N00bie debt boy asking for HELP to sort his life out.

tbourner

OK so me and the wife don't earn too badly, but I've made some huge mistakes due to my obsession with cars!! So when we bought our house 3 years ago I took all my debt on board with us.

I filled in the budget planner from here to be told we're spending nearly £300 a month more than we earn!!!! So that's why my overdraft keeps growing!!!!!

Anyway; we've never missed any payments on any loans or anything, but I think we might be changing that fact in the near future.


So we need help. I'm sorting our budgets at the moment, we've changed our B&C insurance and saved some money, and changed our life insurance and saved some more, now thinking about cancelling our income protection insurance and stuff as well (although I've been through 2 redundancy programmes in the last 6 months and it's quite scary).



Anyhoo, here's a quick SOA I did, it's not precise but it's rough enough to show you how much trouble we're in:


Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household.........
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 1861
Partners monthly income after tax....... 845
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2706
Monthly Expense Details
Mortgage................................ 661
Secured/HP loan repayments.............. 156
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 92
Electricity............................. 45
Gas..................................... 50
Oil..................................... 0
Water rates............................. 23
Telephone (land line)................... 55
Mobile phone............................ 70
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 300
Clothing................................ 0
Petrol/diesel........................... 100
Road tax................................ 21
Car Insurance........................... 100
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 30
Buildings insurance..................... 33
Contents insurance...................... 0
Life assurance ......................... 85
Other insurance......................... 0
Presents (birthday, christmas etc)...... 15
Haircuts................................ 0
Entertainment........................... 4
Holiday................................. 10
Emergency fund.......................... 20
Pet costs............................... 40
Total monthly expenses.................. 1932

Assets
Cash.................................... 0
House value (Gross)..................... 120000
Shares and bonds........................ 500
Car(s).................................. 6000
Other assets............................ 0
Total Assets............................ 126500

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 114000...(661)......5.99
Secured Debt.................. 2200.....(50).......23.8
Hire Purchase (HP) debt ...... 5300.....(106)......6.64
Total secured & HP debts...... 121500....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
NW Loan........................11800.....267.......7.04
Ll Loan........................8300......206.......11.4
NR Loan........................29000.....170.......5.99
Total unsecured debts..........49100.....643.......-

Monthly Budget Summary
Total monthly income.................... 2,706
Expenses (including HP & secured debts). 1,932
Available for debt repayments........... 774
Monthly UNsecured debt repayments....... 643
Amount left after debt repayments....... 131
Personal Balance Sheet Summary
Total assets (things you own)........... 126,500
Total HP & Secured debt................. -121,500
Total Unsecured debt.................... -49,100
Net Assets.............................. -38,800
Created using the SOA calculator at makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using IE browser.


If I'm reading it right it's saying we have £131 left each month after paying everything, which doesn't fit with the budget planner, so maybe I'm missing something which I'll check later. But basically we have FAAAAAAAR too much debt compared with our earnings. So what do we do?
//edit: Just remembered I have a £3200 overdraft limit with about £3000 on it!!! And a credit card with £1800 and something owing.

Some info about us: Me (Trev) and my wife (Zoe), I'm 27 and she's 22, been together 6 years and married for 1 year (May last year - another £8k - relatively cheap!!), living together for 3 years. No kids but we have an Alaskan Malamute puppy called Loki. We don't go on holidays or anything (no passports even) and don't really go out to pubs and clubs, we enjoy the odd takeaway though and would love to be able to go out to restaurants every so often (even Harvester would do). Our main spend at the moment other than debts is the dog - he's a sled pulling breed and when he hits a year old in October we were intending to get him working, which means buying a rig/scooter and harnesses and lines (about £400 total), then going to rallies and events throughout the winter (£40 fuel + food etc. each weekend) - at the moment this is looking unlikely which is a huge shame because it's the most important year for him to start working.
We made (possibly a huge) mistake last month in buying another car, an 05 Corsa, on finance. It's good cos the 4X4 we have for Loki does 23mpg, and also Zoe can use it learn to drive in and then pass her test - at least that's what we told ourselves were the reasons.

HELP US!!!



