What should we pay off first?

Alabama

Hi everyone

I have started a diary on the diary page too but on the advise of happytobedebtfree am posting my SOA here too. We really need advise on what we should pay off first. We had planned to pay off out overdraft first as this has the highest APR (only just realised this as part of sorting out the finances!). Also thought this would be beneficial since the credit card's 0% runs out in July so we will need to move the money on this to the overdraft. We do have another credit card with a high limit so hopefully can get another 0% with them but its the fees that mean it seems to get worse all the time.

Anyway any advise would be much appreciated. NB the amount left over each month is only this figure starting this month as we have come off the fixed rate of our mortgage.

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1486
Partners monthly income after tax....... 1761
Benefits................................ 132.80
Total monthly income.................... 3379.80

Monthly Expense Details
Mortgage................................ 489 (2.50% APR)
Council tax............................. 141
Electricity............................. 42
Gas..................................... 90
Water rates............................. 47.4
Telephone (land line) & Broadband................... 40
Mobile phone............................ 40
TV Licence.............................. 10.14
Satellite/Cable TV...................... 37
Groceries etc. ......................... 400
Petrol/diesel........................... 200
Other child related expenses............ 250
Pet insurance................. 15.64
Home insurance..................... 48.61
Life assurance ......................... 21.83
Total monthly expenses.................. 1872.62


Unsecured Debts
Description...............................Debt…….. ...Monthly...APR
Abbey Credit Card...................15000...........25…........ ..0 (limit £16000)
Overdraft...................................8000.. ...........0.............19.42 (limit £11320)
A& L Loan 1…………………12598.50….299.75…..7.6 (3years 6 months left)
A&L Loan 2…………………..5058.17......123.37….7.6 (3 years 6 months left)
Total unsecured debts..............40656.67...............448.12

Monthly Budget Summary
Total monthly income.................... 3,379.8
Expenses (including HP & secured debts). 1,872.62
Available for debt repayments........... 1,557.18
Monthly UNsecured debt repayments....... 448.12
Amount left after debt repayments....... 1,034.06

Tixy

Hi

It would indeed seem to make sense to pay off the overdraft first as its costing the most. Is the abbey card really only £25 per month minimum? this seems very low?

When your Abbey card stops being interest free is you can transfer to the other card (for 0% or even a low life of balance %) even with fees this is almost certainly worth doing as the APR on the abbey after the 0% will jump up and even your overdraft rate is pretty high.

I know you haven't specifically asked for advice on your outgoings but is there a reason why your gas is so high? do you have arrears on it?

Eric_Pisch

consensus is you pay of the debt with the highest apr first, which apears to be your overdraft

savingmummy

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1486
Partners monthly income after tax....... 1761
Benefits................................ 132.80
Total monthly income.................... 3379.80

Monthly Expense Details
Mortgage................................ 489 (2.50% APR)
Council tax............................. 141
Electricity............................. 42
Gas..................................... 90 this is high have you shopped around for cheaper?
Water rates............................. 47.4 does this include debt?
Telephone (land line) & Broadband................... 40 Mobile phone............................ 40 go payg or cut down if already payg
TV Licence.............................. 10.14
Satellite/Cable TV...................... 37 go freeview or reduce package
Groceries etc. ......................... 400 can this be cut down, drop a brand here and there, stick to a strict list
Petrol/diesel........................... 200 OUCH!!
Other child related expenses............ 250 :eek:what is this??
Pet insurance................. 15.64
Home insurance..................... 48.61
Life assurance ......................... 21.83
Total monthly expenses.................. 1872.62


Unsecured Debts
Description...............................Debt…….. ...Monthly...APR
Abbey Credit Card...................15000...........25…........ ..0 (limit £16000)
Overdraft...................................8000.. ...........0.............19.42 (limit £11320)
A& L Loan 1…………………12598.50….299.75…..7.6 (3years 6 months left)
A&L Loan 2…………………..5058.17......123.37….7.6 (3 years 6 months left)
Total unsecured debts..............40656.67...............448.12

Monthly Budget Summary
Total monthly income.................... 3,379.8
Expenses (including HP & secured debts). 1,872.62
Available for debt repayments........... 1,557.18
Monthly UNsecured debt repayments....... 448.12
Amount left after debt repayments....... 1,034.06[/QUOTE]

Your surplus now is fab!!!!
There are lots of cutting down you can do each month, would help you out a lot!
Good luck x

gonzo127

well the good hting is you are looking at having a very good surplus each month however there is room to cut back if you would like to have more,

first thing to do is the price comparison on your gas and electric and see if you can swop to a better deal when swopping use cashback sites like quidco,

next would be to speak to the council double check you are on the right band, and then see if you can pay over 12 months instead of 10

next one find out when the renewal is for all of your insurances then do the comparisons to make sure you are on the cheapest cover that has the right levels of cover for you, when swoping use cashback sites such as quidco

these above could save you money each month without effecting your life style

the life style changes which could save you money

are such as changing mobile tarrif or going pay as you go, would be at least worth checking out to find out if you currently use all your mins and texts as if not this could save you month

do you really need paid for TV? maybe drop a package or two

groceries - try the drop a brand challenge and meal planning and batch cooking as you could probably save some here as well

anyway as you have been advised currently paying your overdraft off would be the best choice since you have got the highest interest rate on that however do not assume that the abbey credit card will be a higher interest rate as sometime they are actually lower, that being said if you are able to get a 0% interest balance transfer credit card to transfer the debt onto i would reccomend this as it allow you to chip away at the balance and not pay the interest

Alabama

Thanks everyone for your responses. I have never used quidco so will definitely check this out. As regards our Gas bill that is including no debts - I did use uswitch recently and it came out cheaper with npower but I need to do some more investigation. I cannot understand how our gas bill is so high myself. The water rates are also not including any debt they seem to have doubled the bill for some reason for waste water - am not sure how I can challenge this because I would assume this is a standard charge for the area?

