The debt-free system: Part 2: It’s not rocket science (A tale about balancing the books)

The debt-free system: Part 2: It’s not rocket science

(A tale about balancing the books)


“And don’t tell me debt is not a big deal. Debt will cut off your legs and laugh at you as you grovel in the dirt begging for mercy. If you don’t need it, don’t get it. If you can’t afford it, don’t get it. If you’re already in debt, get out quickly. If you think you’ll never get out, you’re right, you won’t.”

Osayi Osar-Emokpae, Impossible Is Stupid

So what’s the plan? Some people like to take a crash debt approach, but just like the approach of it’s sister plan, the crash diet, this method may start off well, dropping a couple of dress sizes in the first few weeks (or thousands of £s in the case of debt) but more often than not it’s not long before they’re back on the same old consumerism bandwagon that they’d been on just weeks before. Downsizing your house or car, selling off important assets, taking on a second job to create additional income in order to clear a debt is an almost pointless exercise if you’re yet to have tackled the root of your financial problems, overspending and over-consumption.

Just as it is that an overweight person has grown to be obese by simply having consumed more calories than they’ve burnt off, although not quite so obvious, most people’s financial position are of a similar simple equation. Debt is often created by people from having continually, for many years, spent more than they had earnt, only for them to wake up one morning, in the cold light of the day, and realise the terrible state of affairs they are actually in.

Balancing the books is one of the key accomplishments in a journey to becoming debt-free and its value is not only in the financial sense of the word but also in the motivational sense of achieving this milestone. It’s the moment of realisation when you know you are capable of doing this and that from now on, probably for the first time in years, the only way is debt reduction (as opposed to debt creation).

To make a hot air balloon rise you have two options, you can either add more gas or lose some weight, it is a similar situation if you’re trying to improve your financial position, there are two potential options; one is to increase income (the money which comes into your bank), the other being to reduce fixed costs (the costs that you have to pay for at the end of each month)….or better still try doing both!

Whilst reducing some of your outgoings comes hand-in-hand with becoming a minimalist, wiping the slate clean by cancelling expensive, income-sapping gym memberships, magazine subscriptions etc, there are also the unavoidable costs (mortgages, electricity, home insurance etc..) which you can, over time, reduce to a bare minimum.If you want to delve a little further into reducing your outgoings then check out my articles ‘Look after the pennies and the pounds will look after you!’ and ‘Whatever happened to the idea of a 15 hour week?’.

For most wage-slaves (like me), increasing your income, especially in the age of 4 year public sector pay freezes, 40+ hour working weeks and continuing austerity, is an uphill challenge, but definitely not impossible. Increasing income can conjure up images of taking on second jobs, working late nights in a supermarket filling shelves, but for me this option’s opportunity costs, leaving little time for the important things in life/additional stress, far outweigh the benefits which the additional income would bring (especially after the state get their share of it!).

However there are other ways, smarter ways to earn money. By moving current accounts this year (single accounts with Halifax, joint account with Santander) I created an instant income of £400 (switching bonus) whilst in the long term these accounts bring in an additional £300 p.a. through a combination of cash-back (Santander 1-2-3) and rewards (Halifax Reward Current Account). Using cashback websites (Quidco) for insurance cover, mobile phone contracts, swapping utilities and buying birthday presents has reaped a handsome £400 this year whilst using a credit card (Aqua Cashback/Tesco Credit Card) for purchases (just make sure you clear the balance), big and small, has netted, through a mixture of cashback, rewards and additional time for money in the bank to earn interest, a useful £200. Check out ‘marginal gains’ for a comprehensive list of ways to do this.

For those of you who have long considered credit card interest, overdraft charges and excessive bank charges (where’s the fairness in banks charging a £28 ‘fee’ just because they didn’t have the money to pay a direct debit) as just part of life….it doesn’t have to be this way. The cruel, Catch-22 element of debt, is it’s those who can least afford to pay these charges that are most likely to be paying them and it makes debt for them a much deeper, darker hole from which to escape. As a result, turning it round for you will be harder than most but it really doesn’t take much to start clawing your way out of that hole. Balancing the books will mean that you’ll soon head away from these outrageous charges and you’ll never have felt richer. So do yourself a favor, as you start balancing those costs, waving goodbye to the worst of the bank charges, you might just want to rise a middle finger the next time your pass you chosen high street bank. It certainly won’t help you get those fees back but it will definitely, without doubt, make you smile…a lot!  

The debt-free minimalist approach: So now you’ve lightened the load, bought in a little gas for the burners, it’s time to start saying goodbye to debt and begin to look forward to the land of freedom. It might be some way off yet, a blip on the horizon even, but the time will quicker than you think and once you get there you’ll probably want to say forever. Balancing the books is a pivotal moment in becoming debt-free and it doesn’t take much, a little bit of time, a little bit of discipline and a little bit effort, but long-term it will be the best paid little bit of effort you’ll ever make!

