Our Situation - Advice Needed

MatthewN

I came across this site a few months ago when seeing Martin on that program with Richard Hammond. Decided to sign up now to explain where I am at.

Currently debts stand at £26500 (not including a new mortgage).

Total income - around £45000 for both of us. This slightly increases each month due to me working part time providing technical support on the internet for a company which is growing and they require more of my time.

Debt Breakdown
About £9000 left on a Barclays loan paying £270.80/Month
About £7900 on a Barclaycard (19.9% I believe)
About £7800 on a Virgin card (19.9% I believe)
About £1800 on an Aliance + Leicester card (19.9% I believe).

I am just about to start a mortgage on our first house which is £95000 payable at 5.4% ish. This is almost complete in a couple of weeks.

Outgoings...
£590/Month Mortgage (Will start next month).
£90/Month for insurance on mortgage etc... (Might be more... Will be starting next month)
£270.80/Month barclayloan - maybe 3 years left I think.
£170/Month to barclays
£170/Month to Virgin (MBNA)
£100/Month to Alliance + Leicester (MBNA)
£100/Month on food
£780/Year (Council tax... I think thats the correct number)
£14.50/Month Barclays to cover car and some other insurance.
£20/Month Gas (we both work all day so it's very rarely used)
£20/Month Electricity (Same as above)
£40/Month Water (I think)
£13/Month TV/Phone (The company I work for pays internet and mobile phone bills)
£50/Month stuff for the house
£200/Year Christmas/Birthdays... we dont spend a lot there.
£270/Year Can insurance
£70/Month Petrol
£80/Month parking - Should drop to zero in a few months as our office is moving to a location with free parking around the corner.

I think thats everything. We are doing ok but I still see the situation as critical.

We have been discussing putting the CC's and Loan on to a Northern Rock loan for a few years at 5.9%.

Also we are considering switching to an interest only mortgage for 2 years which will drop 590 down to 436 and after 2 years switch it back which if we have the same interest will be 640/Month because it will be 23 years remaining. However, hopefully in 2 years the debt would be gone and that would make us 700/Month better off (based on what it costs us now on minimum payments for the CC and loan).

Good things we have going is that I am able to work online in my spare time and increase my earnings which we can plow in to the debts.

With the CC and loans taking at least 700/Month on minimum payments we realise that we need to do something about it or we will never pay them off with that interest.

At 5.9% interest over 5 years it would cost us £411.92 with NorthernRock and if we could double payments (which shouldnt be a problem) then it takes it down to 2.5 years to clear it all although there will be 1500 left over as we can only go to 25K unsecured.

I thought about shuffling money around CC's... but when you are close to maxing out all 3 credit cards it seems that the most a new CC can get you is 1K - 2K.

Any advice on the way to go with this money? We are surviving with more money coming in then going out but I would like it cleared ASAP as children might come along in 2008.

Storm

Hi Matthew & welcome :hello:

There's a couple of things missing off your SoA - monthly income (estimate if it varies), tax & MOT for the car, clothes, haircuts, socialising, hobbies, buildings & contents insurance etc. Can I also ask what the £50 a month stuff for the house is? And the £14.50 to Barclays for car & other insurance - but you've got car insurance listed separately? £90 a month for mortgage insurance - is this life cover? Seems high to me.

You say that you currently have more money coming in than going out, so you need to find out where the 'extra' is going each month. It would be a good idea for both you & your OH to start keeping a spending diary so you can see exactly where your money is going - and it can be a shock to the system to realise how much each week goes on 'little' things like lunches, coffees, magazines etc.

Sorry it's more questions rather than answers!

Storm

loulouloulou_2

Hi there & welcome to DFW!!!!!!!:D

Well done for posting your SOA - im not the best person to be giving out advice, but the fab people here will be along shortly im sure!!

I could suggest that maybe you could switch your CC's to 0% finance ones, which would knock the interest off - or go to one with a low life of balance transfer like the M & S card??

Good luck anyway

L xxx

MatthewN

Thank you both for the posts. Let me try explain a little more in detail about insurances etc...

Monthly income after tax and pension etc... is about £2600 depending on bonus's etc...

Tax... I think it's around £120/Year
MOT.. Just usual 35 ish /Year and maybe 300 of repairs per year.
Hair... Mine is down to a number 1 so my wife cuts it.
Her Hair... My wife's sister is a hairdresser... free again
Socialising... Very little as we dont drink and usualy visit in friends and familys homes. Maybe 20/Month when we eat out once per month. We are quite strict on spending when out due to the debts.
£50 stuff for the house is like cleaning and general maintenance. That was just a rough guess.
£90/Month I think is for buildings and contents, life insurance on the policy etc... That doesnt start till the mortgage finalises so I will need to re check the paper work. I think we are shifting it to another company in feb as we are not tied in on the insurance and my wife qualifies for a discount through the Leeds Building Society.
£14.50 is break down cover and some insurance on barclays. I need to review the paperwork for that to see what it is I actually get and if it can be lowered.
When I mentioned outgoings on credit cards I was more meaning thats the minimum payment. We try to put a few hundred extra on each month, but with the mortgage going through any time now we have been putting money in savings for solicitors fee's and other arrangement fee's on the mortgage.

We tend to be good with not spending on too much little stuff. The debt was accumulated by a company I started in 2001 and sold in 2003 (funnily enough your nickname is almost the name of the company. LOL)... so it's not really a problem with spending too much on clothes and spending on cars etc... and electronic gadgets/ It was just debt that ended up stacking up due to my mistake on the business and it going the wrong way.

loulouloulou I will check out the M & S card. If we can get a 0% balance transfer on all of the CC's or zero on some and low on others then I am all for that as 2007 is our year to plough through this debt and clear as much as possible.

