How did we get suckered in?

russppt

Hi All
Just getting off my chest...so thanks for being patient.

Im 38 and self employed with a wife and 3 children, a 3 year old and 5 month old twins. (unexpected suprise)
I have a £166,799 interest only morgage which may have to be extended for building works due to the growing family. (property worth approx £350,000)
Outstanding car loan of £266 per month with 23 months remaining (was interest free!)
I have a loan for a truck I bought for my business £388 per month with 29 payments to go.
£1000 on interest free credit cards.
Fortuantly I can manage these debts and payments but it does have it stresses, especially being self employed. I dream of being debt and morgage free and think back to those care free days...WHAT WERE WE THINKING? :mad:
I feel the need to plan and secure my future. Its easy to sit and do nothing, so here goes.
Its easy to bleet on about so this is my plan of action. which seems to be working.
1. Dont mona abou the car or truck loan, cant chnage it but every month I make a payment, its £654 less I owe.
2. 10% of my business turnover gets put to one side for a raininy day.
3. Opened an cash ISA for both my wife and I. Hope to put in about £100 a month each and continue doing so.
4. Pay £500 of capital a month or every two months off my morgage.
5. £50 per month into the kids accounts each for the next 12 months

How does it sound, and any good advice?
Thanks in advance for listensing and your support...feeling better already!

R

Tixy

Hi Russ

How long are your cards interest free for? I would suggest that you save some money in an easily accessible place to pay off that debt as soon as the interest free period ends.

Also have you investigated whether you can make overpayments on the truck loan? Or instead of overpaying the mortgage how long would it take you to save up the total amount needed to pay off that loan? That said if the truck is a business expense you will be getting tax relief on your interest payments, so wouldn't be as large a saving of interest as if it was personal.

Have you looked into what overpayments are allowed on your mortgage? is £500 per month allowed?

Good luck

DarkConvict

I agree, best way to get out of debt is to pay it off instead of savings.

I would put your rainy day money, money to kids and isa, against the debts with the highest interest rate (usually cards / hire purchase)

russppt

Hi Tixy and DC
Thanks for the advice. I can make overpayments of £500 or more on my mortgage up to 10% PA.
Not sure on overpayments on the truck, I will look into this but as you said this is a tax deductable expense so would put unnecessary strain on my business cash flow, so I might leave that one.
The interest free period end in the next few months I think but intend to pay that off in one hit instead of making the mortgage overpayment for that month or two.

Using the rainy day money for repaying debt, you really think this is a good idea?

Thanks again for your comments.

Russell

DarkConvict

Consider this,

Interest earned on rainy day money is low, like less than 3-4% APR

Interest been lost due to debt is between 10-30%. APR

Its best to pay off debts, and if something does go wrong you can put it back on credit if you have no other choice.

Try using this - http://www.whatsthecost.com/snowball.aspx

sandiep

I'm going to go against the grain a bit - if you're self employed then i would be tempted to keep the ISAs and the savings going, even if it means that you lose a bit in additional interest you are paying on the debt, because one thing that is very certain, the benefits system is only a fraction as generous to the self employed as it is to the employed. There's no dole, and other income benefits can be virtually impossible to access. Having a couple of months worth of bill money tucked away could well be the thing that helps you keep sleeping at night if the business goes through a quiet spell. If the business goes quiet, you have no guarantee that you'll be able to access new debt if need be.

elfen

I'd agree with keeping the ISA and savings going as you're self employed, but there's nothing to stop you paying more off the mortgage if you have good months

DarkConvict

I didn't think about that, that is true they may refuse to give you credit again after paying it off.

DKLS

I'd be thinking of some permanent contraception to ensure there are no more unexpected surprises.

Twinkles08

DKLS wrote: »

I'd be thinking of some permanent contraception to ensure there are no more unexpected surprises.

Well that comment was constructive-not!I think OP was refering to the fact that it was twins not the one baby they were expecting.;)

DKLS

Twinkles08 wrote: »

Well that comment was constructive-not!I think OP was refering to the fact that it was twins not the one baby they were expecting.;)

Purrlease, is additional family members not a consideration in ones finances?, it certainly is in mine I wouldn't want to give up my lifestyle so I could afford a kid or two.