Budgeting Dilemma

DougieB_3

Hi there,

So here’s my situation: I’m 21, currently working a lowly job full time (after tax £231 p/w) but there’s strong rumours that they’re looking to cost cut / merge posts. The chances of me getting this position are slim – so I’ve a probable 1-2 months whilst they go through the recruitment process (tipped off by a PA).

So here’s the dilemma – I’ve a fair few debts outstanding, too many debits each month & no savings. What would be the best course of action to mitigate any damage should I lose my job? Is it better to save up a reserve so I’ve cash in the bank should I lose it & the ability to pay rent or is that simply delaying the inevitable & it’s best to clear as many debts as I can now. I'm trying to plan for worst case scenario that I don't find work, as I didn't last time 'n that's where these debts came from!

Current Debts

Loan £514.59 (@ £79 p/m)
Bank Account £542.48 (currently only paying off the interest @ £8 p/m)
Credit Card £1904.66 (£300+ p/m)

I had been pushing all my funds into clearing the credit card as quickly as possible (£300+ p/m) but I was wondering if people still thought this wise?

Debits each month

Rent £237.50
Gas/Electric £59
Council Tax £40
TV Licence £17 (aggregated over year)

Would it be best to use the remaining weeks / months at work to save up to pay rent in the hope that I find work quickly, or would it be best to clear as many debts as possible to reduce interest charges?

My thinking was it’s probably beneficial to pay off whatever I can, assuming Halifax don’t subsequently reduce my overdraft (which they probably will do if sacked). Hi rock – this is a hard place!.

Thanks

DougieB_3

Hah Halifax just bumped their interest rates up to 29%! Good times... credit rating poor, can't get anyone else to take me on - to be young 'n free...

Lokolo

Whats your income?

What are the charges for early repayment?

DougieB_3

Lokolo wrote: »

Whats your income?

Lokolo wrote: »

What are the charges for early repayment?

Hey Lokolo, thanks for the reply. Quick update following my first post, looks like they'll be keeping me on till the new year so that's great news! Should hopefully have a weekend job within the next few weeks so that should speed things up!

I'm earning £231 after tax each week, so £924 per month. Currently work my bills out weekly (as I'm paid weekly) - with my main debt being the credit card.

Rent £60
Electric £4.90
Loan £19.25
Credit Card £80
Petrol £20
Food £25
Broadband £1.62
Council Tax £7
Gas £4.90
TV Licence £2.91

Total £225

Recently taken in the flat mates boyfriend so reduced the bills somewhat - it's getting away from Halifax that's killing me.

Has anyone any experience of switching banks when their credit rating is real poor? I've missed payments but always paid them off (i.e. made them late) & I've been on time with all payments since January of this year. But I guess that’s not enough - none of the banks are interested in taking on my debt - anyone know of a favorable one? It all seems so arbitrary... the interest is crippling me

Lokolo

Ah so things are pretty tight at the moment with you, only leaving £6 spare a month eek.

The credit card is 29% yes?

My only thought is to try Zopa? Have you looked at that yet?

Getting a 1 year loan with Zopa, pay off the credit card, thats 29% interest gone. You can repay early on Zopa too, not sure of the charges though. And I am not totally sure on the interest rate.

DougieB_3

Lokolo wrote: »

Ah so things are pretty tight at the moment with you, only leaving £6 spare a month eek.

The credit card is 29% yes?

My only thought is to try Zopa? Have you looked at that yet?

Getting a 1 year loan with Zopa, pay off the credit card, thats 29% interest gone. You can repay early on Zopa too, not sure of the charges though. And I am not totally sure on the interest rate.

Hah you could say that! Just means underpaying on the credit card if things get too tight.

It’s really frustrating, almost feel like things would be easier were I to pack in the job & go on JSA. Interest rate froze, bank charges reclaimed, housing paid for… ah to lack ambition!

Sent an email off to Zopa, though looking at their T&C I don’t expect much “Note that Zopa does not lend to anyone with CCJs or unsatisfied defaults. You'll also need a minimum annual income of £12,000 with demonstrable ability to afford the loan, and no recent missed payments on any of your credit lines.” (I’ve no unsatisfied defaults – but wait to see what they mean by “recent”!) Fair enough I guess, nobody wants to lose their money. Hopefully Zopa’s ‘Young’ credit line comes through! Quoting 14.9% at the minute, with early repayment so that'd be a good sight better than my current debt. Thanks.

