Light bulb moment - time for action

ManagingDebt

Hi all,

This is my story and having my Light bulb moment at the beginning of February 2011.

I've had these debts for quite a long time now and have always felt i was on top of them. Not greatly reducing them, but managing them ok. I work in Finance so i think (perhaps too innocently) that i know what i'm doing. However you'll see from the debts i have, that i've been kidding myself for quite a while. Time for this to change i think.

Having an ok salary with a decent amount of dispoable income, i've enjoyed a social and fun lifestyle for some time. I'm in my early 30s and don't have any dependants, so it's just number one to look after.

Moneywise i've juggled money around for a long time and tried to take advantage of the Credit Card Balance transfers. My failing is that i havent been paying them off, just bumping them every 12/15 months to another card.

My current situation is this:

HSBC CC: £4,000; (£100pm) I do take this money back
Mum & Dad: £5,100; (£100 pm)
L1 £5,342 (£230.80pm) 14.6 APR
L2 £2,920.84 (£129.16 pm) 5.6% APR
Virgin CC: £2,500; (£56 interest payment) 22% APR
OD1: £1,050; £18 interest pm
OD2: £1,500; £5 interest pm
OD3: £1,000: £9 interest pm
Total Debt: £23,412.84 15/02/2011

My total payments out per month are £647.96 of which £459.96 is paid off the debt and £88 is paid in interest. £100 from the HSBC card goes back into my monthly

My plans for 2011 are this and would welcome anyones thoughts to these plans.

• Pay off £2,500 Virgin card (save £56pm)
• Pay off £2,920.84 Loan (save £129.16pm)
• Take out a loan for the £5k owed to my parents
• Perhaps include the £4k on balance transfer inthe above loan (ends in Sept 11)
• Save money every day/week to begin paying off the Overdrafts. £3550/52 = £68.26 per week. £9.75 per day.

Any advice from people who are going through or have been through this would be very welcome.

tbourner

First off I would advise against getting a loan to pay any debt, you need to be certain that you're on top of your own problems and really are VERY strict with yourself. I thought I was but still ended up in the debt spiral (reduced payments of loan or not having HP over the car [in my case] meant I could borrow more).

Have a look here:
https://forums.moneysavingexpert.com/discussion/2976812
My new standard reply to most DFWs!

Posting your SOA in this thread will be the next thing to do though as people will be able to look through a give a rough idea of where to look to save more or pay more off:
http://www.makesenseofcards.com/soacalc.html

[Deleted User]

Hi, as mentioed above, the best place to start is with an SOA: http://www.makesenseofcards.com/soacalc.html detailing all your income and expenditure so you know exactly where you stand.

Then at the bottom of the SOA is a link to a snowball calculator which will show you the best way of paying the debts off (paying those charging you the most interest first)

ManagingDebt

Here is my SOA based on last month. There is a lot of trimming of the expenses that i have begun doing that i think will help. Any comments are very welcome

Statement of Affairs and Personal Balance Sheet
Monthly Income Details
Monthly income after tax................ 2500
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2500
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 500
Management charge (leasehold property).. 0
Council tax............................. 16
Electricity............................. 15
Gas..................................... 15
Oil..................................... 0
Water rates............................. 12
Telephone (land line)................... 5
Mobile phone............................ 50
TV Licence.............................. 3.5
Satellite/Cable TV...................... 0
Internet Services....................... 6
Groceries etc. ......................... 150
Clothing................................ 100
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 100
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 20
Entertainment........................... 300
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1292.5

Assets
Cash.................................... 650
House value (Gross)..................... 0
Shares and bonds........................ 250
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 900

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
Loan 1.........................5342......230.8.....14.6
Mam and Dad....................5100......100.......0
Loan 2.........................2920.84...129.1.....5.6
HSBC...........................4000......0.........0
Overdraft 3....................1000......9.........0
Overdraft 2....................1500......5.........0
Overdraft 1....................1050......18........0
Virgin CC......................2500......56........22
Total unsecured debts..........23412.84..547.9.....-

Monthly Budget Summary
Total monthly income.................... 2,500
Expenses (including HP & secured debts). 1,292.5
Available for debt repayments........... 1,207.5
Monthly UNsecured debt repayments....... 547.9
Amount left after debt repayments....... 659.6
Personal Balance Sheet Summary
Total assets (things you own)........... 900
Total HP & Secured debt................. -0
Total Unsecured debt.................... -23,412.84
Net Assets.............................. -22,512.84

ManagingDebt

On reviewing my expenditure my entertainment bill of £300 includes £64 per month Gym bill which i find keeps me out of going to the pub and fills up my week nights with activities.