The debt-free system: Part 1: Making the impossible possible (A tale about having the right mindset)

The debt-free system: Part 1: Making the impossible possible

(A tale about having the right mindset)


When you’re swimming in an ocean of debt, it’s all too easy to think that becoming debt-free is an impossible, distant dream, far beyond your reach. In your mind, such is its unlikelihood, most people decide to choose the easier option, the option to just believe that debt is just part of life, an illness that you’ll just have to live with, better still why not dull the pain with a little retail therapy, a new coat/iPhone/TV, after all… what’s another two or three more hundred pounds of credit on top of what’s already there? Of course, this behaviour serves only to enforce what you’d already been thinking…getting out of debt is just about impossible!

The truth is, getting out of debt isn’t easy, there isn’t any instant, quick-fix solution, but it is possible…and it’s not half as painful as you think it’s going to be. Next month, after 8 long years, I will have made my last payments against consumer debt which, amongst many other things, had been accrued from retail binges and travelling adventures long now forgotten… apart from their cryptic code existence within the depressing negative balances displayed on my monthly loan and credit card statements.

It’s been a commitment, a sacrifice of summer holidays abroad, of learning to live without, of time taken to search out the best deals, of having to say no to things which you know you know for sure you’d enjoy, of scrimping in every single area of my life, but, now that I’m there, I’m going to make absolutely sure that I never, ever, take on another pound of consumer debt for as long as I live. And on reflection, what’s 8 years of a life which I hope, God willing, may last for another 60 at least, but now with the greater freedom which living without debt will bring us. Now for the mortgage!

The debt-free minimalist approach: Up to now, consciously, my articles have never offered a solution, a strategic system to attack debt with, because I believe the most difficult challenge in tackling debt is changing people’s attitude towards money and dealing with the behaviours of over consumption (and being conscious of the aggressive, consumerism-driven marketing tricks which surround our lives). It’s only when you’ve accepted that stuff doesn’t make you happy that you can begin to adopt the debt-free minimalist approach, the culmination of hundreds of small changes in lifestyle, which given the benefits of time, will give you a system that is not only long-term sustainable but also powerful enough to change the direction of your whole financial future. So now if you’ve got the mindset it’s time to start making the impossible possible and get debt-free!

Next week: The debt-free system: Part 2: Balancing the books

If you haven’t read any of my previous articles then just scroll down or visit the archives page (for selective articles only)

Haven’t you got something better to be doing with your life? (A tale about the endless pursuit of stuff)

ImageHaven’t you got something better to be doing with your life?

(A tale about the endless pursuit of stuff)

Have you ever stopped to consider how much of our lives are wasted in our endless pursuit of stuff? This consumer cycle is much bigger than you’d ever think! These consumer purchases, be it a new kitchen, must-have gadget or luxurious holiday, commit us to working longer and longer hours which leave us exhausted, drained of energy with which you could have done something with purpose.

Be it your weekday evenings or traditional weekends, most people choose to recover from work by, you guessed it,’treating’ themselves to more stuff!  Having seen it advertised on the tv show you were watching/magazine you had been reading/website you had been browsing/friend you had been visiting, you then spend some more time finding out if this is definitely the stuff you want to buy.

Convinced that we definitely need this stuff we then commit more of our leisure time to purchasing and collecting the stuff you wanted. For some items this may be the swift, addictive ‘1-click’ on a website but for others this could be an all-day investment of their leisure time walking around endless shops in bland shopping malls and uniformed high streets. If you’ve travelled to shop by car then you may even find yourself having to work a little longer that month just to pay for the small slab of concrete you parked on whilst you were out shopping for your stuff!

Beware though, whether it’s on online or in the mall, it’s all too easy to become distracted whilst shopping for stuff. Retail shopping can be like one big confectionary stand that’s sitting temptingly next to the till. It’s the moment you ask yourself ‘What did I come in for?’  (or go online for?), the original purpose having been forgotten as you become distracted by the consumption of even more stuff which you just happened to pick up on your way to purchasing what you had come in for!

Stuff has a nasty habit of not keeping us happy for long and it’s not long before the ‘feel good’ factor of this new stuff wanes, so we begin to spend out time seeking out the next item that you really just have to get.

Now, if you’re really unfortunate ,you may even have to work a little longer to pay for the interest that has accrued on an overdraft/credit card as you didn’t actually have the money to purchase your stuff at the time. If you’re just unfortunate then it’s highly likely that you’ll be working a little bit longer down the line to pay the mortgage which you could have been paid off years earlier had you just owned a little less….you guessed it……STUFF!

LESS STUFF = MORE TIME (and a happier, simpler life).

