Don't know what to do...

daretodream

Hi there
It's taken a lot of courage for me to put a SoA together and I'm pretty sure that there can't be anyone else who is in such a state financially! I've read a lot of the threads here and I am ashamed to admit the level of debt we are in. My partner and I have got to the point where we don't know where to turn and don't know what the best solution is or if there is a solution? Just when we think our heads are above water something always happens... e.g. my partner's self-employment income has dropped dramatically over the last few months and I've been put on short-time working too. Please, if anyone could just offer a few words of wisdom or give us some direction then we might be able to get our lives back on track.

UnderPressure

Hello and welcoe to the forum

OK there will be lots of words of wisdom that people will offfer but first things first we could do with seeing a copy of your SOA, so dont be shy put it up and lets see what the fantastic people here can offer

daretodream

Thanks for the quick reply! Here goes...

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 930
Partners monthly income after tax....... 2600
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 3530
Monthly Expense Details
Mortgage................................ 767
Secured/HP loan repayments.............. 359
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 104
Electricity............................. 49
Gas..................................... 0
Oil..................................... 40
Water rates............................. 28
Telephone (land line)................... 22
Mobile phone............................ 25
TV Licence.............................. 12
Satellite/Cable TV...................... 22
Internet Services....................... 17
Groceries etc. ......................... 250
Clothing................................ 0
Petrol/diesel........................... 800
Road tax................................ 20
Car Insurance........................... 45
Car maintenance (including MOT)......... 25
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 70
Buildings insurance..................... 20
Contents insurance...................... 11.19
Life assurance ......................... 78
Other insurance......................... 0
Presents (birthday, christmas etc)...... 15
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2779.19

Assets
Cash.................................... 0
House value (Gross)..................... 155000
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0
Total Assets............................ 158000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 155000...(767)......6.39
Hire Purchase (HP) debt ...... 10874....(359)......11.9
Total secured & HP debts...... 165874....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Tesco M/card...................6700......135.......16
Capital One M/Card.............6700......199.......12.9
Lloyds TSB M/Card..............1000......25........17.9
NatWest Overdraft..............5000......65........18.4
Very.co.uk.....................173.......2.........39.7
Next Directory.................698.......47........26.49
Tesco Loan.....................25661.....239.8.....8
NatWest Loan...................21603.....480.......7.3
NatWest M/Card.................2450......55........12.2
Total unsecured debts..........69985.....1247.8....-

Monthly Budget Summary
Total monthly income.................... 3,530
Expenses (including HP & secured debts). 2,779.19
Available for debt repayments........... 750.81
Monthly UNsecured debt repayments....... 1,247.8
Amount short for making debt repayments. -496.99
Personal Balance Sheet Summary
Total assets (things you own)........... 158,000
Total HP & Secured debt................. -165,874
Total Unsecured debt.................... -69,985
Net Assets.............................. -77,859

I'm not sure if I've entered the mortgage correctly. My partner and I had to go for 100% mortgage as 1st time buyers and we are paying interest only at the moment. I kind of hope it's entered incorrectly as it might show an improvement in the figures?!?

UnderPressure

Well done :beer:

That must have took some doing figuring all that out and finding out exactly where you stand

OK keep an eye on this thread throughout the day Im sure the knnowledgable here will offer lots of advice with this one

The thing that jumps off the page for me instantly is £800 a month in petrol/diesel crikey that is an awful lot, I take it this has something to do with a business of some kind?

Im not the worlds greatest with these things but as said keep an eye on this there will be others with excellent knwoledge that will make some suggestions.

TUS

Petrol and groceries can be reduced. I'm sure you can reduce your outgoings by 500pm there with some cutbacks.

We need to better understand your circumstances first. Why is petrol SO high? (100 per week EACH).

Groceries you can cut to £100 per month max. I feed a family of 5 on less than you do for 2 people.

dancingfairy

Petrol and diesel seem very high - what's the reason behind that? Basically you need to free up about 500 a month to be able to meet your commitments. Assuming that your petrol figures are correct and you need this to get to work and for your job then I can't see how you are going to cut back by 500 a month.
You need to get in contact with one of the debt charities Martin recommends (National Debtline, CCCS or your local CAB for example) and see what they recommend. You can't carry on like this.
You need to consider things like an IVA or bankruptcy to be honest. The debt charities will go through it all with you and the pros and cons of each option.
You will need to get an account with no overdraft though with a bank you don't owe money to because your bank can withdraw your overdraft at any time and worst they can use money in your current account to pay off their cards/loans and leave you no way of paying your mortgage, buying food etc. You need to pay the important things in order - ie mortgage, council tax, electric, etc - the unsecured debts come at the bottom of the pile and will get what's left.
Good luck with it all and please phone one of the debt charities.
df

theoretica

Have you shopped around recently to try and lower your life and pet insurance costs?