Mobile - this is my DH so I will have to get him to check his contract out - think he is tied in because of the phone he chose. will definitely get him to find out when it ends.

TV- sky sports is the killer but DH does not want to get rid of it - will keep working on him! Have looked into Freeview and BT vision but we get hardly any channels in our area (don't even get BBC1/2/ITV or Channel 4!).

Am going to do some meal planning and try to cut down here - I based the SOA on what we spent last month.

I want to be able to pay off at least £1000 over and above our loan payments - am so happy I have started this - finally feel like I am making some progress in understanding where we are getting unstuck!

Alabama

oh in answer to savingmummy other child expenses relates to money paid by DH to his ex for childmaintenance plus the horse riding lessons we pay for every two weeks for step-DD

JimmyTheWig

I'm going to look at this from a different angle...

Yes, you can save a bit by shopping around for gas, etc, but that's not going to make a huge difference.
The thing is, most people who post their SOAs on here are struggling to make any payments on their debt. In which case saving £20 a month on gas makes a big difference.

I would ask the question "Why are you in this state in the first place?". I accept that your mortgage has reduced significantly, but even if that was double what it currently is that still would have given you £500 spare a month. Not only were you spending that but you were spending more than that to build up these debts.
Now, I'm not having a go at you. You've got yourselves into this situation and are getting yourselves out of it again. Good for you.
But I think rather than worry about how to save the pennies, you need to look at the big picture and make sure it doesn't happen again.

JimmyTheWig

But I will answer the given question, too.

Absolutely pay off your overdraft first. No question about that. If you can keep to your plan that should be down to about £3k by the time the 0% deal runs out on your Abbey card.
It is definitely best if you can get another 0% deal to switch it on to. You could then have cleared most of it by the time that deal finishes, which would be great. The fees you pay will be dwarfed by any interest savings, so as long as you can keep up your plan this has got to be the best solution.
[Remember not to build up a debt on the Abbey card again after the transfer!]

However, you have a lot of debt and these are tricky times. If I were you I would plan as though you won't be able to get another 0% deal and so you may end up paying 20% interest on anything you owe. Given that it's going to take you about 2 years to clear these two debts, this means that any money you can throw at them now will be worth 40% more to you in the long run.
I.e. pay off £100 now or pay off £140 in two years time.

Given that that is the case, you may like to look at reducing your outgoings. The grocery bill is the one that you can shave most off.
Also, is your mortgage interest-only or repayment? If it is repayment, it is worth thinking about switching to interest-only for a while and plough the money against your debts. [Make sure this is what happens to the money, otherwise this could be a disaster!] Note, however, that this is converting unsecured debt into secured debt and that mortgage rates will go up at some point in the future.

The other thing that I notice is that you have 2 cars and 2 fairly hefty loans. Are the loans for the cars? If so, that makes at least one of the cars quite expensive. Can you trade down? You can easily buy something reliable for £4k. If you can sell one of your cars for £10k, that's £6k off your debts in one hit. Remember the interest you're paying? That £6k is worth £8400 in the long term!!
Even better if you can do without two cars for a while. This may well not be possible with both of you working, but it's worth doing the sums. You can afford the odd taxi if you're not paying out for tax and insurance.

chivers1977

You have two cars - do you not pay insurance, tax, maintenance MOT on them?

With 3 children I reckon that there must be loads missing out of the SOA...school dinners? holiday clubs? afterschool clubs? going out at the weekend? dentist etc etc

This is where we fell foul - not planning for all of these things and then whacking them on cards! But no more!!

Alabama

Ok thanks for the advice and replies. To answer the queries

- how did we get in this pickle - well we did up a house and sold it at a profit but then bought another and so forth - never quite paying off the debts built up. We also had money on cards before we started this from holidays years ago and seem to have just kept adding to the debt. Two lots of statutory maternity leave also meant we ended up using the cards to cover the excess. The loans are one where we consolidated credit card/other loan debts from the previous houses.

- Yes we do have to pay car maintenance, MOT, insurance and I know I need to add this into the budget at some point. We have paid for the MOts/insurance for the year recently so I know I haven't got to pay for them for a while so even though I probably should put these on my thinking was using the money that I ought to keep each month for debt. Probably not a good idea in the long run.

- with the 3 children - one is covered by maintenance payments, the other 2 are under school age and nursery fees are free for one and the other is paid for with childcare vouchers that come out of my wages - my salary above is shown after this as come out. Weekend trips are not factored in I agree to I need to think about this. I was trying to use my food and fuel bill to cover everything inc this.

Thanks for the advice I will definitely think more on this