PS: Jeebus that's a long post! :eek:

timtav

Sounds like a similar situation to me. I don't earn that badly either but this debt can spiral and I shudder to think the interest that is being spent. We have rented our house and living with family for a while to get some of the debts offset. Create a plan to get yourself debt free and by a given date. Thats my limited advice

Lokolo

Just a couple of things you could cut down on

- Groceries.... £300 for 2 of you? That could be cut down by at least 1/3.
- £55 on landline phone?

staffie1

Lokolo wrote: »

Just a couple of things you could cut down on

- Groceries.... £300 for 2 of you? That could be cut down by at least 1/3.
- £55 on landline phone?

If his landline phone includes internet access (no seperate entry for that) just the rental (if with BT) could easily be best part of £50.
If so - ditch and switch asap!

mothsinmywallet_2

Gas and electric look high to me - we are a family of four in a 3 bed semi, husband was working from home until recently and ours is only £65 per month. Might be worth looking at switching that. You sound like you have a good attitude - good luck sorting it all out!

talana

Yep, groceries can be cut by up to £100 if you want.
£125 monthly on telephones (mobiles + landline) is ridiculous! That could be halved.
£20 emergency fund - if this is in your budget then you should have cash assets unless it's just a plan. To be honest I wouldn't bother, put it towards the debt.
Likewise £10 holiday fund - is this really enough to bother about?
It's not going to stretch very far on the holiday front - so again put it towards the debt.

Katie-Kat-Kins

Nice to meet you trev! Thanks for the detailed introduction, it actually helps a lot. I'll make some suggestions on your SoA, but to be honest if you have a surplus on the SoA that isn't there in real life you need to start a spending diary where you record every penny you spend so that you can work out where it goes.

tbourner wrote: »

OK so me and the wife don't earn too badly, but I've made some huge mistakes due to my obsession with cars!! So when we bought our house 3 years ago I took all my debt on board with us.

I filled in the budget planner from here to be told we're spending nearly £300 a month more than we earn!!!! So that's why my overdraft keeps growing!!!!!

Anyway; we've never missed any payments on any loans or anything, but I think we might be changing that fact in the near future.


So we need help. I'm sorting our budgets at the moment, we've changed our B&C insurance and saved some money, and changed our life insurance and saved some more, now thinking about cancelling our income protection insurance and stuff as well (although I've been through 2 redundancy programmes in the last 6 months and it's quite scary).



Anyhoo, here's a quick SOA I did, it's not precise but it's rough enough to show you how much trouble we're in:


Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household.........
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 1861
Partners monthly income after tax....... 845
Benefits................................ 0
Other income............................ 0 You could get an extra income, one of you could get a part time job or you could try something like avon/betterware, or get a lodger.
Total monthly income.................... 2706
Monthly Expense Details
Mortgage................................ 661 Could you switch to interest only for a few months to work on getting your other debts down?
Secured/HP loan repayments.............. 156
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 92
Electricity............................. 45 Your combined spend on gas and electric look high, compare tarriffs anc change to the cheapest. Moniter your weekly usage by checking the meters and try to reduce it. There are some great threads on using less gas and electric.
Gas..................................... 50
Oil..................................... 0
Water rates............................. 23
Telephone (land line)................... 55 Yikes that is waaaay to high, mine is less than £20 and includes broadband. Shop around for the best tarriff and cut your usage to the minimum.
Mobile phone............................ 70 That is high too, can you reduce your tarriff? Or switch to PAYG? Make sure you don't use more than your inclusive minutes either.
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 300 You can cut back here. Downshifting brands would knock off about £50, you could cut more by meal planning and shopping to a list, visit the O/S board for help.
Clothing................................ 0
Petrol/diesel........................... 100 Can you cut back on how much you use here?
Road tax................................ 21
Car Insurance........................... 100 You said you have already shopped around but that looks high still. Don't pay for your wife to be on the insurance if she isn't actually going to learn to drive as learners are expensive, only put her on the cheapest car too.
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 30 That is high, shop around.
Buildings insurance..................... 33 Shop around for the best quote
Contents insurance...................... 0
Life assurance ......................... 85 Very high for such a young couple, shop around.
Other insurance......................... 0
Presents (birthday, christmas etc)...... 15
Haircuts................................ 0
Entertainment........................... 4 I bet this is where your surplus goes! I bet you spend more than this!
Holiday................................. 10 Ok you can't afford to save for a holiday if you can't meet your debt repayments. Once you are in a better place start saving for a holiday and NEVER take finance for a luxury like this.
Emergency fund.......................... 20 Do you actually have emergency savings? If so they should be targetted at your debts for now.
Pet costs............................... 40 In addition to the £30 insurance? What does she eat caviar???? Seriously look at cutting back the costs here.
Total monthly expenses.................. 1932