CLAPTON

what is your monthly income? (take home)

it will be much easier for you (and us reading) if you

a. seperate spending from debt repayments
b. put all spending as monthly equivalent (i.e. divide yearly figures by 12)
c. add up the totals so you can see where you are


at the moment, and doing that for you, gives

spending = 1191 per month
debt repayments = 710

total about 1,901

now i dont know your take home pay but it should be something like 2,800 maybe

so you should have 900 a month spare to throw at your debts, but of course you dont.

first thing is to really work out where all your money actually goes

start a spending diary and write everything down....currently you have nothing down for socialising, work lunches/coffees/magazine/newpapers, clothes, and food at 100 seems too low unless you have a lot of takeaways/eat out (if so you need to include these costs too), any hobbies, gym costs, dental/optical/medical

also look at all the yearly or one off costs....divide these by 12 and add to the budget..so car tax, MOT servicing, repairs, any holidays?, weekends away, with a house and car you need to build an emergency fund to pay for the inevitable things that need replacing etc.


sort out the spending first and then think about re arranging debts or interest only mortgages later.

MatthewN

Thanks Clapton. I will spend some time getting the details together in a more organised format and post them back shortly. Just in the office at the moment getting a few things ready to send out today. Once that is done I will get a reply back out with more details. Some I covered above your post so I think we might have cross posted... but I still see there is a lot more I need to do for organisation to clear the message up a little.

Thanks again!

Storm

Debt Breakdown
About £9000 left on a Barclays loan paying £270.80/Month
About £7900 on a Barclaycard (19.9% I believe)
About £7800 on a Virgin card (19.9% I believe)
About £1800 on an Aliance + Leicester card (19.9% I believe).

I am just about to start a mortgage on our first house which is £95000 payable at 5.4% ish. This is almost complete in a couple of weeks.

Outgoings...
£590/Month Mortgage (Will start next month).
£90/Month for insurance on mortgage etc... (Might be more... Will be starting next month)
£270.80/Month barclayloan - maybe 3 years left I think.
£170/Month to barclays
£170/Month to Virgin (MBNA)
£100/Month to Alliance + Leicester (MBNA)
£100/Month on food
£78/Month Council Tax
£14.50/Month Barclays to cover car and some other insurance.
£20/Month Gas (we both work all day so it's very rarely used)
£20/Month Electricity (Same as above)
£40/Month Water (I think)
£13/Month TV/Phone (The company I work for pays internet and mobile phone bills)
£50/Month stuff for the house
£16.66/Month Christmas/Birthdays... we dont spend a lot there.
£22.50/Month Car insurance
£70/Month Petrol
£80/Month parking - Should drop to zero in a few months as our office is moving to a location with free parking around the corner.
£10/Month car tax
£27.92/Month MOT & Car repairs

TOTAL OUTGOINGS: £1953.38
INCOME: £2600
DIFFERENCE: £646.62

Cool, it looks like you should have a good amount left over each month to throw at your debts. Adding the 'spare' to the minimums in your SoA you should be putting £1357.42 each month towards the debts.

If you're not paying this amount or something close to it I would still recommend a spending diary - i.e. you've got £100 for food, which may well be your monthly shop, but does it include all the extra bits throughout the month, lunches at work etc?

You need to find out the exact APRs of the credit cards so any extra money can be thrown at the highest one first - the snowball calculator at https://www.whatsthecost.com will work it all out for you based on what you can afford to pay & minimum payments & give you a debt free date.

I've split all the yearly bills down into monthly amounts, but you may need to look at when things like car tax are due & budget more for these for the first few months.

Storm

MatthewN

Wow... Thank you for the breakdown of numbers. I can confirm that you pretty much hit the nail on the head with what we have left at the end of the month although I did forget a couple of things which takes it down to about 1100 per month to throw at the debts. That money is for donations which I have commited to make and am happy to do that.

Regarding lunches and extras... I was recently married (In April) and my wife is very strict when it comes to money. She makes sure we live a strict budget. With the help of family we go over each Sunday for a main meal and take lunches to work rather then buying as that saves a whole lot of money each month. We dont have the heating on too often and watch very little TV which all cuts down bills. I am fortunate to have someone who can put their foot down on things like that and make sure we are only spending what we need to.

I do have a second car which is currently off the road and we will be keeping that off the road (at my parents house) till we are in more control.

The next step seems to be for us to try get the % interest down on the cards and I believe they are all at 19.9% and will check my statements tonight.

Am I correct in thinking I should concentrate on the highest interest card first? I had advice from someone saying I should pay off the smallest ballance first and then the second smallest ballance etc... It seems to be mathmatically wrong though and I thought I should pay of the largest APR rate card first (although I think all mine are the same).

lynzpower

yes, definatley pay off the highest APR first.

However, it can be a psychological boost to pay off smaller balances first, but Ive never been a big fan of that idea

MatthewN

I checked and it seems the AandL is the lower interest rate at 16.9 although it's not clear on the website. I will need to check the statements at home.

Is it possible to negotiate a lower APR with a CC company. For example I call up barclay card about my account and ask for a lower APR. Or is it just a matter of finding a new card and transferring the balance over?

MatthewN

I just spoke with M & S and they said if we apply they can manually review the application and see if they can give a higher credit limit. I guess it's worth a shot even if we can shift just a couple of thousand on to it at 3.9%. Thanks for those who pointed that card out for me.