I also include a £13 pm unlimited cinema card which fills my time too - 5 movies in the last month.

CH27

Looking at those figures yo have quite a bit of disposable income.
I would cut all but one of the credit cards up so you can't spend anymore on them.
Pay off the highest interest card first & then move onto the next one.
You need to be disciplined & set yourself a realistic figure to overpay & a realistic target to do it in.

josephine82

Firstly, do you have the £659 left over each month? If not, you need to work out where it goes. In theory, without making any changes to your budget, you could start making massive overpayments to your debts and bring your totals down very quickly.

Your mobile bill is high- can you bring this down by £10 or £20 quid?
Do you need to spend £100 on clothes each month?
£300 a month for entertainement is massive for that amount of debt- what else does this include apart from gym and cinema?
Gym at £64 is crazy- is there not a cheaper one? If this is part of your lifestyle then keep it but there must be a cheaper option?

I have the £13 cinema deal and a £30 gym membership and I give myself £25 a week for entertainement- a grand total of £143 a month and this serves me fine- I think this is the main area you could cut down on.

If you could make a few cuts and start making overpayments you should be able to bring our debts down without the need for any extra loans.

I would advise setting up a new basic current account and setting up standing orders to pay off the overdrafts as well as the min payments on the loans.

ManagingDebt wrote: »

Here is my SOA based on last month. There is a lot of trimming of the expenses that i have begun doing that i think will help. Any comments are very welcome

Statement of Affairs and Personal Balance Sheet
Monthly Income Details
Monthly income after tax................ 2500
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2500
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 500
Management charge (leasehold property).. 0
Council tax............................. 16
Electricity............................. 15
Gas..................................... 15
Oil..................................... 0
Water rates............................. 12
Telephone (land line)................... 5
Mobile phone............................ 50
TV Licence.............................. 3.5
Satellite/Cable TV...................... 0
Internet Services....................... 6
Groceries etc. ......................... 150
Clothing................................ 100
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 100
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 20
Entertainment........................... 300
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1292.5

Assets
Cash.................................... 650
House value (Gross)..................... 0
Shares and bonds........................ 250
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 900

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
Loan 1.........................5342......230.8.....14.6
Mam and Dad....................5100......100.......0
Loan 2.........................2920.84...129.1.....5.6
HSBC...........................4000......0.........0
Overdraft 3....................1000......9.........0
Overdraft 2....................1500......5.........0
Overdraft 1....................1050......18........0
Virgin CC......................2500......56........22
Total unsecured debts..........23412.84..547.9.....-

Monthly Budget Summary
Total monthly income.................... 2,500
Expenses (including HP & secured debts). 1,292.5
Available for debt repayments........... 1,207.5
Monthly UNsecured debt repayments....... 547.9
Amount left after debt repayments....... 659.6
Personal Balance Sheet Summary
Total assets (things you own)........... 900
Total HP & Secured debt................. -0
Total Unsecured debt.................... -23,412.84
Net Assets.............................. -22,512.84

Tixy

Hi

Do you have the £659 spare at the end of each month? Do you use all of this to put towards your debts on top of the minimum payments?
If you don't then you need to find out where you are spending that money.

There are as you say a lot of areas you could cut down which would mean you could afford even more off your debts each month eg
Groceries etc. ......................... 150 -quite high
Clothing................................ 100 - very high, could easily halve, or buy nothing new for the next year if you have been spending this much
Entertainment........................... 300 - very high, could easily halve and still afford the gym etc and a couple of nights out.
Mobile phone............................ 50 this is quite high - if not in contract shop around for a better deal.

A couple of other things stand out
Council tax............................. 16 - is this right? seems very low. I assume you house share?
Medical (prescriptions, dentist etc).... 0 - do you need to budget anything here, eye tests, dentists check ups, occasional prescriptions?
Contents insurance...................... 0 - do you not have this?
Presents (birthday, christmas etc)...... 0 - you should budget for this monthly ideally - 1/12 of the annual amount you spend.