Assets
Cash.................................... 0
House value (Gross)..................... 120000
Shares and bonds........................ 500
Car(s).................................. 6000
Other assets............................ 0
Total Assets............................ 126500

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 114000...(661)......5.99
Secured Debt.................. 2200.....(50).......23.8
Hire Purchase (HP) debt ...... 5300.....(106)......6.64
Total secured & HP debts...... 121500....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
NW Loan........................11800.....267.......7.04
Ll Loan........................8300......206.......11.4 Find out if you can over pay this as it has the highest APR you should try to get rid first.
NR Loan........................29000.....170.......5.99
Total unsecured debts..........49100.....643.......-

Monthly Budget Summary
Total monthly income.................... 2,706
Expenses (including HP & secured debts). 1,932
Available for debt repayments........... 774
Monthly UNsecured debt repayments....... 643
Amount left after debt repayments....... 131 You need to find that £131 and start overpaying those debts with it so that you are debt free sooner.
Personal Balance Sheet Summary
Total assets (things you own)........... 126,500
Total HP & Secured debt................. -121,500
Total Unsecured debt.................... -49,100
Net Assets.............................. -38,800
Created using the SOA calculator at makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using IE browser.


If I'm reading it right it's saying we have £131 left each month after paying everything, which doesn't fit with the budget planner, so maybe I'm missing something which I'll check later. But basically we have FAAAAAAAR too much debt compared with our earnings. So what do we do?
//edit: Just remembered I have a £3200 overdraft limit with about £3000 on it!!! And a credit card with £1800 and something owing. Do a new SoA and add them in. Start a spending diary to track what you are spending.

Some info about us: Me (Trev) and my wife (Zoe), I'm 27 and she's 22, been together 6 years and married for 1 year (May last year - another £8k - relatively cheap!!), living together for 3 years. No kids but we have an Alaskan Malamute puppy called Loki. We don't go on holidays or anything (no passports even) and don't really go out to pubs and clubs, we enjoy the odd takeaway though and would love to be able to go out to restaurants every so often (even Harvester would do). Once you start to get rid of some of those debts you will be able to afford more, look upon it as short term pain for long term gain.

Our main spend at the moment other than debts is the dog - he's a sled pulling breed and when he hits a year old in October we were intending to get him working, which means buying a rig/scooter and harnesses and lines (about £400 total), then going to rallies and events throughout the winter (£40 fuel + food etc. each weekend) - at the moment this is looking unlikely which is a huge shame because it's the most important year for him to start working. Ok this is a good aim, if you can free up some cash you might be able to afford some of this. Start looking into second hand rigs to save money or find out through the sports governing body whether there are schemes to enable you to borrow one. The cost of rallies could be built into your entertainment budget once you have made some savings and reduced your debts.
We made (possibly a huge) mistake last month in buying another car, an 05 Corsa, on finance. It's good cos the 4X4 we have for Loki does 23mpg, and also Zoe can use it learn to drive in and then pass her test - at least that's what we told ourselves were the reasons. Why not sell one or the other? For a second run around you could get a 10 year old car for £1k if you really need it and that would free up some capital. Alternatively do you really need the 4x4 do you make use of it? Could you manage without until you actually start attending rallies? Could you make do with an estate car that might be cheaper to run?

HELP US!!!



PS: Jeebus that's a long post! :eek:

Hope some of that helps.

tbourner

Thanks for all the advise so far.

Groceries and fuel I put as £400 because we allow ourselves £100 a week for everything, that is ALL shopping and fuel and toiletries and clothes etc. It often wants to be more than that!!

Home phone includes broadband, landline and digital TV all with Virgin, we were on a 3 for £30 deal but it ended.

