Help - Debt Mountain - SOA Attached

rhepneil

Hi,

Given the level of income we have this post is difficult to write. I can't believe we have got ourselves into this situation but it's been a grip that'sstarted to throttle us over the past few months.

I had a year out of work in 2006 but then took over running of an existing small business. We'd started to load our credit cards then and had to use up what savings we had left to put money into the business as well as drawing down equity in my house for this (I raised and put in about £65k total). I still earn a very good salary and my wife went back to work last year part-time to try to give us a bit of extra support each month(our kids are 13 and 9) - yet we're in a serious mess!

It's clear from where we are now that we've been living beyond our means and with the recession my £65k investment remains locked up in the business for now with no immediate prospect of releasing this - we've survived the recession as a business for now but it's going to be a slow process getting this original money back out with no guarantees I ever will. Hence I haven't listed this as an asset in my SOA given this uncertainty.

I have attached our SOA below. Note that although we have one car listed that's my wife's (a 9-year old car) as I have a company car but pay private fuel costs. We live in a semi-rurual area with poor public transport so getting rid of my wife's car is a no go. Some of the SOA has been difficult to assemble as on checking through our joint bank statement we have been drawing out over £600 per month in cash between us and some of the monthly spend items I have listed are an assessment of what my wife and I have been using this for added to what's itemised on our bank statement.

I have considered trying to go down the consolidation loan route to clear out the credit card balances but want to avoid that if it all possible as the large AA Loan below was really taken out for that purpose and we made the classic error of not closing down the credit card accounts at that point hence are now being hit hard with the levels of monthly interest.

We need to make some serious changes in how we live as I can see that we have been spending too much on the kids (apart from weekends at cinema etc its football clubs, after school sport, dance classes etc) and also on clothes (mainly my wife and kids) - we are heading for big problems with the credit cards and loans - thus far I've been paying minimums without any defaults but my credit score has just started to plummet given the used vs available % and where we are now isn's sustainable.

I haven't had a recent valuation on my property as house prices have been a bit variable but it was valued as high as £500k before the slump so I have based my valuation on a recent sale nearby for a similar property.

Any help/advice/support very welcome?!!!

Thanks
rhepneil

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 5562
Partners monthly income after tax....... 0
Benefits................................ 149 (child benefit)
Other income............................ 0
Total monthly income.................... 5711

Monthly Expense Details
Mortgage................................ 1564
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 151
Electricity............................. 87
Gas..................................... 70
Oil..................................... 0
Water rates............................. 25
Telephone (land line)................... 35
Mobile phone............................ 47
TV Licence.............................. 12
Satellite/Cable TV...................... 47
Internet Services....................... 0
Groceries etc. ......................... 790
Clothing................................ 471
Petrol/diesel........................... 210
Road tax................................ 12
Car Insurance........................... 34
Car maintenance (including MOT)......... 0
Car parking............................. 5
Other travel............................ 15
Childcare/nursery....................... 0
Other child related expenses............ 434
Medical (prescriptions, dentist etc).... 44
Pet insurance/vet bills................. 0
Buildings insurance..................... 43
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 90
Haircuts................................ 15
Entertainment........................... 410
Holiday................................. 0
Emergency fund.......................... 0
Lunches - School/Work................... 187
Gym Membership.......................... 65
Boiler Service.......................... 23
Total monthly expenses.................. 4886

Assets
Cash.................................... 0
House value (Gross)..................... 425000
Shares and bonds........................ 0
Car(s).................................. 1250
Other assets............................ 0
Total Assets............................ 426250

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 347583...(1564).....3
Total secured & HP debts...... 347583....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Capital One....................7100......205.......26.43
Barclaycard....................10750.....241.......22.9
MBNA...........................11200.....219.......23.46
Santander Loan.................2972......157.......6.9
AA Fin Svcs Loan...............24801.....517.......5.6
Halifax........................5141......91........16.74
Total unsecured debts..........61964.....1430......

