Whether it’s a blip or a major set back, failure can happen on your debt free journey. From using your credit card on something you know you shouldn’t have to needing to spend £1000 on your car repairs, it happens to all of us. The important thing is that you learn from it and ensure that you do everything you can so that it doesn’t happen to you again.
Reasons we fail on our debt free journey.
There are so many things that can make us feel like we have failed. From personal experience, lack of planning can be the most common cause. When you’re in the midst of throwing everything you earn at your debt payments it can be so easy to forget about extra costs in life. Of course, we’re all aware that birthdays, Christmas, Car MOTs and many other things cost money, but as they are not weekly or monthly costs we can often lose sight of them.
When I first began to face my debt this was something that caught me out on more than one occasion. With an irregular income from being self-employed and the desperation of trying to cover all of my bills and fees, I was often left short when it came to going out with friends or covering Christmas gifts. At my lowest point, I went to the ATM to withdraw £20 to cover a dinner, only to find I had -£35 in my account. I had forgotten about a bill that was due to be taken from my account on that day and there was nothing I could do about it.
Of course, this is not a mistake that only those in the early stages of their debt free journey make. Several months into my own I feel like I am on top of things. Then earlier this week I realised that in January my tax bill is due. I’ve been so focused on my debt free journey that I’d forgotten to ensure that money was set aside. Thankfully it is not a huge bill, just over £1000, and I will be able to save for it in time. Unfortunately I will need to slow down my debt payments until I have that money set aside as a result.
What can we do to avoid them?
Use an emergency fund.
If you’ve never heard of an emergency fund before, take a quick look at this post and then come back. Once you know and understand an emergency fund, it doesn’t need any more explanation. Have one in place and if an unplanned expense arises you will be ready to deal with it.
Use a budget and stick to it.
You need a budget. It’s as simple as that. At the beginning of each month, sit down with a calendar and get familiar with your money. Everyone in the family who contributes to the pot should be included. Know where your money is coming from and where it is going. What events do you have coming up? Are there any big expenses expected? Should you be saving a little extra than normal? Planning ahead this way will definitely save you from hitting crisis point.
If, like myself, you have an irregular income read my budget for irregular income post. When your income is uncertain it can be tough to prepare for unexpected outgoings. On top of my budget and emergency fund, I now keep a float of £500 in my current account. This helps me combat potential slow months and ensure my minimum payments can always be made.
Use sinking funds.
Sinking funds, no they have nothing to do with boats. They are essentially saving pots with names. Whether you choose to use separate accounts, have money jars in the kitchen or just keep a note of what is going where, the idea is simple. Instead of having general savings, allocate portions of your savings to specific things.
Let’s use the money jars as an example as often something physical is helpful. You might decide that over the next year you need to save for a family holiday, Christmas, birthday presents and car repairs. You allocate a jar to each of these and decide how much each will need. Now every time you put money into savings you divide it appropriately between the jars.
How does this help you avoid bumps in the road with your debt? It removes the surprise of irregular costs. You won’t be caught out by something unexpected arising because you already have a fund ready and waiting to cover it.
Track your spending.
Over the last couple of weeks I have started to track my spending whilst tracking no spend days. Each evening I make a note of all of the spends from that day and of course if there are none, it counts as a no spend day. This might sound ridiculously simple but it has had such a positive impact on my spending habits!
Within just a couple of days of starting my efforts were already having a positive impact. I managed to avoid going to the shops for snacks, picking up a few unnecessary items on amazon and getting a takeaway. As you are forcing yourself to be more conscious of where your money is going you take a second to consider it first. Try it and see what happens. Set yourself a challenge to have X number of no spend days in one month and see what impact it has!
Remember, failure does not mean that you are no longer able to tackle something. It’s difficult to face, but it can teach you so much. Take each hurdle that you face as a learning opportunity and keep going. Keep working hard. You’re doing an amazing job and soon you will be debt free.