Like a countless list of other frugal bloggers I am in debt. You can read the details of why here: Me, My Debt and I, but in short I borrowed money for some other people and they never paid me back. The money was borrowed on credit through Loans and Credit Cards and I did it because they were in terrible situations. In hindsight I wish I had not as they would have found another way out, their mindsets will mean they will likely always struggle financially through life, which is sad but I have learned the hard way that giving money to people like this is not helpful.
As it stands my debt is approx $38k. This wad of cash debt is sitting under management of a debt management plan (I know Dave Ramsey does not recommend this!). I finally went through with the plan using a company recommended by the National Debt Helpline, a government run charity in the UK. My debt management company has been fantastic and charges me 0 Fees. I have no idea how they make their money but they have frozen all my interest rates and I now pay approx $200 a month of which 100% goes to pay off my debt… Prior to the debt management plan I was struggling keeping up with paying the interest alone which was around $400 per month, minimum payments were much more than this. The debt was doing nothing but growing, I was paying credit with credit and it was hurting me mentally.
So since January, under this plan, I have been able to get back on track. $200 of my money goes to debt each month and the rest can be budgeted for everyday life and savings. My priority right now is saving an emergency fund, then savings. The plan will have me paying down debt for 18 years but I hope I can crush it much earlier than that with sensible saving… Once I have double the debt in savings I plan to pay the debt outright.
The two serious side effects of the debt management plan have actually been positive for me. 1) I have a ruined credit score, so getting credit will now be very difficult. 2) Whilst under the plan, acquiring any new credit without prior approval could be counted as fraud! The option of using credit has effectively been killed for me, and I like it!
I NEVER want to use credit again, I am not against mortgages and credit cards but I have used both in the past and I don’t like the feeling of owing. My plan is to one day buy property 100% cash down, no mortgage. Until then I will rent my homes and do without if I have no cash, with no plans for children anytime soon it isn’t an unrealistic ideal for me to follow.
So who is joining me on a pledge to never use credit again?
What do you think about this idea and am I being realistic?