Confused about the best way to clear our debt

Pernicious

Hey everyone, sorry if this is long!

Bit of background info - myself & my fiance bought our first house about 4 months ago. We went into it knowing we wouldn't have a whole lot left over each month but couldn't resist stretching ourselves to our max since we got a MUCH nicer house then what we would have got at a more comfortable £10k less.

So far we are keeping up with all the regular essential outgoings, but what we are struggling with is paying back the credit card (currently still on 0% for our purchases) & my overdraft.

My overdraft is currently about £2k...& the credit card is about £2800 now as we have only been paying back the minimum fee each month.

I know this is not as terrible as some people's debts so I apologise if this seems trivial to anyone but this is the worst amount of debt I have ever been in & am really starting to worry about how we will pay this back without racking up more debt/affecting our credit score.

I have tried doing a lot of the things this website suggests (changing energy suppliers, cut down on my spending a lot etc) but there just never seems to be enough money left over to pay more then the minimum credit card payment, & with xmas coming I can only imagine it getting worse.

My partner has been doing lots of overtime (not an option where I work) but there's always some sort of "unexpected" bill that swallows up the extra he's earnt. The latest was the overpaid housing benefit he told me he had paid back (turns out the direct debit never came out for months...). I have talked to him about this & he has agreed to regularly check these things from now on & that should be the last of it, but from his track record I do worry something else will randomly come up that takes priority & we're still stuck not being able to pay these debts off.

I'd like to point out most of my overdraft has gone on our first mortgage payment as he didn't have the money to cover it, & essentials for the house so it's not as if I'm asking him to cover my personal debts...We do still go out 2-3 times a month to the pub or something else that requires spending a bit (again, we have cut down on this) but we could cut back more, but I'd really like to maintain some kind of social life considering it's difficult to get friends over for a night in (something I had assumed wouldn't be an issue when we first bought the place).

Can anyone give me any advice on how best to solve this?

Perni x

RAS

Hi

I would suggest a joint Statement of Affairs http://www.makesenseofcards.com/soacalc.html with all the information. Do this together so that your partner can add the little things he has forgotten and get him on board. get your statments for everything for the last 6 months and go through them with a fine toothcomb, both of you.

You then both need to sit down once a month and go through the finances together. Anything not agreed at that meetign does not get spent.

As part of that you need to start doing the basic budgetting, which means that you know that Christmas is an annual event and it comes at pretty much the same time of year, so you make an allowance for it and then divide this by 12 and put that money into a separate account. That way there are fewer things that randomly come up.

Primrose

I can understand your desire to stretch yourself financially to get a better house but the reality seems to be that perhaps you hadn't quite realised all the overheads that this would involve or the possible lifestyle changes it might need to trigger. Firstly, forget Christmas spending and tell your family and friends that this year you're having to cut out all presents this year. I know it seems drastic but you're currently not paying back a penny of your credit card or overdraft debt, and the money you spend on Christmas could make a difference. You need to start addressing this issue now, rather than waiting until after Christmas when your debts could be even higher.
I'd also suggest a moratorium on nights out at the pub or eating out until the end of the year. Cook at home, bring in a few cans and invite your friends in. It simply isn't always possible to continue the same lifestyle when you have a mortgage and my guess is that your nights out at the pub are costing more than you realise, which could go towards paying off your credit cards.
Sit down together, work out your budget and both start a spending diary where every item of expenditure is listed. Seeing things in black & white will help you understand what you're spending money on and which things could be shaved back a little. Also, are you spending too much on housekeeping by buying in ready-processed meals rather than cooking from scratch?

Percy1983

As mentioned get an SOA up so we can have a look.

On a wider thought you may have overstreched too far with your mortgage, interest rates can only go up from here and likewise you mortgage payments will probably go up.

beanielou

JUst wanted to say hi & well done on realising that you need to deal with things before they get worse.
Is there any way you could increase your income even if just in the short term?
Keep posting!

Verbatim

As you have a house and I guess no children yet (?) have you got a spare room? If so take a lodger or two if you have 2 spare rooms. It needn't be for ever but make sure the rent goes off the ccs. If you haven't got the furniture you could advertize on freecycle for what you'd need. You need to offer something first I think but that could be empty jam jars (for jam making) or anything you no longer use. You'd get the stuff you need to rent a room without putting anything on the ccs. Again it needn't be for ever and once the cards have been paid you could save the rent for a holiday or stuff for the house. Or enjoy being lodger free again. You can advertize on gumtree for lodgers free of charge. Have a look to see what rents are being asked so you know what to charge. Or if you live inor near a big town or city you might be able to get a Mon to Thurs lodger who works in your city but goes home at weekends. less money but more privacy.

barbiedoll

If you live anywhere near a hospital, the junior doctors are always looking for rooms to rent and as they're always at work, you won't lose too much privacy. Plus they have all been checked for criminal records etc! Otherwise, as other posters have said, you need to work out exactly what you're spending each month and see where you can cut down. Nice house or not, eventually you will have to pay out for some sort of maintenance so you need to start budgeting for these expenses and soon. Houses swallow up a good deal of your income so get real about your current outgoings and make sure that your OH is on board too. It's no good if he's going to "forget" to pay things, take charge of the money if you have to (that's what I've had to do ) I know it seems like you won't have much of a social life for a few years but unfortunately, that's the price you pay for being a grown-up with a big mortgage. Why can't you have friends over more often? We have get-togethers where all our friends bring a dish and drinks, that way, no-one has to spend too much money. We do the "Come dine with me" thing and all slag off each other's cooking!

