How We Escaped £371,000 Debt to Become Debt Free In 2 years
Roanne lives in Birmingham and works as a clothing buyer.
She lives with her husband Laurence who is a trainee barrister.
I recently had the pleasure of staying over with both of them when I was invited to join the Q&A panel for the screening of the ‘Playing With FIRE' documentary in Birmingham.
The one thing that stuck with me (beyond their generous hospitality), was their debt free journey.
Particularly just how life circumstances can suddenly go from one extreme to another.
I asked Roanne and Lawrence to share their story with our readers and they agreed.
This story does have a material element of inheritance, which remains highly topical. However, there remains much to be learned from this debt free story.
I'll now hand over to Roanne and Lawrence to tell their story:
Roanne and Lawrence's Debt Free Journey
“How my husband and I escaped £371,000 of debt in two years”
The sentence above may look like clickbait – but this was the reality of our situation.
I got married in 2015 and although I had earned good money, I was on a long journey to really discover what sensible financial decisions looked like.
In 2011 I read Rich Dad Poor Dad and decided that property was the way forward to my financial independence.
These seemed to me the most logical income-generating assets.
I already had my own house, but I went on to buy two small flats in Coventry where I lived.
These both required deposits.
My financial journey progressed.
I continued to earn well, but also made some big financial mistakes.
I invested with a large, well-known investment company and paid them extortionate fees.
In another venture, I paid £3k for a three-day FX trading course.
Not totally disastrous in themselves, but underneath these errors was a more insidious issue. I slowly started getting into more and more debt.
Debt can be a slow slide which you hardly notice. Every month, my intention was always to pay off the credit card.
But as payday came round, the demands on the money were greater than my desire to pay off the debt.
When I got married in 2015 I had racked up £31,000 of consumer debt.
This entailed over £1000 minimum payments each month. My husband had no debt.
I thought about trying to get out of debt before I got married, but it just seemed totally unrealistic.
I was ashamed.
When my credit card statement hit the doormat, I used to grab the envelope and not allow my husband anywhere near it.
I was also trapped into having to earn a high salary to service the debt.
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In the summer of 2016, I finally decided enough was enough. Whatever it took, I wanted to get rid of this debt.
I sat down with my husband and told him the full extent of my debt situation.
He was really shocked when he found out exactly how much debt I was in.
This conversation led us to take some important steps.
We agreed that we would do the following to become debt free:
- Live as simply as possible
- Cut out all unnecessary spending from our lives and bought only essentials.
- Stopped eating out and buying clothes.
- We agreed to no holidays.
- Limited unnecessary travel, even to visit our families.
- Pay the minimum amount on each debt, using any excess funds to pay off the smallest debt first.
Food, work, and sleep are all that we did for 6 months!
The process was not easy, but the peace that I found by just acknowledging the debt and facing up to the full extent of the amount I owed was a powerful moment.
I found a deep inner calm.
Even though the debt was still there, facing up to the truth of the situation set me free to get rid of it.
The first debt was quite small and gone within a month.
Then, the payment that I had been making on the first debt was rolled into defeating the next one.
For me, this was a very useful psychological tool to feel like I was making progress.
There were moments of discouragement along the way.
We were living in a house that was having some renovations done and all these came to a screeching halt when we decided to get out of debt: we were living without carpet, just bare floorboards and lots of dust and dirt!
Sometimes it would have been nice to get some takeaway or go out for a meal, but that was not the priority.
In just seven months we managed to get out of all our consumer debt.
I was starting to sleep better at night and have less anxiety about our finances.
The most interesting part of the process was what getting out of debt actually did for our marriage.
We started to learn to work together as a team on a single goal.
We would sit down at the beginning of every month and make a budget of what we wanted to spend that month, breaking our projected spending down into individual categories.
That wasn’t easy, but once the conversation had been had we felt like we were on the same page.
Sometimes we would argue, but more and more we found we were going in the same direction, working towards a better future for ourselves.
We started to think ‘if we can do this together, then what could our next goal be?’ We began to explore our potential as a couple to work together towards other targets.
