New SOA - £45k debt exc mortgage!

EB69

OK, done the SOA - Jeepers creepers - that's scary! Unsecured debt of £45,000! Dont even want to think about the mortgage debt...

I have used historical figures and as such I can already see that there is plenty of scope for cutting back. The holiday expenditure typically comes from my annual bonus, (or rather the bonus pays down the credit cards so I can load back up with holidays!). That will now need to be revisited. along with many of the other unnecessary expenses.

Anyway. Where do I start? I can already see some areas to trim, but how do I prioritise? And what is a reasonable time frame to hope to be debt free ?

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 3 (adult daughter at uni and boyfriend)
Number of children in household.........
Number of cars owned....................
Monthly Income Details
Monthly income after tax................ 2985
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 2025 amended to include rental income
Total monthly income.................... 5010
Monthly Expense Details
Mortgage................................ 1551
Secured/HP loan repayments.............. 432
Rent.................................... 0
Management charge (leasehold property).. 132
Council tax............................. 179.22
Electricity............................. 69
Gas..................................... 0
Oil..................................... 0
Water rates............................. 15
Telephone (land line)................... 14.75
Mobile phone............................ 60
TV Licence.............................. 11.95
Satellite/Cable TV...................... 36
Internet Services....................... 0
Groceries etc. ......................... 200 - scope to reduce - lots of waste!
Clothing................................ 100 - can reduce
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 75
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 14.21
Life assurance ......................... 108.01 - endowments and policies
Other insurance......................... 30
Presents (birthday, christmas etc)...... 100 - reduce this?
Haircuts................................ 20 - can reduce this by half?
Entertainment........................... 100 - will be tough as out a lot with work but will try
Holiday................................. 150 - this can go for the next year
Emergency fund.......................... 0
cleaner................................. 15 - needed as I work 16 hours a day and away at weekends
Gym..................................... 83 - this can go
Total monthly expenses.................. 3496.14 - aim to get this down to £3,000

Assets
Cash.................................... 0
House value (Gross)..................... 525000 (home, 300k, investment prop £225k)
Shares and bonds........................ 225
Car(s).................................. 0
Other assets............................ 10000
Total Assets............................ 535225

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 290000...(1551).....5.9<
Mortgage (inv prop)............185000...(432)......2.95
Total secured & HP debts...... 475000....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
virgin.........................12000.....110.......0
Egg mastercard.................5600......130.......18.9
personal loan (friend..........26000.....503.......5.8
Overdraft (Abbey)..............400.......0.........0
Overdraft (NW).................0.........0.........0
Overdraft (A&L)................1000......0.........0
Total unsecured debts..........45000.....743.......-

Monthly Budget Summary
Total monthly income.................... 5010
Expenses (including HP & secured debts). 3,496.14
Available for debt repayments........... 1513.86
Monthly UNsecured debt repayments....... 743
Amount available for making debt repayments. 770.86
Personal Balance Sheet Summary
Total assets (things you own)........... 535,225
Total HP & Secured debt................. -475,000
Total Unsecured debt.................... -45,000
Net Assets.............................. 15,225


Stop press - I forgot to add my rental income! there's an additional £900 of income which I had forgotten about as it goes straight into a separate account to pay the mortgage, agents fees etc Therefore I have amended the above figures in red to show the correct figure !!!

JasX

Well looks fairly efficient so far after the cuts you've already indicated, good news there is everything seems managable and you have a surplus to start chisiling away at the debt with.

Couple of observations

1- Most importantly is it accurate? do you have the amount you should have left over at the end of each month (ie £700+ clear after all spending and minimum debt payments?). If not one thing to do is start a spending diary for a month or so and try and work out where else money is 'leaking out'

2-what is the 10,000 other assets? if that ssomething that can be accessed assuming its not delivering 18%pa after tax you'd be saving a good few hundres pounds using it to pay off the £5200 loan immediately. Similar argument for the shares unless you see them growing (in the past i've used nationwide's telephone dealing service, not the cheapest but certainly an easy way to ditch them and pay down some expensive debt).