Mobiles we are going to reduce, I'll give up the idea of getting a Blackberry on my renewal and go for something cheap, likewise Zoe can reduce her tariff.

Never thought about checking out gas and electric as Zoe's dad is an area manager for SSE so we've just stayed with them - might look into it - is uSwitch and stuff any good for that?

The £20 goes into an ING savings account, I'm thinking I'll keep that as it is and use it for Birthdays and Christmas presents, maybe set a limit of £10 per person.

£10 holiday fund I put in to cover any little trips we do, to the beach one weekend or something, little things that don't get added usually.


Kat, your replies:
I've got an interview on Wednesday at Little Chef, just for weekend work, I'm also planning on asking in Argos and places if they need help upstairs etc.
We can't change our mortgage as we're 2 years left on a fixed rate, the costs would outweigh the benefits and that's if we even could remortgage!
We DO need to start shopping to the list a bit more!!
Pet insurance we need the best, most places don't offer cover for life on overrunning conditions and we're not willing to risk it. It also includes similar cover for our cat who I didn't mention, he's just a moggy though.
B&C insurance and Life insurance I spent weeks searching and phoning for to reduce what we had, and that's the prices we got!
Entertainment the £4 is our Lovefilm subs. We honestly don't go out!! We try to keep all other entertainment within our £50 each a week limit.
Pet costs include cat food (about £4 a week) we get dog food more or less free, but we buy toys cos he kills them very quickly - I've used freecycle a LOT for people getting rid of bags of cuddly toys etc but we still end up buying some and it's not cheap!! Bear in mind we said Loki is our only real love in life, we have very few vices, I think we've been very good in how much we spend on him compared to what we would if we could!!
Cars, we've tried different combinations, we had an estate and it wasn't big enough, plus the number of times we got stuck in fields and dark woods in winter was getting silly. The 4X4 is pretty cheap except for fuel. the Corsa was maybe a mistake but to sell it now and buy something cheap would mean losing out quite a lot - best bet for that is to keep it as long as is humanly possible!!!! Zoe is only insured on the Corsa, but because of the stupid rules for not using NCB on 2 policies it cost LOADS to insure 2 cars.

Spending diary: The next plan is to use our dormant joint account for our 'groceries', so my account and Zoe's account are purely for transfering our salaries into the other joint account to pay the bills - we need to get some debit cards for the dormant account but with no OD facility etc. it should be easier for us to stick to the budget. How does that sound?

RAS

Sorry but you life insurance is crazy - it should be about £14-18 for term life insurance for the two of you, unless either of you have a major health problem.

tbourner

The £85 is £52.24 for life cover (including £170,000 cover plus all the critical illness gubbins). + £19.62 for me and £13.45 for Zoe to cover us for half of our salary after 6 months out of work. As I said in the first post we're thinking about cancelling the income protection side of it but it's scary at the moment cos I'm at risk!

Katie-Kat-Kins

tbourner wrote: »

Thanks for all the advise so far.

Groceries and fuel I put as £400 because we allow ourselves £100 a week for everything, that is ALL shopping and fuel and toiletries and clothes etc. It often wants to be more than that!! Haha it always does, the trick is to get it to be less!!!

Home phone includes broadband, landline and digital TV all with Virgin, we were on a 3 for £30 deal but it ended. Ok then shop around, and read Martin's article, we pay less than this with tiscali but I think it is different from area to area. Consider just using freeview rather than paying for the tv.

Mobiles we are going to reduce, I'll give up the idea of getting a Blackberry on my renewal and go for something cheap, likewise Zoe can reduce her tariff. Why not go PAYG on renewal, you could then just use the mobiles for incoming calls and emergencies and probably drop your joint spend to about £20

Never thought about checking out gas and electric as Zoe's dad is an area manager for SSE so we've just stayed with them - might look into it - is uSwitch and stuff any good for that? You can probably save a decent amount by switching if you haven't done before. Martin has done a very good article on how to do this, it is important that you compare prices based on actual not estimated usage though.

The £20 goes into an ING savings account, I'm thinking I'll keep that as it is and use it for Birthdays and Christmas presents, maybe set a limit of £10 per person. Definitely do a budget for presents, it really is the thought that counts so don't be afraid to buy cheap things. Also think about using loyalty points and vouchers earned from cashback sites etc for presents.

