Why am I in Debt?

As of today, I have 3 forms of debt around my neck - a loan and two credit cards. In total, these are just shy of £10,000. Yet the only debt I can reliably explain is the loan, which now has a balance of 'only' £5,096.37.

So how I find myself in almost double that? I have nothing to show for it.

In order to completely understand my financial situation and change my mind-set towards debt positively and permanently, I decided to undertake the depressing task of analysing where this debt had come from.

Debt #1 - The Loan

This is the easy one, in April 2013 I had a car accident which saw my car being written off. Luckily the accident was fully covered under my insurance, unluckily I had unpaid finance.

After receiving the insurance pay out and settling the outstanding finance, I found myself in a deficit of £500ish (it could've been a lot worse!). However, at that time I was commuting to work and my daily round journey clocked up 160 miles! I found myself without a car, and with no savings to buy a new one.

Sensibly, I decided against another round of car finance - I had learnt my lesson from the car I'd written off - the interest was ridiculous and I was paying £180 per month for 5 years which resulted in me paying over £10k for a car marked up at £6,500 when I purchased it in 2010.

Instead, I decided to take out a loan: my bank could offer me £8,000 with an APR of 6.4% over 36 months. Unsensibly, I opted for this amount and purchased my new car for £5,000; I used the remainder to clear the finance deficit and to pay for tax for the year. The rest, unfortunately was squandered and I have no recollection of what on!

Debt #2 - Credit Card (I have transferred some of this onto a 0% deal so now have 2 cards but am not paying interest on a chunk)

I've analysed my spends on this card for the past year (as far as online statements will allow). To be honest, the results are shocking:

Cash	£1,250.00
Clothes	£127.54
Debt	£2,405.97
Dog	£74.59
Fee	£66.37
Gift	£1,365.71
Groceries	£279.14
Home	£689.12
Insurance	£384.27
Interest	£621.44
Ipad	£223.00
Misc	£11.94
Petrol	£321.67
Subscription	£89.94
Takeaway	£31.30
Travel	£39.40
	£7,981.40

 

 

I am absolutely gobsmacked at how much money I have wasted, and where my debt actually originates. I thought I would (ashamedly) explain these figures.

 

• Cash - £1,250.00 - I am 100% against taking cash off a Credit Card, unfortunately personal circumstances found myself and my sister on the verge of homelessness, due to my wage I am not entitled to any form of government help and so private renting was our only option. We didn't have any savings and so I withdrew cash of my card to pay for the bond and months rent up front.
• Debt - £2,405.97 - this is debt brought forward - it was accumulated by me and my ex, unfortunately when we split he refused to pay his share. I have no idea what it's for but I am lumbered with it.
• Gifts - £1,365.71 - this is horrifying, how can I justify spending this kind of money on other people? I paid £637.50 for a piece of sporting memorabilia (stupid, stupid, stupid woman!) for my ex's 30th birthday - we split before his birthday and consequently this is gathering dust in my attic. £538.16 is on various gifts for my current boyfriend for valentines day/Christmas. £148 was for a bracelet for my sister's 21st bithday
• Fees & Interest - £450.64 - money down the drain.
• Home - £689.12 - we  needed a lot of things when we moved into our flat, the most expensive item was my bed but we also needed crockery, iron & ironing board, pots and pans, curtains, towels etc etc.
• Groceries & Petrol - £600.81 - absolutely should not have been paid for by Credit Card, must be covered by monthly budget.
• Ipad - £223.00 - I can't justify this, it was a reckless and unnecessary purchase, the only saving grace being that I will get a considerable amount of use out of it when I resume studying in September
• Insurance - £384.27 - My car insurance for the year, it made sense to me at the time - no monthly DD, however, I know that this should've been budgeted for and paid out of savings.

 

I feel completely and utterly ashamed by this breakdown, I have been an absolute idiot where spending is concerned. This will stop here.