Getting started on the debt free road

Brighid

Hello

A long story - please forgive me, but I think putting it down in writing will help me, and hopefully help you to help me better.

Me and my partner have got ourselves into huge debt, not gradually, but through a choice that may seem foolish to many of you. But, the basic fact is we spent more money than we had, and it will now take a long time to pay back.

About a year ago we put our house on the market as we lived in a very bad neighborhood and desperately needed to move. (Think men with baseball bats turning up for fights down the road at 2am and suspected drug dealers/users) We accepted an offer on the house quickly, and started to look for a new house. We found our dream house, on budget, in a wonderful area and closer to his family. A week before we were moving the sale of our house fell through, and with the property market getting worse and worse we could not see ourselves getting another sale quickly. By this point I was too afraid to be in the old house on my own, and so here's where the debt started.

I am on a good wage so we worked out that we could afford both mortgages, but the problem was the deposit. (supposed to come out of the house sale). We had some small debts before on a credit card, but good credit limits and ratings. My parents offered us half the deposit, and we took a loan for another chunk, and finally took advantage of a 0% credit card offer for a cash transfer.

We have now moved, and are extremely happy in our new home. After a couple of months not selling the old house we managed to rent out the house, which covers the mortgage at the moment (but I'm on a variable rate, interest rates will go up at some point, my credit rating will be rubbish, and its now a landlord mortgage I'll need so this scares me)

I do not regret the decisions we took, but I am struggling to cope now that the 0% has run out. We can afford all our minimum payments so i know many people are in a much worse situation, but with the thought of increasing mortgage rates in the future, and knowing I've shot my credit rating to pieces, I sometimes feel overwhelmed. It doesn't help that yesterday the solicitors sent me a bill after 'reviewing my file' for a further 400 pounds we didn't expect.

I'm desperate to pay off the debts as soon as possible - but I've been turned down for a 0% card this month, so don't want to keep applying and make matters worse. We have cut back our lifestyle massively, cutting out holidays, most entertainment, new clothes, haircuts etc. Its all worth it, as I love our home, and now feel like we're somewhere we can start a family and feel safe - but we can't do that whilst we owe so much money.

I will do a full SOA that I've seen in other posts, but until I do, I'm hoping for a bit of moral support.

Summary of debts:

Old Mortgage - £80,000
New Mortgage - £163,00
Loan - £12,000 (7.9%)
Credit Card 1 - £7,900 (1.5% per month I think need to check)
Credit card 2 - £2,900 (1.5% per month I think)


B

tlc123_2

:T Just to give a bit of moral support really...you're not alone at all. Everyone on here is here because they are/were in debt. It's great that you're ready to do something about it so fingers crossed it's onwards and upwards from here

Brighid

Ok. So I've done an SOA. guessed my APRs a little as haven't got them to hand, but think this is about right. Also - I never have this much left (even though I pay more than minimums on cards, which this doesn't reflect, there is still about 300 I can't account for.....

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.................... 1

Monthly Income Details
Monthly income after tax................ 2508
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 400
Total monthly income.................... 2908

Monthly Expense Details
Mortgage................................ 730
Secured/HP loan repayments.............. 106
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 151.51
Electricity............................. 35
Gas..................................... 19
Oil..................................... 0
Water rates............................. 62
Telephone (land line)................... 16
Mobile phone............................ 20
TV Licence.............................. 13
Satellite/Cable TV...................... 61
Internet Services....................... 0
Groceries etc. ......................... 250
Clothing................................ 0
Petrol/diesel........................... 150
Road tax................................ 20
Car Insurance........................... 35
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 18
Pet insurance/vet bills................. 5
Buildings insurance..................... 30
Contents insurance...................... 11
Life assurance ......................... 50
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0
Entertainment........................... 50
Holiday................................. 0
Emergency fund.......................... 50
Total monthly expenses.................. 1902.51


Assets
Cash.................................... 0
House value (Gross)..................... 300000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 300000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 163000...(730)......0
Secured Debt.................. 80000....(106)......0
Total secured & HP debts...... 243000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
loan...........................12000.....241.......7.9
credit card....................7900......83........18
credit card 2..................2900......91........18
Total unsecured debts..........22800.....415.......-


Monthly Budget Summary
Total monthly income.................... 2,908
Expenses (including HP & secured debts). 1,902.51
Available for debt repayments........... 1,005.49
Monthly UNsecured debt repayments....... 415
Amount left after debt repayments....... 590.49

Personal Balance Sheet Summary
Total assets (things you own)........... 300,000
Total HP & Secured debt................. -243,000
Total Unsecured debt.................... -22,800
Net Assets.............................. 34,200

Created using the SOA calculator at ww.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using other browser.

katsu

Brighid wrote: »

Ok. So I've done an SOA. guessed my APRs a little as haven't got them to hand, but think this is about right. Also - I never have this much left (even though I pay more than minimums on cards, which this doesn't reflect, there is still about 300 I can't account for.....
Get a notebook and write down everything you spend, get receipts for everything and use excel if you find that easier. You need to trace this £300. Look at your bank statements - where is it going?
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.................... 1

Monthly Income Details
Monthly income after tax................ 2508
Partners monthly income after tax....... 0 does partner not work? Surely they should work or claim benefits?
Benefits................................ 0
Other income............................ 400 the rent on house 1?
Total monthly income.................... 2908

