Help (desperately) Sought with SOA and Shifting Credit

sanctuary

As you'll see, I've been a member here for nearly three years but work + children + stress has meant that I've not yet managed to take the bull by the horns and address my finances.

I have attached my SOA and will be grateful for any advice you may have to offer. But before I do that, some background info may be helpful as the figures don't give the full story.

You will see that income/expenditure/debts/assets are all high. We bought our house at a good time and despite the downturn in the housing market it is worth considerably more than what we paid for it (and we take its maintenance seriously, doing much of it ourselves). We are self-employed, have been for years, and are fortunate to earn a good living. But much of our earnings must go back into our business. Our business accounts are separate from the SOA that I have attached here, and all our business is in good order - no debts, few overheads, low monthly outgoings (accountant, business credit cards that must be paid off monthly) so it is not particularly relevant to the poor picture of our personal finances which - over a period of about 10-15 years - has slowly but steadily spiraled into credit card debt.

We are a family of four. Food bills are high because three of us work from home and eat at home (our eldest child works with us); additionally, our work involves feeding other associates who stay with us on average three nights per month (we save money by not paying their hotel/travel fees as they stay in our house). We don't go to the pub, eat out and I do cook from scratch - I shop primarily at Morrisons and Lidl, and am always looking for ways to reduce my food bills. We have also foregone holidays for the past couple of years and won't be going anywhere this year either as paying off our debts is our priority.

As our SOA shows, we have sufficient funds to pay our debts. The problem is shifting them so I am not paying such high interest and can therefore pay them off quicker. Because of some serious personal problems last year, I was late paying on two of our credit cards on several occasions - not because I couldn't pay, but purely because it slipped my mind. I know there is a mantra here to 'not judge others' - but as I take courage now to sort this out and emerge from the quagmire of denial, it is hard to not be embarrassed as I share with you my stupidity for not at the very least setting up direct debits on all my cards (I have done for two of them) and falling into the debt trap of only paying minimum.

Because of this, I fear my credit rating is weak - and so I am wondering what options I have available to me as I attempt to 'shuffle' my credit and eventually clear my debts.

Any advice on offer will be gratefully received (and I accept there could be a fair deal of 'tough love'). Many thanks.

(Here is my SOA. Before posting this, I have done some spring cleaning and cancelled any direct debits that were clearly unnecessary and I have already saved a considerable amount.)

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 3
Number of children in household......... 1
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 3700
Partners monthly income after tax....... 0
Benefits................................ 80
Other income............................ 0
Total monthly income.................... 3780

Monthly Expense Details
Mortgage................................ 993.1
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 205
Electricity............................. 88
Gas..................................... 0
Oil..................................... 100
Water rates............................. 40.49
Telephone (land line)................... 100
Mobile phone............................ 95
TV Licence.............................. 12.12
Satellite/Cable TV...................... 48.5
Internet Services....................... 20
Groceries etc. ......................... 400
Clothing................................ 5
Petrol/diesel........................... 200
Road tax................................ 30
Car Insurance........................... 82
Car maintenance (including MOT)......... 33
Car parking............................. 0
Other travel............................ 35
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 25.9
Pet insurance/vet bills................. 0
Buildings insurance..................... 99
Contents insurance...................... 30
Life assurance ......................... 30
Other insurance......................... 14
Presents (birthday, christmas etc)...... 35
Haircuts................................ 25
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 25
Total monthly expenses.................. 2771.11


Assets
Cash.................................... 0
House value (Gross)..................... 550000
Shares and bonds........................ 0
Car(s).................................. 20000
Other assets............................ 50000
Total Assets............................ 620000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 105000...(993.1)....6.79
Total secured & HP debts...... 105000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Virgin.........................8700......190.......16.6
Capital One ...................9000......190.......18
HSBC...........................1000......25........19.9
American Express...............700.......25........18.5
Total unsecured debts..........19400.....430.......-


Monthly Budget Summary
Total monthly income.................... 3,780
Expenses (including HP & secured debts). 2,771.11
Available for debt repayments........... 1,008.89
Monthly UNsecured debt repayments....... 430
Amount left after debt repayments....... 578.89

Personal Balance Sheet Summary
Total assets (things you own)........... 620,000
Total HP & Secured debt................. -105,000
Total Unsecured debt.................... -19,400
Net Assets.............................. 495,600

Created using the SOA calculator at
Reproduced on Moneysavingexpert with permission, using other browser.

sarahs999

HI there - obvious one, but do you need two cars, given you work from home?

