Am I mad to want to be a Debt Free Wannabe whilst on income support?

Kay.Samuels

Has anyone done this?

I have just seperated and am now a single mum on income support, I also receive carer's allowance and my son recieves Disability Living Allowance at the moment (probably won't forever though). When I am thinking big and bold I think I could get my finances on track and do some training to find a better job when I do go back into working.

What do you all think?

I have money at the back of my mind as I haven't paid my loan for two months, have a big utlity bill from old house, and have a catalogue bill that was buy now pay october that I have so far paid zero on. :embarasse
I know I need to get my money sorted but don't know where to start!

Nargleblast

Hello Kay. No, you are not mad to want to be a DFW - being on a restricted income means having to be even more careful not to get further into debt. Now is a good time to revamp your finances. Why not do the Statement of Affairs on here? You will find the SOA calculator at the top of the list of threads in this forum, it's a "sticky". Apparently there is a link that you will have to remove before it will allow you to post it, but once you have posted it you will see your situation in black and white and people on here can give you some ideas to be going on with.

Kay.Samuels

Yes although I will be on a limited income, I will be better off in many ways compared to living with ex in a bad relationship, and am hoping (when I am feeling positive), that I can clear my debts and try to make life a little nicer from my son and I. Will have a look at the SOA, not sure if I will understand it but will have a look

Ames

I'm on IS. I've spent a while making token payments, and now I'm on my feet and budgeting better I'm saving up to make full and final settlement offers.

Kay.Samuels

Okay so have done my SOA as best I can, :A found it confusing as receive some benefits weekly, some fortnightly, and some four weekly! Have done my SOA as calendar monthly though to make it clearer.

Statement of affairs: (Done for a Calendar month)
Incomings:
Carer’s allowance £230.10
Income support £176.37
Child tax credits £544.44
Disability living allowance £304.85
Child benefit £86.66
Housing benefit £394.98
Total incomings: £1737.40
Outgoings:
Rent £350
Water £23
TV licence £24
Gas (prepayment meter - estimate as just moved in) £100 current estimate as heating on more than in summer?
Electricity (prepayment meter - estimate as just moved in) £70?
Phone (tied into contract for now) £15
Internet (tied into contract for now) £15
Groceries £30 max
Loan £75
Laptop on credit £25
Clothing for me and son ? suggestions welcome
Travel (bus fares and occasional taxi) £40
Entertainment/luxuries ? suggestions welcome

Debts:
Loan owe final balance of approx £1600 MBNA In arrears of about 200, have had default sums. Interest: 12.9% per annum
Catalogue £250 (arrears of £22) Very APR 39.7%
Laptop on credit £560 HFC (says on last statement “opening annual rate of interest 26.16%”)
Old home insurance £40 AA Installments
Old house utility bills £235 NPower
Black horse £25 left to settle on an account

Also have ‘forgotten’ debts:
Technically owe usborne books £100.
The nursery that I worked at and son used which I left in July, about £40 childcare bill.
______________________________________________________________

I know this won't be 'complete' and I'm sure I will have missed something but any help/advice will be appreciated. Have only just moved and had benefits start coming through so new situation financially so have had to estimatethings like prepayment meters and have left a ? for luxuries, clothing, etc although have never been extravagent with these before anyway (think charity shops, and primark for clothes) I am unsure how much to put. Also I have not listed council tax as my council tax benefit is equal to the council tax bill.

THRIFTY_GIRL

Welcome to the challenge!!

Do you mean £300 per month max for food/groceries? £30 seems a little too frugal

I would say allow youself a maxmum of £50 per month for extra luxuries and clothes if you can afford it? If you don't spend all of this then it will effectively count as emergency savings. When you get this to a reasonable level you could then pay a big chunk off a debt or take a holiday maybe.....

Looking at your income currently, you should be looking to pay off in the following order:

1. Minimum repayments on all debts -calculate the amount
2. Arrears - have you contacted the lenders?
3.Catalogue ASAP
4. Overpay on other loans in order of cost (psy off those with highest interst rates first)

You may only achieve steps 1 and 2 to start with, but that will be the start:T

Kay.Samuels

Hi there, I think I have put in the weekly figure there £30 a week. Duh! :rotfl:I think that will be manageable as was spending approx £50 a week with another adult (who wanted things like steak and bacon and so on), and two older step sons every weekend, whereas now it's just me and son aged 5, plus cat who eats very little.

Am I better off paying minimum payments, trying to pay a little more, I just don't know where to start!

Gordon_the_Moron

1st get all your accounts out of arrears

2nd make 100% certain you pay at least the minimum payment on any debts

3rd make overpayments of as much as you can, after having paid the minimum payment to all debts pay whatever you have left for an overpayment to the debt with the highest interest rate, until you have cleared that debt do not overpay any of the others, when it is cleared work on the next most expensive and so on.

Most loans will only allow you to overpay by a certain amount, if you want to repay it in full you can but will be charged a fee. In the case of the MBNA loan, overpaying may not be worth it.

Memory_Girl

Good Luck Hon

Im sure that it can be done - with a willing head and a bit of planning.

What works for me :-

Well I know the SOA is monthly - but that really didn't work for me when benefits are paid weekly and bi-weekly. Although my "Big SOA" is monthly I actually have a weekly one pinned to the inside of my Kitchen Cupboard that is our "working budget". At the end of the week as long as everything on that list has either been ticked off as paid - or ticked off as transferred into my "bills account" then the left over cash can get stashed in my "emergency pot" - because if you are reliant on benefits you WILL HAVE EMERGENCIES. There will be weeks when they do things and calculate your benefits and the money simply will not be there.

As for chipping away at my debts - I have another sheet (in the other cupboard :rotfl:) with easily achievable targets. I have a 10K debt that I have broken down into £10 chunks and I colour these in as I pay them over. Its a bit like dieting I find - sometimes you have stand in front of your chart and remind yourself how far you've come.

I've also got my DS on board (he's 9) and he's happy to eat "free meals" - from our storecupboard challenge and has just finished changing as many of our light bulbs over to energy saving. I've also got him an electric blanket which means he is cosy in bed and I can snuggle up with a blanket and hottie on the sofa.

Biggest manoney saving tip - Meal Plan, Meal Plan ,Meal Plan. Get yourself over to the OS Style and they will show you how to eat better than you ever have - for less money than you ever thought.

Good luck hon

Memorygirl

Kay.Samuels

Thanks everyone for your replies, it feels very overwhelming so I am glad of the support. :T

I guess I need to start getting things going - Monday morning I will be calling my loan people and asking them to restart my Direct debit, and arrange a plan for my arrears. I guess I am lucky that I will have some money leftover after my budget to whittle away at my debts!

Getting my regular payments restarted will be a first step I suppose, then will just need to figure out what to pay in what order and how much. Catalogue has very high interest rate so that is weighing on my mind.

Does anyone know if NPower would consider a payment plan for me to pay the bill from my old house? Would be more manageable than trying topay £200+ all at once. I think I will give them a call too on Monday.

Kay.Samuels

Hi memory girl think I cross posted with you there. I have had colour in and tick charts in my kitchen cupboards before when dieting so think I will do that! :rotfl:

I have also just written out my budget in weekly format so I can plan my money better and am thinking I could draw cash out on a Wednesday for example, pay bills, do grocery shop, and then cash after that can go on debts. Is this what you do?