Started paying off debts 2 years ago, but now considering consoldating - need advice!

bwrb30

Hi All,

I am new to the site but am hoping I do this the right way, but if not please be gentle!

I spent most of the 2000's spending more than I earned and as a result accumulated a significant amount of debt on credit cards and loans. I had my lightbulb moment back at the beginning of 2008 when I realised I couldn't keep funding an extravagent lifestyle with CC's and loans. Rather than use a debt company to set up an IVA or similar, I contacted the CAB and found out how to arrange my own reduced payments, which I subsequently did. All my creditors were understanding and I got started with my new more restrained life. Since then I have paid off a couple of credit cards and a loan, but am left with a core debt that seems to have stagnated. my SOA is below:

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 2083
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2083
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 400
Management charge (leasehold property).. 0
Council tax............................. 60
Electricity............................. 20
Gas..................................... 50
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 15
Mobile phone............................ 50
TV Licence.............................. 12
Satellite/Cable TV...................... 45
Internet Services....................... 0
Groceries etc. ......................... 300
Clothing................................ 0
Petrol/diesel........................... 150
Road tax................................ 20
Car Insurance........................... 35
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................. 15
Buildings insurance..................... 0
Contents insurance...................... 15
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 0
Entertainment........................... 400
Holiday................................. 30
Emergency fund.......................... 0
Total monthly expenses.................. 1662

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1500
Other assets............................ 0
Total Assets............................ 1500

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
Halifax CC.....................6300......150.......12
Mint CC........................3500......110.......0
HSBC...........................9800......116.......0
Student Loan...................1000......70........1.5
Total unsecured debts..........20600.....446.......-

Monthly Budget Summary
Total monthly income.................... 2,083
Expenses (including HP & secured debts). 1,662
Available for debt repayments........... 421
Monthly UNsecured debt repayments....... 446
Amount short for making debt repayments. -25
Personal Balance Sheet Summary
Total assets (things you own)........... 1,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -20,600
Net Assets.............................. -19,100

Reproduced on Moneysavingexpert with permission, using IE browser.

From the above it would appear that I have far more money left over each month than I do, so I will start a diary to work out where the mystery cash is going, but that is not really what my question is about.

Here is some more background info:
My HSBC loan is a managed loan which means it is interest free and has small payments, but they will not do anything else for me while I have it.
My Mint CC is on an agreement until Feb that I pay a reduced amount and they have frozen interest and charges.
My Halifax CC is on an agreed reduced payment of £150, but they still charge 1% interest each month, which means I end up paying off less.

Right, finally to my questions (thanks for sticking with me)!

1. Should I try and consolidate my debts into 1 £20k loan? It would allow me to simplify things and stop having to call my CC providers every 6 months to re-negotiate the agreement for reduced payments, but I would have to pay interest on the bits that I currently don't?

2. I got married last year, but because of my financial situation, (my wife is debt free and owns her own house although we live together in rented accomodation) we have kept our finaces completely seperate, (I don't think she should have to contribute towards paying off my mistakes)! Because we are married, is she liable for my debts in anyway?

3. I am desperate to make a career change, but can't because I can not afford the reduction in salary that this would entail. Should I just put up and shut up, or should I look towards some other way of reducing my debt payments?

4. Finally, how do you stay positive about paying off your debts, when people all around you are going Bankrupt and walking away from their debt, only to emerge a year later with seemingly no ill effects? :mad:

Sorry for the massive first post - I needed a rant!

podperson

I wouldn't suggest consolidation, especially if it is putting you on a higher rate of interest then you are at the moment. Also if you are making reduced payments to your creditors I would assume that your credit rating is going to be shot at the moment so your chances of getting a 20k loan would be fairly low and any that were offered would be at awful interest rates.
Another option would be trying to cut down on your outgoings which would leave more for the debts - groceries, mobile phone and entertainment stick out as extremely high at the moment. Also you say your wife is currently living with you, does she work? And if so is she not contributing to the bills? If you keep all your finances completely separate, ie no joint accounts, bills etc then your credit shouldn't affect her.