3-you ask elsewhere about paying off smaller debts first or highest interest ones, if you're talking about the £400 and £1000 ones according to your SOA that'll take 2 months tops so is probably neither here nor there in the bigger picture, do what works best for you.

4-When does the virgin 0% run out? what does it go up to? will need to factor that in for when its comming up.

5-do you pay your council tax over 10 or 12 months, if you can up it to 12 it'll work in your favour.

6-Does the £1900 odd mortgage + HP payments cover both mortgages? are they fixed or variable as if interest rates start to go up that could prove a risk.

7- £60 for a mobile phone is high if its only for one? can you reduce your plan/tariff at all (often you can do this before the end of the tie in period, varies by operator)

8-what are the endowments and other policies? related to the mortgage? are you shopping around at renewal time for the best deal? are you using cashback sites?

9-£69 for an all electric is very good, must be highly efficient there

10-Timeframe for being debt free..... £45,000 is a fair sum and will be a bit of a slog at the best of times.

On the plus side with rental you have a fairly decent income £5000, assuming mortgage payments stay around £2000 theoretical max £3000 debt payments a month would give you 15 months.

Obviously unrealistic to get there as you need to live, pay bills, spend some money to keep you sane working 16 hours a day.

However with moderate trimming and freeing up only £1000 per month for debt payments would leave 45months and would seem a very long slog?

Getting an annual bonus in will shave extra months off that at the rate of 1 per £1000.

Other thoughts to mull over would be any more drastic options there might be to change your circumstances..... is the bf aware of the high level of mortgage payments and is he contributing his fair share to keeping a roof over your heads? any scope to downsize for a few years and rent out your main home? are there any outlets at work for promotion/higher salary/transfer overseas/getting head hunted to another job paying more?

probably some dud and/or too extreme ideas there but if they get you thinking...... and perhaps get you alot closer to the 15 month end of the scale rather than 45 month

JasX

EDIT -saw your other post if your bf/partner doesn't live with you, depending how that pans out if the pair of you end up sharing a place plus bills plus rent/mortgage that'd let you take much bigger chunks out of the debt pile too....

EB69

Wow - extremely grateful for that fantastic reply! As to your questions:

1. I think the sums are pretty accurate. The surplus to date has gone on property maintenance and repair (there was a lot to do on the house) but I've got the the point now where it is more than fine as it is and I need to priorise the debts of more spending.

2. the £10k are endowment policies which have been running for years - to cash them in will give me no more than £10 k now (in fact a little under) but if I keep them for another 5 years they are schedule to bring in almost £100k. They used to be linked to an old mortgage, but not any more.

3. noted - thanks. Think I will clear them as I'll feel better with less debtors!

4. the virgin deal ends in Feb and then reverts to 16.9%. I have diarised to find another deal if I can in January, possibly incorporating whatever might be left on the Egg at the time as well (although hopefully that will be all but gone by then, esp if I get bonus).

5. Didnt know there was an option to pay council over 12 months - i will look into it!

6. the mortgage figures is for both - they are both currently on variable - oops - no they are not - i just found out that one is five year fixed ending in 2012 -but i have today made appt with a financial advisor to see what he suggests about fixing.

7. phone I am stuck with - i use it constantly for work so need high tariff and have only just taken the contract out last month (for 18 months)

8. have had endowments for years and have never looked at them since they were taken. dont use cashback sites - what are they?

9. I'm pretty pleased with the electric - its all storage heaters and economy 7, which is great!

10. the timeframe is depressing, but i think if I just get rid of all the cards and watch the balance go down I will feel so much more motivated and it will make it worthwhile. I think I might promise myself that whatever bonus I get (if any, of course) 75% must go to the debt, 25% to me, on the basis that when I finally get to debt free the next bonus will be spent on something fancy and extravagant before I switch to concentrating efforts on the mortgage. I am on interest free on both at the momnt, so will want to switch to repayment soon as soon as possible.

