A MUM-OF-THREE whose debt spiralled after a bad relationship managed to pay off £6,400 in less than two years using easy budgeting tips.
Amy Cunningham’s debt hell began 10 years ago when her former partner spent all of her £2,500 overdraft.
Amy Cunningham, 38, cleared 10 years worth of debt in two by using Monzo ‘pots’.
Amy, 38, racked up debt with her energy firm, council tax payments and other utility bills and was soon left feeling desperate.
By 2019, she owed £6,400 and every penny of her spare cash was spent just meeting the interest repayments.
She said: “I rang my council and my utility provider SSE for help – and they helped me set up repayment plans.”
“But it wasn’t enough – with three kids, rent to pay, rising bills and a salary that wouldn’t allow me to save, I just couldn’t keep up.”
Amy, a civil servant, had never been particularly money-savvy but things took a turn in 2011 when her ex-partner spent her overdraft allowance.
He used the money to splash out on furniture and tech including a new TV, but when the couple split up, he never repaid the money.
As a single mum, Amy soon found that she couldn’t keep up with the bills and her debt spiralled.
She owed thousands to her bank and gas and electricity supplier as well as her council for underpaid council tax.
By 2019, she was £6,400 in debt and unable to apply for a credit card, loan or mortgage.
Amy, who lives in South Wales with her husband Tom and three kids aged 21, eight and four, said: “It was highly embarrassing to be a civil servant and be in so much debt.”
But when the Covid pandemic hit in 2020, it proved to be a turning point for Amy’s finances.
“I was working from home in lockdown and suddenly I had extra time to get on top of my finances and make a debt spreadsheet,” she said.
Making a spreadsheet helped Amy face up to exactly how much she owed and what she could afford to repay each month.
Amy uses app-based bank Monzo and started to look at the free budgeting tools it offered.
Monzo lets you create different “pots” for your money so you can split your cash up to be used for different outgoings.
Pots allow you to separate money from your main bank account into smaller accounts specific to different needs.
Amy set up a whopping 19 pots and split her salary between them, putting money aside for household bills, debt, and even Christmas savings.
The money can sit in each pot, or you can set up a direct debit or standing order from a specific pot to pay a bill each month.
She slowly started to chip away at her debts but by August 2021, had just £800 left to repay to her bank to clear her overdraft.
Her husband, Tom, cleared the final balance for her as a surprise to show how proud he was of her getting on top of her debts.
Amy said: “But I’ve set up another Monzo pot now so I can save up and repay him!”
She said her top tips for anyone struggling with debt would be to make a spreadsheet so you understand how much you owe and speak to the companies you’re in debt with and ask about repayment plans.
She said: “Using the pots system was key for me.
“It helped me to visualise my debts so I knew exactly what I needed to repay.
“The day I realised I was debt-free, I couldn’t believe it – I was over the moon.”
What to do if you’re struggling with debt
If you find yourself in a situation like Amy, the first thing to do is speak to your creditors.
A creditor might be a bank, business or entity you owe money to.
Crucially, many will have payment options or help schemes in place for those who are struggling – but you need to let them know first.
And if you’re looking for targeted debt support, the government’s Debt Respite Scheme, also known as Breathing Space, is one option.
It’s free to use and someone in debt the right to legal protections from their creditors.
Under the scheme, people can freeze most interest, fees and charges on debts and pause enforcement action and contact from creditors.
This scheme is aimed to give you the time to find out if your creditor offer any debt grants.
For example, if you’re in debt with your energy firm, certain households can get up to £1,500 in bill help.
If you are looking for general help and advice to help you manage your debt, there are a number of charities and organisations that may be able to help:
- National Debtline – 0808 808 4000. An adviser will ask you about your income and spending, so try and have as much information to hand as possible when you call. An adviser will help you work out what you can afford to repay, and help you decide on the best solution for your debt. Self-employed workers can also get help through Business Debtline.
- Step Change – 0800 138 1111. It can talk you through different options such as debt management plans (DMP), individual voluntary arrangements (IVA), bankruptcy, and debt relief orders (DRO) if they are appropriate.
- Citizens Advice – 0808 800 9060. Citizens Advice is a free and impartial service, and it can help you come up with a plan to getting on top of your debt including which payments to prioritise and how to reduce your living costs. The organisation’s website has a useful page with advice on many aspects of debt, but you can contact it for more personalised help.
Local organisations may also be able to provide support in your area.
National Debtline also recommends contacting organisation such as Mind, Samaritans and Anxiety UK if debt worries are affecting your mental health.
A benefits calculator can help you work if you might be entitled to extra cash.