Quite new here - am I on the right lines?

Vickicb

Hi all,

I'e posted over here occasionally, although you'll see from my sig we're in the process of moving. This is for 2 reasons - one is wanting to move areas and the other is to get rid of debts. We've been stretched so much due to credit cards, loans, etc to the point where we've had very little to live on. But I'm getting a handle on it now, number one I'm determined not to get into the credit card - loan - credit card cycle again!

So, in black and white:

Current Debts:
£25K secured loan £343 pcm (paid off CC's 6 weeks ago prior to offer on house, no major penalties to get out tho)
£20K Sainsbury's loan, about £16K o/s £300 pcm
£950 left on Barclaycard
£780 left on Egg Card
£800 left on OH Barclaycard
£1000 to a nice friend!

Effect of house sale after £20K deposit to new house + all charges paid:
£25K secured loan - PAID OFF
£5-6K owed to us
changing to 100% replayment mortgage so cashing in endowment so £10K to us :beer:

So I think after we've cleared and cancelled the remaining credit cards we'll have £12K left over (OK, maybe £11K after paying for Christmas - kids promised quite expensive pressies as guilty about them leaving their home).

So, I'll have £11K in the bank and a loan of around £16K, 5 years to run... BUT I know I'll want to do things to the house, a new bathroom is a MUST and the decor is not to my taste. Also considering some alterations and the garden is a nightmare! The Sainsburys loan is on a fairly good rate (around 6.5% I think), credit history has got worse since I took it out so doubt I'll get that rate again.

So against all MSE advice I think I'm going to keep the loan as it is, overpaying it if I can, and keep the £11K to spend very wisely on new house. Anyone think I'm totally mad? I just know if I repay the loan and have nothing left over I'll fall into the CC trap again to get the house how I want it, I can see so much potential!

I will have gone from around £45K to £16K debt, and am also just starting the process of reclaiming bank charges, plus have gone down the endowment misselling route before cashing it in, so might get a few grand back on top.

I've done an estimated SOA for when I move, it looks good to me, I've been living off peanuts (at one point CC minimum repayments were £700!)

Monthly Incomings:

My salary - £1789
Partners salary - £1735
Benefits - £117

Total - £3641

Monthly Outgoings:

Mortgage/Rent - £950
Council Tax - £100 (guess)
Gas & electric - £70 (based on current house so might be less)
Water - £30 (??? Never had a meter before)
TV License - £11
Sky £42
Phone & broadband - £45
Mobile x 2 - £60
Food - £300
Car Insurance - £40
Petrol OH - £160
Petrol - £40
Life Insurance/Crit illness - £100 (a guess – awaiting quote)
Home Insurance - £30
Loan - £304
Childcare - £300
School Dinners - £10
Endowment - £35
Hair - £20
Clothes - £60
RAC - £12
Kids savings accounts - £20


Total: 2667
Surplus: £974

Complicated, I know, but any thoughts?

Don't wish to sound flippant about keeping a £16K debt, and I know house improvements are the last of many people's worries on here, I just know I WILL go back to CC living if I have no fallback money.

SunderlandBlackCat

The food bill looks high, especially considering school meals aren't included. Check out the moneysaving Old Style board for tips on reducing this.

Phone & Internet also looks high. Have you shopped around to get a better deal?

You could check that you're on the best mobile phone tariff for your usage pattern.

Also if you cancel Sky subscription you will still receive Freeview channels on it.

The clothes bill also looks high - I haven't spent £60 on clothes this year & I 'm hardly a scruff.

Theres a water usage calculator on uswitch.com that gives you an estimate of what it will cost you.

You might want to consider that putting money into the kids savings accounts is not going to make as much in interest as paying that money off the loan will save in interest so you could suspend that then pay more in to their savings to catch up once you've cleared the loan.

Hope this helps.

CLAPTON

just a few things

hold back some of the 16k as a true emergency fund....dont simply spend it on the house and then when a car/appliance/tile off roof emergency etc occurs you'll end up putting it on the CCs again.

be more realistic about your budget which seems a little understated..presumably you have two children...i'm sure they must have activities/school expenses/trips outs/presents and xmas must cost something...annual holidays (all the annual ones divided by 12 and add to the budget) similarly you need to make provision for car servicing, tax, repairs etc. in the months you dont spend on these things you need to save up so when you need to spend rather than use the CC you will use the savings.

Vickicb

Thanks both,

Yes, agreee phone and internet is high but OH works from home alot and needs better than the basic connection, although I might see if we can drop down when we move and see if it actually makes any difference to him.

Food bill is about half for the monthly shop, and the rest I put down for the extra bits in between and for take-aways and wine etc with OH and friends - parents equivalent of a night out! Just trying to be realistic, but I'll keep a diary of food spend one month (not over christmas!) and see where it all goes.

