The neverending story

alicemary

I am in a seemingly never-ending cycle.
My husband and I are doing very well in keeping our heads above water financially, but one fly in the ointment is our credit card.
We pay it off in full every month, but here is the problem: every month at the start of the month we pay off the CC. By the end of the month we are back at the full limit.
I don't know how to get out of this cycle. If next month I were to pay it off in full again, We'd then not have enough money to last us until the next payday. This is why we keep going back to the credit card!
I'd like to keep this card for emergencies only, we have no savings at the moment and our debt is as follows: 1 loan payment of 160 a month, student loan repayment at 120 a month. Total income after tax of approx 3000. CC limit is 1250.
I try living frugally, but every month something new pops up that needs lots of money spent on it, scuppering my plans for tightening my belt.
How can I get out of this cycle?

tealady

Hi If you put up your SOA then we may be able to help you cut back so that you won't have to use the card as much. I would also keep a spending diary, its a real eye opener.

embarrassed_about_my_debt

I would also say that it isnt something that will happen over night, maybe try going upto £1k next month, £750 the month after and so on, then it isnt as much of shock to the system\budget.

To take £1250 out of your budget over night isnt going to happen, no matter how hard you try.

Staciep88

can i suggest that if you are doing all your spending on a credit card and paying it off in full each month then i dont see the problem with changing your current credit card and getting a new one that offers cashback - as long as you pay in full each month you are saving. just an idea

embarrassed_about_my_debt

I think the op's problem is they are using it like an overdraft.

I.e using it to the max each month as that is all they have left to spend on with nothing in the bank account.

CCCS_Sarah

Hello,

First of all you will need to put together an income and expenditure. This will show you how much you everyday living costs are (priority outgoings). The surplus you have is the amount to go towards your creditors.

This may mean you need to offer reduced payments to all your creditors (unsecured), if so you then need to look at how long it will take you to pay the debts back offering reduced payments.

The length of time will determine what is your best option (along with other factors).

Once you have put your budget together, this will help you see things more clearly and see if there are any areas that you can cut back on. Also is there anyway you could increase you income? (PT job, overtime, benefits)

If you need any help putting together a budget or would like to know you best option you could visit our online debt advice facility Debt Remedy. Alternatively you could call for an appointment on 0800 138 1111.

I would not recommend keeping your card, as it could always be a temptation. What would you class as an emergency? Car repairs? – This can be built into your budget without relying on credit, so you could just use the money you have saved.

Sarah

alicemary

An emergency could be anything...for us the problem is we live abroad and have various sick/elderly relatives back in the UK and elsewhere that we may have to travel back to help care for at the drop of a hat. I like to have access to funds in case we need to travel suddenly.
Here is my SOA. It doesn't look so bad! I think we just need a month or so of being really prudent
Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 1500
Partners monthly income after tax....... 1600
Benefits................................ 0
Other income............................ 90
Total monthly income.................... 3190

Monthly Expense Details
Mortgage................................ 0
Secured loan repayments................. 0
Rent.................................... 600
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 100
Gas..................................... 20
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 10
Mobile phone............................ 50
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 40
Groceries etc. ......................... 520
Clothing................................ 150
Petrol/diesel........................... 120
Road tax................................ 21
Car Insurance........................... 70
Car maintenance (including MOT)......... 20
Car parking............................. 5
Other travel............................ 60
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 20
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 100
Haircuts................................ 60
Entertainment........................... 250
Holiday................................. 100
Emergency fund.......................... 0
Total monthly expenses.................. 2348

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 200
Other assets............................ 0
Total Assets............................ 200

No Secured Debt

Unsecured Debts
Description....................Debt......Monthly...APR
store card.....................2000......60........15
Lloyds loan....................6000......90........4
Student loan...................12000.....160.......4
Total unsecured debts..........20000.....310.......-

Monthly Budget Summary
Total monthly income.................... 3,190
Expenses (including secured debts)....... 2,348
Available for debt repayments........... 842
Monthly UNsecured debt repayments....... 310
Surplus(deficit if negative)............ 532

Personal Balance Sheet Summary
Total assets (things you own)........... 200
Total Secured debt...................... -0
Total Unsecured debt.................... -20,000
Net Assets.............................. -19,800

Created using the SOA calculator at https://www.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission.

redpete

alicemary wrote: »

I try living frugally, but every month something new pops up that needs lots of money spent on it, scuppering my plans for tightening my belt.
How can I get out of this cycle?

£520 a month on groceries and £250 a month on entertainment seems to leave plenty of scope for more 'frugality'.

GeorgeUK

Electricity............................. 100
Have a look at the comparison sites to see if you can get a better deal

Mobile phone............................ 50
PAYG?

Groceries etc. ......................... 520
This can be cut down quite a bit - have a look at the old style board for meal plans. Have you tried moving down a brand - shops own?

Clothing................................ 150
Every month? I think you should be able to cut this back

Entertainment........................... 250
Have a few quite weeks in the month and this will soon reduce.

Just a few suggestions, but with the savings you can make from this and the supposed £532 remaining each month, you should be able to manage pretty well without the creditcard.

If you pay the minimum to all debts then throw anything remaining (i understand that you will want to keep something aside for emergencies) at the debt with the highest interest, you should soon see the debts reducing too.

I think it may be advisable to keep a spending diary for a month so you can see exactly where all your cash is going, You may be spending without realising on things you don't need and may not be aware of just how much it is costing you. Most obvious are coffees - 2 a day * 20 days = approx £80

alicemary

Thanks for your input redpete and George.
I have to admit I was quite shocked when I looked at it all added up, particularly food, clothes and ents.
This was on the basis of our expenses (closely tracked on a spreadsheet) for the past 4 months.
The big expense in the entertainment category is the gym membership for 2 people which we are tied into for another 6 months (stupid minimum contract thingy). We do actually go very regularly so at least this is an expense being used!
My "groceries" budget includes things other than food: all household maintenance and admin, dry cleaning, all home improvements and DIY etc... but it still seems high to me. We have recently moved house, so this may be why it's high, I'm sure we can bring it down in the short term.
We actually do lead a very quiet life! I know it seems hard to believe...
I have to clarify one thing: I live in Belgium, and the amounts on there are in Euros. So in effect we spend 400 GBP a month on groceries and household expenses, working out at 50 GBP each a week. That seems less frightful
For the electricity, this is a standard amount, which is then readjusted at the end of the year. We are careful with our elec and heat and hope to get a good lump sum back at the end of December, a manner of compulsory saving!
I can definitely cut back on clothing.

alicemary

Thanks to a bit of internet reasearch...I think I've found a way to cut the mobile phone bill from 50 a month to 10 a month!
:j