The debt-free minimalist approach: It’s a fact of life that most people will spend the majority of their week working but do we really need to spend such a significant proportion of our leisure time in the endless pursuit of stuff? Consuming is not living, happiness is not found in the pursuit and accumulation of more and more stuff, it is found in living an active, purposeful, social, creative life. Go out for a walk in the woods/by a lake, draw or write something, spend time with your family, tend to the garden, make something, fix something, learn something new (an instrument/a language), join a community club, become a volunteer, plan an adventure, write a letter to someone you love, follow a passion, get fit, bake a cake….the options for how we spend our leisure time are almost endless. So when you next find yourself about to begin the next consumer cycle, pause for a moment and ask yourself ‘Isn’t there something better that I could be doing with my life?’ because you’ll normally find that actually…there is!

Look after the pennies and the pounds will look after you! (A tale of accumulated marginal gains)

Look after the pennies and the pounds will look after you!

(A tale of accumulated marginal gains)

penny pounds

‘A small leak can sink a great ship’ – Benjamin Franklin

Do you ever get to the end of the month, without having made any substantial purchases, yet still find you have very little (if not none) of your salary left? I suspect this is a familiar experience all around the globe, yet many do nothing about it. You may even ask yourself where has it all gone? In the hope that it’s not you that is responsible for spending everything you earn, you may even attempt to blame someone else (your partner, your kids).  Once I actually called up my bank convinced that I had been the victim of bank fraud, that was until the bank clerk began to whistle through the last 15/20 transactions on my account….to which I replied ‘yes, yes, yes, yes….oh, it looks like I’ve actually spent the money!

Whilst you can become transfixed with reducing the big fixed monthly outgoings (your mortgage, car loans, loan repayments etc.), what many don’t realise is that every month substantial amounts of money are paid out through numerous small bills/costs, payments which could have been reduced or eliminated altogether. These innocuous, frequent, sums of money, the ones which make up 3-4 pages of your monthly bank statements, can stealthily consume equal to or far more than the big outgoings, the ones you sit and agonise over, yet they warrant comparatively little or no attention.

David Brailsford, the multi-gold winning coach of the Team GB cyclists, is accredited with much of the team’s Olympic success through his emphasis on the ‘aggregation of marginal gains’. Put simply, it’s how small improvements in a number of different aspects of what we do, can have a huge impact on the overall performance of the team (or in this case, the state of your finances). To turn Team GB into a gold machine he examined every aspect of the team’s performance, from the streamline design of their helmets to the shape of the pillows on which the cyclists slept. Fast forward to the 2012 Olympics, it was with the accumulated gains from hundreds of micro-improvements, that Team GB won 8 golds (double the golds won by Team GB in any other discipline), 2 silvers and 2 bronze, earning David Brailsford the reputation as one of the most respected sport coaches in the world.

Where can you find marginal gains? Once you delve below the surface you’ll begin to find that the opportunity to achieve marginal gains is everywhere (a bit like clutter). How about turning the thermostat down a single degree Celsius (3-5% savings on your gas/oil bill and you won’t even notice it), or cancel a magazine subscription (they only encourage you to consume). Reducing your car use can save you hundreds of pounds, I’ve saved almost £500 ($800) this year by cycling, on just 2 days of the 5 days I work each week . You will probably have all heard of the ‘latte factor’, but how about the ‘leftover factor’? The cumulative savings of eating last night’s leftovers and other perishable food items in your fridge/cupboards (which otherwise would soon to be destined for the bin) will save you another £400 per year (using a prudent £2 per day approximation).

At home I currently enjoy high definition TV (via FreeSat), broadband and home telephone (inc. line rental) for only £10 per month. 3 years ago we were paying over £200 a year interest on our bank overdrafts, now the banks PAY US £300 per year, despite ending most months with little more than a few hundred pounds in credit. Last years we were paid £400 to move our current accounts and £100 to move energy suppliers, with the additional bonus of both offering market-leading products. Use a combination of cash-back websites such as QuidCo/TopCashBack (with caution) and cash-back credit cards (3% Aqua Credit Card = £100 per year) to shave pounds off retail purchases. Shop around for telecommunications packages.

If I was to list all areas of potential marginal gains this article could easily become a book in itself so here is a list of the key words relating to further potential marginal gains which you may wish to try for yourself. Water butt to water garden, reuse supermarket carrier bags for green points, use own brand toiletries in expensive branded bottles, pay bills by direct debit, use first litres of cold water in shower to wash hair, turn off heating an hour before bed, porridge for breakfast, cut down on alcohol, no gambling, meat-free Monday night dinners, do it yourself, energy saving light bulbs, don’t pay to park, fresh cooked dinners, switch off not standby, no lottery tickets, increase insurance excesses, wash your own car/windows, use restaurant vouchers, grow your own, don’t buy newspapers, no coffee shops, bulk-buy during offers, flush toilets less, borrow not buy,  cut out unnecessary car journeys and don’t use air-con.

