unlikely), it works out that we could clear £778.06 (£295 which we’re already paying and £483.06 which is leftover after bills) per month off our debt.
With our current debt standing at £18,020.13, we can make the following calculation to work out how long it’s going to take us to clear the whole amount: £18,020.13/ £778.06 = 23 months.
At this rate (if things stay the same) it will be almost two years before we clear our debt completely. For me, that is just too long to wait. Two years from now to achieve just a clean slate. Even with the £50 we’re putting away each month in the emergency fund – if there are no emergencies, which is unlikely – it won’t amount to a great deal of savings.
My youngest daughter will have started school and be in year one. Daniella will have turned 13 and be in the second year of secondary school. We’ll then be able to start saving money for the occasional holiday, a family car, even a home to call our own. It’s not too much to want, is it?
How long will this take though? Again, on the basis of the above figures, once we clear the debt, we would be in a position to save £778.06 a month towards a deposit for a house.
We live in Tunbridge Wells in Kent. It’s certainly not the cheapest area to live but we have family here and Daniella is settled in school. If we wanted to buy a house where we live, it would cost us around £250,000 – £300,000. That would give us two or three bedrooms, a small garden and we’d be within a mile or so of schools.
Looking at what we currently earn, which amounts jointly to £46,000, the maximum we could look at borrowing would be £151,000 and that’s with a good credit rating. At the lower end, we could only be offered £107,000.
That means if we wanted to buy a house for £250,000, the best-case scenario would be that we need to raise a £99,000 deposit. That would take us to 127 months to save for – or 10 years! I don’t even want to look at the worst case scenario.
I know these numbers are slightly hypothetical, and in two years’ time I would hope both my wife and I would be in a stronger position financially and earning more than we currently are, but it shows the scale of the task we have ahead of us.
So what can be done to get us there sooner? On paper it looks pretty bleak, and if I was the type of person who was prone to negative feelings I’d be feeling pretty low at this point but that’s not me. I’m angry at myself and the financial pickle we’re in, but moping around isn’t going to clear my debt or allow me to start saving for a deposit. The only thing that is going to do that is having a plan and taking action.
I’m going to act now so that I can still give my children the best childhood possible. It’s not going to be easy, but I’ve faced struggles in the past and got through them. This is just a new struggle, a new challenge. The only way we’re going to get this done in a short space of time is something I mentioned earlier.
SPEND LESS AND EARN MORE
Simple right? Yes and no. I said it would take us approximately 23 months to be debt-free but I want to reduce that time period drastically. How about 17 months, 10 months or even five months?
Those timeframes may sound unrealistic but if you really put your mind to something, anything is possible. It’s because of this that I’m not going to put a definitive timeframe on it, but nstead have complete focus on clearing it as quick as I possibly can.
Starting from now, every decision and every action we take will have the goal in mind of clearing the debt. I can’t emphasise enough how much we want this. We cannot allow ourselves to grow old with a ‘what could have been’ attitude. Time waits for no man and I’m not about to let it wait for me.
Looking at our monthly outgoings, there are quite a few things we can do straightaway to save money. Rent is our largest monthly expense and, although we could move to a smaller and cheaper property, with the added expense of fees and moving, it may not be that cost effective.
Also, a quick search on Rightmove.co.uk shows there aren’t any properties suitable and cheap enough to make it worthwhile to move at the moment. That doesn’t mean I won’t stop looking.
Council tax can’t be reduced as our property isn’t single occupancy and the banding is correct. Our energy costs have been reviewed recently and we’ve switched to save money already. We could try to be more aware and more efficient with our usage and could manage to cut £5 a month.
Water rates are quite reasonable for our property, but there is room to save a small percentage. Perhaps £5 a month. TV, broadband and phone is currently with Virgin and we are tied into the contract. We absolutely need internet access but once the contract is up, there is an opportunity to save some money.
The mobile phone contract also has a while before it ends but once that happens I can easily move over to a cheaper alternative such as pay as you go. Groceries and cleaning products are quite low already for a family of four but, again, this can be looked at and reduced. We have survived on less when we’ve needed to and we can do it again.
We already have £500 in our emergency fund so the £50 we are currently saving could start going towards debt. Naomi’s travel costs, running costs of my website and maintenance payments cannot be reduced.
The above savings might reduce our spending by around £90 a month. We can add that amount to the £778.06 we currently pay each month and redo the previous calculation: £18,020.13/ £868.06 = 20.7 months. Better than 23 months.
Being able to reduce the money we spend will help, but earning more is where we can make a big difference to our situation. Unlike saving money, where sec an only go so far, making extra money has no cap.
First up: Naomi. She currently earns around £28,000 a year. For the job she does, I believe she is underpaid, but perhaps I’m biased. Still, it won’t hurt her to ask for a pay rise (they can only say yes or no) or start looking for a better-paid job. She could also look for a promotion or opportunities for overtime.
For me it’s a different story - but also where the biggest opportunity lies. Just over two years ago I was working as an account manager in London, but because of rising travel and childcare costs, I left my job to become a stay-at-home dad.
Fast-forward a few months to September 2013 and, at the same time that we realised our situation needed to change, I also started the Skint Dad blog. Our lives were about to change forever.
In the two years since I started the blog, with help from Naomi, we have managed to grow it from a relatively small entity into one of the top money saving blogs in the UK, attracting more than 100,000 page views a month. Just to write that is truly unbelievable.
As well as the blog, I have also managed to carve out a job as a freelance writer, writing for some of the biggest names in money saving in the UK. All of this was created out of nothing but the hunger for a better life.
Because of this I know that I can push on and get to those goals quicker than planned. I certainly don’t lack motivation, and the thought of what can be achieved is all I need to keep pushing.
From the income figures above, it shows I take home on average £1,050.00 a month after deductions. As I also mentioned, this figure varies month to month because of how I earn money in different ways.
By concentrating on increasing each income stream, not only will we be able to clear that debt quicker, we can also build for the future and shoot for those goals of owning our home and creating a better life.
GROWING MY EARNINGS
There are four ways my blog earns money. Affiliate marketing: this is when someone buys something through my site and I take a small percentage.
Sponsored content: this is where I write about a product, brand or service and get paid for doing so. Advertising networks: this is mainly Google adverts, and payment is based on the amount of views and clicks they receive. And finally freelance writing, which is where I write for other sites and publications that pay me for doing so.
Each one of these generates money each month and there is a big opportunity to earn more than I currently do. For example, if I could generate an extra £250 a month through each of the four categories, that’s another £700 (with around 30% taken off to cover tax and National Insurance) I can put towards debt. Add that to the amount we’re paying off already and the savings we’re looking to make, and we get this calculation: £18,020.13/£1,586.06 = 11.5 months.
Now we’re talking! From starting off with a gloomy outlook of not clearing our debts for another 23 months, with a few calculations I’ve proven to myself that it is achievable to get it done in half the time.
Of course, these are just figures and I now have to take action but that’s the whole point. I am going to take action. I am going to achieve all of the above and more.
Saving money is going to be straightforward. Making the extra money will of course not be as simple. That said, if you truly want to achieve something, perhaps make a better life for yourself, then you really can do it. Nothing is straightforward but by really analysing your current situation like we have, at least you know what needs to be done and can start taking action.
￼Ricky Willis is a freelance journalist who writes The Skint Dad Blog, Skintdad.co.uk
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.