£10 holiday fund I put in to cover any little trips we do, to the beach one weekend or something, little things that don't get added usually. Ok, but you could try to not dip into it and then when you get to £100 put half towards and overpayment.


Kat, your replies:
I've got an interview on Wednesday at Little Chef, just for weekend work, I'm also planning on asking in Argos and places if they need help upstairs etc. Brilliant! Good luck!
We can't change our mortgage as we're 2 years left on a fixed rate, the costs would outweigh the benefits and that's if we even could remortgage! I didn't mean remortgage, I meant ask your current provider whether you can go from a repayment to interest only, so you are paying back less.
We DO need to start shopping to the list a bit more!! Get Zoe on the O/S board, a well thought out meal plan and shopping list can really cut your spending. It saves time too and is often healthier. I've found that going to the shops less automatically saves money.
Pet insurance we need the best, most places don't offer cover for life on overrunning conditions and we're not willing to risk it. It also includes similar cover for our cat who I didn't mention, he's just a moggy though.Why not drop the level of cover for the cat if he is just a pet moggy rather than a working hobby animal? I'd shop around for the dog insurance, that looks pretty high comparing it to the cost of cover for a horse.
B&C insurance and Life insurance I spent weeks searching and phoning for to reduce what we had, and that's the prices we got! Wow the B&C doesn't look too bad but the life cover does look high, are you sure you aren't over insuring yourselves and have an appropriate policy? Might be worth haveing a read of the insurance boards on here.

Entertainment the £4 is our Lovefilm subs. We honestly don't go out!! Do you really make this worthwhile? If you aren't watching more than one film a week it perhaps isn't worth it.
We try to keep all other entertainment within our £50 each a week limit. Where is that on your SoA??? Should the entertainment figure be £220 (£50 per week plus £4 per month) in which case that puts you into a defecit. £50 a week on entertainment is high, what does this pay for? Can't you cut it?
Pet costs include cat food (about £4 a week) we get dog food more or less free, but we buy toys cos he kills them very quickly - I've used freecycle a LOT for people getting rid of bags of cuddly toys etc but we still end up buying some and it's not cheap!! Bear in mind we said Loki is our only real love in life, we have very few vices, I think we've been very good in how much we spend on him compared to what we would if we could!! So you are spending £4 a week on cat food and £6 a week on dog toys, making £40 a month?? Sorry but £6 on toys is excessive. Can't you make toys out of old worn out clothes and blankets etc to suppliment what you get on freecycle. He is *just* a dog, I appreciate he is the love of your life, but he is also a hobby. If you can't afford to keep him you either need to make cuts or sell him to someone who can afford him. Animals like this (I ride horses) are more than just pets and do cost a lot and you have to bargain for this when you buy them. Right now you are living beyond your means and this will mean an adjustment for everyone. If you had kids we'd be telling you to cut what you spend on treats too. You may love him but keeping a roof over your heads and food on the table is more important.
Cars, we've tried different combinations, we had an estate and it wasn't big enough, plus the number of times we got stuck in fields and dark woods in winter was getting silly. The 4X4 is pretty cheap except for fuel. the Corsa was maybe a mistake but to sell it now and buy something cheap would mean losing out quite a lot - best bet for that is to keep it as long as is humanly possible!!!! Zoe is only insured on the Corsa, but because of the stupid rules for not using NCB on 2 policies it cost LOADS to insure 2 cars. Ok so you need to make these cars really work for you. Are you teaching Zoe yourself? Can you insure one vehicle in her name so she starts building a NCB? Could you put the 4x4 off road for most of the year and only have it taxed and insured while you actually need it for rallies?

Spending diary: The next plan is to use our dormant joint account for our 'groceries', so my account and Zoe's account are purely for transfering our salaries into the other joint account to pay the bills - we need to get some debit cards for the dormant account but with no OD facility etc. it should be easier for us to stick to the budget. How does that sound?

Sounds like you need to revisit the SoA, do a spending diary and sort out some meal planning and get to a stage where you have a *genuine* surplus in your SoA rather than the current fictitous one!!!