Nobody's business

Nob0dy · 22 March 2017 at 4:45AM

Will keep this intro short, it's 3am and I want to go to bed, but I also want to get this started, so I thought I'll get the ball rolling and will add the details as the days go by.

A Brief Introduction

I've been in debt now for a good 10 years and went through various phases, originally it all went down as a mix of being naive and some bad luck, I applied for a loan for a bike considering my income at the time, however, my contract did not get renewed, I ended up out of work for a couple of months, found a new job out of town which wouldn't cover my expenses and used my credit card to cover them while I looked for a more suitable job, it didn't happen and I found myself constantly out of budget and spiralling out of control.

Some time down the line I got myself into gear, got a new job and started repaying, then after a bad breakup I got myself into more debt, guess how? Another bike. Eventually things got under control until another bike came by and I've lost my good habits again.

The Goal

Now, since I do want yet another bike, but I am tired of messing about and I would like to do it the proper way, I'm back at budgeting and doing things seriously to get my expenses under control and be free of debt within a reasonable amount of time, I reckon if I do things properly I should be able to be debt free within the next 36/42 months, however, I still need to check some numbers and without exact details I can't make an appropriate estimate, this is in the pipeline and will be done in the next few days.

Why MSE Forum?

I know myself and I know how I can require some extra motivations at times, so this thread is mostly for me to motivate me in keeping up the good work, I could have blogged elsewhere, but here I have the added benefit that, if anyone comes by, can offer suggestions. Last but not least I thought that keeping a diary of my adventure could prove useful in the future, if I anyone I know was to find himself in a similar position.

The Plan

Budgeting.

I bought a YNAB license ages ago and used it successfully for quite some time, then stress got to me and I stopped tracking expenses, but I do still have the license, hence I have reinstalled YNAB and from this month I am writing down all expenses again. It's an interesting exercise.

Reducing interest rates.

I am currently out of over £14,000, around £10,000 in a bank loan and £4,500 more in credit cards, the first logic step is to reduce interest rates and has been partly dealt with, more details to follow.

Spending last month money.

One curious concept that I have read on YNAB is to stop spending your salary right away, budget instead so that you keep your money away and this month's money go to cover the expenses next month. I should probably focus more on paying off my debts rather than saving, however, in the long run I believe it should buy me piece of mind. More on this topic will follow.

What Next?

The first obvious step is to write down the exact numbers, everything is already sorted in YNAB, but it took me already half an hour to write the above and I genuinely want to go to bed.

With the initial numbers down, I will detail the steps already taken to improve my situation and the ones I am planning to take in the near future. I will go into the details of my budgeting, why YNAB, all my reasoning behind the madness.

Once the initial setup has been sorted I don't plan on updating much, I will write down monthly updates and will probably do an extra post in case a particular goal has been achieved or I have found something interesting to share.

Why Nobody?

Lookup My Name is Nobody if you haven't seen it.

Cherryfudge · 22 March 2017 at 11:17AM

So... 'Nobody was faster on the draw'?

Hopefully that's a sign of how fast you'll be sorting out your finances and saving for the next bike! It sounds as though you already have a good mechanism in place. Did you get some sleep in the end?

Nob0dy · 22 March 2017 at 12:59PM

Yep, that's the one!

Didn't get much sleep in the end, was up at 9 to go to work, but at least I've finished researching the information I was looking for and I got this thread started.

Having a good mechanism is not the problem, the real problem is sticking to it and making it an habit...

Cherryfudge · 22 March 2017 at 1:18PM

powerdegre wrote: »

Having a good mechanism is not the problem, the real problem is sticking to it and making it an habit...

I think there will be people everywhere nodding sadly in agreement.

Posting on here will help. It's a great community.

Nob0dy · 22 March 2017 at 2:16PM

Using a break to get some things started, but I won't be able to delve into details and plans, busy day at work and getting a new bed at home later, so I'll be otherwise engaged.
I decided that I needed budgeting again some time in February, so I left everything as it was until the end of the month and got things started with the 1st of March, I can be a bit OCD occasionally and having a clean start on the 1st of the month felt ideal to me, anyway, I digress, here is where I stood back there, mind that I have already made some changes so the following doesn't reflect my position today, this is my position 22 days ago when I started, I will discuss the changes already done in a later post.

Bank account: 17.13
Saving Account: 202.84
Cash: 2.98
Cash Savings: 0.00
Barclays Card 1: -3,163.53 @ 18.9%
Barclays Card 2: -1,438.14 @ 26.9%
Loan: -10,368.29 @ 13.9%
Pension Fund: 11,000*
Personal Loan: 150

Total Assets: 11,472.95
Total Debts: -14,969.96
Net Worth: -3,597.01

I don't have a car, but I do have two motorbikes which are assets, I estimate somewhere north of 5 grand for both, however, I am not going to count them as assets and leave them out of equation as I don't plan on monetise on them at any point, I'll live on beans on toast before I sell the babies.