Monthly Expense Details
Mortgage................................ 730
Secured/HP loan repayments.............. 106
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 151.51
Electricity............................. 35 you should be able to reduce this. Turn everything off standby, only charge mobiles for an hour or so, no lights on in rooms you are not in etc etc.
Gas..................................... 19
Oil..................................... 0
Water rates............................. 62 looked at a meter? This is v high - is it for the two houses?
Telephone (land line)................... 16
Mobile phone............................ 20 for you both or just you?
TV Licence.............................. 13 I believe this should be £12
Satellite/Cable TV...................... 61 get a freeview box instead. If this includes the net, people like 02 and orange have cheap internet.
Internet Services....................... 0
Groceries etc. ......................... 250
Clothing................................ 0never?
Petrol/diesel........................... 150 look at the non-essential journeys and try to cut them out/down
Road tax................................ 20
Car Insurance........................... 35
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 18 what is this? Can you get it cheaper - such as a PPC?
Pet insurance/vet bills................. 5
Buildings insurance..................... 30
Contents insurance...................... 11
Life assurance ......................... 50
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0 never?
Entertainment........................... 50
Holiday................................. 0
Emergency fund.......................... 50where is this going? Is not in the cash line
Total monthly expenses.................. 1902.51


Assets
Cash.................................... 0
House value (Gross)..................... 300000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 300000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 163000...(730)......0
Secured Debt.................. 80000....(106)......0
Total secured & HP debts...... 243000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
loan...........................12000.....241.......7.9
credit card....................7900......83........18
credit card 2..................2900......91........18
Total unsecured debts..........22800.....415.......-


Monthly Budget Summary
Total monthly income.................... 2,908
Expenses (including HP & secured debts). 1,902.51
Available for debt repayments........... 1,005.49
Monthly UNsecured debt repayments....... 415
Amount left after debt repayments....... 590.49

Personal Balance Sheet Summary
Total assets (things you own)........... 300,000
Total HP & Secured debt................. -243,000
Total Unsecured debt.................... -22,800
Net Assets.............................. 34,200

Created using the SOA calculator at ww.makesenseofcards.com.
Reproduced on Moneysavingexpert with permission, using other browser.

Think you need to work out where the money really goes as you are showing such a big surplus that you don't have. Maybe state what you are spending on the card repayments as additional information?

HTH

glimmerofhope

****ignore me, just seen you had included it in the secured floan figure****
Hi and welecome
Just a thought
You show the additional income (rent on house 1?) but not the mortgage repayment or is that included in the mortgage payments of £750
If not then this would show as additional cash (maybe part if the unaccountable £300)

Brighid

Thanks Katsu - agree that I have to trace the money, and I like the idea of a spreadsheet. I am thinking it might be food, as the budget was set when we first moved, based on a month's receipts and perhaps I've got sloppy and allowed us more treats. Confirmed by a quick look in my cupboard to see I've allowed us heinz beans this month!

katsu wrote: »

Monthly Income Details
Monthly income after tax................ 2508
Partners monthly income after tax....... 0 does partner not work? Surely they should work or claim benefits?

Partner is self employed and work is not regular at moment (building trade very slow) as I can't be sure of income any month we don't count it, but pay his checks direct to CC, and then use CC at tax time if he owes any


Other income............................ 400 the rent on house 1?
Yes


Electricity............................. 35 you should be able to reduce this. Turn everything off standby, only charge mobiles for an hour or so, no lights on in rooms you are not in etc etc.

We are trying to reduce this. But until we get next bill not sure how effectively!


Water rates............................. 62 looked at a meter? This is v high - is it for the two houses?
I thought it was high too - only for new house, but sacred we could end up worse off on a meter

Mobile phone............................ 20 for you both or just you?
Just me. Lowest tarriff and needed for work. Looked at PAYG but amount of calls I have to make mean it costs more

Clothing................................ 0never?

Not for last 8 1/2 months. The few bits we needed we asked for for christmas/birthday from family. It feels too much like a treat

Medical (prescriptions, dentist etc).... 18 what is this? Can you get it cheaper - such as a PPC?

This is for our dentists, as we have no NHS round here

Haircuts................................ 0 never?
A very lovely friend now does it in return for a homemade cake! If only my credit card company would set up the same deal!!!

Emergency fund.......................... 50where is this going? Is not in the cash line
This is a 'wish list' that I want to set up, brought on by the unexpected legal fees, as yet not set up but wanted to see if it was do-able.

HTH

consultant31

First thing I'd do is dump the Sky. It's an awful lot of money on top every year which could be going to the debts.

Another thing is the grocery budget. There are two of us and we spend just over half what you're spending. Have a look at the Old Style board for ways to make money stretch further. Cook from scratch and down-grade your food a bit - lots of the own-brand stuff is really good, produced in the same factories often and loads cheaper.

My Mum and Dad went to a water meter and their bills dropped from £48 a month to £12 - no kidding! Be vigilant, don't leave the tap running while you brush your teeth etc. We should all be saving water anyway, it's a finite and very precious resource

katsu

I believe if the meter costs you more you can go back to standard billing - look into it with your water company

Jevvers

Hi well dOne for posting and fwiw I would have done the same in yr shoes. Ditch the satellite tv and get freeview or freesat. Also don't fear the meter - we are on one and our bill is about £300 per year and that's with two toddlers who have a bath each night and create loads of washing.

Are you still trying to sell your old house?

Good luck

dreamdreamer

Hi, I can't add much on your SOA that others haven't already advised you of, but I just wanted to say you can't put a price on your families safety and happiness, and if the new house is what you needed to achieve it then so be it! A few years of hardship until you can sell the old place is a small price to pay.

Also I don't think your credit rating will be "shot to pieces" as you're keeping up with repayments - you'll just be close to what companies see as your "affordable" limit. Nothing wrong with that if you have no need for any more credit - and once it's paid off your credit rating will be excellent.

Brighid

Jevvers wrote: »

Are you still trying to sell your old house?

Good luck

Not at the moment. When we went on to renting we decided to take it off the market - they have a 12 month contract and we are going to look at the market again at that point. We're keeping an eye on other houses for sale in the area and if they start selling again we'll reconsider.