LightBulb Moment. Just relised how much debt I'm In

2bFrank · 4 August 2007 at 12:19AM

Hello Everyone,

--- WARNING - LONG POST ---

I have been a long time reader of these forums, sympathising with many fellow people who have got themselves in the debt cycle. Seems now its my turn to throw in my 10p worth (well 1p and that’s if your lucky and I find one on the street).

Today I got my first bank charge arrrggggg!!!!!!. £34 from A & L for not having enough money for a standing order. My fault, I drew out some money and didn’t check my balance. However its really hit me and decided to add up my debts.

I owe £4438.69. Now I realise I have to pay all this money back. Its really scaring me the amount I have borrowed, yet looking back, I have absolutely nothing to show for it. The money has just been p***ed up the wall, and spent on holidays and nights out with the lads. I have No credit cards, but the debt has been built by my overdraft. I got £3500 in debt last year through my overdraft, and I got a loan to clear it (because of a cheaper Interest rate from 29.9% to 14.9%) yet I made the same mistake and now -£1500 in the red. and now i am unsure on how to pay this back.

Plus to add to the worry, me and my girlfriend of 5 years have decided to save for a deposit, she is very excited of the prospect of saving and getting a house, but I need to clear this debt before I can save, I don’t want to disappoint her, and have not told the G/F or my mum of the situation. We are aiming to get the deposit (£3000 each) in two years, she’s already got £500 saved yet I am stuck on a big fat 0.

Please help with any advice possible. I have done a SOA below for your Information. Any advice much appreciated.

Income
Wage after tax (take home) £1108

Outgoings (All Per Month)
Lodge for mum £430 (mum is disabled and because I work I have to pay rent and some bills)
Car finance £171
Insurance £80
Sky £21 (£18 paid by work for broadband allowance) = £3
Mobile £35 (£20 paid by work for mobile allowance) = £15
The AA £8
Natwest Loan £150
Prescription Payment (medicines) £7
Garage £17
Gym £38 (9 months left on contract)
Petrol £100
Car Tax and Servicing £25
Dental Insurance £18

Total = £1062

Remainder = £44

This does not include any entertainment spending etc. Any MSE out there that can offer some words of wisdom. Thanks.

BWZN93 · 4 August 2007 at 12:40AM

My first thought would be the AA - £8 per month seems a bit much if you have a reasonably decent car and i believe many on here are getting it for around £8 for a year after quidco returns.

Dental Insurance is another - is this totally necessary? I know its good to take care of your teeth and everything but you might be able to source this cheaper again via quidco.

How about car insurance? Is this something that is up for renewal soon? Can the petrol costs be cut in any way?

How long is left on the car finance and loan? What are the apr's? Is it possible to to do something like a 0% cc and pay them off that way, allowing you to throw the interest repayments at the capital too? And how about the overdraft? Whats the apr on that?

Is there any way you can increase your take home pay with a bit of overtime or a second job? Can you ebay anything?

If its any consolation, I take home about the same as you and my debt is roughly similar. Ive been on the snowball calculator and with careful budgeting I can clear it in 12 months. You can do it!!

Jo x

*zippy* · 4 August 2007 at 12:43AM

Hi 2bfrank

A few thoughts, obviously you need to help your mum out and pay your way, but have you made sure she is claiming everything she is entitled to?

www.entitledto.com

Could you sell your car and take public transport for a while, would selling your car, clear your debts?

Could you get extra work, a payrise, evening/weekend job. do you have anything you could sell to raise some cash?

Make sure you ring A&L and try to get the charge refunded, especially as it was your first one.

Wish you all the best
zippy x

angelavdavis · 4 August 2007 at 3:41AM

Hi 2bfrank and welcome to DFW!!!

______Warning - even longer reply!!!!_________

Well done for posting - it takes people a lot of guts to post up on here and having your lbm moment is bad enough.

I think zippy has a good point and you should help you Mum make sure she is getting what she is entitled to benefits-wise to help out.

Having said that, the amount you are paying Mum is by no means a lot less than you would be doing if you were paying half your living costs with your G/F, so you will need to get used to the fact that you need to start either living on less, earning more or both!

You mention bills, but can you please break down what they include and how much you are paying - could be that you could shop around for cheaper elec/gas/water/phone, etc which could be helping you both out financially. We have no way of helping out if its just bundled in together.

2bFrank wrote: »

I owe £4438.69. Now I realise I have to pay all this money back. Its really scaring me the amount I have borrowed, yet looking back, I have absolutely nothing to show for it. The money has just been p***ed up the wall, and spent on holidays and nights out with the lads. I have No credit cards, but the debt has been built by my overdraft. I got £3500 in debt last year through my overdraft, and I got a loan to clear it (because of a cheaper Interest rate from 29.9% to 14.9%) yet I made the same mistake and now -£1500 in the red. and now i am unsure on how to pay this back.

