Disposable Income When Paying Off Debt

ReadingTim · 16 March 2017 at 5:14PM

In one sense, "every last penny" does need to be accounted for, because if you spend more money than you earn, you'll get into debt. If you earn more than you spend, you won't.

But this doesn't mean having to itemise every single purchase you've ever made or will ever have to make and know what it costs down to the penny - that's silly. It's simply a case of making a budget and sticking to it. Your budget can include anything you like, so if you need (say) £5 per week 'petty cash' for the parking meter, pint of milk, cheeky Nando's, whatever, then add it in. The trick is not to spend more than the allocated £5. £4.99 is fine. £5.01 isn't. And so on....

Sounds like the OP needs to keep a spending diary to see where this "big chunk" of his/her money is going over the month, then use that to create a realistic budget which needs to be stuck to.

loey93 · 16 March 2017 at 5:22PM

Hi TheRoders, I think it is important to allow yourself some "fun" money each month even when paying off debts. I have tried in the past to go cold turkey for a few weeks and I always end up miserable and just having a crazy blow out (and end up in exactly the same situation) :-(

I allow myself around £100.00 per week for "fun" money. I draw it straight out from the bank and make sure I stick to this.. whereas before I would use my card or credit card and gets slightly carried away some weeks..

Fireflyaway · 16 March 2017 at 5:22PM

Clearing debt requires motivation and if you have no money and no fun you are likely to fall off track. I keep some money for fun but write it into the budget. So in short, do have spending money but less than if there were no debts. I find keeping spending money in plastic envelopes works for us. Every Sunday we get an envelope to last the week.
Also I find its impossible to account for every penny. This week our son came home with school photos, leavers hoodie and mothers day gift order forms. That's £36 I had not expected so I find it good to have a small miscellaneous fund too.

Ebe_Scrooge · 16 March 2017 at 5:34PM

loey93 wrote: »

I allow myself around £100.00 per week for "fun" money...

Are you for real - £100 a week ??? Blimey, I'm lucky enough to be "comfortably off" by most people's standards these days, and I don't ( and would never ) spend anything like that amount ! When I was in a less fortunate situation in my youth, my weekly fun budget was about a fiver.

TheRoders · 16 March 2017 at 6:38PM

Yep... £100 a week is what I have been using as "fun" money but because I know it's there then I tend to spend it on junk....... we like going out for meals etc but know full well we go out way to often. I want to clear my debt and I am a very good saver. I'm just very impatient hence the debt. Would rather have it now than save for it!

It's interesting to find out what you all put aside as fun money. I think £50 a week is reasonable and that means that I can throw £1000 a month at the debts (Black Horse and PCP aside).

London_Town · 16 March 2017 at 8:22PM

TheRoders wrote: »

We are in a fairly fortunate position at the moment. We do have a LOT of debt but all manageable as I've just got a new job.

Income:
Me - £2224
Hubby - £1900

Debts:
Mortgage - £147000 / £638.00 a month
Barclaycard - £4200 / 6% / £65 a month
MBNA - £6250 / 0% / £65 a month

Car PCP - £378 a month
Black Horse - £147 a month
Personal Loan - £157 a month

With everything we pay out, it leaves us with £1200 a month. I have been squirreling away/saving £800 a month to clear our debts on top of what we pay monthly anyway which leaves £400 disposable income but looking through what we spend that on, it really is takeaways and rubbish!!

My only concern is, if I reduce this will I start to resent it and mess everything up!! I was looking to reduce it to £50 a week to give us some breathing space.

To me, your debts seem very modest, relative to your income. £400 does seem alot to spend on takeaways and "rubbish" though. If you literally have nothing to show for that £400 at the end of the month, perhaps look at reducing the amount you do spend.

In my mind, as justification for alot of disposable income, you need to ensure that you are paying down your mortgage - is it repayment? Also, of equal importance, are you both paying into pensions - ideally work placed?

If you have an interest only mortgage and no pension provision, spending £400 a month on "rubbish" would be like rearranging the deck chairs on the Titanic.

Sharon87 · 16 March 2017 at 10:11PM

Do a proper SOA with ALL your income and outgoings, inc bills, clothes, haircuts, food, insurances, phones, TV.etc Then you may realise that actually you don't have as much spare as you may think - hence running up the debt in the first place. Just divide your yearly spend by 12 to get a monthly figure.

I am paying off debt as well as and do allocate money for 'fun'. I budget about £150 a month for my 'fun stuff' including eating out, drinking, booze at home.etc

jayII · 16 March 2017 at 10:36PM

We (2 of us) keep £150 each per month for 'pocket money', plus £200 into the holiday fund. So a total of £500 in unnecessary/fun money each month.

Until last year we hadn't had a holiday for a decade and only had minimal personal money because we had other priorities, including saving for a house deposit.

The pocket money is now often used to pay for additional holidays/weekends away or is added to savings, but that's a personal choice for each of us. Now that we have the house we want, holidays and fun times are a HUGE priority for us, lol.

We have a huge but rapidly decreasing mortgage, 'average' incomes (total about £3500 pcm) and owe 15K on 0% credit cards from work we did on the house when we bought it (we owed 30k on 0% cards 1 year ago). We save enough each month to pay the cards off well in advance of the 0% deals running out. Once they're gone, excess income will be used to overpay the mortgage. Our cars are owned outright. We eat well, work hard and enjoy life. Not many takeaways but lots of days out and meals out with our adult children, friends and family.

It's important to manage debt well, but it's also important to enjoy life, just in case that bus does run us over tomorrow.

moneyfacts · 17 March 2017 at 7:24AM

I actually think your debt payments are high each month but I suppose that's subjective.

£400 is a lot of money to spend each month when you could be clearing debt.

People here talk about fun money and spending money to feel better. Well that is the exact reason why people get into debt, because they think spending money is needed to enjoy life. Why not try to enjoy life outside spending (or spending a very little).

The fact is, the longer it takes to pay your debts down, the longer they stay and you're putting off the option of saving and investing for the future.

If however you just can't live without Nando's, treats and new cars, just be prepared to work for a lot longer

determined_new_ms · 17 March 2017 at 8:09AM

I have a low income and no debts and allow myself £120 a month for spending money. This is everything after all expenses are paid. I find this a really low amount even though I don't spend very much (I think). Allows for going out drinks a few times a month or a meal with friends, hobbies, coffee while out, ice cream with the nipper, clothes, anything I want to spend it on. I allowed myself a similar amount while debt busting but had a considerably higher income then (I earn about a 1/4 of what I earned a few years ago!).

Takeaways - everyone is different but I always feel disappointed after a takeaway what we get for the outlay just doesn't seem worth it and if you can cook well then what you get just doesn't compare with what you can cook in terms of price. I try to allow for 1 nicer meal a week. So will this week we are making sushi. Costs about a tenner for all the ingredients for a banquet. I know I can get a takeaway in my area for sushi for about £20 and there would be a lot less. Similarly curries are easy to make. I have a Madhur Jaffry cook book and haven't been disappointed once with the recipes. I'll grab in some pilau rice from the SM and a couple of naan breads and we have a curry for less than a tenner. There's a great recipe book called "The take away secret" again haven't been disappointed.

So when we do inevitably reach for a takeaway I always feel I can do better for a fraction of the cost

Disposable Income When Paying Off Debt

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