A mother-of-one who was once in debt of £25,000 has explained how she changed her life in six years.
Katie Pratley, 42, who lives in Oxfordshire, is now the boss of her own business and also has a mortgage after coming back in the clear.
But life was once very different for the now successful entrepreneur.
Katie was cared for from the age of 14, and by the age of 16 she was living in various bed and breakfasts and friends’ living rooms.
Her financial difficulties began soon after when she moved into her own apartment while studying for her A-Levels.
She was on income support at the time – but after paying her bills she was left with just £7.50 a week for food and living expenses.
Katie recalls: “There were times when the electricity went out halfway through Friends and I would sit in the dark until the next time I got paid.
“It was tough and not a happy time for me.”
But going to college triggered the real trigger point for Katie, who says it “opened up a whole new world” of debt.
By the time she graduated, Katie owed £15,000 to various credit and store card companies and banks.
She continued, “There was also everyone and their dog offering me credit cards, store cards and overdrafts. It really was free money – or so I thought.
“I never really took the time to think that one day I would have to pay it all back.
“In fact, I remember saying far too often ‘it’s just another direct debt’ without understanding that all of these small payments would become a massive payment when put together.”
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After graduating, Katie struck up a relationship with her father and decided to move into his farm, but that didn’t stop her debt from mounting.
A love of shopping and spending led Katie to apply for another £10,000 loan, bringing her total debt to £25,000.
Katie says she ‘can’t remember why’ she thought it was a good idea to borrow more money as she only had a £12,000 administrative job at the time to cover its costs.
She left her father’s farm after six months and took part-time jobs, but that wasn’t enough to cover her rent, bills and the huge repayments she now had.
“The net was getting closer to me and I felt like I was drowning,” she recalls.
“In the end, I couldn’t pay my rent and I ended up with my father again. I think he suspected I was in debt, but he never asked me and I don’t think I would have told him if he had.
“I was at rock bottom, as they say. My only options were to pay off my debt or go bankrupt.
“I didn’t feel like bankruptcy was an option because I didn’t want it to weigh on me my whole life.”
Moving back to live with her dad meant Katie could use every penny she had to pay off her debts as quickly as possible.
She decided to train as a teacher because she could earn a living wage and claim £600 from the government under a scheme.
This £600 a month allowed Katie to start reducing her debts, starting with £300 a month.
When she paid off one debt, she moved on to the next – this is called the avalanche method, where you first pay off your most immediate debts, before moving on to smaller or less demanding payments .
Katie eventually moved back in with her dad, but managed to continue prioritizing her repayments by not taking vacations or buying luxuries such as clothes.
However, the biggest change for Katie was her mindset towards money.
She said: “I used to spend without a budget and without thinking. If I wanted it, I got it.
“I know now that I was just trying to establish some kind of self-esteem because I was mainly buying clothes and makeup.
“I remember not feeling comfortable going out to a party without having a new outfit because I had very low self-esteem at the time.
“Focusing on paying off debt suddenly meant I couldn’t spend money on items just to feel better, and eventually, I kind of unwittingly retrained my brain.
“In six years I have paid off all of my £25,000 debt and saved £10,000 for a security deposit.
“I now have a five-year-old and I try not to use phrases like ‘we can’t afford it’ around him.
“I want him to understand the concept of money and that he has to save and work for things.
“Since I had my son, I also trained as a life coach and started my own business; The Happy Wellness Club.
“I run workshops in high schools to help young people dream big, overcome their doubts and plan for the future they want.”
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Katie said: “It may seem impossible, but you just have to draw a line and choose your first day.
“It’s the most difficult and painful moment, but once you start being honest with yourself, it’s all from there.
“You have to make a deal with yourself and say this is your new beginning.”
Holly Andrews, CEO of KIS Finance and personal finance expert said: “Katie said she used the avalanche method to pay off her debts, which is definitely a technique I would recommend to people in a similar situation.
“The avalanche method is to pay your most immediate debts first, before moving on to the smaller or less demanding debts.
“The most immediate debt could be either the highest balance or the highest interest rate.
“You pay off as much as you can one debt at a time until it’s paid off, while remembering to keep paying the minimum on others to avoid missed payment charges.”
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