Tixy

Hi and welcome

bwrb30 wrote: »

1. Should I try and consolidate my debts into 1 £20k loan? It would allow me to simplify things and stop having to call my CC providers every 6 months to re-negotiate the agreement for reduced payments, but I would have to pay interest on the bits that I currently don't?
I would advise no, because as you say it will cost you more in terms of paying interest. I would also suggest that its highly unlikely that you would get a £20k loan. One because I expect that you may well have defaults on your credit file due to paying reduced payments, or at least arrangement to pay/arrears markers and two due to affordability. You are earning about £34k or so? and you already have debt of £20k, even though you want the extra debt to consolidate a lender cannot force you to do that so would consider your new application as additional credit, and would therefore say you cannot afford repayments on £40k credit on your income.

2. I got married last year, but because of my financial situation, (my wife is debt free and owns her own house although we live together in rented accomodation) we have kept our finaces completely seperate, (I don't think she should have to contribute towards paying off my mistakes)! Because we are married, is she liable for my debts in anyway?
No, she would never be liable for debts in your sole name (even if you had joint accounts she would not be liable, but you are right not to have joint accounts to keep your credit rating from affecting hers)

3. I am desperate to make a career change, but can't because I can not afford the reduction in salary that this would entail. Should I just put up and shut up, or should I look towards some other way of reducing my debt payments?
Hmmm, that would have to be a personal decision. I guess if you did earn less then you could still consider a DMP or something, but obviously that will increase the amount of time it takes to clear your debts. Would the salary reduction be permanent or short term whilst you worked your way back up to a similar salary to now?
Maybe work out a debt free date and see if you think you can manage to stick at the current job until then.
Or maybe consider if you could change career and work longer hours (or even get a second job) to get the income similar to what you earn now and ask yourself which would be preferable to you.

4. Finally, how do you stay positive about paying off your debts, when people all around you are going Bankrupt and walking away from their debt, only to emerge a year later with seemingly no ill effects? :mad:
Its really each to their own and everyone's circumstances are differnt. Of course the no ill effects isn't strictly true, their credit file will be marked for the next 6years that they have been bankrupt and will make getting new credit difficult. If asked legally they would have to declare that they had been bankrupt in the past for the rest of their lives. Plus many people who go bankrupt have to pay towards their bankruptcy debts for the next 3years on a income payment order.

Sorry for the massive first post - I needed a rant!

:)Right looking at your SoA figures, are these costs for the household just half of the cost (with your wife contributing the same) or all of the cost?

bwrb30 wrote: »

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 2083
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2083
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 400
Management charge (leasehold property).. 0
Council tax............................. 60
Electricity............................. 20
Gas..................................... 50 if this is half the cost then it looks really high. Do you have any arrears? Have you shopped around to see if you can find a cheaper supplier for gas & elec or better tariff (online tariffs are usually quite a bit cheaper).
Oil..................................... 0
Water rates............................. 0 do you not pay this?
Telephone (land line)................... 15
Mobile phone............................ 50 This looks high, can you reduce your usage, look for a better deal or see if you can drop to a lower tariff if you are in a contract.
TV Licence.............................. 12
Satellite/Cable TV...................... 45 this is quite high with landline on top, look for a combined deal or to reduce to view less channels. Or if sky phone them up and threaten to leave and see if they give you a half price deal for 6months or similar.
Internet Services....................... 0
Groceries etc. ......................... 300 This seems high. Some on here manage on as little as £60 per person for all groceries, but more typical is 80-100 per person. There are lots of tips on reducing this cost on the old style board, such as meal planning before you go shopping, trying the drop a brand challenge, shopping in £shops and bargain shops for cleaning products and toiletries etc. Every bit you can cut back here will bring you debt free date forward.
Clothing................................ 0
Petrol/diesel........................... 150 is this all essential driving? do you drive 'fuel efficently' always fill up at the cheapest place etc?
Road tax................................ 20
Car Insurance........................... 35
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................. 15
Buildings insurance..................... 0
Contents insurance...................... 15
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 0
Entertainment........................... 400 You could easily reduce this significantly if you really want to clear your debts. If you did consider a DMP then you would need to reduce this by probably 75% or so.
Holiday................................. 30
Emergency fund.......................... 0
Total monthly expenses.................. 1662

Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1500
Other assets............................ 0
Total Assets............................ 1500

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
Halifax CC.....................6300......150.......12
Mint CC........................3500......110.......0
HSBC...........................9800......116.......0
Student Loan...................1000......70........1.5
Total unsecured debts..........20600.....446.......-

Monthly Budget Summary
Total monthly income.................... 2,083
Expenses (including HP & secured debts). 1,662
Available for debt repayments........... 421
Monthly UNsecured debt repayments....... 446
Amount short for making debt repayments. -25
Personal Balance Sheet Summary
Total assets (things you own)........... 1,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -20,600
Net Assets.............................. -19,100

Reproduced on Moneysavingexpert with permission, using IE browser.

From the above it would appear that I have far more money left over each month than I do, so I will start a diary to work out where the mystery cash is going, but that is not really what my question is about. It seems to say not that you have left over money but that you have a £25 shortfall

I would look at the spending diary, try to reduce your entertainment and grocery spend and then use the snowball calculator (same site at the SoA) to see how long until your debt free date is, then play around with the figures to see how much sooner you could be debt free if you paid an extra £100 or £200 to your debts each mont, not to mention how much more you would save in interest over the time.

Hope some of these suggestions help.

dancingfairy

Hi - from your post it looks like you could free up several hundred pounds a month realtively easily if you reduce the food bill and the entertainment bill and the mobile bill - have a look at the snowball calculator and see how much difference an extra couple of hundred pounds a month would make.
I think you need a bit of a refocuss and to push on personally and remember how much you want to get rid of this debt.
Good Luck
df

PerfectPeaches

Hi bwrb30

Well done for posting, you've taken the hardest step so far. Tixy has given some great info on your SOA so I won't repeat anything as I agree with it all.

Just wanted to query your pet insurance as you state its £15.00. This can be reduced and you should shop around for a better deal. It may only come down by a few £s but every little helps!

It is hard to stay positive but the way I've done it is apart from knowing I've had my LBM I've found people on here really do help you wanting to be debt free as soon as possible. There are great people with great advice as well as other boards which can give you tips on almost anything.

Peaches

bwrb30

Thaks for the rapid and useful feedback. In answer to your questions:

My wife and I split the bills 50:50, but I do tend to pay for most of our entertaining as she has a lowers salary than me.

Our water rates are currently included in our rent.

Our gas bill is ridculous - we live in a rural area (no mains) and are supplied LPG by Calor. It costs 46.8p per litre and the minimum delivery is 1000 litres, which proves a nightmare to budget for! Unfortunately the house is also old and poorly insulated and in the last 12 months has cost nearly £2k to keep warm/dry. We are hoping to move soon, so this should come down by about 50%! we would have changed earlier, but the tank belongs to calor, so would have involved getting a new tank etc, which was not an option in a rented property. My wife also works from home, so during last winter we had the heating on A LOT!

The food budget is probably high because I guessed as I am not sure exactly what I spend! I think an expenditure diary will make a big difference here.

Entertaining is definitely too high and I am having October away from the pub to see what a difference it makes (I suspect a lot! ) Because my job involves a lot of travel and meetings with clients it is difficult to run my finances with no contingency - I don't have a company credit card and if I have a meeting where I am expected to buy lunch towards the end of the month, it can all get a bit embarrasing if I have to ask for money from petty cash, or come up with excuses not to go to the meeting (also not good for my career and feel that this is probably adding to the stress of my role). I do get the money back in expenses, but not to the middle of the following month, so it proves difficult to budget.