Monthly Budget Summary
Total monthly income.................... 5,711
Expenses (including HP & secured debts). 4,886
Available for debt repayments........... 825
Monthly UNsecured debt repayments....... 1,430
Amount short for making debt repayments. -605
Personal Balance Sheet Summary
Total assets (things you own)........... 426,250
Total HP & Secured debt................. -347,583
Total Unsecured debt.................... -61,964
Net Assets.............................. 16,703

Little_Miss_Uni-Debt

Hi,

Well done for posting. Thought I'd drop by and offer support. I guess there are a few ways you could approach this debt. Is your wife's income included in the total at the top?

If you wanted a quick resolution that would be harsh you could always consider downsizing.

If you're in it for the long haul and want to reduce the debts one by one then you need to really cut back on your expenses. Are you making the min payments each month to your debts/have you missed any? Your current SOA says you are falling short. If you make the payments each month then maybe you spend less than you think on certain areas.

Groceries, Clothing, Entertainment are the main areas for concern.

As you are fortunate enough to have an excellent income you can make cut backs and make exceptionally large payments to your cards.

How about you now try and do an 'ideal' SOA where you include only absolute essential to survive payments and things you are contractually obliged to pay and see what your surplus is. I know on here folks suggest even £400 is a luxurious amount to spend on groceries for a family of 4.

Maybe edit those 3 areas to reflect what you want them to be and try your hardest only to spend those amounts. You could make some awesome payments into that Capital One card which when clear would free up £200 per month!

Just a few months of tightening your belts would make a fantastic difference. Once you know what surplus you could gather each month, go onto the snowball calc http://www.whatsthecost.com/snowball.aspx enter in the amount you can spare, your debts, and interest rates. It will tell you the fastest & cheapest order to pay your cards off. It really can get addictive seeing how many months of payments you can knock off by cutting back even an extra £50 per month.

Squeeze what you can out of your SOA - plough in onto your highest rate cards!!! Also - start making/taking lunches to work to shave £180 more :-)

Best of luck! Post back soon with any updates. I'm sure you'll get more advice shortly!

mostlycheerful

Hello, I think that perhaps it’s time to consider making some reductions among the following :

Satellite/Cable TV...................... 47
Groceries etc. ......................... 790
Clothing................................ 471
Other child related expenses............ 434
Presents (birthday, christmas etc)...... 90
Haircuts................................ 15
Entertainment........................... 410
Lunches - School/Work................... 187
Gym Membership.......................... 65

Satellite/Cable TV...................... 47
Consider cancelling this and getting a freeview box and using tvcatchup dot com which live streams 40 channels and has a library of old stuff to watch for free. And if you still want more then search for more on the net.

Groceries etc. ......................... 790
That’s a lot, even for 4 people, so consider buying the cheap “value” brands and getting the reduced stuff which all the big supermarkets offer every day at 6pm 8.30pm and other times weekdays and 4pm Sundays. I regularly get whole roast chickens for £1.50/£2, ready dinners reduced from £3.29 to 69p and 29p, pizzas reduced from £3 to 75p, bread for 25p, fish reduced from £3 to 25p, and all sorts of stuff, always at half or quarter or tenth price, I save about £20-30 a week, £1,000-£1,500 a year, £10-15k over the last 10 years. It soon mounts up and makes a big difference. And the stuff is just as good as the expensive stuff. Cook extra and freeze it for tomorrow and next week. Look at the old style board here for meal planning ideas. You should be able to immediately halve this 790 figure if you set your mind to it and there are other people on this board who could get it down to even 300 or 250.

Clothing................................ 471
That’s a lot to be spending on clothing all the time so by now you probably have a large collection of lots of nice clothes so consider now making do with these for the next year or two. If you really feel the need for more then start using charity shops, ebay and market stalls to find cheap stuff. I normally spend £5 or £8 for shoes and never more than £12. I’m always amazed when people spend £50 or £80 just for a pair of trainers when you can get them for a fiver. That’s why I’ve always got spare cash and several people I know are always broke. Primark have comfortable trousers for £4, supermarkets sell jeans for £3 so there’s no need to spend astronomical amounts of money that you can’t afford when there is always so much fantastic cheap stuff always available everywhere if you just look for it.

