always in debt

brokemedic

Hello all,

I have recently tried to embrace the debt-free lifestyle (again) and am just after some advice so that I don't succumb to the temptation of cards again and take two steps back (again!).

My first question is how do you stay on the straight and narrow? I do really well for a couple of months and then go back to my old ways. How can I ensure that I don't return to my old ways?

My next question is that I have a lot of monthly direct debits coming out each month. I have only started paying monthly direct debits recently whereas previously I used to have the money to pay annually. So that I don't fall into the same situation next year, should I pay off my debts first and then start saving or should I put some money aside each month now.. in preparation for my bills next year. I still have a debt of approximately £13,000.

I am desperate to be debt-free.. I am so fed up of being in debt as soon as I get paid and it would be wonderful to not have to use my overdraft.. I can't remember the last time I was in credit. So please be as harsh as you like. If it means that I achieve being debt-free, it will have been worth it.

brokemedic

Tixy

Hi brokemedic and welcome to DFW.

I know how you feel about being good for a couple of months and then letting things slide again. Its tough to keep the motivation going but perhaps now you have joined here you could join in with some of the challenges to keep you motivated. The other thing I would suggest is to not set yourself an unrealistically harsh budget, otherwise when you 'fail' by going over slightly you may be tempted to binge spend (its like dieting really). Allow yourself some small treats that are within your budget.

Have you sat down and written a full financial statement of affairs yet? If not this is a good format to use - http://www.makesenseofcards.com/soacalc.html
This will allow you to work out how much you can afford for little luxuries and how much your debts are costing you.

Regarding your question on monthly/yearly costs that can be a tough one -ideally we recommend that people put aside 1/12 of the annual cost for items that are not paid monthly into an instant savings account, then when your car insurance or road tax is due you have the money set aside in an account, so that you don't spend on credit. The problem with this theory is that if your car insurance is due in 4months and you put aside 1/12 each month, clearly you won't have enough by the time it is due. Still its probably as good a model as its possible to come up with, maybe you need to try and put some extra into the savings account over the first few months.

If you are feeling brave once you have done the statement of affairs (SoA) then if you choose format for MSE you can post it on here and we can offer some practical suggestions on where you can make savings and the best way to tackle your debts (we might also suggest you need to cut down on luxuries but we wont be too harsh!) Most people find it really useful to get other people's opinions.

Good luck and keep posting and reading and you may get as addicted to money saving as the rest of us!!

beanielou

Just wanted to say hi & welcome to MSE
The debt free journey is not always an easy one but hopefully we will all get there in the end.
Pop up a SOA when you get a mo & we can advise you better.

brokemedic

Thank you so much for your responses. It's not as scary as I thought it was going to be.

How do you work out how much to set aside? Is it a percentage of your earnings? Or is based on the types of treats you like??

Mmm.. think that's what got me into this trouble in the first place.. Lol..

I will definitely post my SOA as well for people's comments.

Thank-you.

brokemedic

brokemedic

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................ 1100
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 803
Total monthly income.................... 1903

Monthly Expense Details
Mortgage................................ 685
Secured/HP loan repayments.............. 0
Rent.................................... 287.5
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 25
Gas..................................... 25
Oil..................................... 0
Water rates............................. 15
Telephone (land line)................... 0
Mobile phone............................ 20
TV Licence.............................. 6
Satellite/Cable TV...................... 0
Internet Services....................... 11
Groceries etc. ......................... 150
Clothing................................ 40
Petrol/diesel........................... 60
Road tax................................ 12
Car Insurance........................... 36
Car maintenance (including MOT)......... 20
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..................... 16
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 15
Haircuts................................ 0
Entertainment........................... 40
Holiday................................. 0
Emergency fund.......................... 0
professional subscriptions.............. 18
Total monthly expenses.................. 1481.5

Assets
Cash.................................... 0
House value (Gross)..................... 180000
Shares and bonds........................ 0
Car(s).................................. 2500
Other assets............................ 0
Total Assets............................ 182500

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 118500...(685)......5.15
Total secured & HP debts...... 118500....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Loan...........................3300......138.......0
MBNA...........................1424......25........20
MBNA...........................499.......20........20
Overdraft......................2000......0.........16.9
House of Fraser ...............30........4.........0
Next...........................106.......12........0
Barclaycard....................1500......35........16.9
First Direct...................598.......18........4.9
Sainsburys.....................1210......30........5.9
IF.............................1940......20........4.9
Total unsecured debts..........12607.....302.......-

Monthly Budget Summary[/b]
Total monthly income.................... 1,903
Expenses (including HP & secured debts). 1,481.5
Available for debt repayments........... 421.5
Monthly UNsecured debt repayments....... 302
Amount left after debt repayments....... 119.5

Personal Balance Sheet Summary
Total assets (things you own)........... 182,500
Total HP & Secured debt................. -118,500
Total Unsecured debt.................... -12,607
Net Assets.............................. 51,393



Hi, I have posted my SOA above and would be grateful for any suggestions/comments. I really, really want to get rid of this debt and get out of my overdraft.