Now you are on short-time is there anything you can do to earn extra? Any way you could help out your OH's business for instance?

otb666

i think as said before you need to speak to one of the debt charities thats recommended on this site-you dont seem to have any assets that you would loose and definiely looks the best way forward for you-obviously have to stay with same mortgage provider fo 11 years-but in theory you would have a clean sheet in 5-go for it you -sending you love and encouragement

daretodream

Hi everyone

Thanks for your comments so far. The petrol/diesel costs are high because my partner runs a driving school business. I've checked the average spend on fuel and it is actually nearer to £500 not £800 per month-thank God! I have to commute for work too which does add to this total. I've started to look around for a new job as I'm unsure for how long I'll be on short-time for and I'd like to get something nearer to home so I can walk/ride a bike to save further. In the meantime, I have been rummaging through the house and garage and have been car booting (weather permitting!) to make some extra cash in my free time-£150 so far and I've got more stuff to get rid of to keep me going!
I'll definitely work on the life assurance quote and the £70 pet cost relates to my eldest dog's heart medication which wasn't covered by his insurance. I cancelled the pet insurance and now plough that money towards the medication.
I really feel that we've learnt a lesson too late and I that we are just going through 'damage limitation' now. We have seriously considered a DMP or IVA but very scared as we don't know much about them and we don't want us to lose our house.
I'll ring the debt advice charities as suggested and go through the options and see where we stand realistically.
Thanks again for the advice so far and I'll let you know how we get on and it's reassuring to know we can speak to people here who have experienced something similar and not be judged. We've admitted to a few family members that we are struggling financially but they don't know the half of it!

mostlycheerful

Hello, here’s some ideas, I hope they’re of use and worth considering :

(1) Mortgage
The first thing that comes to mind is have you attempted to get a cheaper mortgage rate as 6.39% £767 is quite high seeing as most people are now currently on 5% and 4% and due to credit crunch there are also a lot of lucky people now on only 2% and 1.5%. So if your credit rating is currently ok it might well be worth asking your current provider to give you 4% or 3% and when they probably refuse then tout yourselves about elsewhere. If you could get 2% or 1.5% it would reduce that £767 significantly. Even getting it down to just 5% or 4% would save some money over the years.

(2) Total unsecured debts..........£69985
That’s a lot. What has this been spent on?

(2.1) Investment?
If it’s been spent on doing up your house and or buying shares and gold and investments and or investing in your business then all well and good and therefore is any of it currently saleable/recoupable to put towards the debt? If it’s all tied up in the house and business, well, that’s a logical position to have put yourselves into but is there any way of rejigging it? For instance, have you considered registering yourselves as a limited company and then selling some shares to raise say £50k which you could then spend all or some of on repaying the debts? Or getting someone to invest in you while you trade as a sole trader or partnership?

The kind of people who buy your shares if you do a limited company or invest in you as a sole trader/partnership are people rich enough to have spare money to put into such a venture and if they don’t get it back then they may be able to put it as an expense/loss set against their tax exposure on their tax bill if it is set up in this manner from the off. An accountant familiar with business planning would be able to advise you about how this might work and there’s loads of business info on the net so if you’re interested in this notion then perhaps do some research and learn the terminology then when you’ve decided what you want to do and how you think you want to do it then you’ll be ready to talk coherently to some experts and some potential investors. So people investing in you don’t necessarily have to simply take a punt and risk losing their investment, there are ways of making it a win win situation. The government wants taxation rules to encourage small business, not stifle it.

(2.2) Living Beyond Your Means?
However if the £70k has been spent on high living and living beyond your means and has gone on stuff such as posh cars, jewellery, top restaurants and expensive champagne, expensive flights and hotels and holidays, clothes, new 50 inch plasma tellies and such like then you may feel that you have a spending problem which now needs reining in, now that you’re at your limit and looking at maybe hitting the buffers. So can you now stop spending? From these figures it kind of looks like you have to stop spending, whether you want to or not. Otherwise you may go bust. Then what? Well, then you’re looking at drastic measures like a DMP, IVA or even trying to sell the house or filing for bankruptcy.

