I am new here and need help

Iwanttobedebtfree_3

Hi all,

I owe about 50K in total. My salary is just over 47K. Due to divorce / matrimonial home taking two years to sell, I accumulated these debts. My commitments are:

Loan with the AA - 25K (taken out in 2008 over 10yrs) - £306 per month
AA credit card - £6185 - min payment £79 per month
BoS credit card - £8300 - min payment £104 per month
Northern Rock - 7000 (over 30+ years - was taken in conjunction with mortgage, but de-linked on sale of the house) £76 per month
Overdraft - 6K - I pay interest/ charges of £65 ish per month
Money to children (2 over 18 at uni and one about to turn 17) minimum total of £500 per month
I live with partner and I pay £400 per month for bills and £400 for food (I can reduce this to half as it is just the two of us and of course the children visit at least once a week)
Travel £100 per month
Pocket money £140 per month
Gym £46 per month (I can cancel and just run)
I gave up smoking 18 days ago, so huge saving there

Total £2169 - My salary after tax and pension contribution is £2731. I can earn up to an additional £5 K doing other work from home in line with my profession (3K after tax at 40%).

Ok, I have never missed any payments other than two months of half mortgage payment before the house sold. I paid my share, but long story, ex-wife who earned as much as I do did not pay her share. Equifax report says that my credit score is very good, but CreditExpert said very poor. I don't own a home at the moment. I want to clear my debts as soon as possible. Advice appreciated.

Many thanks

didabuf

Just looking around and wanted to leave a quick message, well done for deciding you want to make a difference,
firstly maybe do a SOA, secondly, seriously look at your shopping... £400, there is 5 of us in my house and 2 dogs and we spend half of what you do, and i dont skimp on nice food or treats.
thirdly... spending money....... thin about what your spending it on and is it worth it.
some good savings to be had.

work on paying the smallest debt off first and work your way up.

good luck

Iwanttobedebtfree_3

Excellent advice Didabuf. I am sure you are right about the shopping and the spending money. Most of the spending money is spent on food in the canteen at work. Reducing my wine consumption would more than halve the food shopping costs.

many thanks

Verbatim

No! Snowball and pay the debt with the highest interest rate first. This is more efficient and will pay your debts off more quickly and for a lower amount of interest.

didabuf

packed lunch's for work!!! extra portions from tea ina tuppawear tub for lunch,
a cheaper bottle of wine
discount shops, aldi, lidl, home bargains,
savings to be made in every aspect

Iwanttobedebtfree_3

Absolutely, thank you Didabuf and Verbatim. I have to hit the credit cards first, since the cash amount is close to 2000 on each. I have closed both credit cards and I will start by paying £500 each month to the BoS credit card for 4 months to pay off the higher interest cash balance. I will then do the same to the AA credit card.

Thank you

notatvstar

... Reading your opening post I thought you were my OH!... apart from the fact he doesn't give me any money for rent and he would never face up to his debts like you have. So congratulations for pulling your head out of the sand and whatever digit was plunged into your orrifice of choice.

I'm trying to get my OH to snowball - no chance on that score, but I do think that's the way to go. There's a useful online software thingy on this site that works out how long it would take you to clear all your debt if you did go down that route.

Good luck!

gallygirl

I think notatvstar is possibly referring to THIS site. Register on there and on the left hand side is something called snowballiing. Basically the principle is you bung in all your debts, monthly payments and APR's and it calculates when you will be debt free. It assumes that when the 1st debt is paid off you 'roll the payment' over to the next debt, so it has a snowballing effect and you can see what a difference that makes.

You should pay off the highest APR debt 1st, though sometimes it can give a psychological boost to pay off a smaller one so at least that is one crossed off. In your case I suspect it's one and the same - if my calculation is correct your overdraft, with interest & charges, is the equivalent of 39% APR :eek: so that should be first.

It depends on how much you want to go for it really as to how quickly you can pay it off. You have a v good income & fair bit of spare cash so you are in a relatively good position, though it may not seem that way.

I would turn it into a game - note your debt free date then set out to beat it (in the same way you do with the sat nav arrival time :rotfl:). If you normally spend £12 on a bottle of wine then spend £6, and pay the £6 off a credit card straight away. If you have a £5 shopping voucher then use it & pay £5 off etc. You'll be surprised at how quickly it adds up.