Other child related expenses............ 434
How necessary are these? Could some of them be reduced or cut or cheaper alternatives found? For instance, instead of buying dvds, cds and books perhaps start using the local library and charity shops and ebay and getting free downloads.

Presents (birthday, christmas etc)...... 90
That’s quite a lot to spend every month so perhaps instead of buying expensive tat in shops perhaps make some wine or jam or cakes and or artworks and such like, ie something that’s really from the heart and made with your own fair hands which may be considered to be showing more love if it takes you time and effort and more thoughtfulness to do rather than just buying general non descript stuff which doesn’t actually take much time or effort or care.

Haircuts................................ 15
Haircuts require a mirror and a pair of scissors and anyone can do it, it’s only as difficult as cutting your finger nails so have a go at doing it yourself.

Entertainment........................... 410
That’s rather a lot to be spending on self indulgence when you’re massively in debt and hugely overspending and close to doom so perhaps it’s time to slash this to nothing or down to the bone. Learn to enjoy free stuff such as walks in the park, free cinema and theatre tickets which are available from loads of outlets as suggested on this website and loads of others, if in London the Prince Charles cinema does tickets for a quid or so, learn to enjoy free museums and look up all the free stuff available on the net, in this day and age there’s an abundance of free entertainment available if you just look for it. There’s lots of stuff for free on freecycle and various other similar websites. Re dvds, cds, books etc use libraries, ebay and markets, there’s loads of free and extremely cheap stuff available.

Lunches - School/Work................... 187
Slash this, take packed lunches to work and school, you can’t afford to waste money paying for high priced stuff that you can easily slap together yourself at home for a fraction the cost.

Gym Membership.......................... 65
Cancel this, you can’t afford it. If you want exercise then go jogging on the street or in the park or just jog on the spot at home in the living room or back garden, get an exercise bike for free off freecycle or for a tenner at a charity shop.

You’re busy working hard at your business so you haven’t got time or energy to do ebay so get the kids to sell all the masses of tat and clothes that you’ve accumulated on ebay and amazon, you should be able to claw back at least a few hundred quid and maybe even a grand or two depending on how much you’ve got. Then get the kids to sell stuff in general on ebay, just a few hours a week and once you crack it and get some good repeat sellers it’ll make a massive difference to your current precarious situation. This practise will also teach your kids how to make money which will set them up for life.

If you do all the above then in just months or maybe a year you can make a sizable dent in the debts and start to breathe again. The alternative is what? Well, there isn’t really an alternative, is there? Good luck.

Sarsie

A finacial whiz I am not, but running a family on a tiny fraction of what it's currently costing you- well that I have some experience at. I know it's not all the advice you need, but sticking to what I know here I'm gonna pick out what bits of your SOA stood out to me and offer what advice I can with those.


Electricity............................. 87}
Gas..................................... 70} These are high, when I was a wife and mother I had 1 child and a husband in a 3 bed detatched house our gas & electric was about half this, see if your energy supplier does assessments to help you cut your usage and try a price comparisson site to see if you're on the best bill you can be too.

Water rates............................. 25} My water bills are from SWW (killer expensive) so I wouldn't know if this was high or not but I would say check if you'd be better off on a meter anyway for good measure.

Telephone (land line)................... 35} Fair enough for the 4 of you, again though, as a matter of routine check ifyou can switch onto a package that will save you money or to another supplier.

Mobile phone............................ 47} Not dreadful for 2 adults and 2 kids, however with your debt mountain this'll have to be looked at too.

Satellite/Cable TV...................... 47} You can't afford this anymore, so sorry.

Internet Services....................... 0} How come it's 0?

Groceries etc. ......................... 790} Astonishingly high, £200 is entirely possible and £300 affords a fabulous standard of dining. Over on the old style money saving board they are absolute angels at taking the cost of your shopping back to next to nothing. I think you and the wife hanging out reading and replying over there for a bit is a top idea.

Clothing................................ 471} This has got to stop. Check out George at Asda and Matalan, also if you have extended family there is nothing wrong with hand me downs for the kids- or even for you.

