Don't know where to start paying it off!

TryingToBeDebtFree_2

Hello

I new to this so please stick with me if I get it wrong or leave something out!

We are stuck - poor money management has left us with increasing debts! Now we have decided to put it right once & for all but we don't know how to arrange our debts into order of priority.

Below is a breakdown of our in's & out's & debts. If you could take a look & advise that would be brilliant!

Incomings:

Husband's take home wage: £2100
My wage: £0
My benefit: £450
Lodger: £500

Total: £3050

Outgoings - all paid monthly by direct debit:

Utilities: £188
Insurances (life, dog, home etc incl elec/gas ins): £241
Council tax: £130
Mortgage 1: (main mortgage = interest only, hsbc var rate £160k) £450
Mortgage 2: (eq release = repayment, hsbc var rate £20k, 25yr left) £110
Loan: (northern rock, 4 yrs left @ 5.7%) £227
Communications: (phones, b'band, tv lic) £90
Car: (loan @ 3.1% 4 yrs left @ 140 +fuel, tax etc) £200
Food: £250
Gym: £16

Total: £1908

Additional Debt - those that aren't paid off regularly or managed!:eek:

Husbands overdraft: £1600 (halifax 1.8%)
Husbands credit card: £5000 (virgin 0% int til July)
My overdraft: £1500 (hsbc student acc = 0% int which can be extended)
My credit card: £2200 (hsbc 15%)

Total: £10,300

THE RUB...

We should be able to get on top of this but we've never been disciplined - however we've come to a watershed & have changed our attitude, however we need some help:

What should we pay off when?

We would like to allow £300 per month for spending & emergencies which would leave us with a total of £2208 outgoings not including the additional debt - above.

This would mean we can pay off approx £840 / month

• My husband has option to take out hsbc c'card @ 0% int for 25 months, 2.9% fee. By transfering my c'card to his virgin card then all to hsbc card we could make all our c'card debt 0%.
• We have hsbc + acc (taken for travel ins offer) & were both able to open regular saver accounts @ £10% int - max deposit £250 / month. I've saved £450 & have 10 months left, my husband has saved £50 with 11 months left - should we take advantage of this?
• Should we focus on my husbands overdraft first or our northern rock loan / something else?

We would like to clear EVERYTHING so that we're only left with our main mortgage which we will then be able to afford to pay as a repayment m'gage OR which if we could find a very cheap rate we could perhaps keep as interest only & save to pay off lump sums?

It is a hideous & embarrassing situation to find ourselves in - the truth is we've just never learned to be disciplined we don't tend to buy big luxury items BUT we do seem to waste money & spend without thought. Its made worse as I can't work due to an industrial injury.

We would be massively grateful for any help & advice anyone can give us re how to get it all paid off PLUS how to NOT SPEND / WASTE MONEY

Thank you

Beth - TryingToBeDebtFree

Horace

Hi and welcome - it would help if you could use this calculator https://www.makesenseofcards.com/soacalc.html and follow the instructions for MSE to copy and paste it here. We need to know the APRs on the loans and credit cards before we can say which you should think about paying off first.

Keeping a spending diary helps as this will show you where you are frittering money away and it helps keep you disciplined.

£90 is a lot for phones,broadband and TV) - I am assuming this is a bundle, if so try dropping to a smaller package.

That's all I can say for now - I am sure folks will be along with further ideas.

poorandindenial

First things first, do a complete statement of affairs (calculator at www.makesenseofcards.com) then see whether you have money to throw at debts, if you do then run the snowball calculator (on the same site) and see how you should repay the debts (although the rule of thumb is pay those with the highest APR first)

If you post the SOA here then we can help you to find ways of trimming back so that you have more money to go to your debts.

Hopeful34

OMG! You've come to the right place. I won't try to be an expert but this site is fantastic. Look at some of the other threads and you'll pick up loads of tips. I would say that in terms of paying off the credit cards and overdraft, pay off the highest interest rates first. Obviously you still have to prioritise paying debts like the mortgage. Use the tools on this site, the demotivator is fab for making you realise how much you may fritter away money on coffee, mags etc. Good luck!

McKneff

When you are tempted to buy something, pick it up, and every single time
deliberately say to yourslef 'do i really need this' 9 time out of ten you will put it back down again. Your half wa there when you admit that you ae overspending. You have the motivation so stick with it.

The time when you realise that yu have no other debts than your mortgage is magic, look forward to it.

Little_Miss_Uni-Debt

Hey, welcome & well done on posting! It can be shocking when you write it all down, all that info and not knowing where to start. You are correct in knowing that you need to pay off your debts in a certain order, this really does make a huge difference in allowing you to become debt free quicker. I think you are fortunate to have a good amount of money to throw at your debts. However if you get ruthless with the other things that you spend each month then that will free up even more for you to bring your 'mortgage-only' days even closer!

As others have said it would be very useful to us to see your full statement of affairs. www.makesenseofcards.com/soacalc.html

I can see you have done quite a comprehensive incomings/outgoings list. However it would be really good to break things down even further. For example separate utilities into water,gas, elec. You can see which is highest and aim at saving energy in various ways.

Also separate the insurances down. Is the gas/elec insurance cover for your household appliances or something else? It can be tempting to round up for certain thing - say for example, car = £200 pcm. Do you really have the full car tax saved & put aside in a bank account for when it comes around to pay it or does the money get spent along the way? When you lump things together you can miss areas where money can be saved.

Ideally you want to be putting something aside for each of your insurances or annual bills so that you can purchase your renewal in one lump sum next year and then you will have freed up a HUGE chunk of income!!!!