Also your phone bills are astronomical. Is that business-related? If so they should be paid byu the business and not included in your personal statement.

The oldest child that lives with you, do they pay nothing back in rent? They really should, given that they are working, even though it is with your family business. I presume you're paying them a salary?

Can your husband not apply for some 0% credit cards - what's his rating like? You could then shift some debt to a lower rate to give you breathing space. Have you tried ringing any of them to see if they have any offers/lower rates?

OK. Also: your SOA shows you have £1000 available for debt repayment, but your minimums are only totalling £430. In two months you can easily clear your highest APR (HSBC) if you throw all the spare money at it. And the next month you can just about clear your American express. I guess it just needs some real strictness with your cash, can you do that?

webitha

firstly, congrats on finally getting it sorted

i had a few :eek::eek::eek: how much :eek::eek::eek: on a few things, namely
telephone an mobile costs, if they are used for business, then get the business to pay it iyswim, if not payg.
groceries, i feed a family of 5 on around £250 a month inc cleaning etc get over to the old style board, they are masters nay gods/goddesses of fab cheaper grocery bills :D.
insurance car/ building/contents, if used for business, then get the business to chip in again, if not shop around and haggle, i got my motorbike insurance by haggling down to £57 a year and my home insurance down to £18 for both.

the main one you need to concentrate on is the HSBC as it has the highest APR, also and i cannot say this loud enough you need to keep a spending diary, i used one for the first time last year, and wow what an eye opener, write down everything in it and i mean everything, inc the chewing gum/choccy bar/newspaper etc

good luck with some tweaking you will see those pesky debt come down

DisgruntledGoat

Hi Sanctuary, that looks a good thorough SOA. The card debt is large, but under half your annual income so looks to me as if you should be able to grit your teeth and deal with it. I agree with the other posts, particularly:

Telephone (land line)................... 100
Mobile phone............................ 95

These look very large - you say that business expenses are separate, but I'm guessing that it includes business use too? Otherwise you should be able to cut back hard here. Look for free calls packages and PAYG

A few more things:

Satellite/Cable TV...................... 48.5

That's high too - full Sky package? Can you move to the minimum package for what you actually watch, or move to Freeview? Have a think about whether it's giving value for almost £600 a year!

Presents (birthday, christmas etc)...... 35

Give cards (home-made!) instead of presents for a year? If necessary buy small things for children, tell adults that you need to invest in the business if you don't want to say you're dealing with debt.

Buildings insurance..................... 99

Looks quite high, I shopped around and after Quidco got annual buildings & contents for under £200 for a band-E council tax property.

Finally, have you kept a spending diary - your SOA suggests that you should have a lot of free cash to throw at the cards, if you're finding it a struggle then maybe there are other things you're spending cash on that aren't yet showing up in the SOA. And think about how you ran up the debt - have you cut out what you were buying?

talana

Rather than focusing on shifting the debts, I'd focus very simply on throwing all your available surplus at them. £578 surplus after min payments are accounted for will allow you to clear HSBC and American Express completely in 3 months or so.
Make a few savings on your expenses (some suggested above), and that £578 surplus will rise significantly. The changes you make don't really have to be that drastic even.

Once you've cleared those two, you can contact them and ask what rates they'll offer you on balance transfers.

DisgruntledGoat

A couple more thoughts:

Life assurance ......................... 30

Is this just to cover the mortgage? If so, it's quite high for the outstanding sum (i'm assuming you're non-smokers, which i'm guessing from the SOA), you can probably save a bit here.

Car(s).................................. 20000

If you could downsize to one car then that's a lump sum that could be thrown at the debt, and your outgoings would reduce, but...

Other assets............................ 50000

what's this?

kataklysm

I second that on the phone bills, that would cover my monthly repayments in one . And I'm certain there's lots that can be done to reduce the grocery bills, such as planning meals ahead, price comparison sites, cheaper supermarkets etc.

