Lightbulb Moment: Before it's too late

adam_devon

Hello all,

I lurked for a while a year or so ago, and convinced myself that I didn't have debt problems, only short-term cash flow issues (brought on by overspending).

I now realise that there are definite debt issues, and given that I'm getting married soon I don't want to begin married life without taking control of these issues.

My debt problems would be so much worse had I not had family support, and I don't think I fully appreciate how lucky I am for that. I'm now kicking myself, because had I invested money wisely I would be in a strong position now.

I want to learn, and make changes, and gain control over my finances. I want to spend my own money to buy things - not always be in an overdraft. I often avoid looking at bank statements because I don't want to confront how out of control things feel, and instead I just put things on credit cards or finance deals, because momentarily buying things makes me feel better.

This is my SOA:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household.........
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1150
Partners monthly income after tax....... 1040
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2190

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 495
Management charge (leasehold property).. 0
Council tax............................. 90
Electricity............................. 40
Gas..................................... 0
Oil..................................... 0
Water rates............................. 28
Telephone (land line)................... 45
Mobile phone............................ 55
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 250
Clothing................................ 0
Petrol/diesel........................... 400
Road tax................................ 0
Car Insurance........................... 66
Car maintenance (including MOT)......... 0
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...................... 10
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1491


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 4000
Other assets............................ 0
Total Assets............................ 4000

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Lloyds Card....................530.......40........17.9
MBNA Card......................330.......30........16.9
Overdrafts.....................1300......0.........0
Santander Loans................7056......196.........6.9
Hitachi Finance................2628......146.......NaN
Creation.......................836.......0.........0
Total unsecured debts..........12680.....412.......-


Monthly Budget Summary
Total monthly income.................... 2,190
Expenses (including HP & secured debts). 1,491
Available for debt repayments........... 699
Monthly UNsecured debt repayments....... 216
Amount left after debt repayments....... 483

Personal Balance Sheet Summary
Total assets (things you own)........... 4,000
Total HP & Secured debt................. -0
Total Unsecured debt.................... -12,680
Net Assets.............................. -8,680

I have combined TV, broadband, phone into one figure. Some of these are joint loans (Santander) and partner's debts (one credit card and Hitachi). The creation finance is 12 months interest free, hence APR figure.

Santander loans has 36 months left. Hitachi has 18 months left. Creation needs to be paid by February 2012, otherwise APR is ridiculous. MBNA credit card had been cleared, but I recently put cost of wedding ring on there.

I use my car for work, so business insurance costs a little more, and some petrol costs are expensed.

I'm willing to take any and all help, please advise checklist of things to do. I have already opened an ING savings account, so I will make sub-accounts and begin saving - but I'm mindful of clearing debts before turning attention to aggressively saving due to interest costs.

Please share your wisdom, and thank you.
Adam

FireWyrm

Landline and mobile together are £100. Can you reduce this, perhaps ditch the landline or go prepaid on the mobile?
Groceries are an obvious target. It might not be what you want, but do you truly need £250 per month? Discount stores, meal plans, extreme cost cutting will all make a difference and it's only for a short time until you are clear.

Petrol is another obvious one. Reduce your moterway speed from 80 to 70 (60 is better....) and you'll get more from your tank. I know from experience since I used to get 300 miles to a tank, but just by changing driving style, I now get 400+. Can you cut your mileage, work from home at least part of the time, car share, take public transport, walk? Any and all of the above will have an effect and pretty quickly too.

I'm not sure your SOA is totally accurate. My advice is to get a cheap billing app for your phone (there are several good ones available for both IPhones and Androids, or a pen and notebook will do) and then keep a running tally of your daily expenditure and I mean everything right down to the penny. Once you have a month of this, or two, you can start to really analyse it and see what it being spent where. For instance, I used to go to the shop every other week for 'milk' but used to spend about £20 in unaccounted for spending. Just have enough milk on hand (or bread) and you wont have to go to the shop which means you wont be getting all those other little impulse buys either, not to mention spending the petrol to get there.

