Which direction to attack the debt? Advice please :)

earthmother

A few years ago, we were in major debt (over £30,000, plus small mortgage), but we managed to clear it with some serious renegotiations (thanks to the CCCS help pack) and the (unrelated) sale of our house :j


We've kept things under control since then, until the last few months - a couple of store cards taken out with the intention of using the opening discount then paying off, but not, and large unexpected bills going on catalogues and credit cards that should only be for emergencies - that sort of thing.


So, I've just totted up, and we owe just over £9,000 (inc buy now pay later debts due to start within the next 6 months), costing us about £470 a month - which is just over a fifth of our income. I am so annoyed we slipped back into debt :mad:


Anyway - we are not at the stage where we need to arrange special payments, but I do want to clear these debts down again.

So, we have small no-interest debts that will clear in the next 6-12 months anyway, and we have large interest bearing debts that at current payment levels will clear in between 3-6 years.

Which way would you attack it - send extra money to the little ones and get them out of the way, or to the biggies?

msmicawber

Hi Earthmother,

To get the best advice, please post your Statement of Affairs (SOA) - see the following link: http://forums.moneysavingexpert.com/showthread.html?t=107280

Don't forget to include the APRs for loans and credit cards.

Usually, the best way to get straight is both to reduce your other outgoings as much as possible and throw as much money at your highest APR debt then, once that's cleared, the next, and so on.

earthmother

Thanks I think I pretty much answered my own question as I hit post - as you said, hit the high APRs first.

So - the dreaded Capital One Mastercard is the first on my list, lol - told hubby that was a bad one to go for in the first place (highest balance and interest rate of all our debts).


As to a SOA - I do a financial statement about once every 6 months now (habit from the CCCS days) - that's what just showed up the debt.

The basics are; family of 5 living on disability benefits, already minimised all possible bills, about £30 a month guaranteed spare.

But, on the plus side - no defaults, late payments or anything like that in over 3 years (which is probably why the credit's being thrown at us again - but at least this time I caught it whilst it's manageable)


I'll put a proper SOA together

msmicawber

Please do post - I don't doubt you've honed your outgoings down, but some one may just be able to suggest some fine tuning, or ways of making your cash go further.

earthmother

Here we go - per calender month (a bit untidy - cut and paste from excel)

Income

Incapacity Benefit £633.19
D L A - Higher Rate - Care £266.18
Child Allowance £177.02
Invalid Care Allowance £203.45
Child Tax Credit £519.00
Housing Benefit £433.94

D L A - Higher Rate - Mobility - direct to Motability for car
Council Tax Benefit - direct to Council

Total Income (cash in hand) £2,232.77



Expenditure

Rent £600.00
Council Tax (after CTB, paid over 12 months) £29.00
Water £11.23 (expected to increase to approx £20 at next bill/meter reading)
Electric & Gas £125.00

Life Insurance £10.04
Contents Insurance £20.12

Talk Talk B/band Package (BB go live Sept) plus non-geo call allowance £25.00
Tiscali Broadband (will stop in Sept) £14.99
Postage, Stationery, etc £10.00
TV Licence (Cash Entry Scheme) £13.00
Sky (4 packs and 'plus') £28.00

Travel & Transport
Petrol £150.00
Car Maintenance £10.00
Towards Next Motability Vehicle £50.00

Food & Housekeeping:
Nappies for two £79.60
Food & Groceries £400.00
Tobacco £25.00

Ironing Service £10.00
Gardener £71.50 (part of rental agreement)

Footwear £40.00
Other clothing etc £10.00 (School uniform - everything else comes from credit accounts listed below)

Total Expenditure £1,732.48


Balance Available After Essential Expenditure £500.29

Payments on Debts (in order of interest rate)
Cap One MC £105.00
Next £15.00
Brantano/Duet £5.00
Aqua £30.00
cap One Visa £60.00
Kaleidoscope £25.00
Kays £100.00
Empire £75.00
La Redoute £25.00
Classic Combination £15.00 (My mums account, but my debt)

Grolier Thomas £3.99
Grolier Willows £4.75
Grolier Ladybird £2.99
Grolier Seuss £3.49

Total £470.22


Balance after all spending £30.07


We also owe our kids just over £800 as we had to borrow from their accounts earlier this year when the housing benefit was messed up

And, for this one coming term, there will be nursery fees of £9 a week (2 sessions) - middle child qualifies for free placing after Christmas


Shopping and petrol are usually well under budget - but these figures are based on the most expensive months - it is also the area we tend to make our emergency cuts from.

Ironing service is an occasional expenditure, but not a luxury, as I cannot always physically iron due to hand problems - only use it for essentials like uniform.