Petrol/diesel........................... 210} Again, review this as a matter of course, but when you stop running your kids round to every activity there ever was this'll go down a lot.

Car Insurance........................... 34} On the main site Martin's got a page about bringing this down by methods you hadn't thought of like adding your granny as a named driver. Check it out.

Car maintenance (including MOT)......... 0} You don't pay for MOT's?

Car parking............................. 5} Where are you parking it? Is there on-street parking for free within a mile of that car park?

Other travel............................ 15} What's this?

Other child related expenses............ 434} Jeepers! No, this has to stop. I know as a parent you want them to live full and happy lives but that does not neccessitate a £5200 spend a year. There is a whole book I could write on this one so if you wanted to post what that is actually comprised of in detail I might be able to help with various bits.

Medical (prescriptions, dentist etc).... 44} On no account should anyone go without healthcare to make savings, however even this will have to be reviewed just to check it's all essential, swaping daily contact lenses for cheap glasses etc. Registering with an NHS dentist not a private one. Even prescriptions can come down in cost (yes really), simply tell your Dr you hve serious financial worries and can he prescribe more pills in one go please so that your £7.20 now goes twice as far. Your Dr is only likely to say no for safety reasons or if it's a heavily legally controlled medication, for example Morphine.

Buildings insurance..................... 43} Review as a matter of course.
Contents insurance...................... 0} In with the buildings cover yes?

Presents (birthday, christmas etc)...... 90} Not too bad, but again, got to be reviewed, if you can even get this down by £5 a month so much the better.

Haircuts................................ 15} Review, as for presents. My ex-husband was a soldier- needed a simple £6 buzz-cut every 2 weeks for work. He bought clippers for £25 and I did it, we saved an arm and a leg in the 3 years we were married and I even was able to charge his mates in beer for the same! Was good fun! Also student hairdressers at salons or colleges are another avenue for the girls or anyone with a complex style. Never try to cut hair yourself- found that out when my daughter was little- thankfully no photos survive!

Entertainment........................... 410} On top of the Sky TV and the kids clubs? Got to stop as well, get this back to £40 max, I am sorry.

Lunches - School/Work................... 187} Assuming the kids are in school the usual 6 half terms of 6 weeks each and you work a 6 day week and your wife a 2 day week for 50 weeks a year that is 580 lunches a year. So if I times your £187 by 12 and divide it all up, you're spending £4.56 a lunch. See why that's shocking? Tupperware boxes cost £2 for a good one, you'll be needing 4 then sandwiches and fruit cost pence when brought from home.

Gym Membership.......................... 65} You can't afford it, take up jogging, or even cycling if you have bikes or if at least some of you already do. Even if both parents need to buy bikes (£120 in Halfords, from £40 in the classified ads second hand) you're currently spending £780 a year, your bikes have paid for themselves and saved you £540 in the first year alone. What's more you might get to like cycling and save on car trips/petrol as a result. Jogging only requires trainers- you already own those for the gym.

Boiler Service.......................... 23} Strictly neccesary?

Sarsie

rhepneil wrote: »

Given the level of income we have this post is difficult to write.

Can I also add well done for doing this mate, it's far from an easy thing to lay yourself open to a bunch of strangers taking apart your financial situation and it's most certainly not easy to confess to your debts, I imagine being outwardly well-off to onlookers can not possibly help that either. It was brave of you to do this and sometimes it pays to remind yourself when you've done a good thing. :T

rhepneil

I'm really grateful for the prompt and comprehensive responses thus far - just the beginning for all of this for us and some great ideas.

Little Miss Uni-Debt: really supportive and the idea of an 'ideal' SOA and working to that to allow snowballing on the highest interest card makes lots of sense. Our income total does include my wife and although we haven't actually missed payments I built the SOA from some recent bank statements so I think it's only been beneficial timing of income and outflows on the debts thus far and managing cash around those points that has stopped us falling short.

mostlycheerful and Sarsie: some really good suggestions here and I think your posts are the ones I should sit my wife and kids down with to emphasise the big and small changes we must make. Very salutory to see everything laid bare like this and realise where the obvious extravagances are and what real benchmarks on family spending could be. I probably have missed a couple of things (MOT) but internet is provided through work and insurance is combined contents and building.