Do you also have your exact figure for your northern rock loan and car loan? As you have said there are 4 years left on each but it is easier to work out when to pay off what if we know how many payments of each you need to make.

What will your husbands credit card rate be at once the 0% finishes in July?

I would get disciplined in making regular payments first to get you into good habits - then think about saving and other offers. Once your re-worked SOA is posted we can then say when you will be debt free by and what order to pay things off in!

TryingToBeDebtFree_2

Hello again

I'd like to give sincere thanks to all of you for responding to my post - not only is it a massive help because of all your advice & tips but also it's a great reminder that we're not alone. :T

I have done what was suggested & produced a statement of affarirs:

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 2100
Partners monthly income after tax....... 0
Benefits................................ 450
Other income............................ 500
Total monthly income.................... 3050
Monthly Expense Details
Mortgage................................ 450.6
Secured/HP loan repayments.............. 110
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 130
Electricity............................. 90
Gas..................................... 50
Oil..................................... 0
Water rates............................. 38
Telephone (land line)................... 20
Mobile phone............................ 45
TV Licence.............................. 11
Satellite/Cable TV...................... 0
Internet Services....................... 19
Groceries etc. ......................... 250
Clothing................................ 50
Petrol/diesel........................... 20
Road tax................................ 15
Car Insurance........................... 25
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 15
Pet insurance/vet bills................. 14
Buildings insurance..................... 13
Contents insurance...................... 10
Life assurance ......................... 180
Other insurance......................... 24
Presents (birthday, christmas etc)...... 35
Haircuts................................ 10
Entertainment........................... 90
Holiday................................. 50
Emergency fund.......................... 50
Windows................................. 10
Gym..................................... 16
Total monthly expenses.................. 1850.6

Assets
Cash.................................... 500
House value (Gross)..................... 250000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 13000
Total Assets............................ 263500

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 160000...(450.6)....3.95
Secured Debt.................. 20000....(110)......3.95
Total secured & HP debts...... 180000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Halifax overdraft..............1600......100.......24
HSBC credit card...............7000......350.......0
HSBC overdraft.................1500......0.........0
Car Loan.......................7000......140.......3.5
Northern Rock Loan.............13000.....227.......5.07
Total unsecured debts..........30100.....817.......-

Monthly Budget Summary
Total monthly income.................... 3,050
Expenses (including HP & secured debts). 1,850.6
Available for debt repayments........... 1,199.4
Monthly UNsecured debt repayments....... 817
Amount left after debt repayments....... 382.4
Personal Balance Sheet Summary
Total assets (things you own)........... 263,500
Total HP & Secured debt................. -180,000
Total Unsecured debt.................... -30,100
Net Assets.............................. 53,400
Created using the SOA calculator
Reproduced on Moneysavingexpert with permission, using IE browser.

I also did a snowball calc!

It is good to know that if we keep ourselves very disciplined & focussed we can get debt free in just over 2 years BUT I worry due to our previous lack of discipline.

Any thoughts on how to trim away outgoings would be much appreciated!

Thanks again

Pollycat

Hi there
Here are my thoughts:
£180 on life assurance? This is very high. Do you really pay out over £2k each year on this?

From your SOA it appears that you have a reasonable amount (almost £400) after paying out for everything, but maybe you don't have this amount left over.
A spending diary, where you write down EVERYTHING you spend on a day-to-day basis will help to highlight where some of the money goes.
It may be the odd coffee out, or a can of pop, birthday cards/stamps, newspapers etc.
It's surprising how quickly you can spend £10 but can't see where the money has gone.

Also, try the OldStyle board for great ideas on menu planning, using up leftovers, batch cooking, using alternative cleaning products etc.

Good luck.

TryingToBeDebtFree_2

Me again!

I just wanted to thank you all specifically for the tips you've given me re how to get a real grip on things.
I'll give the following a try:

- spending diary
- break down of exact spending in certain areas
- look at other threads to pick up tips
- use the demotivator (sounds scary)
- asking myself if i REALLY need something
- looking forward to mortgage only days
- not rounding up
- actually putting money for car tax etc aside
- finding out exact figure remaining on loans & last payment dates
- to get disciplined by making payments & then look at other options

Hopefully I'll be able to keep it up...

TryingToBeDebtFree_2

Hi

Good point - I will look at our life insurance... It is in part an old endownment with critical illness which was expensive; but I'll check.

I like the idea of a spending diary because whilst I know we waste money I don't really understand how so much goes missing! scary!

Thanks

Little_Miss_Uni-Debt

Hi again, it's me! Well done for taking so many tips on board! Sometimes it's overwhelming, so much to check out and sort and all that! :rolleyes:

Just another quick look,now you have accounted for compound monthly interest on the halifax overdraft. You can now see that actually it is one of your highest interest rate debts (1.8% interest pcm = around 25% apr) At the moment it works out at around £25 pcm interest, it doesn't seem much but I would probably start with paying this one off first as you have fairly good rates of interest on other borrowings! As it is one of the lower balances it would be done and dusted in a few months, it's always a good feeling knocking off one debt from the list.

I did a quick snowball calc based on these figures and I got your debt free date down to around Dec 2010! That's even before you start to cut back on anything! Not that long at all!!!! Lucky thing

If you could just clarify a few things - are the following payments on your SOA payments for this years bill or has these already been paid this year and this is what you should be saving for next year?

TV Licence
Car Ins
Buildings Ins
Contents
Windows

I only ask because, for example - if you are paying this years car insurance each month (£25) you should then allocated double that in your future SOA - £25 for this year and £25 towards next year.

Sorry if I'm confusing you!