On a slight tangent since we’re covering all the bases, I read through Martin’s guide back in February & have applied to reclaim my bank charges – but didn’t think I’d qualify under the hardship loophole. People agree? £609 the b*stards took! That’d go a long way…

CLAPTON

You really need to look at ways of increasing your income... a part time job

I'm afraid your budget is just not realistic... you seem to have a car as you buy petrol but you are putting nothing aside for car tax, insurance, MOT repairs so when they fall due you will need to use the CC again
Similarly you have nothing in for going out, clothes, the odd present ..OK for a week or two but not a very realistic way of living for a long time.

Try working out a full year's budget (i.e. including all the one offs or yearly costs ..try this format
http://www.makesenseofcards.com/soacalc.html

also try keeping a spending diary (write down everything you spend for a month or so) and see where there are other things you spend money on.

DougieB_3

CLAPTON wrote: »

You really need to look at ways of increasing your income... a part time job

I'm afraid your budget is just not realistic... you seem to have a car as you buy petrol but you are putting nothing aside for car tax, insurance, MOT repairs so when they fall due you will need to use the CC again
Similarly you have nothing in for going out, clothes, the odd present ..OK for a week or two but not a very realistic way of living for a long time.

Try working out a full year's budget (i.e. including all the one offs or yearly costs ..try this format


also try keeping a spensing diary (write down everything you spend for a month or so) and see where there are other things you spend money on.

Hey,

Yeah I’m not sitting totally idle – as said earlier, should hopefully be starting a weekend job at the local football stadium come the new season – but at best that’ll only bring in £88 p/m, likely less most months.

I did try & get in on Arise UK but they never got back to me… there’s not much going at the minute & I’m not overly qualified (starting a OU course in October!).

The flatmates in a similar position (though saving for a holiday not through debt!) so the leisure thing’s not too much of an issue, I’d rather write off a year than spend the next three struggling… there's fun to be had with nothing, just need to lower your expectations. Clothes & books from the Shelter charity shop, borrow DVDs from mates. People know I’m skint… birthday card & a song, live within my means for now “IOU 1 Gift!”.

The car, I’m young – thankfully the parents pay the insurance (not a chance I could afford it on my own & required to get to work), though I take your point on car tax / repairs.

Unexpected bills have been paid through dipping into the credit card payments (basically disposable only for essential payments but not for anything else). The credit cards long since been cut up, I've essentially £290 "spare" that barring anything unexpected goes on the credit card (£320 but there's £30 minimum repayment).

But you're right - more money would help !

Bananasplit

Also remember that your monthly pay will not be £231 x 4
but (231 x 52)/12 so monthly pay is actually £1001.

And as Clapton says fill in an SOA with EVERYTHING!

James123_2

I've no practical advice but I think the OP is very level-headed in his/her deliberations. The debts in themselves are too daunting, but clearly need to be dealt with. (Bank of mum and dad??) So, unlike many who get themselves into a mess, I think you've pretty well got the measure of your circumstances - that's the first hurdle! So, I guess I'm only giving you good luck.

DougieeB

Hey James thanks for the kind words!

The bank of mum & dad is closed for business, which is good – I wouldn’t be comfortable taking their cash. I’ve been raised terribly in that I appreciate personal responsibility… if you’re old enough to move out & accumulate debt you’re old enough to face the consequences & pay it off. That’s the mantra that’s getting me through – should hopefully enjoy the good times more (should they ever come!).

I’ve looked into Zopa (can't link there as I'm a new member), but the people on their forum don’t seem to think it’d be appropriate to my situation (and the credit checks are much the same as the high street banks). There’s a £118.50 administration charge on taking out the loan – and my shaky maths agrees with sl75 that this’d be several months’ worth of interest (though I have always struggled working out actual credit card interest, don’t suppose there’s a decent online calculator anywhere?). I would be looking at a reduced rate of interest (13-14%) but taking into account this admin fee I don’t think I’d be much, if any better off.

Think it’s more psychological at this point – barring getting onto a 0% credit card (come to accept this is impossible) there’s little I can do but continue to grind it out. I guess when the debt was that massive I was that far off it doesn’t seem achievable, especially when you know you’ve to make payments each week or risk being kicked out / electricity cut off, so things were a lot more regimented.

Whereas now, although still heavily in debt (relative to my income!) I am more than paying off what’s required, so it’s a constant battle to remind yourself that this is not in fact a disposable income and you actually have no money, because of all the debt!

sl75 also helpfully points out that I’m just two weeks away from a debt milestone of £2500, which is great.

The plan here-on-in, barring anything unexpected (or if anyone’s any better suggestions) is to follow this route – plan each milestone per £500, then tip my hat with everyone ticked off.

Thanks for the helpful advice, from both forums.

(can’t seem to login in with my account)