Well done for realising that you have the beginnings of a problem, it's good to see that you're facing up to this now rather than later. Post up your SOA and let us have a look, we usually manage to save everyone a few quid somewhere! Good luck with your new house and your new life, keep us posted.

Want_to_be_free

Just wanted to say Hi and wanted to point out that renting a room or two could be answer to your problem.Although I understand it is not easy and not for everybody. You need to be very careful who you let into your home. And never ever forget the tax man. ( I am aware many people are doing it without telling the tax man but just in case)

Pernicious

Hi guys, thanks for the quick responses! I tried to post our SOA, but as a "new user" it's saying I'm not allowed.

It wasn't completely accurate though as I'm having a hard time deciding just how much we (mainly me) spend on clothes/entertainment...which in itself says I must be spending too much in those areas!

Primrose I think you're right although I did realise I wouldn't be able to spend as much on myself as I did before I don't think I realised just how much I would have to reign it in, I think the spending diary is a good idea as this will show exactly where all the money I can't really account for has gone.

We used to buy lots of ready made sauces etc but recently we have tried making more meals from scratch as well as buying bigger packs of mince for example & freezing some as it's more cost effective then buying the smaller packs.

Percy as we are first time buyers our rate is pretty high but after our fixed rate ends in 2 years the rate we should get will be much lower, so assuming interest rates rise we assumed we'd end up paying a similar amount to what we are now. But I can't predict the future I can only try to take steps to ensure everything will be ok, perhaps you can guide me here?

Beanie I have signed up for 2 market research companies so I am slowly raking in the pounds there...yet to claim anything as it seems to take ever so long to get the required amount! I have mentioned getting a second job but my OH says not to as for the amount of hours I will put in I will get very little back, & it makes more sense for him to just do the overtime. He got his payslip today & assures me there are no extra bills he should have already paid coming so fingers crossed that'll make a nice dent in our debt & enable us to get just a small something for our family & closest friends at Xmas. I do understand where Primrose was coming from there but I'd feel guilty not getting them just a little something each.

I also use cashback sites wherever possible now (again, yet to see anything in my bank account unfortunately!) & intend to sell a few bits on ebay when the next free listing day comes along. We don't have any children but my OH isn't keen on the idea of a lodger as although we could rent out a room he pointed out some potential problems with that - he often gets up at 5.15am to go to work for 6am, would a lodger be willing to keep the noise down sufficiently for him to get enough sleep? He also worries about the general compatibility with them. The junior doctors lodger idea is definitely something to look into though as we are only about 1-2miles away from the hospital. How can I "screen" as such for just them?

Does anyone have any more tips on boosting our income?

We have what we need now (hence so much debt!) else I would definitely check out Freecycle.

I have invited friends over several times now but the response is generally one of "Hmm maybe..." A lot of my friends still live at home &/or are single & tend to do the same thing every week & although there's nothing wrong with that as such trying to get them to mix it up once in a while is difficult! My closest friends are easy to get round, or go over to theirs, but the others are definitely stuck in the same old routine & I don't really know how to convince them to drop the pub once in a while for a night round mine.

I'm going to make a concerted effort to keep track of all expenditure now, & keep trying to reduce bills where I can (energy supplier should be changed over from next month so hopefully that'll be a nice saving). I am also just going to have to suck it up & spend less on going out & clothes, at least xmas is coming up so when people ask what to get me I'll have plenty of ideas for them! Fingers crossed I can break the bad habits there.

If anyone else has any other tips/advice though I'm listening

struggling-breadwinner

I managed to clear a good few chunks off my overdraft by earmarking travel expenses from work simply for paying off the credit cards. I appreciate not everyone gets travel expenses!
Can you ebay? I know people make a lot of money off that
Minimum payment is "acceptable" and better than no payment at all so try not to beat yourself up too much about it for now. the mortgage is a worry which you will have for 25 years!!!!!

xxx

Percy1983

By all means I can't predict the future, but as a general idea I guess you are fixed around 6% and then you got to the SVR which will be say base + 4% so if things stay how they are then great, but the interest rate can't stay at 0.5% forever so say it jumps to 3% which is still low then you SVR will be 7%, by all means don't worry if you are fixed for 2 years.

I would advise against waiting for a free listing weekend on ebay as many people list at the same time, depending on the items you are selling buy it now might be the better option as you can price slightly higher than the average auction and cash in on peoples impatience.

A spending diary is the way forward, just make you list every penny as you will soon see how pennys make pounds.