Martin Lewis explains the concept of 'forgotten gold'
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Appearing on Nihal Arthanayake’s BBC Radio 5Live show, Mr Lewis spoke to listeners who had phoned in to share their debt free stories. Claire called in and explained she joined the military at 18 and this was her first time being financially independent.
She used credit to buy her first laptop, a car, and also used it to fund her first holiday.
She said: “It was things that you could afford to pay it off, but you didn’t have the cash to pay for it [upfront].”
When she met her now-husband, he encouraged her to be honest about her finances and how much debt she had.
She realised she was about £3,000 in debt and felt “shame”.
She said: “My husband was like, ‘Let’s work out the maths, let’s work out how much you get paid, how much you want in savings, how much you can afford to pay off every month and I got rid of it.
“I remember when I rang the bank and said I’d like to clear the balance of my credit care please and then close the account.”
In relief, Claire cut up this credit card as she knew it meant there would be no more payments towards it.
Martin responded: “Wow, well done you.”
Whilst trying to clear her debt, Claire said: “I could still put petrol in the car, I could still go visit my parents, I could still go out with girls if I wanted to.
“It was just cutting back on things and I paid it off in eight months.”
Claire mentioned that her dad told her that after paying off debt, the money that has now become free should be put in a savings account.
Mr Lewis called this money “forgotten gold”.
He said: “Forgotten gold is money that you’re not used to having.
“When you get it, decide what you’re doing with it before you absorb it into your regular spending.
“Whether it’s a pay rise, or whether it’s a debt you no longer have to pay off, don’t let it seep into your everyday finances.
“Make an active decision. What can I do with this before you get used to having that income and then it’s far easier to go and do something good with it.
“You can build up savings or save for a holiday. I don’t care what you do with it just make sure you actively decide rather than passively letting it become part of your regular income.”
Claire went on to explain that now she knows how to manage her finances so much better, and the only debt she has on her credit card is because of an educational course she is doing to change her career.
She confirmed to the money saving expert that “it’s zero percent [the credit card] for like 19 months or something”.
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