So, as I say, after seven months, in January 2017, we could say that we were consumer debt free!
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Debt Free Living
However, you may remember I described how I had started to buy property.
Although the sense of peace from getting rid of the debt was huge, we still had four mortgages totalling £340,000 of mortgage debt.
Of course, some readers may argue that this is good debt as it is leveraged against an income generating asset.
I am not going to try and dispute that now.
All I want to help you understand is how we came to the decision to get out of the mortgage debt as well.
My husband’s father had died in 2014 and we had been given a house.
The house was fully paid off and the value of the house was enough to be able to pay off all our four mortgages if we sold it.
I am fully aware that inheriting a house is a privilege and not down to our efforts at all.
My husband’s parents’ hard work had given us a valuable asset and we knew that it was our responsibility not to waste the chance to change our lives.
We came to the decision to sell the property in this way.
We asked ourselves some simple questions.
If we had all the money from this property in the middle of our table in cash would we go out now and buy a detached, difficult-to-rent, bungalow an hour and a half from where we live?
The answer, clearly: No.
If we did have that money in cash on the table what would we do with it?
Well, we’d pay off our mortgages of course!
When we said it out loud the course of action seemed simple – and as Dave Ramsey said
‘Pay off your mortgage. If you don’t like it in a few months you can always take it back out again.’
The second part of the equation was that we had spent quite a lot of money on the inherited property.
We had put on a new garage roof and had the roof cleaned and the windows repaired. None of these particularly added value to the property.
Seth Godin usefully talks about the need to ignore sunk costs.
The money that we had spent on the property was gone, we couldn’t get it back. We just had to do the best that we could in the situation as it was.
We have found this method of thinking useful in lots of different areas of our life together.
You can ask the question about any of your assets.
If you had the money in front of you today, would you go and spend it on that particular house, car, business or investment fund?
If not then why not sell that house, car – or whatever – and move on?
How many of us are holding on to individual shares hoping that eventually, they will go back up in value?
What we may need to do is sell them and invest more wisely with the better knowledge that we now have.
We can ask the same question about our jobs.
If we knew what we know now about the job would we have accepted the position?
We tend to hold onto things tightly because of the investment of time, energy and money that we have already sunk in them.
Maybe we just need to accept that, although that seemed the right decision at the time, our knowledge has grown and we need to make new and sometimes painful choices to free ourselves.
If we are in a hole we should stop digging.
If we have made a mistake, we should admit it, not double down on a previous wrong decision.
By the Summer of 2018, we were completely debt free.
The feeling of owing nobody any money is highly recommended.
It meant I didn’t have to stay in a job I didn’t like.
We could live (modestly) from our rental income.
Our savings rate went through the roof because when you don’t owe anyone any money you can keep, or give, or spend what you earn.
At last, we have started paying for our present and future instead of my past.
What to Read Next>>
- How We Paid Off Our Mortgage Early and Why You Should
- 5 Debt Realities and What To Do About Them
- 7 Habits For A Successful Debt Free Journey
What to Watch Next>>
I usually love reading your blog, Ken. Today though I’m sorry to say this seems a bit of a cheat of a story. Yes, they worked hard to pay of the consumer debt, and well done, but the rest of the money came from an inheritance. Not so many people have this to bale them out. It’s like saying, I won the lottery and now I’m financially free. Sorry, but it didn’t seem relatable for a great number of us who are/ have worked hard to gain what you inspire us to.
However, I do totally relate to the notion of using your money to get rid of your mortgage to free you to do the things that make you happy. We made the decision to give up a 30 year business after it faced financial problems following recent economic downturn, side moved to a better house for 100k less, paid off all our business debts and mortgage, and now run a smaller business from home part time. Life with less has become so much more. I love my paid work and I am free to do lots of rewarding and fulfilling voluntary work in my new community. We have seversl little pension pots kicking in in the coming years, and modest savings. A camper van conversion is about to start to enable us to start travelling on a budget.