Me and BF dfont live together, so there are no contributions to the mortgage. I did look at renting the house out but the rental income would not cover the mortgage (not even close) so instead I have just taken a lodger for a few months. Was only supposed to be termporary, but its working well so I will stick with it for now. Dont think there is scope for more money at work - so many of my friends have been made redundant in last few years I am keeping head under the parapet... :-)

Thanks again for the great reply - I am now off to ring the council!

EB

EB69

cohabiting is not on the cards for a few years at least - I am dating the world's biggest commitment phobe - we've only been together 3 years and I reckon it will be nearer 10 before he is ready to think about that!

JasX

EB69 wrote: »

dont use cashback sites - what are they?

I use topcashback.co.uk but there are others, basically whenever i renew insurance / switch energy suppliers / buy something online you 'click through' the cashback site and they pass any commission or referral fees they get back to you.

Tends to be highest for the stuff you get salesmen pestering you for (insurance, moblile phone contracts, utility switches etc) as they make a living from them. eg recently swtiched my utilities to scottish power, grabbed £120. Signed myself up for Sky and got £145 'commission', a fair few online stores for computer bits give me 3-5% of whatever i spend.... not going to turn things around drastically but all helps.

Don't know much about endowments but if you can't cash them in are you obligated to continue putting into them? perhaps its possible leave what you have already invested in to mature but stop further payments and put it towards debt? might be worth checking the small print.

you're fairly fortunate your daughter isn't draining your funds while at uni (think i was quite lucky with my parents there).... they did get me back when i moved back in post uni tho and had to start paying £250pm housekeeping.... proved much cheaper then renting tho and allowed me to save up my first house deposit

Ho hum I'm sure others will be along with other ideas soon too.

oh, one other idea -if you work 16 hours a day and are away all weekend do you really need Sky? could you live with freeview/freesat?

eyeopener2

What about back to basics and selling your investment property?

EB69

Will l;ook into the cashback sites, thanks. I know my BF has mentioned a few times I should look to change suppliers.

I don't watch TV at all but I feel bad getting rid of it because of my daughter and her boyfriend and now of course the lodger. Its not actually that much more to keep it because its on a package with phone and internet too (and work pay that anyway) so I think the TV part costs me about £10 per month. I might run it by them though.

I did check re the endowments and if I dont pay in then I forfeit them - dont quite understand so will ask the IFA to look at them too when he looks at my mortgages next week.

I dont want to sell the investment property at the moment because it is let to a very reliable tenant who pays me £900 (after fees) - mortgage is only £420 or so so its a no brainer. also, due toi property crash there is not enough equity to make it worth selling. Would defo consider selling my home if i could though - its been a money pit since day one, but locked into some rubbish deal with Northern Rock paying way over the odds with a huge penalty clause (£15k) if I move before 2012. I am just hoping that the market will have picked up by then so that I can sell it or rent it out and I can move somewhere nearer to work, saving me a further £4k per annum in travel expenses!

EB69

you know, the more I am looking into this the more i realise I know diddly squat about my finances! how did i not know I was on fixed rate?!

JasX

EB69 wrote: »

I am just hoping that the market will have picked up by then so that I can sell it or rent it out and I can move somewhere nearer to work, saving me a further £4k per annum in travel expenses!

Anything stopping you renting it out now, renting somewhere cheaper closer to work and saving 4k+ pa from the word go?

EB69

I had an agency out a while back and they said the rental income I could receive is a max of £1,200 (and I reckon that is optimistic - its a one of these arty farty conversion buildings which were oh so trendy a little while back, unfortunately when the market crashed loads were repossessed and are on the market for far less than current value, so i would potentially have a shortfall of around 400/500 per month). On top of that I would lose my lodger and would still need a base for my kids - my daughter is at uni in London but commutes from home (she works part time to fund it so could not manage if she had to pay rent as well) and my son is away at uni but still needs a roof for out of term time.

You have given me one wee idea though, and that is to look at how much i would get on a room by room basis and rent it out that way, I could then rent somewhere else for me and my part time kids... i dont know much about renting on those terms, i imagine the rules are quite strict about health and safety, fire doors etc.

I wonder whether I would be hit for tax on the whole thing too? Hmmmm. food for thought though - would love to move!