:::: MENU ::::

Browsing posts in: Member Stories

Steps I Took to Reduce Debt and Get Back on My Feet After a Job Loss

by

By Mary Greenhalgh

I’m Mary and I used to work for a big firm in London as a Legal Assistant, earning £28,000 a year. Life was good until the credit crunch. After that I lost my job, and ended up having to find a new firm to work with. Now I’m just earning £22,500 a year, but life has never been better. You’d think I’d be in a horrible mess – and I was at first, but losing my job was the best thing that’s ever happened to me because it forced me to learn how to reduce my spending, shop smarter and actually start saving money. I’d like to let you know what I went through and how you can use my experiences to reduce your own debt and save money.

To be honest, the first thing I did when I lost my job was to start freaking out. I had no idea where I would find work, and no way to pay my rent since I was living from month to month off my pay checks. I had student loans I needed to make payments on, a car payment, and a phone on credit from O2. My bills were so much that I couldn’t figure out where I was going to get the money to pay them all, even after I found work. So I consulted Doctor Google, and found out that I wasn’t the only one with these problems.

Of course as everyone knows, Google always tells you you’re going to die, but there was good news too. Even though it took me six weeks to get hired, I was able to find help and get back on track. While everyone’s situation is different, I thought sharing might help others that might be in a similar situation or who just needed to know that it could be done. This is what I learned, what I did and how it can help you if you need to get back on your feet and reduce debt after a job loss.

Step One: Find any job you can to get some income. The very first thing I did was to pick up a part time job on the weekends and a few nights a week as a waitress. It’s thankless work, but I got my tips in cash every night, which was what helped carry me through the worst of my unemployment scare. It also let me meet my immediate expenses and gave me some hope that I could sort out the mess I was in. Having some cash in your pocket makes a world of difference and even though I was working bad shifts, having something is better than nothing. As a plus, there was usually off time between split shifts, which gave me a chance to look for other work (and everyone over 20 waiting tables is always looking for other work). Plus I got free meals, which saved money on my weekly shop.

Step Two: Find a real job in your field or profession. The next thing I did was to start looking for work in my profession. Unfortunately I wasted days filling out job applications and online CVs on every job site and hire site I could find. I barely got anything back from them, which was depressing to say the least. I had more luck with the government’s Universal Jobmatch site, and that gave me some hope. They let me quickly find places that needed my skills and cut through the mess I had been dealing with in trying to find work with the other sites.

Step Three: Cut your costs as much as possible. Then I changed my flat. I was paying £900 a month for a little one room, but I found a flat share for £400. It wasn’t great, but it was good enough, and let me save £500 a month from what I had been paying. Plus I didn’t have the costs of my utilities and Internet plan, which also saved me money. I also sold my car, because it was more of a convenience than a need. It took me almost two months to sell it, but I got everything in order with my papers, and made sure to tell DVLA that I had sold it. I ended up with an extra £800 after the sale, and the loan was closed in my favour, which was great for my credit.

Step Four: Take a hard look at your spending habits. The other thing I did was to take a hard look at my credit cards and my spending habits. Part of that involved researching sites out there that had good tips, which showed me that I was actually paying interest on my pants. Seriously, who does that? It’s just crazy when you think about it. Since I had good credit, I was able to get a Tesco 0% card for 18 months, and transfer my balances over. I lied a little on my application and said that I still had my old job, but that let me shift all of my high interest payments to a no interest card and start paying things down without the interest. That made a huge difference in what I had to pay out every month.

Step 5: Start saving money to protect yourself. Finally, after I’d reduced my debt, cut costs and put myself in a better financial position, I took a look at what I had been spending before. By cutting my rent payment, moving to a flat share, reducing my outgoing payments and consolidating debts, I was saving more than £1,200 a month. That was almost half of my previous yearly salary when looked at over the course of a year. When I realized that I almost cried. Not because I had lost the salary before, but because I had just jumped into this crazy financial circus without even considering how much money I was wasting. Three years of wasted money was more than £30,000 I could have saved if I had just known better. Now I save every week, and I’m on track to save more than £6,000 this year, despite my pay cut.

Step 6: Look at your long-term financial goals. I used to just live for the moment. I had a great time, but if I could change it I would definitely have focused more on my future. Now that I’m saving, I can see that in a few years I’ll have about £20,000 saved up. That will let me buy my own flat, which means I won’t be wasting my money on rent every month. That means I will have the security of a home, and as I build equity in it, I’ll be able to get a secured loan if I find myself in a jam. That’s something I could have done before too if I had known better, but no one ever taught me how to save money or even pay attention to debt. I just lived for the moment, but now I actually feel like I am living. I’ve got security and a plan for my future.

