How I Paid My $24,000 Divorce Debt in 16 Months
After my ex-husband and I separated, I was left with all the family debt – all of it. But hang on – before I let you think he was a horrible person, I should say that he wasn’t. You can read more here and here. I just wanted to make that clear before I carry on. I wasn’t all holy and kind myself.
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Saddled With Debt
Okay – so as I was saying – I was saddled with all the debt… what I call my Divorce Debt. Not just the debt I accumulated during the Family Court proceedings, the lawyer etc. This Divorce Debt included all the stuff over the years – credit cards, hire purchases, and so on.
It felt like an impossible amount that I desperately wanted to just bury into a deep hole and forget.
I thought about filing for bankruptcy – but then after much thought, I realized that I wasn’t quite there yet… not quite ready to give up.
I wanted to start my life over – not give up.
So my partner, Wayne, and I sat down to discuss how we would tackle it. He had his own debt that had not been accounted for as yet – but I won’t tell his story. That’s not fair. Let’s focus on mine.
Now, as I said, I wanted to start my life over – my career path, my views on life, everything. So we talked about what I wanted to do. That was when I confided that I always wanted to be a Writer.
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1. We made a budget
The great thing about having a budget is that it pushes you to plan how you will spend or save your money. Even better, if you do one monthly, then it helps you have a clear overview of what your spending habits are – what you spend on, where you can curb your spend, what your Fixed and Variable costs are.
If you missed that post, read it here. This is how I explained it:
Fixed Costs are expenses that that DO NOT change. They are fixed. Think about your mortgage (or rent), power bill and other utilities, insurance etc.
Variable Costs are those that vary. Simply put – these are the costs that you have some control over, like your groceries, eating out, alcohol, entertainment, children’s activities and so on. These are also the costs that can blow up your budget!
2. I cut up all my credit cards
Yup – I did. LITERALLY. You see, credit cards are bad. Plain and simple. If I don’t have cash to buy something I want today, I add that on to my budget and make a plan for how I can get it later on.
Think about the reasons that you have used your credit card in the past (or today). Notice anything? We use credit cards when we don’t have the immediate cash to pay for things.
And what things do we buy with them? Groceries (okay), medical expenses (okay, I get it), the latest mobile phone (even if your current one is still relatively new), a piece of furniture (to replace something that is perfectly fine, but the new one is prettier).
We use our credit cards to buy things that depreciate the moment we swipe our cards and walk away with them. As the value of our purchase depreciates, the value of the interest we owe, increases.
The bottom line is this – if you need to use your credit card, use it for the right reasons; and make sure you pay the balance off in full every month.
3. We consolidated my debt, where possible
On reviewing the debt, it all looked so overwhelming. There were several creditors; it was impossible to pick which one to service first. By this time, payments were behind. I had made the mistake of putting everything under my name, because I had the better credit.
Okay – so point of interest here:
A Creditor is someone who is owed money.
A Debtor is someone who owes money.
So, we canvassed the different banks and financers; and went with the one who was able to support our plan.
Most of my debt was consolidated into one major chunk with a single provider.
4. We worked closely with all of my creditors
As I mentioned, I had several creditors – it was crazy!
- Credit Card
- Hire Purchases
- Medical expenses
All in all, this amounted to $24,000 after consolidation. I was in over my head.
So, we worked closely with our creditors. We discussed my situation – my separation/divorce, income, and ability to pay.
I was pleasantly surprised (and grateful!) to learn that there were things they could do – adjustments made to help me meet my payments.
This goes on to support the old saying: The squeaky wheel, get the grease. If you don’t ask, you don’t get. And if you do ask… what’s the worst that can happen, aye?
5. We stuck to the budget and the plan
So then, now that there was a budget and plan – it was then my responsibility to stick to it.
Now it wasn’t just sticking to it. I had to actually make some compromises – no matter how little it seemed:
- No takeaway coffees
- No takeaway lunches at work
- No clothes shopping (yes, this included shoes!)
- No thrift shopping (this was one of my favorite things to do, so that was hard!)
We did it
As the months went by, and I stuck to my budget and plan as best as I could; I saw how the big $24K started to go down… until one day, I received a credit of $84 for over payment. My debt was paid. I breathed and cried.. and breathed again. We did it.
Don’t get me wrong. It wasn’t all a walk in the park. It was definitely hard – not just because I wanted coffees or to go shopping, because who doesn’t? It was hard because I have little kids, and sometimes, you don’t want to say no. But I’m really happy to say that over the 16 month period, not only did I learn so many things; my kids learned about the value of money, how to save, and how to spend wisely. Once the debt was paid off, we implemented an allowance scheme for the children – in the hopes that they will continue to be wise with their money and carry than on with them into adulthood.
So here’s the takeaway:
If I can do it, so can YOU.