So you know the deal - like many of us (me included) you have proved to yourself that you aren't controlled enough/don't earn enough to consolidate your debts and not build up more debt - be thankful you found out now and not when you were £38k in debt like I was! So I am afraid, like I did, you are going to have to pay it off the hard way as the quick fix didn't work for you!

Is the overdraft arranged or are you paying extortionate charges for it?

OK, onto your outgoings:

Income
Wage after tax (take home) £1108

Outgoings (All Per Month)
Lodge for mum £430 (mum is disabled and because I work I have to pay rent and some bills)
Car finance £171 - OK, this is £2052 per year - how long is left on this? Is it not possible to scale down the car to lessen your car costs (see below)? It would be short term until you get yourself straight.
Insurance £80 - This is £960 per year - did you shop around for this? I suggest again you shop around and look to switch insurers if possible through quidco so you get cashback for doing so.
Sky £21 (£18 paid by work for broadband allowance) = £3
Mobile £35 (£20 paid by work for mobile allowance) = £15 This could still be cut down a little more
The AA £8 - have a look at Martin's article here. I do a lot of business miles and recently renewed with RAC because AA was getting pricey. I paid £35 for the same cover for a year and renewed through www.quidco.co.uk so I got cashback too. I think you could save at least £40 on this rate over a year.
Natwest Loan £150 - how long do you have left to pay? Also, can you read through the terms and conditions to find out if you can make overpayments or early settlement without penalty? The apr at 17.9% is high - did you shop around for this? Is it worth looking at Northern Rock (7.4% unsecured) or another provider - if possible go through quidco also for cashback. It won't save fortunes, but work out about £10 per month cheaper I suspect. At this rate, you are probably paying off about £4500 in reality.
Prescription Payment (medicines) £7 - do you really use this?.
Garage £17 - do you really use this - if you have a new car, is it essential on top of the £25 you have aside for tax/servicing?
Gym £38 (9 months left on contract) - I hope you use it for that cost!
Petrol £100 - can you not claim any of this back from work? You need to look at cutting down wherever possible
Car Tax and Servicing £25
Dental Insurance £18 - I would also shop around through quidco for this to see if you can get cheaper

Total = £1062

Remainder = £44 - You need to start a spending diary and maintain this for about two months to look at what you are really spending on - for example, could you take in lunches into work to save the pennies? I would do all the suggested above to save as much money as possible - my estimate is you could free up at least £30 per month - not loads, but better than nothing - that will gradually whittle down the overdraft. In reality, just paying £30 a month off (I have assumed the interest rate as being 14.9% for the OD which I think is about average?) would mean it wouldn't clear until 2014 - a horrible thought but hopefully an incentive to see if you can shave off more ££££!

This does not include any entertainment spending etc. Any MSE out there that can offer some words of wisdom. Thanks.
[/quote]

Your car is costing you £321 per month or £3852 per year including petrol which after the money you pay Mum is the highest percentage of your outgoings. To really free up some income, you need to look where you could save here.

OK, so bottom line is that you need to increase your income somehow as I have shown that simply freeing up £30 outgoings is not going to be enough to pay off your overdraft - let alone start saving. As mentioned, its not just about affording to live now, it will be even more expensive to live when you move out from home.

So some ideas:

- Can you ask for a payrise or look around for something better paid?
- Can you look into getting a part time job - perhaps some bar work for a couple of nights a week? It stops you spending any money but is sociable and even if you only earning about £30 a week after tax, paid off your overdraft that could mean you would be overdraft free within 13 months (I have assumed you would work 40 weeks of the year and so that averages out £100 per month after tax).
- Anything to eBay to throw at the overdraft?
- Have a look at the snowball calculator, it will help you see how soon you could pay off the overdraft if you threw in an extra £5 per month for example.
- As mentioned start a spending diary - its a real eye opener.
- Draw out the £40 cash at the start of the month and then put the cash-card away. You effectively have £9 per week to live on outside of the bills. This means that you will have to ration yourself big-time and find cheap ways of spending time with your g/f (using some of the quidco cash for example to treat her - having a look at the vouchers board for ideas, etc). If you have anything left over at the end of the month - pay it back into the bank to pay off the overdraft.

There is another thing you need to face up to and that is that you need to come clean with your g/f. What if she discovers that you have nothing saved up? Without knowing, she will think you are not committed to her and settling down together and if it were me, that would be worse than knowing my b/f had debts to deal with. The reality is that it is pointless saving anything while you are paying 14.9% (ish) for an overdraft and 17.9% for a loan.

I hope all that is of use. Good luck

hypno06 · 4 August 2007 at 9:04AM

I think that angelavdavis has just about got it all sown up above!!!