Think that's everything

msmicawber

I'm better at reducing spending on outgoings than advising on paying back loans etc, so have just added a few ideas to your SOA.

I note you have a lot of payments to book companies - how much longer before these are paid off ... or can you cancel them?

earthmother wrote:

Total Income (cash in hand) £2,232.77

Expenditure

Rent £600.00
Council Tax (after CTB, paid over 12 months) £29.00
Water £11.23 (expected to increase to approx £20 at next bill/meter reading)
Electric & Gas £125.00 These are very high - have you looked at switching supplier? If you sign on to Quidco first, you could get some cashback for switching, too.

Life Insurance £10.04
Contents Insurance £20.12 Try shopping around as you could probably get this cheaper.

Talk Talk B/band Package (BB go live Sept) plus non-geo call allowance £25.00
Tiscali Broadband (will stop in Sept) £14.99
Postage, Stationery, etc £10.00
TV Licence (Cash Entry Scheme) £13.00
Sky (4 packs and 'plus') £28.00 I should get rid of this, if possible, or ring them and see if you can reduce further.

Travel & Transport
Petrol £150.00 This is high. Can you try combining trips a bit more? Check locally for cheapest petrol?
Car Maintenance £10.00
Towards Next Motability Vehicle £50.00

Food & Housekeeping:
Nappies for two £79.60
Food & Groceries £400.00 Eek - this is very high! I note your comments below, however. How many are you feeding for that? Please look at the Moneysaving Old Style board for advice on menu planning, cheap shopping tips, etc.
Tobacco £25.00 What about giving up completely? (Easier said than done, I know, but there are free services via GP surgeries now.)

Ironing Service £10.00
Gardener £71.50 (part of rental agreement)

Footwear £40.00
Other clothing etc £10.00 (School uniform - everything else comes from credit accounts listed below)

msmicawber

I meant to say - I know you probably feel dreadful at having borrowed from the children, but once you have paid back all the debts, you can always set up a standing order to their accounts to repay them. I think they're quite young from the entries about nappies and childcare, so you've got a few years.

tyllwyd

One thing I noticed - you spend £10 per month on postage/stationery? It seems a lot on a tight budget, so I guess there must be a good reason.

You've also got quite a lot going on your Grolier books. I don't suppose you can change that now, but I prefer the Book People (or their sister company Red House books for children) - you can get some excellent books through them and there is no book club to join.

earthmother

Thanks - in answer to your points -

Electric and Gas - with Powergen, and paying off last years winter debt (which should be cleared this month) - however, before this last lot of increases, they still reckoned we were using about £95 combined, so I don't expect it to drop much. Did a comparison last week when Martin did his 'switch' email, but the best saving I can get is £15 per year - hardly worth moving for as it was a '1 month credit in 12' deal, so would actually end up paying more per month.
We run the heating longer/hotter than most as hubby is disabled and the slightest chill causes problems. Also, the house we rent is single glazed and not very well insulated, so quite hard to maintain a temperature.


Contents insurance - again, the cheapest we could get at last renewal (PRU) - has to include hubbys wheelchair etc, and we're in a flood risk area, which bumps premium. Due again in December - always shop around.

Sky - can't cancel yet, but are in process of reducing package again - trouble is, this is hubbys main link to the world, as he can't access the PC or get out and about much

Petrol - always use cheapest petrol - don't do unnecessary trips - but there are necessary out of town journeys every month, and we have a guzzler (Previa), again through necessity

Food & Groceries - I'd probably say £80-£100 of that is specialised toiletries, the rest does get reduced regularly to £40-£50 a week (2 adults, 2 kids and a baby, additive-free diets, so no cheap products)

Tobacco - talk to hubby - it's a form of pain relief as much as anything these days. He usually has it down to less than 20 a week - but a bad week can be almost 40, hence the budget allowing for that.

earthmother

Took me a while to type all that


Once the money is straighter, the Halifax do a very good high interest kids account that I have my eye on to repay the boys - but it's a minimum of £10 a month for a year, which right now we can't commit to. They're 5,3 and 6 months, so as you say, a while yet - but they money all came from relatives for their future, so they will get it back.


Postage and stationery - it varies - one month nothing, another a lot more, as I include printer cartridges, giftwrap and birthday cards and things for school projects in there. It's one of those areas that can be very easily cut, but still needs to be budgeted each month just in case.

Grolier - they were sets that were bought back when most of the other credit didn't exist - there are only a few payments left (less than 6 on three of them). We actually have some very good second hand bookshops in town now, so we use them these days.

msmicawber

Blast!

What are the chances of you getting a 0% interest or low life of balance credit card to transfer the Capital One debt to, so that more of your repayments are actually going towards the debt than the interest?