I love the postman. There is nothing better than hearing that letter box go and seeing what has come. I know, I need to get out more, but that is how it is. There was a time when I hated the post man. A time when all he brought was bad news. I won’t bore you with the details of how, but in 2009 at the beginning of the recession, we found ourselves saddled with just over €28,000 in debt.
“It was terrifying, it was depressing, it was crippling.”
It was terrifying. It was depressing, it was crippling. I went through a stage of denial. I would hide bills, throw them away, pretend they never came. There was no logic to my reasoning, but apparently that is quite common in people in financial trouble. The worst part? My husband had no idea. Eventually he was home one day when the postman made his drop of doom and intercepted the bad news for me. Needless to say that conversation didn’t go too well. He knew about some of it of course, the managed stuff, but he didn’t know about a lot of things or how bad it actually was.
We knew we needed a plan and that we needed to sort things out. He was working a lot at that time and I was overwhelmed by the phone calls and post. We tried to deal with some of our debtors but got nowhere, so we got some outside help. We worked with a company (who no longer exist) that dealt with all the debtors for us. All the notices and negotiations went through them. Within a week or two we had an almost manageable single monthly payment that kept most of them happy. Bank of Ireland were never happy though, they were a nightmare to deal with and treated us like absolute dirt and I will never forget it. I refuse to even use their ATMs today lest they get any sort of cut. But I digress…
“It was tough, there were days when I cried, but we got there.”
Things were very tight. We had to cut down to one car. We got rid of health insurance and our TV and we never ate out. I went for years without a proper haircut, we cooked budget food and we never went on holiday. We implemented all of the principles I outlined in my post on how to cut your household spending and then some. We inched by. It was tough, there were days when I cried, but we got there.
Budgeting was the most important tool we used. We have tried all the major software out there and failed. YNAB is good, but didn’t work with a mid month payday for us. Mint, Pearbudget and some of the other American ones are also good, but they often don’t work with Irish banks or Euro. We could never get in sync using one either, it always came down to arguments over who didn’t or didn’t track minute spending.
“Budgeting was the most important tool we used.”
We ended up using a paper money envelope system. I would quite literally withdraw my grocery money at the beginning of the month and put it in an envelope and when it was gone, it was gone. The same for petrol and other day to day expenses. It was a pain in the ass, but it kept us on track. In my never-ending search for a feasible program, I discovered Neobudget, an online envelope budgeting system. We tried it and really liked it, but it didn’t have an app, so again we fell behind entering receipts and it got dropped.
We used the Dave Ramsey debt snowball to pay off the debtors through the monthly payment. That meant paying the smallest balances first. Some people say this makes no sense and you should pay the debts with the highest interest rates first, but we found the opposite was true. The maths work out, but more important was the psychological boost. There was nothing better than knowing one debt was paid and we could pay the others more. Eventually when we were down to just a few, we handled it all ourselves. We continued using the debt snowball and couldn’t believe it when we were down to our last few months. We rang the last couple of debtors and offered them settlements and just like that it was all over. That was in 2013.
How things are today…
I’d love to tell you that we’re flushed today, but alas that’s not the case. We were a lot more comfortable than before, but then I decided to go back to school. This required a second car and a commute of two hours each day and another hour a day for himself. It also means childcare, so we are essentially back to paying a big monthly payment like we did when paying off the debt. Having said all that, it is much more satisfying paying that, than blank faced debtors and we know it will be worth it in the end.
“In terms of managing our money today, budgeting is still the key.”
In terms of managing our money today, budgeting is still the key. About two years ago, Neobudget got apps. Bingo, we finally had found an idiot proof way of managing our finance. We avoid arguing over who did or didn’t enter their coffee by allocating us each a discretionary spending amount. That way we can just withdraw the cash, assign it to our category and away we go, no logging in every coke or magazine!
Both of us have the apps on our phones – him iPhone, me Android – and they sync together with the desktop version which lets us see where our money is, where it has gone and analyse the data. It allows you to create a budget and then allocates any income to the envelopes (categories) of your budget depending on what you stipulate. If you divide yearly payments by 12, you can pop that much in monthly and watch the envelope grow.
Our envelopes at the time of writing
If there’s a positive balance, it’s because the money allocated there hasn’t been used yet. If it’s zero, it’s been paid out and if it’s negative – well, we screwed up somewhere! We try and sit down each month and see if anything needs to be adjusted. For instance, you’ll notice a high amount in the mobile envelope. This is because one of the contracts is up and won’t be renewed but the money has still been allocated there. I will adjust this and direct it elsewhere in due course. It on;y works if you fine tune it. I found it took us a few months to get a budget that really worked for us.
This is something we will continue to do. Once I finish university, anything I earn as a midwife will go straight into our downpayment fund (which only exists in my head at the moment) to someday buy the house we really should have bought by now according to society’s standards. If we’re living fine on his salary and all my school fees and diesel costs, then it shouldn’t be an issue. Bottom line, there’s a light at the end of the tunnel. We still live month to month, but we know where our money is going, we have no debt and we know it will all be worth it in the end.
How do you manage your money? Do you find budgeting difficult? What tips and advice do you have for others? I’d love to hear!