I want to be debt free

helen_melon_2

Hi Guys

Although I don't have a lot of bad debt (have mortgage aswell) I'm gradually getting towards it getting out of control.
I owe about £500 on credit card and have an overdraft of £2000.
With the charges I am currently paying on these debts my good debt is becoming affected (mortgage is last payment at the moment out of my account and has been returned for the last 2 months).
I WANT to pay these both off and get back to being bad debt free.
I have some savings but to clear the debt would mean clearing out the savings.
I have cut up my credit card.
I'm using my Tesco Clubcard vouchers for things such as RAC.
I've re-done my budget and am transfering my monthly allowance of spending money into a cash card account so I can only spend that.
I am also looking into selling avon to slightly increase my income,

What else can I do??
Please help I wanna get rid!!

sarahs999

H i Helen and welcome. You need to post an SOA - use the link here if you like http://www.makesenseofcards.com/soacalc.html

we can then look at your monthly incoming and outgoings and advise wher eyou can make changes. don't worry, you're not that far into debt so it can probably be sorted quite easily,

You m ight want to try and change the date tha tyour mortgage comes out so that it is the fist thing out when you get paid. The mortgage is by far the most important payment you make - credit cards can wait.

helen_melon_2

thanks I'll post one up.
I get paid 4 weekly so some times it's the first sometimes it's the last, from november it'll be the first. Can I switch my mortgage to 4 weekly?

dumpy

Echoning sarahs999 a SOA and a spending diary will help you work within your budget.

You mention that you have had the mortgage returned twice, but you have savings that would clear your debt.

Look at it this way, how much does it cost you when things are returned (not mentioning the damage to your credit file). Are you making more interest than that on your savings? If not then why hang onto your savings.

If you are worried about not having savings think how quickly you can build them up again when you start living within your budget and are not paying interest out on your debts.

helen_melon_2

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1569
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1569

Monthly Expense Details
Mortgage................................ 459
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 280
Council tax............................. 83
Electricity............................. 36
Gas..................................... 0
Oil..................................... 0
Water rates............................. 16
Telephone (land line)................... 15
Mobile phone............................ 40
TV Licence.............................. 12
Satellite/Cable TV...................... 33
Internet Services....................... 15
Groceries etc. ......................... 150
Clothing................................ 0
Petrol/diesel........................... 100
Road tax................................ 0
Car Insurance........................... 29
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 13
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 12
Holiday................................. 0
Emergency fund.......................... 65
Total monthly expenses.................. 1358


Assets
Cash.................................... 800
House value (Gross)..................... 0
Shares and bonds........................ 4000
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 4800


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(459)......0
Total secured & HP debts...... 0.........-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
credit card....................459.......11........0
Total unsecured debts..........459.......11........-


Monthly Budget Summary
Total monthly income.................... 1,569
Expenses (including HP & secured debts). 1,358
Available for debt repayments........... 211
Monthly UNsecured debt repayments....... 11
Amount left after debt repayments....... 200

Personal Balance Sheet Summary
Total assets (things you own)........... 4,800
Total HP & Secured debt................. -0
Total Unsecured debt.................... -459
Net Assets.............................. 4,341

sarahs999

HI Helen,

So there must be something missing here as you should have a surplus of £200 each month. Can I suggest a spending diary to see where you've underestimated?

Also is that right, £280 a MONTH on management? that's some expensive agreement you've got there.

At a glance I'd say you could get a better package for TV, phone and internet combined. Are you getting them all separately at the moment?
Also please include your overdraft in the SOA so we can see better how to pay off. AT the moment you seem to only be £459 in the red, which you could easily clear in a couple fo months if you really do have that £200 surplus.

Jesthar

Hi helen, and welcome!

Well, this one is hopefully fairly straightforwards.