* the pension fund value is a wild guess, I receive an updated balance once a year on my pension fund and I don't know exactly where it stands now, being that is an off-budget account that won't be used until I actually get to a pension, I have no interest in calling them up to have an updated figure, it will be updated once I receive the annual statement; this value is here only because I'm curious to see what my actual net worth is.

monz · 23 March 2017 at 10:50AM

Yikes on the interest rates!! have you tried a interest free for some of it x

Nob0dy · 23 March 2017 at 3:59PM

Yep, as mentioned that was my position on the 1st of March and some changes have already been done, I just haven't got around to write them; in regards to the cards I have already moved all my balance on two new cards offering 0% balance transfer, but I will go into details with a proper update which will discuss that and more.

I wanted to take a proper screenshot at the beginning of my path, so I could record the actual starting position and every measure taken.

Nob0dy · 23 March 2017 at 11:00PM

Cancel Subscriptions

When I decided to face this mess and deal with it, the first thing I did was to deal with subscriptions I could do without, so my subscription to BSH (motorcycle magazine) and the Royal British Legion were the first to go, I wanted to cancel them for some time, this was the right moment.

I have also cancelled my Prime subscription, I used to get lots of stuff from Amazon, but then I switched away from them for a couple of reason, first of all I am trying to give more business to smaller shops, then last year I started going through a phase where I realise that you really need to make a difference in between "I need" and "I want", and "I need" doesn't really occur those many times, so I wasn't using my membership that much any more. Paying annually I actually got some £60 back, all the better.

What I am keeping for the moment is my annual subscription to the theatre card and my English Heritage Membership, I really like to support those guys. Theatre card is on trial though, I haven't really used in a while and, if I carry on this way, might cancel it soon.

At this point I have gym and martial arts subs, expensive at a whopping 60 together, but well worth it, and a few minor things, like Netflix, Spotify, WoW and my contact lenses monthly contract with Specsavers.

Make a Budget (YNAB)

I then reinstalled YNAB and started a budget from scratch, there was no point in keeping data that had not been updated in years, so I sat down, analysed all my expenses and wrote everything down, not surprising worked out that, if I wanted to keep my lifestyle, I needed to sort things out.

Lower Interest Rates (Bank Loan)

The obvious problems are my debts, they are taking quite a big chunk of my income and are preventing me from doing any saving, I didn't even remember how long I had left on my loan or what was the interest rate, so I called up Barclays and found out I have 42 months left at 13.9%, asked them if they had a way of making it better and got told I already had the best I could get, but hey, was worth asking.

Lower Interest Rates (Credit Cards)

Next up the credit cards, especially as at this point I had just been served a £405 speeding fine, so I really needed to cut down on those interests to pay this road tax, last month I've got charged around £90 in interests, when you repay only £200 you are not paying back much; so I called up Barclays Credit Card branch, explained how my interests were getting out of control and asked if there was a way to freeze my rate for a while, instead of balance transferring elsewhere, the operator wasn't sure and passed me onto her supervisor which immediately told me that she could freeze my interest for a month to give me a breather, she then proceeded to check my file and lowered my Barclays2 to the level of Barclays1, from 26.9% to 18.9%, at that point she suggested me that probably the best solution was a balance transfer elsewhere.

That surprised me, a lot.

A few years back I got myself in a tight spot while I was banking with HSBC, I called them up to say I couldn't keep up the payments, at the time it wasn't like today when I can't save, but I'm still riding and going out, at the time was bank or food, so they made me go through a lengthy interview, then sent me home a questionnaire with all my expenses to fill in and after sending it back I was told that, since I could have not afforded the lower payment rate, I was to stay on the higher one. Madness.

The day after I opened a new bank account with Barclays, moved all my accounting there left all HSBC bills unpaid, eventually they froze everything and contacted me for an IVA. I had to strongharm them to solve anything, whereas with Barlcays I made a simple phone call and was granted a free month, a lower interest rate and was actually suggested to shop elsewhere. Kudos to Barclays, they have earned my loyalty.