If you're good with excel, maybe set up your own spreadsheet, showing all the debts, adding interest automatically plus your regular payments & planned overpayments. Again, calculate your debt free date and try to beat it. The beauty of that is you can scroll down to when it hits 0 and see how much it will take to knock a week off (assuming your payments go out on different dates of the month). If it's only £50 or so it's amazing how you can manage to find that . Even better when it's a smaller amount (I have £12 coming from paypal and know it will knock a month off my mortgage free date :T).

It's all about trying to have a positive outlook and making it an interesting challenge, with milestones to achieve, rather than a worry and millstone round your neck (which I know it is ).

Good luck :T

yorkshire-lad

Hi,
Congratulations on the journey of tackling your debt.
Great advice above, the first debt you need to tackle is the one with the highest APR, pay the minimum payments on your others and concentrate on one card, it will boost your confidence when you start to see the balance drop.

The other thing I have noticed is the money to your children, 2 of them are adults and the other one not far off. Do they not have part time jobs while at uni to pay for things?
I don't want that too sound harsh but that cash would go along way in helping you pay off your debts.
I obviously don't know what the money is for, but if it's for entertainment then in my opininion they should be earning that themselves.

Good luck
YL

Magpie23

Hi,

I just wanted to say 'Hello' and a massive well done on tackling your debts. It can be very scary facing those cold hard numbers but you've taken the first step which is always the hardest!

At their highest my cc's were £25,000+:eek: and I vividly remember throwing up as reality sank in. I felt there was no hope, but there always is hope and you've certainly come to the right place to hear some inspiring stories and get some great support. We're all in it together here!

I whole-heartedly agree with all of those before me who say pay the debt with the highest interest first. Otherwise, your debt increases quicker than you're paying it off and that can be soul-destroying! And undermine any previous good work.

As for the AA loan (I have one too ) and when I ask it if was worth paying it off early they said there was 'no point' as the interest was already fully loaded into the monthly payments which would run until the end of the term. Therefore, I'd leave that one until last.

With your cc's could you transfer the balances over to 0%? I know they charge a 2-3% balance fees, however the offers usually last 6mths+ which might give you enough breathing space to get your head around things and gain momentum in the meantime.

£400 for food shopping!? Well, at least you can make some significant savings here. I bugdet that for five of us, we never go without, have great variety and that includes a payday takeaway. Have you thought about downgrading brands? Or doing a weekly planner? That's what's saved me.

Ok, as for the £500 for your children, that's a hard one. I hear what other posters have said about encouraging your children to get part-time jobs. Maybe they do, we don't know, and if they did in this climate, they'd be the lucky ones! But still, we also have three children and spent £500 per month on their clubs, which we deem as 'non-negotiable' in our budget. We'd much rather they were out of the house, doing sport and having fun than sat like blobs infront of the TV. You can make significant changes in other areas first, so I'd leave the kids money. However, maybe you could decrease the financial amount that you support them for each year that they're in Uni so that they are able to stand on their on two feet by the time they enter the 'real world'.

Fantastic news on the smoking, keep that up and you'll be debt-free in no time!

If you are in the wonderful position of being able to earn £3k then grab it with both hands!! And as it's extra money, make sure that ALL of it goes of your cc's and you'll make a serious dent in it.

And finally, I just want to wish you all of the very best of luck on your journey. It will be a bumpy road but hang on in there.

Magpie23
-x-

Iwanttobedebtfree_3

Thanks Notatvstar for the tip re: the application for calculating debt. I will locate it on this site. I am not your OH, honest !

Gallygirl - thank you for your very useful suggestions and the link to the calculators. I use excel for everything. The interest I am paying for the Overdraft is high, but I didn't think that it was as high as 39%! I will check with the bank on Monday. I like the idea of turning it into a challenge. thank you.

YorkshireLad - The older two boys have part-time jobs. The money £500 includes mobile phone payments, which I know I can reduce once the contracts expire. They are good boys and never really ask for anything, but I want to support them until they finish their degrees, then they should become completely independent by then. Thanks YL

Magpie - Wow, you are an inspiration and thanks for your advice. Yes, I will halve the expenditure on food and will leave the AA Loan for now. I will see if I can transfer my cc to 0% product, but I am not sure if I will be able to get another credit card? As I said in my first post, CreditExpert is showing very poor rating, but Equifax very good! I will let you know how I get on.

Cheers