Debt Repayment is hard!
Today I want to talk about the reality of debt repayment. Not the advice type post that if you searched you could find hundreds, thousands of versions of the same post, taking debt snowballs and advice on how to repay that debt. No. This post is about the feelings and thoughts around debt repayment and how it feels when you don’t hit the goals you had set. Debt repayment is hard!
Most debt posts are a celebration of debt being repaid. And to me they all seem to be about paying off debt as quickly as possible, with some big numbers being thrown around. £30k in one year, £100k in two years. These posts can have a negative effect particularly when one might feel they are not paying off their debt at these significant levels. This post is about me slipping backwards into debt after making some financial decisions that have cost me greatly in the short term.
I set goals
I like to set goals. It gives me something to aim for. A timeline to plot a way forward taking that goal each step at a time. And yes, I am from the corporate world, I make my goals Smart, specific, measurable, achievable, relevant and timely. Okay whoops, I have fallen down on the achievable part.
I had a target of £16k back in April 2017 to pay off.
You will remember if you have been following my debt repayment story that I took my head out of the sand last April and added it all up. There were many updates of small and bigger chunks being repaid. I had a few very positive months where I spent very little and managed to pay off some big chunks and put some emergency savings aside. The audacious goal was set to pay off 16k in 16 months, aha, that means by the end of August 2018. I didn’t share that goal with too many people, my sub-conscious mind must be telling me something.
It is not going to happen. I am nowhere near paying it off by the end of August 2018.
Head Goes Back in the Sand
This process of head in the sand seems to happen regularly. I put my head in the sand last July/August and I have done it again this year. This means I ignore my finances for a couple of months. Note the last debt update I wrote was in April, here I was all happy and positive, the light at the end of the tunnel.
July and August are the toughest month for cash flow. Not only lower income but also higher spending. The summer holiday hit and it is a more expensive time, more money is spent entertaining the boys.
My last debt update mentioned that I had 5k left to repay this included 8k on 0% credit cards and 3k in an emergency fund account. As at the end of August 2018 that emergency fund has been spent. And I have had to move another £1,500 over to 0% credit card debt. My balance that was at £5k is now £9.5k.
Having Money Means spending Money (to me)
I keep a pretty close check on my cash flow, and back in March I had 11k. This was a nice balance at the bank of 6k, plus another 5k in money owed that was either already invoiced or soon to be invoiced. Q1 had been an amazing quarter for Mrs Mummypenny. I did pay off some of my debt. But the over-riding thought was that I was rich. I had money to burn so what could I spend the money on.
In March we bought two cars. Yep, £4,500 of my hard-earned Mrs Mummypenny money went into the deposits for two cars. We had one car already that was nearing 100k miles and was starting to break often. I can justify it all I like but we didn’t need to buy two brand new cars. The irony now is that hubby has got a new job with a car, and we are selling the small car back to the garage, which also means we lose the £2,000 deposit. Maybe there is another option to not lose this £2,000?
Investment in the Business
I also went on a spending spree and invested in some things that are yet to make a return. My three-year-old laptop kept crashing, so I bought a new laptop for £600. I wanted to up my Instagram and YouTube game so upgraded early and spend £180 on a new Samsung S9+. Again, turns out that my old laptop just needed its memory cleared down of bulky video, and its still going strong, as I sit in France typing this post on my said old laptop. £600 spent there that I didn’t need to. And the phone, well my Instagram is much better now, and I am getting lots of social media work, so I would say that investment has paid back.
Investment in Products and People
One should never compare oneself to others. I know this. But when I see others selling products I think I can do that as well. Products teaching others about my area of expertise. I know how to run a successful blog, I know how to negotiate like a demon. I know how to pitch and I know how to make money from many different avenues. And even better I had already written this content in blog posts and the chapters I wrote in Blogging Your Way To Riches.
I invested £2500, into the development of these products and as I sit and write I am yet to recoup this money. This money needs to be recouped and a positive ROI returned, yes forever the accountant. (Point added as I refresh this post in 2020, I never recouped the money, the coach I paid the money to was a complete scammer, AVOID Kerrie Rycroft at all costs)
The second thing I have invested in which I know will take some time to recoup is time with a manager/life coach/strategy expert. My favourite manager of all time from the corporate world just happened to have a few months out of work just when I needed some help. We reviewed my business strategy, threw everything up in the air and let it settle down to see what the right things were to continue with. A new strategy was born, a new mission statement.
To Inspire others
This makes it incredibly easy to decide on which work to say yes or no to. I have pillars of content and pillars of brands to work with. I have a constantly evolving stop, start and continue list. And I have a clear strategy for the next three to five years. I do have one thing left to do which is to convert it all into an official business plan document.
Building a team
I also took the step to invest in a member of staff. I took on virtual assistant who took on all this work for me, marketing mgr, editor, image maker, debt chaser, SEO expert, tech support to name a few skills. Having a VA meant that I had more time to create content and to negotiate the new campaigns and projects coming in. After three months there was a 40% increase in traffic. But she came a significant cost of around £1000 per month. I could not maintain this cost ongoing. And after four months we ended our agreement.
Around £12k has been spent
Adding up all this investment and spending the total spend is £12k. Ouch. I could have not spent any of this money and had the debt paid off in full. This is annoying and frustrating. I want to know why I cannot control that desire to spend any money that I have?
I must be kind to myself and say that a chunk of the money was investment in the business and you cannot expect a return immediately. After my many years of study and working in commercial finance departments I know when you invest money it’s a good result to get a return in a year. And it normally takes longer.
To succeed in business and grow and make more money you must invest. You must invest in a team when it comes to a point where there is too much for one person to do. I had reached that point and knew there was so much I could improve on with my business but simply did not have the time to do it all.
With one side of my brain I can be annoyed at myself for not resisting the urge to spend and paying off my debt. But with other side I can see that I have invested a chunk for the greater good of my business. Sometimes investments work and sometimes they don’t work. Let’s assess in 6 months’ time to see if I have managed to learn my cash flow lessons?
Do you relate, how is your debt story progressing?