I'm very grateful for your support and will keep this updated regularly to show progress....

RAS

Hi is your missus totally on board with the changes you need to make?

Have you added her income into yours or is she not working now?

And well done for hitting this before it hits you. You are going to need major changes here.

I am going to be harsh but given your income a lot more generous on the spends - it is reckoned that you can feed a family reasonabley on £60 per person per month so £360 for 4 is generous (CCCS would allow slightly more - I think it is £387).

rhepneil wrote: »

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 5562
Partners monthly income after tax....... 0
Benefits................................ 149 (child benefit)
Other income............................ 0
Total monthly income.................... 5711

Monthly Expense Details
Mortgage................................ 1564
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 151
Electricity............................. 87 - high have you got energy saving lamps otr masses of downlighters and spots?
Gas..................................... 70
Oil..................................... 0
Water rates............................. 25
Telephone (land line)................... 35 - this is high, learn to carve a bit off
Mobile phone............................ 47 - this is also high given you have a landline. Is this work?
TV Licence.............................. 12
Satellite/Cable TV...................... 47 - get rid
Internet Services....................... 0
Groceries etc. ......................... 790 - sorry but this is ludircrious. You need to halve it.
Clothing................................ 471 - which planet is is someone on?
Petrol/diesel........................... 210
Road tax................................ 12
Car Insurance........................... 34
Car maintenance (including MOT)......... 0 - you need something here
Car parking............................. 5
Other travel............................ 15
Childcare/nursery....................... 0
Other child related expenses............ 434 - the kids will be happier doing less. Let them chill out and ride a bike.
Medical (prescriptions, dentist etc).... 44
Pet insurance/vet bills................. 0
Buildings insurance..................... 43
Contents insurance...................... 0 - you need this
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 90 - halve this
Haircuts................................ 15
Entertainment........................... 410 - pardon? Aim for £100 per month
Holiday................................. 0
Emergency fund.......................... 0
Lunches - School/Work................... 187 - this is very high - please break it down
Gym Membership.......................... 65 - when can you get rid of this?
Boiler Service.......................... 23
Total monthly expenses.................. 4886

Assets
Cash.................................... 0
House value (Gross)..................... 425000
Shares and bonds........................ 0
Car(s).................................. 1250
Other assets............................ 0
Total Assets............................ 426250

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 347583...(1564).....3
Total secured & HP debts...... 347583....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Capital One....................7100......205.......26.43 - this is your priority debt
Barclaycard....................10750.....241.......22.9
MBNA...........................11200.....219.......23.46
Santander Loan.................2972......157.......6.9
AA Fin Svcs Loan...............24801.....517.......5.6
Halifax........................5141......91........16.74
Total unsecured debts..........61964.....1430......

Monthly Budget Summary
Total monthly income.................... 5,711
Expenses (including HP & secured debts). 4,886
Available for debt repayments........... 825
Monthly UNsecured debt repayments....... 1,430
Amount short for making debt repayments. -605
Personal Balance Sheet Summary
Total assets (things you own)........... 426,250
Total HP & Secured debt................. -347,583
Total Unsecured debt.................... -61,964
Net Assets.............................. 16,703

Hi

Any of these card increased their Aprs and you not used them sionce as you can get them to revert to the old APR.

You and OH both need to get spending diaries out and keep them rigourously for a few months to find out what is going where.

You need to have folks to dinner or a barbie every so often rather than going out.

Given the vast sums spent on acquiring stuff, can you OH get all the clothes not longer worn and the toys no longer played with etc etc and start to put them in e-bay, amazon or to a car boot sale. Pay it all of cap1

AnnieG

Hiya
I just wanted to say good luck.... it may feel like the end of the world to be in a financial pickle, but it's really not. So many people here have been in similar situations and have lived to tell the tale, often with renewed, more simplistic views on what makes them happy and what matters in life. There's so much support and advice available here there's no need to feel like you're facing your problems on your own.
I hope it all works out for you, I'll subscribe to your thread and pop in and say hello now and then.