The Creation Loan is £900ish. This is your very first priority even if you hav eto go to beans on toast for a month. Get rid of it asap before anything else. All those little savings here and there go to this instead.

adam_devon

FireWyrm,

Thank you for your help.
I'm interested to hear why you don't think the SOA looks accurate? The mobile phone contract ends in October for both partner and I, with both of us having smart phones which we can sell for about £120 each.

We really could do with cutting down grocery costs - we have lots of meat in the freezer which I'm determined to work through!

Working from home and public transport aren't options - my work is remote community NHS work - but I can definitely cut my speed.

Out if interest, you recommend paying Creation off first because of the extortionate APR when it kicks in?
Thanks,
Adam

Tixy

Hi adam

I assume you don't have £483 spare at the end of every month? If not then you need to work out where else your money is going. A spending diary, or spending app is a good idea to track down the missing money.

adam_devon wrote: »

This is my SOA:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household.........
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1150
Partners monthly income after tax....... 1040
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2190

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 495
Management charge (leasehold property).. 0
Council tax............................. 90
Electricity............................. 40
Gas..................................... 0
Oil..................................... 0
Water rates............................. 28
Telephone (land line)................... 45
Mobile phone............................ 55 can either or you reduce the tariff you are on at all?
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 250 this does look high (some on here can feed a family of 5 for that amount). Perhaps try cutting to £200 and then seeing if you could get to around £160?
Clothing................................ 0 probably need to budget something here (annual spend divided by 12)
Petrol/diesel........................... 400 how much of this would you tend to get back in expenses? have you included that in your income figure?
Road tax................................ 0 budget for this so you don't have to pay with a CC (1/12 of annual cost)
Car Insurance........................... 66
Car maintenance (including MOT)......... 0 budget something for mot, servicing, tyres etc
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0 never anything? dentists, eyetests etc?
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 10
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0 try to budget for this so you don't end up using your cards at xmas
Haircuts................................ 0 budget for this
Entertainment........................... 0 and probably a little something here
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1491


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 4000
Other assets............................ 0
Total Assets............................ 4000

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Lloyds Card....................530.......40........17.9
MBNA Card......................330.......30........16.9
Overdrafts.....................1300......0.........0 probably you are paying at least interest or daily charges on this which are not accounted for in your outgoings?
Santander Loans................7056......196.........6.9
Hitachi Finance................2628......146.......NaN
Creation.......................836.......0.........0
Total unsecured debts..........12680.....412.......-
Are you paying more than the minimum on anything?


Monthly Budget Summary
Total monthly income.................... 2,190
Expenses (including HP & secured debts). 1,491
Available for debt repayments........... 699
Monthly UNsecured debt repayments....... 216
Amount left after debt repayments....... 483

Personal Balance Sheet Summary
Total assets (things you own)........... 4,000
Total HP & Secured debt................. -0
Total Unsecured debt.................... -12,680
Net Assets.............................. -8,680

Its good to have a savings account set up and probably you could use that for some of the pots of money such as saving for car services, road tax, presents etc. If you try to assume you will no longer have any access to credit cards it encourages you to ensure you've budgeted savings for what you need. But you are right not to start major savings whilst you have these debts, you really want to try to pay these down first.

RAS

You need to budget for everything. Unless your car is maintained and taxed by work, you need to put aside one twelth of the cost every month. Clothes? Holiday?

You also need to know the APRs of all your debts and the costs of anything like ODs.

Superbiatch

For every business mile you do, you will be getting back approximately 57p a mile (thats my rate in the NHS), so you must be doing a fair amount of miles each month to rack up £400 - how much do you usually claim for? Or do you do a lot of personal miles too?

There was a time when working in the NHS your mileage expenses would cover your fuel and running costs, but not these days - I think i just about break even with fuel costs! Are you an essential user? If not, then maybe you should be whereby you get a lump sum each month and a lower amount per mile. It could help off-set the costs of keeping the car running.

dark^knight

I would recommend a spending diary as well, it will help you to track exactly where you are spending, and allow you evaluate where you could make savings.

adam_devon

I really should budget for unexpected expenses, or yearly expenses. This is what gets me in to trouble, trouble resolved with credit cards.