The interest rates that are listed as O aren't - it's just that I can't find them on my statement. Is that deliberately done??

Thank-you.

brokemedic

Tixy

Hi

You have a mortgage and rent? Are you in a shared ownership scheme? What is the other income that you get of £803?

If this is not from a lodger would it be feasible for you to get a lodger to help with the housing costs?

Most of your expenditure does not seem excessive. You should be able to cut back on groceries a bit, perhaps aim for £100 to start with, though you should be able to manage on around £80pm. When feeding just one person its a good idea to bulk cook some meals and freeze them, which works out cheaper as you buy in larger quantities and saves the tempatations to reach for expensive ready meals. If you look at the oldstyle board on money saving you will find loads of tips such as meal planning, the drop a brand challenge, bulking out meals with low costs healthy items such as lentils and pulses, shopping at the greengrocers/butches/low cost supermarkets like aldi & lidl. Eating cheaply can still be eating healthily.

You could probably cut down on your clothing budget a little. Do you have items you no longer wear that you could sell on ebay or amazon or car boot? same goes for books, cds, computer games, old mobiles etc. anything you don't use can be used to earn money to reduce your debts.

Is there any opportunity to increase your income at work? by doing overtime or different shifts? are you likely to get a promotion or payrise soon?

Your interest rate should be somewhere on the statements for house of fraser & next (sometimes on the back of the statement or at the bottom of the statement under estimated interest next month). Both these debts will be fairly high rates - sometimes they put in monthly figures instead of APRs, as a rough guide mulitply these by 12, or find a calculator online to convert these. Although you don't know the rates as these are both small balances I would concentrate on clearing these as its motivating to clear a couple of small debts to start - you do need to stop spending on these if you haven't already done so.

Do you know where the surplus money of £119 you are showing has been spent in the past? A spending diary is a really good idea. Have a small notebook you carry with you and write down everything you spend for a couple of months, be it 50p on a bar of chocolate or £50 on new clothes. This may highlight areas you are spending more that you realise (magazines, lottery tickets, and coffees are common areas that people spend a lot on without thinking of it as real spending). If you can identify your weaknesses then you can try to cut back and pay more off your debts. (Some people like to use www.spendingdiary.com - i just stick with my notebook).

If you haven't already done so its worth signing up to one of the cashback sites (quidco, topcashback or similar) then if you need to switch insurance, utilities, or buy many goods online you can earn cashback with each transaction.

You could look at joining online survey or review sites which can earn you either cash or vouchers (not a huge amount admittedly but its still helps). The vouchers can then be used to buy christmas presents for people and that reduces the amount allocated for presents.

I'm sure others will be along with more ideas soon.
Good luck

brokemedic

Thank you for that.

I am a post-grad medical student so opportunities for overtime are ltd during term-time as I am weighed under with study/clinical placements.

I think the money was spent on stuff like medical textbooks/coffees and lunches whilst on placement/magazines that are my weakness especially the weeklies and lots of expensive food from the expensive tesco's on the corner.

I think what really makes me sick and I haven't told anyone this is that I reduced my OD from £4000 to £2000 over a year but then I went and maxed out a barclaycard in the space of a couple of months. I feel both sick and disappointed in myself whenever I think about it. How could I have undone all that good work within a couple of months. I just don't want to do that again..

brokemedic

brokemedic

Sorry I forgot to say - the £803 is for rent that I receive for a house. I used to live in another city and had to move when I got into this medical degree. The rent is for a place I rent with a friend from medical school.

regards,

brokemedic

kissjenn

Hi BM,

I have a slightly different view of your outgoings and hope you don't mind if I share my thoughts.

You've a house elsewhere in the UK with a mortgage of £685 plus upkeep, insurance etc. The rent it brings in is £803 so you probably break even or make a slight loss ASSUMING 100% occupancy. For every month it lies empty your income will drop around £1000 a month as you may have council tax liability, contents liability, repairs, advertising, legal costs, trips to meet tenants etc. If you use a factor you are almost definately in negative territory every month now...you may simply never have noticed this.

My suggestion therefore is to consider selling. Use the equity released in 2 ways, one to pay off all your debts and two to lock up the remaining £50k or so in an account paying semi decent interest where you do not have easy cash-card type access. Keep using this board to keep on a budget but you will have around £300 a month available for treats and extras, saving for annual payments of car tax etc.

As you are studying in a very demanding field, moving around for placements etc my rationale is swap the house for peace of mind and stress reduction now. Have some budgeted money for magazines and so forth and when you finally qualify and get a permanent role then you'll have £50k tucked away for a deposit on a house. In the interim you can enjoy uni and hospital without panicing about debt as well.

Just my thoughts but I hope they're of some use.

KJ

brokemedic

Thank-you.. I am happy for any advice and fresh ideas from here. I think a fresh take on my financial woes is exactly what is needed as I haven't done so well myself, so far.

brokemedic

brokemedic

Can I ask how people get started on the challenges?

Do you have to wait until a certain time or can you just start whenever?