If you're really committed to slicing your debts, the quickest way might be to trade the cars in... painful I know, but you could potentially make a quick 10k out of that, and halve your debt in one go. Who knows, they might even be cheaper to run.

There are definitely reductions that can be made elsewhere, such as house insurance, TV, and I wonder how many of those expenses can be incorporated into business expenses, eg petrol.

The APR on those cards is truly shocking though. Even if you can't get a 0% deal, you can certainly look into low life of balance cards, credit repair cards or even a loan at 8% would be much, much less than you're currently paying. And if you really can't switch, every penny you have should be ploughed into the repayments until your credit rating is better.. that £578 can be put to good use.

And if you haven't already, create a budgeting spreadsheet so you can keep track of all your regular outgoings and other spending, build some projections for when you are likely to be debt free, and you'll see what a difference those little cut backs will make.

Good luck with your quest, you're well on the way to being debt free soon. :beer:

danthemoneysavingman

To echo what others have said, can't quite believe the size of you phone bills! Home phone: suggest you dont call mobiles from it - use free minutes on mobile instead.
Buildings insurance - very high - shop around. £1200 a year? seriously, I have a large house and got insurance B&C) for <£350 this year.
Electricity - what? Do you leave everything on all the time? That truly is astronomical. Try switching utility company maybe?

Cr card debt - I advised a friend to ask their current mortgage company if they could get this shifted there on SVR. This worked and they now pay 4.99% on all their cr card debt, with an aim to putting this on the mortgage at renewal time. You can choose any term you like though, so talk to them about this possibility.

Well done for trying to address this!

HTH

DisgruntledGoat

Cr card debt - I advised a friend to ask their current mortgage company if they could get this shifted there on SVR. This worked and they now pay 4.99% on all their cr card debt, with an aim to putting this on the mortgage at renewal time. You can choose any term you like though, so talk to them about this possibility.

This is a good suggestion, as even if your credit rating is dented the mortgage company may well extend your loan - there's a lot of equity, the loan is secured and they know your payment history. However, i'd only do it if you're confident that you're not going to run the card debt back up again, consolidation loans often go wrong this way. So i'd look to really understand where all the money is going at the moment before looking down this route.

sanctuary

I can't thank you all enough. I was very embarrassed to post my SOA for many reasons but the non-judgmental and constructive advice has been so valuable and is helping me feel much better about taking control over matters.

Yes, the phone bills have been a red flag to me too. I am going to address the landline today.

I started keeping a spending diary on 1 January. It's been less than a week and I started the New Year with the intention of being particularly careful, so it hasn't yet exposed any overspending disasters ... but it's early days yet!

Two potentially interesting possibilities have been suggested regarding the credit cards: (1) apply in my husband's name, and (2) shift it to my mortgage company on SVR. Both seem like real possibilities.

The credit card debts have built up over a period of, say, ten years. I switched them to 0% a couple of years ago when it was easier to do so (and I hadn't yet tarnished my credit rating with late payments) but even though I haven't spent anything on these cards in the last two years, I've only been making the minimum payments so have barely put a dent in repaying them.

Once again, thank you all very much for such useful advice. I really am grateful.

sanctuary

danthemoneysavingman wrote: »

Electricity - what? Do you leave everything on all the time? That truly is astronomical. Try switching utility company maybe?

At the end of each year, we get a 'refund' from our electricity supplier - at the end of 2009, the amount refunded was just over £250. It wasn't until you questioned it, danthemoneysavingman, that I wondered why my electricity provider has not adjusted my monthly DD rather than refund at the end of each year because NO!!! we most certainly don't leave everything on all the time (I am a stickler for never keeping anything on standby, closing lights when we leave a room and using energy-saving bulbs).

So - thank you for questioning it. After I have addressed my landline, the electricity company is next on my list. Then my buildings insurance! I will shop around for better deals on all of these.

Trading in one of our cars is not a possibility given the nature and needs of our business, but downsizing one of them is certainly a possibility.

While I am determined to spend less/earn more, my priority at this stage remains dealing with those CC debts. I have taken note of all the advice that has thus far been offered here and hopefully I can turn this around soon. Accruing more debt is not a fear - I haven't put anything on these cards in two years and have no intention of every doing so again! - I just want to stop paying crazy interest so these debts will start to go away.

Once again, many thanks for all the extremely valuable suggestions.