Reducing debt isn’t easy, especially if you’re pushed into it by a job loss or unexpected change of circumstances. The thing is, looking back I can see so many ways I could have done this before I found myself in a pinch. Now I’ve got enough extra cash to do what I want, and to go out when I like – but I’m always aware of how much I am spending and what else I could do with the money. I’m no longer binge shopping and I always buy things on sale when making my weekly shop. These are things you can do too, and they’ll make a big difference in not just how you live, but also the quality of life you enjoy.


My Plan to Save Up to Buy a House

by

By Jenna Brown

One of the worst parts about being in debt is the feeling I get that I’ll never have a place of my own. Home ownership is a big decision. I know that. In fact, it’s been a decision that I’ve steered clear of for most of my adult life. As a renter, a big chunk of my utilities are included in my rent. As a renter, when something breaks I just call my landlord and viola! It gets fixed. As a renter, I can pick up and move to wherever I want (with thirty days notice, of course). I’m not tied to any one place and I don’t have to worry that my living space will be threatened if the economy tanks again.

Still, home ownership is a boon in so many ways. It adds a level of stability to my life that has been missing. It would be nice to know that, zoning laws notwithstanding, if I want to change something in my home I can: I can paint. I can knock out or build in walls. I can add space. I can make it absolutely my own instead of having to find creative ways to dress up a rental space. Plus, owning a home makes me look better and more reliable on paper. Finally, being a homeowner would qualify me for a bunch of tax breaks that are mere pipe dreams as a renter.

Of course, buying a home isn’t easy. Houses are incredibly expensive (unless I want to buy in Detroit and, no offense to the Motor City, that’s not in the cards right now). Buying a home means saving enough to be able to fork over at least 20% of a seller’s asking price up front. That is a lot of money to save, especially since I’m still paying down my debt and building up my emergency funds, retirement accounts and savings accounts. Then, there’s finding a mortgage lender who will actually approve my application. It’s a lot, to say the least.

Still, I have a plan. It might be a “Pie in the Sky” type of plan, but it’s better than nothing. Here it is:

Figuring Out the Timeline: There is no way I am going to be able to save up 20%, pay down enough debt to make me stop looking risky to mortgage lenders and be ready to move any time soon. So, instead, I’ve decided that I don’t even want to start looking for homes or mortgages until 2022 or 2023.

Why So Far Out? I have debts and several accounts I’m trying to build. My long term goals will not allow me to totally eschew those accounts and debts in favor of saving for a home. Giving myself seven to eight years to save lets me accomplish all of those goals simultaneously. Plus, it takes an average of seven years for bad marks on a credit history to fall off. Most of mine have an average of three years left on them before they disappear. If I keep paying down my debt and don’t rack up any new bad marks, I’ll have four years of totally positive credit history to build on as well as three years of diligent and positive payment histories working to my benefit. Mortgage lenders will be able to see that I work on my debts before taking on new ones and that I know how to manage my credit and payment plans.

Finding Breaks & Deals: Did you know that there are tons of different programs out there that make it easier for first time home buyers to purchase their first homes? It’s one of the areas I have been researching. At office of Housing and Urban Development, for example, has programs that help reduce the closing costs and down payment amounts through grants or very low cost loans. If you have served in the military, Low VA Rates says your veteran’s benefits entitle you to lower mortgage rates than civilians will get. I didn’t serve and I’m not sure my income will qualify me for a HUD loan but there are other programs through banks, credit unions and nonprofits that can help a single lady like me make sense of the system and reduce my costs. I plan on exploring all of them and taking advantage of every break I can get.

Figuring Out My Priorities: I know that I do not want to leave my current city. I’m totally fine with the idea of putting down roots here and really committing to this place. I’m not sure, though, which neighborhood I most want to live in long term. I love where I live now, but buying space here is expensive and primarily condominium-based. I’m not sure I always want to share walls with other people. Another factor is future kids. I know that if I have kids I want them to go to a great school and that means committing to a neighborhood in those school districts. I also want to be able to have enough space to accommodate guests.

You’ll notice that I didn’t really break these categories down into specific numbers. This is because it is important for me to be flexible when I’m putting together a long term plan. I know what I can afford now, but who knows what the market will be like when I’m ready to buy. So, instead, I’m hoping that by keeping it loose and focusing on my current goals and doing my ground work now, when I’m ready to buy, the process won’t be as shocking as it has been for my friends and family. Wish me luck!