Financial freedom is for me about learning to live a contented and fulfilled life by realising how little you actually need in monetary terms. People and relationships are the most valuable asset in life! And loving and living every day where you are on your journey. It’s counting your blessings.
The Humble Penny says
You’ve made such a valid comment and it’s what I expected from our readers.
My view of this was similar when I heard the story but different on reflection.
I personally cannot point to any inheritance in my life although it doesn’t mean that it will not come one day.
The thing that struck me with this story is the fact that:
1) the inheritance came (which most of us would like) and it was unplanned but they chose to make some very wise decisions with the money.
2) The sudden change in fortunes as a result of taking the right steps i.e.
i) starting with Roanne’s choice to engage her husband in communication,
ii) her husband accepting the situation and both of them then coming up with a plan, iii) part of the above then raised a question of the property that they had inherited and this led to a thought process about selling the inherited property (quite a big deal) and using the money in the way that they did.
I personally have never known anyone to use inheritance in quite this way before, as a way to buy back a great deal of their financial freedom.
To the rest of us, this looks like they took a shortcut, but I think there is more to be learned from this story. E.g. the fact that their marriage did not break down due to what some refer to as “Financial infidelity” i.e. accumulating debt that a partner didn’t know about.
I’m interested to hear what others have to say about this story.
By the way, love your story!
Sorry Ken but I’m agreeing with Linsay here – felt like a right let-down reading this one! Especially because the first half of their story is the usual inspiring stuff about getting rid of a huge amount of debt fast etc. Also thought her point about selling the house to pay off the others was obvious, but maybe that’s just me.
I agree with your points about mindset etc – we have some good friends who have always owned their houses outright due to an inheritance from my friend’s father dying. They also have a large amount in trust from the other side of the family. But they still live very modestly, drive 2nd hand cars etc.
Other thing that I think this raises, and your other commenter has too, is about the psychology of moving on from mistakes. I think it’s what holds a lot of people back from making big changes in their finances, and other things like getting rid of unwanted material possessions. We’re in the process of selling our house and moving to a smaller one. This is with 2 young boys and careers that are going to earn us good money later (we’re both doctors). We’re mainly moving to be closer to my parents for help with childcare etc, but we initially thought we’d increase our mortgage and go bigger. This is whilst we still have debt. So instead we’re downsizing to a house 40k cheaper and getting rid of the debt etc. However, the problems with this are 1. it highlights our mistake of pushing ourselves too much to buy too big a house 2. it feels like we’re going backwards and not forwards. It feels very uncomfortable being counter-cultural sometimes!
The Humble Penny says
Thank you! Real insights there from your personal life journey. I agree with your point about the psychology of moving on from mistakes. Your comment has certainly given me food for thought as someone who often meets and listens to other people’s problems. It has made me ask myself – Are there any mistakes that I have not moved on from yet? And also, are there things that I need to quit? One thing I’ve learned for sure is that most of us hate 2 things – 1) Starting things and 2) Quitting things.
I hope your house sale goes well especially in the current economic climate. I’m especially intrigued by your move to a smaller house because every single doctor friend I have is moving the other way. Says a lot about you guys.
On the point about this story, what I find particularly interesting is the reactions that we have towards people who have inherited assets. I’ve always considered such people to have an unfair advantage, but then again, I could argue that many people have perceived unfair advantages in different spheres of life (sporting ability, private education, etc). Perhaps the inheritance of money does have this somewhat negative perception because it is more visible and money is something that everyone can relate to because most of us have too little of it.
Keen on more thoughts on this. Liking the personal perspectives shared.
A side question –
Should we dislike (or not admire) people because they have inherited money at some stage of their life journey?
Ha yes, well my husband is a psychiatrist (and I was for a while) so we spend a lot of time analysing thoughts and behaviours!
Nightmare trying to sell currently, not going to lie! But that also ties in with what your friend said above – we shouldn’t just hold on to it now we’ve made the decision, even though in another couple of years it could have increased in value again….