Clothes is for 4 of us, includes kids school uniform, shoes, etc.

I agree re: kid account - I've actually designated my smaller endowment as savings for the kids so I'll suspend that for a while.

Clapton - you're right about the emergency fund - I was going to stash some away, maybe £2K, where I can't get at it for 30 days - therefore if an emergency occurs I can use CC in the knowledge that I can pay it off before interest occurs. I'm only keeping one anyway with a £1K limit, as is OH, and determind not to use them!

Will definately re-start my holiday/Xmas fund - I used to save from Jan-Aug for holidays then from Sept-Dec for Xmas, back when I had more spare cash!

lynzpower

firstly, I think you are mad as a hatter for spending a thousand pounds on [presents for the kids. promises or not, this is excessive when you have this sort of debt? :eek:

2. your endowment is no longer there, if you are cashing it in- so 35pm to be paid to something else.

Arnt your barclaycards at 18% apr? Ours are

I certainly would not be spending all that money on decor. Maybe Id allow myself the bathroom - and then pay off the loan and you can decorate when youve saved for it.

Vickicb

Re: Xmas
£250 each on cheap laptops - they're using mine more and more for homework and I know there will to constant arguements if they share. This is also birthday pressies for both as we couldn't afford much for them then. Family have promised to contribute but am not relying totally on that.
Other pressies, between us we have 10 siblings + partners, 3 parents + partners, 11 nephews + a neice to buy for, so that all adds up.
Xmas day - 8 people for dinner, Boxing Day - 11 people for dinner - all adds up!

Endowment - I'm cashing one in, but keeping a smaller one (with all life cover etc stripped out) as saving for the kids for Uni - matures when eldest is 21 so hope we will be able to clear their student OD or something if they do go to Uni.

Barclaycard is on high APR but will be paid off in a week or so when endowment comes back.

tyllwyd

I think you should be realistic about what cashing in the endowment means - I'm guessing you have taken on a new 25 year mortgage, so you have set yourself back however many years before you can get it paid off. I'm not saying don't do it, but remember it is not 'free' money, you are going to pay loads of interest on your new mortgage.

If you are happy to keep on your Sainsbury's loan, that is completely your decision. BUT I think it is really dangerous to go into the new house feeling that you have £11,000 in the bank. What you have got is -£4,000. I'm sure you will have to spend money on the new house and it is unrealistic to believe you won't but I do think you should sit down and give yourself a budget. Draw up a spreadsheet, decide how much of that £11,000 you are going to allow yourself to spend, and then as you spend out, add it into the spreadsheet so you can see your money counting down. Even £20 here and there adds up before you know it.

Oh, and I agree with Lynz, £1000 on one Christmas for presents for the kids sounds crazy. It seems like you are treating them, but in fact if you overspend you are risking the family's financial security which isn't doing them any favours. I'd spend half of that - then you've got the other half left for next Christmas, or for a holiday in the Summer. Too much in one go is just wasted.

Edited to say - I've just seen your post above. Have to say, £1000 is still a lot in my mind, but it is your choice, of course.

bananakinz

I personally would keep some of the money back in an isa for emergencys, (£1k - £2k), do the bathroom, not spend as much on Christmas, reduce the loan so its about half, this will get it cleared quicker or even see if you could move it maybe to a 0% card. Redecorate as and when, saving the money as you go, the garden honestly won't be touched till next year!

Vickicb

Thanks for advice - I guess £1K is alot for christmas, I'll try and write down what I'm spending and if I don't reach that amount I'll decorate a room with the leftovers!

I've spent big and probably not shopped around enough on current house, so I'm planning to be VERY tight when we move into the new one, and OH is up for the challenge! It's not really decor, I can do that out of monthly wages. New bathroom is essential, as is putting in a downstairs loo, and all guttering needs replacing. Also need to relocate boiler out of son's bedroom and replace some rotting windows. Kitchen is liveable for now but need some appliances as current ones are integrated. A spreadsheet is an excellent idea, thanks for that.

I'm very aware that our credit rating is poo at the moment, partly due to an identity theft issue earlier this year and partly due to missing CC payments a couple of months ago, so I know if I needed to borrow again because things cost more than I thought I'd not get the rate I've got on the Sainsbury's loan.

Vickicb

Sorry, should have said, am going to use reclaimed bank charges to overpay Sainsbury's loan so should cut a bit off the term then.

I realise cashing in the endowment and going back to a 25 year term can be seen as a step backwards, but my plan is that each time we change deals (current deal is for 2 years) we'll reduce the term a bit. Student loan (taken at source) is £170 - finishes in 2 years, and if I can also clear Sainsbury's loan by then should be able to reduce the term by about 5 years by that point I would have thought. Endowment was only ever for 25% of mortgage anyway.