We’re debt free- What next?

We’re debt free- What next?

Debt free

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Last Updated on April 16, 2019 by Admin

By the end of April 2019, I hope to have completed Dave Ramsey’s Baby Step 2, which is to have paid off all debt other than the house.

I am really pleased at how far we’ve come with this in a short space of time, it has not been without sacrifice but at the same time we’re definitely not going to suddenly start spending an excessive amount each month. So what do we intend to do next?

What is Baby Step 3?

Dave’s advice in Baby Steps 3 is to start building up 3-6 months of expenses as an emergency fund on top of the starter £1000 emergency fund from Baby Step 1. We are going to do this but at a slower rate, splitting our money between the Baby Step 3 emergency fund, every day sinking funds and some much needed home & garden repairs.


Our current situation


At the moment, we have around £900 a month that is being used for savings and to pay off the credit card as quickly as possible. That might sound like a lot of money, but it is literally every spare penny we have. It also includes £200 that was my car payment until it was paid off in January – my car is 8 years old and although I have no plans to trade in yet, I know I will need to start saving some money up for my next car. I travel all over for my job so a car is essential. Ideally this money will be in a separate fund from our emergency money.


After the card is paid off, we should have around £500 spare a month. If I can continue to make £300+ a month from side hustles then this would be £800 a month, which would be amazing, although for budgeting I’m going to round this down to £150 extra to allow for quiet months and also the fact that I don’t spend my matched betting money (although as it continues to grow, once I have around £800 I think I will start to skim off the profits).

A new phone

The first thing I’m going to do is treat myself to a new phone. I have been on the iPhone 6S for over 3 years now and only pay £15 a month, however the battery is so poor now that it needs charging several times a day and is getting to the point where it is unusable. I am going to stick on my current sim only contract with Three and buy a like new refurbished phone from Mazuma. I have always had a good experience with this company when trading in old phones. My husband also bought a like new refurbished phone from them and couldn’t tell it wasn’t brand new. I am going for an iPhone XR which is around £600, although there has been an offer on recently meaning the like new phones they have have sold out. I’m going to try and wait for another special offer to keep the cost down.

Either way this works out cheaper than taking out a new contract or buying a new one. Yes there are cheaper phones out there but it is an informed purchase, I need an Apple phone to go with my watch and I have forgone upgrading through the 7,8 and X so I think it is well deserved. I can also still get £90 for my old phone which will take the cost down further.

Garden improvements

The next thing we need to do is make some improvements to our garden. A section of patio needs replacing and so does the fence, this has been budgeted to cost around £2000. Due to the warmer weather approaching we are going to use all our spare money for this for the next couple of months and make sure we get it done. We will save money by doing it ourselves with a bit of help from family. Once this is completed, this is our plan for our extra cash:

Baby Step 3 fund: £250 a month = £3000 a year

Home maintenance: £100 a month = £1200 a year

Holiday fund: £100 a month = £1200 a year –  This isn’t going to get us the whole holiday but it will be a good start!

Birthday fund: £50 a month = £600 a year – This sounds like a lot but we spend around £20 per person on our extended family and friends and need around £400 a year to cover this, plus extra for our daughter including a cake and the possibility of a party (which we have avoided for the past 2 years to save money). This will also be the fund I use for children’s party presents. I always try and buy a toy for around £7 but it still adds up. I have a separate savings pot for Christmas with Plum which you can read about here.

Days out: £50 a month = £600 a year

My own treats: £50 (from my side hustle money) = £600 a year

On top of this we will have our own spending money (which we keep separate). Currently all these costs above come out of what is classed as our spending money, meaning things can get tight! I am planning to keep my own spending money at around £150-200 a month which should be plenty especially if all these other expenses are no longer taken from it.

If I can continue to earn £300+ a month, then obviously some of these pots will be able to grow faster, but as this money is never guaranteed I don’t want to budget for it!

It will be interesting to see if we manage to stick to this plan. One thing is certain though, I am never going back to relying on debt!

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