Advice on becoming debt-free.

Torbjorn

Good evening,

I think today I finally had what many of you would call an LBM. My new Vanquis credit card arrived in the post, along with it a 49.9% APR. So I decided to lock it away and figure out why I felt I had to apply for it in the first place.

I'm 20, currently a dormant student (I return to my University studies in October), working full time. Since leaving home several years ago I have accrued debts of just under £3000, all with Lloyds TSB. This debt is split between a £1500 credit card at 24.9% APR, and a £1500 overdraft at 0% APR, which I am ashamed to say I could not live without currently.

I've spent the majority of my evening putting pen to paper, and figuring out where money is going. Thankfully, online banking with Lloyds TSB is very well laid out (in my opinion, anyway!). But enough faffing around, here is my SoA, any advice would be appreciated.

One thing to mention, I work in sales, and so my take-home pay is modified by a bonus. My base pay (after tax and NI) is £762/month. My bonus is on average £250 (again, after tax). Can be as low as £50, as high as £500.

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household.........
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 950
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 950

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 330
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 37
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 100
Clothing................................ 5
Petrol/diesel........................... 150
Road tax................................ 15
Car Insurance........................... 139
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
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................................ 2
Entertainment........................... 40
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 828


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 500
Other assets............................ 0
Total Assets............................ 500

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Lloyds TSB Overdraft...........1500......0.........0
Lloyds TSB Credit Car..........1500......45........24.9
Total unsecured debts..........3000......45........-


Monthly Budget Summary
Total monthly income.................... 950
Expenses (including HP & secured debts). 828
Available for debt repayments........... 122
Monthly UNsecured debt repayments....... 45
Amount left after debt repayments....... 77

Personal Balance Sheet Summary
Total assets (things you own)........... 500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -3,000
Net Assets.............................. -2,500

CH27

Hi well done for facing up to your debts.

Do you have the £77 left at the end of the month?

What happens to the extra bonus? How do you manage when your bonus is less?

Keep a spending diary & you will be able to see where you are frittering cash away.

What are the limits on your CC & overdraft?

Logie143

£1700 car insurance? What do you drive!

Is this the best price you can get?

I think If you shopped around and used the OSB you could get your food spend down a fair bit.

Good luck!

jonjamie1970

Hi, well done on saving yourself from a huge pain in the rear end with that Vanquis Card, youve had a lucky escape and can now deal with the manageable debts you have, wish I had been as clever as you at your age !!

Good luck on your Debt Free Mission..................if you choose to accept it ;-)

LAM2011

I agree with Logie - car insurance 139 per month :eek:.

What I did was read most of the Debt Free diaries on here for some inspiration. The biggest credit to you is that you have acknowledged the debt and want to do something.

[Deleted User]

Household Information
Number of adults in household........... 1
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 950 Any way to increase, overtime? Second job?
Total monthly income.................... 950

Monthly Expense Details
Rent.................................... 330 does this include all bills - water, electric, gas?
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Water rates............................. 0
Mobile phone............................ 37 You could cut this down - if you are in contract, see if you can reduce it, if/when you are out of contract have a look at the SIM only contracts, and PAYG deals
TV Licence.............................. 0??
Internet Services....................... 0??
Groceries etc. ......................... 100 You could probably cut this down a little - drop brands, batch cook, meal plan?
Clothing................................ 5
Petrol/diesel........................... 150 Are all journey's essential?
Road tax................................ 15
Car Insurance........................... 139 This is very high, can you really afford a car? I understand that insurance is expensive whilst you are young, but you need to weigh up if you can afford it, and if it is essential. Is it absolutly necessary? - Investigate alternatives like walking, cycling, bus, train, tram, underground (depending on where you are in the country)
Car maintenance (including MOT)......... 10
Contents insurance...................... 0 might want to consider this
Presents (birthday, christmas etc)...... 0 never?
Haircuts................................ 2
Entertainment........................... 40 Is this realistic?
Total monthly expenses.................. 828


Assets
Car(s).................................. 500
Total Assets............................ 500

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Lloyds TSB Overdraft...........1500......0.........0
Lloyds TSB Credit Car..........1500......45........24.9 This needs to be yourr priority, as the interest rate is quite high. Once you have been paid and paid all your essentials try and overpay on this one as much as possible. Once this is gone, you can think about your overdraft, but as it's currently at 0% it's not a priority at the moment.
Total unsecured debts..........3000......45........- Is £45 the minimum payment every month? Have you stopped spending on it?