My unnecessary spending does average out to about £500 per month I would assume - £750 over the last 6 weeks, so I think the SOA is actually reasonably accurate.

I will try and reduce grocery costs and budget something each month for yearly and unexpected expenses.

adam_devon

I think 57p is similar to my figure. I do 800 miles per month commuting to work, 800-900 during the day with work, plus some additional use on top.

FireWyrm

adam_devon wrote: »

FireWyrm,

Thank you for your help.
I'm interested to hear why you don't think the SOA looks accurate? The mobile phone contract ends in October for both partner and I, with both of us having smart phones which we can sell for about £120 each.

We really could do with cutting down grocery costs - we have lots of meat in the freezer which I'm determined to work through!

Working from home and public transport aren't options - my work is remote community NHS work - but I can definitely cut my speed.

Out if interest, you recommend paying Creation off first because of the extortionate APR when it kicks in?
Thanks,
Adam

SOA's are great for a general, this is where we are estimate, but until you have gone through a month recording everything you spend no matter how small, it's inaccurate. Before January, I would have told you that I have x number of DD's, a couple of loans, a credit card and I spend 300ish on food, oh, and we're not in debt, we can cope and yet somehow we always seemed to be on or near the overdraft limit. Clearly, we were far worse off than I suspected. When I bought my money app for my android I thought it would show some minor excess here and there. What it actually showed was about £250 in general spending at my local CoOp on top of my food budget. It showed anywhere between £80 and £200 in general cash withdrawals for which I had no explanation and nothing to show for it...all in £20 increments. It showed 4 lunch meals at the local carvery every month because we were visiting friends. It showed that I was paying for DD's that I didn't strictly need and could go, like Sky box insurance. It also showed that the DD's fluctuated wildly by pounds at times leaving my mental tally a complete work of wishful thinking. SOA's are great for ball park figures but accurate, they are not and should never be a substitute for serious analysis of your real situation. You can make judgements or form a plan unless you are brutally honest. I suspect if you do as I have advised, you'll find money you never even noticed was missing.

Don't sell your mobiles unless you really must. They won't make a significant dent in your debt to justify the loss and they more than make up for the deficiency in being a tool if you use it wisely. I have a grocery app which tracks prices as I shop, I have a money app which tracks all expenditure anywhere and can be reconciled against the bank monthly. I have a TODo list as well as a calendar, bill reminders so I'm never surprised and a snowball debt calculator. I keep a tally of groceries needed so I don't just buy whatever catches my eye.

Another tip I have, but really needs total co-operation and trust between you and the OH is to put one person in charge of the money. The other person doesn't abdicate responsibility, but they have a set budget to keep within and at least one person has a complete overview. What happens so often is both partners go their sweet way with the money and neither know what is happening overall. My opinion is that this can lead to disaster. If you're serious about gaining control, only one person can drive at a time.

With regard to paying off debt, tackle the one that is going to cost you the most soonest. You say that Creation's APR is extortionate and I presume you cannot pay off a lump sum immediately, so, you need to get control before February, so, start planning now. If you do as I suggest and analyse your outgoings objectively, I suspect you'll find the money you need in one month, perhaps two or three but well before the Feb deadline. It's only £900 and so not beyond the realms of possibility. For instance, I got rid of a load of redundant DD's, made my petrol go further, fed two adults and two children on £97 and shopped for better insurance rates and stopped going to the corner shop....net result in a single month is plus £500, I kid you not. You will fall off the wagon, you are changing a lifetime of habit and preconceived ideas, but if you have an open mind about quality of food, start asking searching questions about how you run your life and be totally honest about your faults, you will find all the money you need and more besides.

Superbiatch

adam_devon wrote: »

I think 57p is similar to my figure. I do 800 miles per month commuting to work, 800-900 during the day with work, plus some additional use on top.

So your income goes up about £400 on top of what is stated in your SOA? Or does that include expenses??