Have you got any stuff that could be sold on ebay, amazon, loot, car boot sales etc? If you’ve got piles of expensive tat then perhaps start banging it out and try and claw back a few hundred quid or even some grands if you’ve got loads. And from now only buy the cheapest stuff you can find on ebay, amazon, at markets, at car boot sales and look for the value and reduced food in shops and only buy the cheapest clothes at charity shops, Primark and supermarkets and get stuff for free off freecycle, freegle and the various other free websites. From now on only buy the ultra cheapest stuff that you can find and always look for free stuff. There’s always loads available everywhere if you just look for it, there’s no need to be spending loads of money you can’t afford on high price stuff.

However if the spending is compulsive and habitual and if you actually can’t stop yourself, well, you might then decide that this is a problem in which case perhaps consider getting some kind of counselling, therapy or medical attention or psychiatry which hopefully might help. And have a good think about why you’re spending so much and why you’re compulsive about it. Are you compensating for some unhappiness? Do you equate happiness with spending? Do you automatically always choose high price stuff because you assume that that is the best quality and the only thing worth having and that cheap stuff is inferior and not worth having? If this is the case then can you now consciously decide to stop thinking like that?

Or are you just in the habit of spending and you’ve just simply never really got round to thinking about it till now? A lot of people glide along for years enjoying themselves and not even realising that spending on loans and plastic can come back to haunt you and bite you on the nose. And that if you give yourself enough rope then eventually you do run the risk of hanging yourself. It’s easily done, loads of people do it all the time in UK which has a spend now pay tomorrow mentality, a live on the never never culture. This is specifically a legal/cultural problem in lax countries such as UK but not in tight countries such as, for instance, France and Dubai – in both of these countries few people bounce cheques or default on their credit cards or loans as the moment you do you can get carted off to prison. So in a sense you can blame your behaviour and current situation on UK attitudes and mores as if you lived in France or Dubai you would likely probably never have even started on the rocky road to overspending and debt damnation.

Or alternatively has the £70k been spent on gambling, a cocaine/heroin addiction or some other kind of acute behaviour? If so then Gamblers Anonymous and or Narcotics Anonymous may be suitable organisations for you to join.

(3) Lodgers
Needs must so perhaps consider moving yourselves into the living room and renting out the bedroom(s). Just one lodger paying £300 a month would be helpful and if you’ve got 2 or 3 bedrooms and if the house is nice and the rooms big then you might be able to charge £350 x 2 = £700 or if 3 rooms then £350 x 3 = £1050 which would be an extra 12 and a half grand over a year, 62 grand over the next 5 years. £62,000 from rents would make a massive difference. This would make a serious contribution towards repaying the debt. Yes, sure, it’s a drag having to share your space with strangers but you soon get to know them and if you choose nice people then some of them can turn into friends and be an addition to your life rather than a chore. And remind yourself that it’s not forever, it’s only for a year or three or five while you batter the debts into submission so one day you’ll be able to afford to have your space to yourself again. Loads of people take lodgers, it’s one of the standard time honoured ways to deal with paying a mortgage, especially when you’re new to buying a house. So definitely consider doing this.

Hope this is of help. Good luck.

daretodream

Hi MostlyCheerful

The spending was definitely a habit and we didn't think about any of it until we got our mortgage just a few years ago. We both went from very highly paid and successful jobs in a city to town living and I think it took a couple of years for us to realise that our 'city' lifestyle could not be continued within our 'town' living - if that makes sense? I know that's not an excuse and I think you hit the nail on the head regarding the compulsion to spend. My partner and I found that we were given so much credit that we didn't know what else to do with it other than to spend it all. Our ultimate pleasure was to buy gifts for family and friends and be generous with the cash whenever we could. The ironic thing is that we don't have a house filled with the latest gadgets or anything else fancy. We often sit down and think 'where has it all gone to' and find we don't have an answer and that's even scarier.

Thanks for the advice regarding the mortgage. I've thought for some time that we are probably not on the best deal but kind of accepted it as we were 100% mortgaged. I'll certainly look into this and we have spoken about a lodger and this is certainly something we are seriously considering.

I've started car booting and I'm still looking through the house as I'm sure there is a lot of stuff (collectibles) that can be put on Ebay etc. I am also trawling the job sites as we speak as I need to be earning a lot more than I am currently. I would happily work more than 1 job if the right opportunity arises and my partner is actively advertising his business and offering deals to throw the competition by the wayside.

Thanks again-your advice is greatly appreciated.

DareToDream