I’m a support worker on £17k with over £5,000 in debt. I’m sick with worry. How can I clear my debt on such a low income, and finally get a handle on my finances?

Essentially, I would love to be more financially secure, and debt free.

MY ACCOUNTS

Current account: £0

Savings account: ££0. Christmas has depleted my somewhat decent savings! I do have some savings in a tin to help me when I move, as I’m due to leave where I am in the new year. Not sure how much is in there but the tin is full of notes!

MY INCOMINGS

Annual salary: £17,671.20 (pre-tax); £15,678.58 (post-tax)

Monthly wage: £1472.60 (pre-tax); £1306.55 (post-tax)

Any other incoming payments: £388 per month for Personal Independence Payment (PIP), due to physical and mental health conditions.

MY OUTGOINGS

Rent: £520

Bills: £50 phone bill; £180 shopping about every 6 weeks 

Other: £120 every 3-4 months on hair. I buy the braiding hair and pay my hairdresser to braid and trim it if necessary.

Splurges: Not sure, just whenever I buy – which is too much, too often!

MY DEBTS

Credit card and phone debt: £5000 approx.

MY MONEY THOUGHTS

My worst money habit: Splurges and lack of financial literacy.

My biggest money worry: Paying off my debt and having a bleak future due to low income, very little chance of getting on the property ladder, and sky-high private rent prices, and general cost of living.

My financial hopes for the future: To be debt free, have more financially literacy, and start to invest and save for my future. I’m particularly interested in stocks and shares, and cryptocurrency. But obviously need to get a handle on my debt first!

Current money mood: ????????????????

You’re doing ok

Firstly I want to say a huge thank you for sharing this with us. Opening up about money is hard and whilst it may not feel like you’re taking action, the very simple act of looking through your bank statement and facing the numbers is a big deal. Nobody was born financially literate but unfortunately due to limited financial education in schools, an understanding of ‘money stuff’ is something we have to be lucky enough to inherit. It’s a huge privilege and making financial mistakes is ok (we’ve all been there!) – so be kind to yourself.

Financial overwhelm

It sounds like what you’re experiencing is financial overwhelm – there are so many things you want to fix that it’s making you anxious – paying off debt, investing, buying a house. It’s a lot. My suggestion, as you enter 2022, is to focus on just one thing which should be getting on top of your debt. What can be particularly demotivating about the personal finance rhetoric is the emphasis on frugality – the reality is if you’re on a low income, saving is going to be harder and slower. A girls gotta live so long term I’d always advise looking at ways to upskill and increase your income, as opposed to just decreasing your spending.

Getting advice

Ok, so when it comes to managing debt there are two paths you can go down: 1) DIY, which means coming up with a plan of action by yourself and paying your debts off entirely 2) Debt advice. This is where you get free help from a debt charity who will negotiate with lenders on your behalf and possibly set you up with a debt solution (things like Debt Management Plans and IVAs) Although the ads on TV suggest otherwise, these are no magic wand solutions. They can make it tricky to borrow in the future but they are the right option for some people. Which route to take isn’t always about how much debt you have, but about how unmanageable your debt is and how confident you feel in being able to continue to pay your basic outgoings (mortgage, monthly credit card minimums and utilities etc). Given your mental health struggles, I’d suggest speaking to a debt adviser as they will be able to advise on whether this can be taken into account with something called a Debt and Mental Health Evidence Form.

Where to go

Citizens Advice and StepChange are both great but if you like the idea of sitting down with a debt adviser, then CMA are brilliant. You haven’t mentioned how much interest you’re paying but you could also look at reducing the rate you pay with something called a balance transfer where you move the debt over to a cheaper deal. I’m biased but in terms of more financial education and inspiration, the platform I run has plenty of relatable financial content!

Take care 

Finally, don’t neglect your mental health. The money and mental health connection is real so in addition to getting some debt advice, make sure you’re taking advantage of all the mental health support available and speaking to someone. If you already have a diagnosis your GP may be able to help you find a counsellor or you could go private. The trick is to look for ‘means tested’ ‘sliding scale’ or ‘low cost’ therapists. Alternatively you can refer yourself on the NHS via IAPT. Sending love and luck for the new year.