HSBC...........................4000......0........ .0 - what is this? is it correct? no fees at all on it?

Have you looked at the snowball calculator to see how long it will take to clear all your debts? Hopefully you can clear the virgin cc in 4months or so.

Rock_Cakes

Hi

I am a newbie too, LBM in Jan 2011. I would say that one thing that has really helped me have been the challenges on the forums. They really work as support groups and also help you keep on track. I regularly "use" the following:The Monthly NSD, Weekly spend challenge and the daily small DFW things

I am sure that many MSE gurus will come along with very wise advice. I'm not there yet. I would say keep a note of your spending (all of it) is a great way to start. I know most people use a small notebook, we have a online form which we can access on our phones.

Snowball calculator is also a must. Helps you to focus on what to pay off first and gives you a date when you might be debt free :j

Hope this helps
xx

brokeinlondon

I wish that SOA was mine!

If you can cut down your entertainment bill and put that towards your debt, you'd be laughing all the way to the bank... I can't remember the last time I spent £100 on entertainment in a month, never mind £300

[Deleted User]

Statement of Affairs and Personal Balance Sheet
Monthly Income Details
Monthly income after tax................ 2500 (Is there any way to increase this? Overtime?)
Total monthly income.................... 2500

Monthly Expense Details
Rent.................................... 500 (Is this good value for the area you are living in?)
Council tax............................. 16
Electricity............................. 15
Gas..................................... 15
Water rates............................. 12
Telephone (land line)................... 5
Mobile phone............................ 50 (This is very high - if you are in contract see if you can drop a tariff, if you are out of contract look at SIM only deals and PAYG)
TV Licence.............................. 3.5
Internet Services....................... 6
Groceries etc. ......................... 150 (You could probably cut this down - look at dropping brands, batch cooking, meal planning: check out the old style board)
Clothing................................ 100 (again, this is high - get essentials only until you've paid some of your debt down)
Other travel............................ 100 (what's this? and is there any cheaper alternatives?)
Contents insurance...................... 0 (might need something here)
Haircuts................................ 20 (see if there's a local college near you and get cheap trainee cuts - or last an extra week or 2 between cuts)
Entertainment........................... 300 (this is very high - what do you spend it on, and can it be cut down)
Total monthly expenses.................. 1292.5

Assets
Cash.................................... 650 (there's not really any point in having cash savings if you have debt - better to pay towards the debt that's costing you the most. Maybe keep a small amount as an emergency)
Shares and bonds........................ 250 (Can these be sold and then pay amount to debt costing you the most)
Total Assets............................ 900

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
Virgin CC......................2500......56........22 (This one should be your priority as it's costing you the most in interest - pay you savings towards this, and any monthly surplus you have towards this (after paying the minimum off everything else) until this is gone and then move on to Loan 1)
Loan 1.........................5342......230.8.....14.6 (Are you able to make penalty free overpayments?)
Loan 2.........................2920.84...129.1.....5.6 (as above)
Mam and Dad....................5100......100.......0
HSBC...........................4000......0.........0 (Are you not paying anything towards this?)
Overdraft 3....................1000......9.........0
Overdraft 2....................1500......5.........0
Overdraft 1....................1050......18........0
Total unsecured debts..........23412.84..547.9.....-

Monthly Budget Summary
Total monthly income.................... 2,500
Expenses (including HP & secured debts). 1,292.5
Available for debt repayments........... 1,207.5
Monthly UNsecured debt repayments....... 547.9
Amount left after debt repayments....... 659.6 (Do you have this at the end of every month? If so, pay towards debt with highest APR - Virgin CC is costing you a lot) If you don't have this at the end of every month, then keep a spending diary to see where it all goes.
Personal Balance Sheet Summary
Total assets (things you own)........... 900
Total HP & Secured debt................. -0
Total Unsecured debt.................... -23,412.84
Net Assets.............................. -22,512.84

Hi, I've made some comments and tips above. Hopefully some of them will be of use.

It's generally not worthwhile having savings if you have debts unless the debts are costing you less than the interest you are earning on your savings (I doubt you are getting an interest rate of 22% on your savings, so better to pay towards this debt.) Keeping a little for emergencies might be woorthwhile though.

HTH

Domino9