Monthly Budget Summary
Total monthly income.................... 950
Expenses (including HP & secured debts). 828
Available for debt repayments........... 122
Monthly UNsecured debt repayments....... 45
Amount left after debt repayments....... 77 Do you actually have this at the end of every month? If so overpay this towards your CC so that you are paying £122 every month until it's gone, it won't be that long until it's gone). If you don't have this at the end of the month, then keep a spending diary to see where it all goes.

Personal Balance Sheet Summary
Total assets (things you own)........... 500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -3,000
Net Assets.............................. -2,500

Hi,

I have made some comments above.

HTH

D9

Numpty_Monkey

Torbjorn wrote: »

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 1
Number of children in household.........
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 950
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 950

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 330
Management charge (leasehold property).. 0
Council tax............................. 0 ?
Electricity............................. 0 ?
Gas..................................... 0 ? are these in with rent ?
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 37 can you reduce the tarrif?
TV Licence.............................. 0 ?
Satellite/Cable TV...................... 0
Internet Services....................... 0 ?
Groceries etc. ......................... 100 not bad, maybe save a few £'s, drop a brand, take pack up to work
Clothing................................ 5
Petrol/diesel........................... 150 have a look at http://www.petrolprices.com/
Road tax................................ 15
Car Insurance........................... 139 use comparrison sites and cash back sites,it might drop a fair bit when you turn 21;)
Car maintenance (including MOT)......... 10
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0 put £5 in here
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0 put £5 in here
Haircuts................................ 2
Entertainment........................... 40 that all??
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 828


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 500
Other assets............................ 0
Total Assets............................ 500

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Lloyds TSB Overdraft...........1500......0.........0
Lloyds TSB Credit Car..........1500......45........24.9
Total unsecured debts..........3000......45........-


Monthly Budget Summary
Total monthly income.................... 950
Expenses (including HP & secured debts). 828
Available for debt repayments........... 122
Monthly UNsecured debt repayments....... 45
Amount left after debt repayments....... 77

Personal Balance Sheet Summary
Total assets (things you own)........... 500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -3,000
Net Assets.............................. -2,500

I've left a few ideas, I would suggest you keep a spending diary I bet your grocceries and entertainment are higher. I've also said put some money away for prescriptions and presents, it is so easy to just forget about birthdays and xmas and when they get here they go staight on the credit card or from the OD.

If you have any spare money, put it to clearing the credit card first

:A

Torbjorn

Cheers for all the tips, it is appreciated.

The car/petrol is necessary unfortunately, I live 25 miles from where I work, and public transport would not be an option. I have considered looking for a job closer to home, but especially in this climate its hard to find a decent employer when one is 20.

£139/month was the cheapest insurance I could find. Again, factoring in my age and a general trend towards higher premiums, the truth is I was actually quite pleased with it.

I did foresee fuel costs being a problem. So I bought a diesel. I keep an accurate fuel log, there just doesn't seem to be much more which I could cut down on that front.

I've taken advice from other threads as well, and essentially made a comprehensive log, and pretty much promised myself to take 2 minutes and think before buying anything.

With regards to money spare, my bonus is variable and is one of the key factors, which is not an ideal situation to be in. If it's £50, I would be just in the black for the month, if its £120 or above, I'll be in the red.

I guess the only option with my bonus would be to really push it in my sales, consistently.

Thanks again for all the input, I definitely feel more motivated to keep my logs accurate. Any thoughts on where to purchase a decent self-flagellation device to keep me from unnecessary purchases?

Logie143

Your car tax @£180 a year suggests quite a powerful car too...maybe a switch to something with lower tax? Which could help with petrol/insurance. Are there any other ways of getting to work? I know busses suck, but they are a lot cheaper.

Other than that, have you tried an Ebay purge? It's a good way to get some cash so you can have a bit of a safety cushion. And everyone has crap lying around they don't really need!

Torbjorn

Yeah, the tax is pretty steep. It's a 1995 Peugeot, so falls into the older class of taxation, and the only diesel engined car they made was 1.9 litres.

However, I do feel that I make up some of that with the insurance, as it is a class 3, which to my mind is not too bad at all. Still, maybe I should just switch back to motorbike when the weather brightens up.

An eBay purge would be worth trying, cheers. Time to go clean the closets out.

[Deleted User]

As Logie143 above suggests having a bit of a safetly buffer might be a good idea - especially given the variation in your income. Even if you just start to save £10pm out of your salary, it might ensure that you can make the minimum payment in months when your income is lower.

Put it in an easy access savings account during your higher income months, one that has the higest interest rate - an ISA is probably best given that you don't already have one, and when you have saved a small buffer (£100 or £200) ignore the account except when you absolutly have to use it, and after you have had to dip into it remember and build it up again during more profitable months.

D9