Let’s start from the start.
I graduated from university in 2011, at a ripe age of 25. I chose to take 3 years out between high school and university simply because that’s how long it took me to decide what it was that I actually wanted to study. My BA is in computing and marketing and with a bit of strategic arm-twisting, selective studying and mental gymnastics I just about managed to get out with First Class degree. Because why not – I planned on only doing this university thing once, so might just as well have a good diploma to show for it.
But university was not free, nor cheap, at least not in the UK which I chose to study in. To think of it, maybe it was cheap back then, the costs in 2018 are more than triple per year as compared to when I graduated. All in, I ended the university with just over £11,000 in debt despite working throughout the three years of school. I am saying ‘just over’ because I can’t recall the exact figure anymore. I do recall taking out two years of tuition loans at approx. £3,200 each and additional ‘maintenance’ loan at £4,700 which I also used towards paying for the 3rd year.
Two years after finishing university, I bought a shared ownership* property in South London with a measly £4,260 deposit (30% share in a £142k flat and a minimal 10% deposit). The It was a gift to myself for my 27th birthday. Because you know, YOLO. While going through a mortgage process, all my little financial messes and bad decisions were presented to me in a neat pack. The bank still offered me the mortgage (I needed £42k for the purchase which from today’s perspective is not a lot of money), but while I was looking through my credit card statements and student loan notes and trying to figure out how I’m going to pay for the decorative work I wanted in the flat, the figures made me uncomfortable.
I ended up putting the cost of works on a credit card. With a lot of elbow grease by your truly and a group of friends, the costs of the decorative work (paint, carpets replaced with laminate) was closed under £800. The furniture came up to £754 (£649 for a sofa, £40 for a table and £10×4 for chairs, and £25 for a rug, all but the rug are still in my home). Having moved in August of 2013, making a measly £24,000 per year, somehow I managed to accrue over £12,000 of debt between the student loan and credit cards, a double of my annual salary, and a mortgage on top of that. I was only just getting started in my career, in my first home and instead of enjoying my life, the realisation made me want to cry. And cry I did, not to say full on breakdown while chatting to a lady from Amazon because a driver missed a delivery. True story.
Fast forward to December 2013, I was clumsily beginning to understand how budgeting works. Right around the same time I discovered a YouTube channel called Debtisdum, who happened to be rambling on about Dave Ramsey’s 7 baby steps** plan. And I liked what they were doing with that plan. With just about as much excel love as I could muster, I created my first budget and decided that by the time 2013 turns to 2014 I must have a plan of action.
My plan of action was simple and included, in no particular order:
- Make more money
- Spend less money by budgeting properly
- Follow Dave Ramsey’s first two baby steps i.e. save a $1000 (£ in my case) emergency fund and pay off your debts, smallest to largest.
Making £24,000 and having quite so much debt and no security cushion made me queasy. For the first time, aged 27 I realised that I might have a serious financial mess on my hands and there is nobody there for me to take on the responsibility of fixing it. So I felt that there is no other good choice – I had to grow up and sort my mess out.
I will tell you all about what happened in 2014 in the next post.
Meanwhile, want to know more about me? Visit the About section or take a look at my tiny YouTube channel.
*Shared ownership is a property ownership scheme where a low income person can purchase partial ownership (a share) in a property and pay rent on the remaining share. Usually the remaining share will be owned by a housing association which has built the development. The rent is usually below market rate. In addition to the rent the person buying a share is also liable to pay service charge fees and ground rent, Most shared ownership schemes will allow the person to purchase more shares or full ownership with time. The scheme is designed to help low earners to get on the property ladder but is only suitable for so-called first time buyers. As at October 2018, the scheme backed by the British Government has rebranded as Share to Buy. Their website: https://www.sharetobuy.com/guides-and-faqs/what-is-shared-ownership/
**Dave Ramsey is a Tennessee based financial speaker and radio host. He is best known for his 7 baby steps plan to building financial stability and wealth. The 7 baby steps are detailed on his website: https://www.daveramsey.com/baby-steps. If you are wondering, I am on baby step 6.