I then looked up for balance transfers and got 2 new cards that covered just about my balance, Halifax gave me a 13 months offer and I moved there £1,425, Santander instead accepted me for a 41 months deal and moved there £3,130, they want £3 a month in charges, but it's still better than the £55 a month I was paying on Barclays1 and, in a year time, I will shop around to see if I can get another transfer, this time with no charges. All I had left in my original cards was short of £50, being that I don't have to pay the new ones until the next month I have paid that in and zeroed the balances, Barclays1 will be kept as it's a good card overall, 18.9% with a £7,500 limit, I don't plan on using it, but it's good to know I have a parachute if needed, whereas Barclays2 will be closed in the next few days.

Soon On This Pages

Next step was to rearrange my budget to adjust to the above changes and then lots of math, Excel and reading on the topic, which lead me to this site, but this is a story for the next post.

Treadingonplaymobil · 24 March 2017 at 6:05AM

Sounds like you are making steady logical progress, well done!

Nob0dy · 24 March 2017 at 11:53AM

Thanks! Been there before, so it's just a matter of reapplying knowledge, the only problem is keeping up the motivation, this time seems like the right one though, maybe at 40 I have finally grown up :rotfl:

Nob0dy · 28 March 2017 at 2:12PM

How Long?

I have done some maths and it looks like is going to take me around 31 months to clear this up.

The original plan was to pay off first the Halifax card to reduce the number of accounts I have to deal with, then move the extra money to pay off the loan and last deal with Santander, this way I would have been in the clear in 32 months at a cost of £16635, but then I thought that maybe wasn't such a great idea starting with the 0 interests card.

A second round of maths with the payments starting on the loan and the 2 cards with the minimum payment worked out that I can be off in 31 months and save £500. It's not that much of a saving in 32 months, but hey, better than nothing. On top of that, once the 0% balance transfer offer will be over on the Halifax card I will have to find a new one and hopefully I will get an offer decent enough to allow me to transfer the Santander card credit as well and stop paying fees. I don't think it's possible, but will definitely give it a go.

Other Accounts

While reviewing the above I thought that maybe could have been worth reviewing my other accounts as well, didn't amount to anything in the end, but was a nice exercise all the same.

To sum it all up, here is a brief report of my accounts review:

Bank Account
No interests on my current account, but it is offset by Barclays Blue Rewards that, at the low value usually stored on my accounts, is probably better off than any interest. The deal is to pay in £3 a month and get back £7 for having £800 coming in and 2 Direct Debits out, on top I get another pound for having a loan with them, so it's a £5 net monthly or £60 yearly.
On top of the above I really like their online banking which I find more user friendly and practical than the alternatives I have currently observed.

I have seen plenty of offers to switch bank account and read about people making up to £7/800 for switching around, thing is, £7/800 for constantly switching account is something that doesn't interest me, even switching every 6 months it could take years to see those money, my salary is high enough that I can't be arsed to go through the hoops for a mere £1/200 a year. Is also worth considering that thanks to fidelity I have a low interests loan that I couldn't have got otherwise.

I am happy to bank with Barclays.

Savings Account
I genuinely don't even know exactly what the interest rate is on my Barclays Cash ISA, thing is, I am not actually using it for savings at the moment as I am focusing on repaying debts, as such the account is more of a piggy bank to store money until payments are to be done and will not likely go past a few hundreds any time soon, switching account to get maybe a half point more will net me maybe a couple of quids by the end of the year, losing me the simplicity of having all my accounts under one roof, it's brilliant to have one single app on your phone that gives me details of everything.

Barclays Card 1
Now emptied with the transfer to Santander. This card will be kept for the time being, £7500 limit at 18.9% is a nice umbrella for a rainy day.

Barclays Card 2
This will be cancelled in the next few days, I have kept it even though the balance was zeroed as I wasn't sure if I had any pending payment, however, the last pending payment I had for a book on order has just arrived on Barclays 1, means I don't need this card any more and there is no point in keeping it with me.

Halifax and Santander Credit Cards
Just got them, can't shop around now.
Will shop in 13 months time as the Halifax offer will expire and will need a replacement.

Pension Fund
I have never really looked into this for one simple reason, I don't care.

The pension fund has been offered at work and the main reason I don't care about profitability is because is already profitable as it is. Money are off my gross salary, which means that 20% of my £106.28 monthly deposit is courtesy of Her Majesty's Revenues and Customs, on top my employer matches my deposit. I think I have just hit the limit at which they can match a deposit, last year I remember seeing that, after I increased my deposit their contribution was like a pound short, still good.

So, the reason why I don't care how much interests I get is because every month, each £85 I pay turns already into £211 (85 off my net salary, 21 tax relief and 105 employer match).

I will have to look into it though, improving the interest on top would be beneficial, especially now that the fund is getting well over 10k. I will leave this until the next statement and will try to find out if they have different plans and what could be beneficial to do.

Nobody's business

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