Debtfreeminimimalist approach: Applying the aggregation of marginal gains method to your home finances might not bring you instant wealth, and may even at first appear a lot of effort for little reward, but like most approaches suggested by thedebtfreeminimalist, it is a philosophy which will, over time, enable you to live a simpler life, free of debt and free of the pressures with which having no money can bring.

It’s all about marshmallows! (A tale of deferred gratification)


It’s all about marshmallows!

(A tale of deferred gratification)

Could you resist temptation if promised an incentive for waiting? On a daily basis in our consumerism-driven society we’re presented with something hugely desirable (maybe its a new iPad, a latest smartphone or a new car) and suddenly you are hit with the consumer’s dilemma, should I buy or shouldn’t I?  The moment is often filled with small thoughts in your head, can I afford it? shall I put it on the credit card and deal it with next month? do I really need it? Increasingly the answer is buy it and worry about it later (when the bill drops through the letterbox).

Modern society is increasingly short-sighted especially when it comes to their attitude towards finances. Under half of 25-40 year olds don’t have a pension, nearly 25% of new mortgages are taken out over 30 years or longer and a staggering 68% of new cars are bought with finance. Consumers of the 21st century have been trained to get what they want, when they want, no matter how much it costs them in the long-term.


What about the marshmallows? Well, for 5 year olds, marshmallows are like new jeans, iPads, smart phones etc…very tempting! In a well-known experiment in the late 1960s/1970s, conducted by Walter Mishel of Stanford University, during an interview young children were offered a single marshmallow but were offered the incentive of an additional marshmallow if they could wait (approximately 15 minutes) whilst the interviewer left the room. The results are comedy gold (just search YouTube for this experiment) but the results are no laughable matter. The follow up research which tracked the children involved in the experiment and conducted for many decades after, showed that the youngsters who were able to wait, able to defer their gratification, were much more likely to have greater life outcomes (education attainment, levels of wealth, lower Body Mass Index).


Opportunity cost is an economic term which defines the benefit that you will forgo by consuming a particular good/service….the deferred gratification. For example the opportunity cost of purchasing a new pair of £100 jeans is that I couldn’t afford to go the theatre with my friends. Unfortunately the opportunity cost of our decisions can be a lot more costly in the long run than missing a night at the theatre (time for the number crunching!). The opportunity cost of purchasing the jeans could have been a £100 investment into a personal pension, which enhanced by tax relief would have immediately become £128. At the age of 25 and invested for a further 40 years (at a modest 6% annual return), enjoying the benefits of compound investment, your initial investment of £100 would have grown to a handsome £1,400. This sum, which if invested in an annuity, would deliver an annual retirement income of £72 p.a….nearly enough to buy a pair of jeans (or a night at a theatre), every year for the rest of your, what could be, long retirement.


As the Stanford experiments show, it is that it is more than just financial rewards that mastering deferred gratification can bring. The benefits of exercise are normally enjoyed not in the moment of exercise but in the time (days, weeks, months and years) after, when you’re feeling stronger and looking leaner and healthier. So many people in the western world are obsessed with the way they look yet they look for short-term routes, which require money not effort, to look good. The fake tan, the nail extensions, the new shoes are all just metaphors for scoffing the single marshmallow, if only people would spend their time exercising not shopping, they would soon find that they would be far happier with the way they look and feel than they do by propping their self-esteem’s up with short-term fixes whose benefits fade away as quickly as they are applied.

Achieve: Putting aside my wonderful family, on reflection, my greatest achievements in life have all involved massive dollops of deferred gratification. Be it personal success in running a sub-3 hour marathon, completing a grueling 100 mile cycling sportive (only last week) or educational success in completing A-Levels at night school, a 2:1 Undergraduate degree in Accounting and Post Graduate degree in Education, the achievements I will be forever proud of have all been achieved through a huge investment of not money but time, effort and discipline. The studying until the early hours of the morning, the evenings running and cycling through weather cold enough to make you want to cry, the lack of money whilst others all around are enjoying huge amount of disposable income (and the possessions/lifestyles to match) were all an investment in my future success and happiness, an investment whose benefits I will reap from for the rest of my life.


The debt-free minimalist philosophy: Whilst we won’t all live until we’re 100 years old, there’s no harm in thinking and planning for a life that will. Unfortunately, for the majority this won’t be the the latter years which they had imagined (or seen in the adverts) simply because they couldn’t wait, for them the marshmallow was too tempting! If you don’t want to spend your latter years eating cat food on, relying on state handouts to survive (if there are any by then) or simply not even existing (due to poor health) then it’s time to start thinking more about tomorrow and less about today because one day you’ll wake up without much wealth or health and think ‘if only I could have resisted temptation!’.


“For tomorrow belongs to the people who prepare for it today”

African proverb.