Your SoA indicates that you have a surplus of £200 a month, but it sounds like you are strugging to find this. That either means you must be missing some things of your Soa, or you are spending more than you realise in some areas. I suggest you start keeping a spending diary to see where the extra pennies are slipping away, and to make sure you haven't missed anything - put literally everything you spend into it. I have one, even though I don't have debts, and it's great for stopping all those little spends which add up!

A good start would be to go through all your bank statements for the last few months month by month to get a really accurate picture of your recent spending.

You also have some savings, so if you can access these you would be well advised to use some of them to clear your credit card, as there is no way your savings will be earning you as much interest as the card will be costing you!

Other than that, you can knock £50 off your groceries with ease (I spend around £80 a month on both me AND my cat ), and you should use what you have budgeted for your emergency fund to help clear your debts, as right now they ARE your emergecy!

You also need to budget something for Car Tax and Car maintenance, and also buildings insurance unless this is included in your lease?

Anyway, this isn't as bad as you think it is, and if you can find the surplus money your SoA says you have, plus make a few cutbats and keep an eye on your spending, you should be able to clear this fairly easily as you have caught it so soon.

~Jes

helen_melon_2

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1569
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1569

Monthly Expense Details
Mortgage................................ 459
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 280
Council tax............................. 83
Electricity............................. 36
Gas..................................... 0
Oil..................................... 0
Water rates............................. 16
Telephone (land line)................... 15
Mobile phone............................ 40
TV Licence.............................. 12
Satellite/Cable TV...................... 33
Internet Services....................... 15
Groceries etc. ......................... 150
Clothing................................ 0
Petrol/diesel........................... 100
Road tax................................ 0
Car Insurance........................... 29
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 13
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 12
Holiday................................. 0
Emergency fund.......................... 115
Total monthly expenses.................. 1408


Assets
Cash.................................... 800
House value (Gross)..................... 0
Shares and bonds........................ 4000
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 4800


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(459)......0
Total secured & HP debts...... 0.........-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
credit card....................459.......11........0
Overdraft......................2000......0.........0
Total unsecured debts..........2459......11........-


Monthly Budget Summary
Total monthly income.................... 1,569
Expenses (including HP & secured debts). 1,408
Available for debt repayments........... 161
Monthly UNsecured debt repayments....... 11
Amount left after debt repayments....... 150

Personal Balance Sheet Summary
Total assets (things you own)........... 4,800
Total HP & Secured debt................. -0
Total Unsecured debt.................... -2,459
Net Assets.............................. 2,341

I missed off one payment into a my emergency fund.
I've been trying to pay off about £150 per month of the credit card.
I have a shared ownership flat so the £280 is rent and service charge combined (but is still stupidly high!)

Jesthar

helen_melon wrote: »

I missed off one payment into a my emergency fund.
I've been trying to pay off about £150 per month of the credit card.
I have a shared ownership flat so the £280 is rent and service charge combined (but is still stupidly high!)

Ah, that makes sense.

Regarding your emergency fund, what exactly is this for? £115 is a big emergency fund to be setting aside every month when it could be going off your debts?

~Jes

helen_melon_2

£65 is for general emergencies (My car goes wrong regularly)
and £50 is into a savings account for bigger emergencies

Jesthar

helen_melon wrote: »

£65 is for general emergencies (My car goes wrong regularly)
and £50 is into a savings account for bigger emergencies

OK, the car I can understand - do you put this into a savings account or let it sit in your bank account, though? If you let it sit in your bank account, that would be an extra £65 a month off your overdraft if you didn't need to spend it.

However, you already have £800 saved up for 'general emergencies', which is enough to cover an awful lot of things, so it would be better to either clear your credit card using those savings, or at least divert £50 from your emergency fund to overpaying it so you can clear it faster. And besides, right now your debts ARE your emergencies!

Personally I'd say use the savings to pay it off, as once the card is clear then the credit limit amount on that would then be available to use for emergencies anyway (which is the sensible way to use cards anyway), and clearing it means you wouldn't be paying interest on the balance either!

~Jes