I think the inheritance thing is a very thorny issue. It is something we have discussed a lot with the friends I mentioned above; the one who lost his dad did so when he was a young child and had a difficult upbringing, relationship with step family etc, and has always maintained that he would obviously rather be penniless and have his dad than their big house paid for.
I also think it’s tricky for our (millenial) generation, as our baby boomer parents often have a lot of money tied up in potential inheritances. E.g. my parents bought their house in 1985 for ~80k and it’s now worth 800k! But they are fit and healthy and likely to live for a number of decades yet. I also know people who talk about their inheritance as a given, but an ageing population = costly care needs. And I personally feel that people should pay for their care in later life if they need it, rather than the state paying – a lot of people feel very angry about this issue as they feel that people’s houses shouldn’t be sold to pay for care to protect their inheritence….
The Humble Penny says
Fascinating! I do feel for your friend who lost his dad as a young child. No amount of money could ever replace that.
The thing that I’ve come to conclude about the possibility of inheritance, is not to rely on the possibility that it could come. Personally, I believe in making my own way, and anything else that follows that is an interesting bonus if it does (not when it does).
I came to the realisation early that believing that you’re on your own is a good thing. i.e. I’m not waiting for my mum or dad to come to my rescue in any way financially. Their childcare comes in handy though, haha!
In all seriousness, this belief has made me find my way and fight for it, rather than wait for anything to be handed to me. It means that I can confidently make my own decisions and live life on my own terms and not conditional on anyone or anything.
This also means that when the time is right, culturally, I would have the means to look after my parents in old age (if their resources was unable to handle it).
Gentleman's Family Finances says
I agree with some of the criticism above – click bait and ignores the fact that they might as well have won the lottery – not 100% skill/hard work
But what’s maybe more interesting is the journey that they were on – £31k on a wedding, £3k on an FX-trading course and lots of consumer debt.
I’ve not really had any inheritance so I don’t know what I would think about receiving money for relatives dying – money can’t buy everything.
It’s easy to get jealous of them, but we all have good luck and bad luck, that’s life.
Specifically on inheritance – those who are millennials might have to wait a very long time on average to get their hands on the family silver. It’s so variable on what you migh get – you could call it the genetic lottery but it’s not all genetics – homeowner/renter, DC/DB pension, care home fees, equity released in the 90s for the extension, house paid off and worth £800k. money saved away or invested with Woodford and how many siblings you have (I have 6 so always thought I’d get nowt – but I know others with fewer who have calculated inheritance into their life plan.
The Humble Penny says
Hey Man, thanks for stopping by!
I think it is important to point out that with inheritance aside, Roanne and Lawrence are extremely hardworking. I met this couple, slept in their home, and I’ve gotten to know them personally too. They have worked very hard to get to where they are (and continue to) and that record should not be completely tainted by the fact that they inherited some money much later in their lives (They are not Millennials).
Pre-inheritance – Pushing themselves to not only buy their home but to also become property investors required a different type of thinking (plus skill and hardwork) and the consumer debt accumulated is something that we can all relate to in one way or another.
It’s fair to say that that part of their guest post (and the debt paid off in a short period of time) was more interesting perhaps because it met our expectations. The reaction to the inheritance part (and the general direction of previous comments) is one that I hadn’t fully expected as it has actually raised other quite interesting issues.
Re inheritance and Millennials – You’re spot on.
Your final point is one that I’ve seen become more common too. One guy I know in his 50s (with a large interest-only mortgage) is waiting for inheritance as his only way to clear the debt.
Danni L says
Though well told this certainly felt unrelateable – barristers are top earners and Roanne had money to put down deposits on three houses, and that was all pre the inheritance. Although well intentioned, I’d change the title to ‘I paid off 30K of debt and then inherited 300K plus’ which is far more real.
I enjoyed this entry. I think it’s good to have a wide range of different stories. I may not have related to the inheritance or multiple mortgage angle but there’s plenty in there still. And, in any case, somebody somewhere will be able to relate.
All good stuff!
Rose Buckley says
Really interesting post! Thank you for sharing!