The only other thing that I can think of to suggest is joining in one of the olympic challenges on these boards. One of the "targets" is £3000 so you could use this either as your "pay off your debt" target, or your "house deposit" target. The challenges usually run over 6 months but there is nothing to stop you carrying over to the next one if you choose to! This would really help to focus you to make that little extra effort - it is amazing where you can conjure up a few quid here and there!!

Good luck, and keep posting instead of lurking!!

poodlehorse · 4 August 2007 at 11:06AM

The gym - as has been said for that amount you better be using it!! but if you are then is there a cheaper alternative? I am sure someone on here suggested to another poster that if you say you are moving home to somewhere they don't have a gym then they will let you out of the contract. You could try that?

2bFrank · 8 August 2007 at 11:10PM

Thank you so much everyone for your words of support. its wonderful you have all taken the time to reply to my LBM Post. Sorry I have not posted sooner, been unwell (dodgy BBQ food, that the g/f cooked :lipsrseal) Good news though is because I have been stuck in bed recovering, ive not spent a single penny. plus I lost a bit of weight for not eating anything for three days.

But onto more important matters. As adviced I have listed below what my £410 to my mum pays for.

£340 p/m rent
£32 p/m water rates
£35 p/m electric (we dont have gas so this is probs why its quite high)

Did a check on the entitledto website, looks like we are getting all the benefits were entitled to. Seems to be because I work, they count my wage as the main income and this effects my mums benefits. If i moved out, my mum would be a lot better of in benefit terms (how that works is madness).

Thanks for recommending quidco however I wish I knew about the website before, as ive just changed insurance, got sky (for broadband) and mobile, and if i did it through quidco i would have over £200 :mad:

Unfortunately I need my car, not just for myself for work, but when mum is having a good day with her back, she sometimes uses it at weekend, its the only freedom she gets. I got a good deal with the car, its interest free but I need to pay the higher amount because if its not paid by the end of the three years, then they would have charged interest. although selling it would really reduce my debts. However I dont think this is a option I could take.

Impovements I have made though, thanxs to the advice given. Ive asked mum to contribute to the car servicing which she has offered to pay until the car is paid for (£10 saved a month) plus she is giving £10 for petrol a month for her share. As for the overdraft. Ive rung up both my banks reduced the limit to the £1500 i owe with natwest (from £5,500 which they up every six months), and removed it totally for a&l, this will stop me from getting into any more debt. Insurance and that is the cheapest I could find (im not quite 25 and I live in Manchester) however in janurary when I am 25 I am going to have another look around (plus use quidco as well). Ive estimated that my debt free date, based on current payments is in april 2010 arrrgggg!!!! however with the advice given I am going to imporve on that dramiacticlly

- Can you ask for a payrise or look around for something better paid? hopefully when union and work sort themselves out I will get a nice increase on this
- Can you look into getting a part time job - perhaps some bar work for a couple of nights a week? looking into this, as its a very good idea
- Anything to eBay to throw at the overdraft? unfortunately nothing of value, however I am having a good hunt around, even if i make £50 its less of my debt.
- Have a look at the snowball calculator, it will help you see how soon you could pay off the overdraft if you threw in an extra £5 per month for example. whats a snowboard calculator???
- As mentioned start a spending diary - its a real eye opener.yep, starting tomorrow when back at work
- Draw out the £40 cash at the start of the month and then put the cash-card away. You effectively have £9 per week to live on outside of the bills. This means that you will have to ration yourself big-time and find cheap ways of spending time with your g/f (using some of the quidco cash for example to treat her - having a look at the vouchers board for ideas, etc).Scary but you are right, this is the only extra money I have got spare

As for the outgoings

Insurance £80 - cheapest I could find using moneysupermarket, comparethemarket etc.
Mobile £35 (£20 paid by work for mobile allowance) = £15 - asking work to pay more as I mostly use it for work.
The AA £8 - just renewed. I dont pay this monthly however included it for real terms soa.
Natwest Loan £150 - intresting point. looking into cheaper loans
Prescription Payment (medicines) £7 - nothing much I could do with this, its a lot cheaper than paying for my mediences as a pay and go £30+ p/m
Garage £17 - My insurance is cheaper with my garage, and where I live, its money well spent to protect my car
Gym £38 (9 months left on contract) - Stuck here because locked in contract, however I use the gym 5 times a week, with the g/f.
Petrol £100 - Now £90 carnt claim form work however mum is contributing £10 for her share at weekend
Car Tax and Servicing £25 - now £10 mum is contributing to servicing
Dental Insurance £18 - Now £17 plus £25 back from quidco

Thank you very much for reading and for all your advice. its very much appreciated.

LightBulb Moment. Just relised how much debt I'm In

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