Petrol - my commute to work is costing me £25 per week and again because it is a rural area, the prices at all the forecourts are high (typically over £1.20 per litre). I could probably do with a smaller car, but use the boot on my estate to transport my bicycle or the dog (cycling is one of the few low cost activities I do!).

Overall I know that if I stopped going out and was much more stringent with my eating etc i could be out of debt sooner. I'm just not convinced that I could cope with 5 years of living that lifestyle without going mad or being murdered by my wife for complaining. I feel like an incredible burden on her because I am continuously worrying about money (although try not to whinge as I know it's my own fault). It doesn't seem fair to make her live a dull life because of my previous excesses. It's a difficult line to tread and we have been doing fine, I guess it is just my unhappiness at work that has preciptated a desire to shed my debt and change careers!

Thanks again for your input (except the debt management bloke!)

dancingfairy

Have a look and see what the snowball says. Also you may find that once you clear one of the cards they can offer you a balance transfer deal although it depends on how trashed your credit rating is/was and how well you have maintained payments.
There are other options available to you still like bankruptcy so you could have a chat with one of the debt charities Martin recommends just to see what they advise - although obviously it's only a guide and at the end of the day it's still up to you whether to continue on this path or not.
It's also up to you whether you feel like slowing down the repayments on your debts and changing careers would be best or whether it would be best to hammer the debts a bit more before looking at a career change - only you know which is causing you the most unhappiness.
df

PerfectPeaches

About groceries and the cost, I live with my partner and we spend around £120.00 per month on groceries (it could be less but I'm eating for 2!) and I then take into account the trips for milk and bread which I put at £10.00 a month. I make sure I make meal plans for every week so I know what I need and then make a shopping list. I also shop online which for me makes it less tempting to put additional items in. It took a while getting used to the strictness but I was determined to cut down on what we spent as we seemed to waste so much food.

With entertainment I take it you get expenses from work? If you do make sure you know exactly what you are spending so if and when you put your expenses claim form you have already accounted for this in your monthly budget.

Hope the above helps, no doubt someone can advise more.

Peaches

bwrb30

PerfectPeaches wrote: »

With entertainment I take it you get expenses from work? If you do make sure you know exactly what you are spending so if and when you put your expenses claim form you have already accounted for this in your monthly budget.

Thanks for the tips on the shopping - my wife and I are pretty useless at planning ahead for meals and frequently go to the supermarket hungry, which is a fatal error!

The difficulty with the expenses thing is that this month I have spend £300+ and will not get it back to the middle of October. However the following month it might only be £100. Because it varies so much it is very difficult to keep a suitable amount in reserve. I have recently started going on work trips to Scandinavia, which doesn't help as it is the most expensive place ever!

I think in the long run I need to strike a balance - pay off a bit more on my debts, but allow myself a bit of entertainment to prevent a black hole of depression!

PerfectPeaches

I admit it was hard being strict to start off with when it came to grocery shopping but once you get in a routine it gets easier and you find yourself being quite proud that you've managed to spend less each month and it is by your own self doing.

Expenses is always a hard one and Scandanavia certainly isn't the cheapest place! But even if you just keep a strict, detailed list of all expenses you will at least know what you will have coming back to you and you try and make allowances where you can.

For me, still having some quality of life is important. I don't owe as much debt as some people but to me it is a lot, especially with a baby on the way. My partner and I make sure we have one meal out a week as it is our quality time but we tend to look for offers, such as Prezzo, Pizza Express. A meal seems to taste even better when it doesn't cost as much.

Peaches

isy1011

Even for both of you £400 on entertainment alone is a massive amount. I think you both need to have a chat about ways to entertain yourselves that give you as much fun but dont cost that much! Reading back is this work entertainment then? If so then you need to think if you are earning what you think you are? Maybe a lower paid job would actually cost you less.