How did I reach my credit card limit and brief SOA

lovetobeloaded

Hi All

I have been viewing this site for some months now and posted a couple of times.

Never faced up to an SOA cos always thought, I'll deal with it tomorrow, we are doing okay. However, just tried to pay for something with my M&S card and told it was not authorised, phoned to check balance and have reached my £6000 credit limit!!! I really don't know how I have managed this and don't know what I have got to show for it. I guess this is my lightbulb moment!

The problem is, my husband and I have this false sense of security, we both earn decent wages and don't smoke, go pubbing, only have 1 car etc so regularly tell ourselves, we work hard, we can afford it, let's treat ourselves. This leads to buying new furniture, PC, even a conservatory, my husband currently has his eye on a BMW!!!

We can just about make our very many direct debits but this leaves virtually nothing for 'spare' and certainly not for holidays, christmas, nights out etc. although we still indulge in all of these.

A quick SOA, not totally accurate as don't have immediate access to interest rates:-

In
My salary - £1500 per month
Hubby - £1300 per month

Out
Mortgage £780.00 TOTAL APPROX. £120,000 Abbey
Council Tax £110.00
Water £29.00
Gas/Elec £54.00
Home phone/internet £35.00
Mobile phone £25.00
Window cleaner £6.00
Car insurance £55.00
Other insurance £45.00 INC REDUNDANCY, CRITICAL ILLNESS ETC.
Personal loan £606.00 NORTHERN ROCK £25000 (about 6.9%, got 3.5 years left - did this for consolidation and a bit extra!)
M&S Card (balance transfer 3.9% life) £180.00 (min payment)
Next furniture £50.00 0%, only few months left
Mattress £42.00 0%, about 4 months left
First Plus loan £205.00 YIKES - The Carol Vorderman syndrome led me to think that taking a £20000 loan against my house was a good idea! Dare not even find out what the penalties would be for overpayment/early etc.
Golf membership £65.00 VITAL to keep us both sane, no other hobbies.
Sky TV £38.00
TV licence £11.00
Contact lenses £25.00
M&S (spending 0% 12 months) £125.00 (min payment)
Lottery £12
Petrol - £120 per month
Food - £150

total - £2771

However we are £1100 overdrawn in one account and £900 overdrawn in the other.

Don't know where to start with paying stuff off, reducing outgoings etc.

Planning to start a family this year so don't know how we will make repayments when salary reduced.

Planning to sue the Bank, HSBC, for unfair charges, approx £3000.

Phew - sorry about all that, any advice much appreciated.

Thanks guys.

Snaggles

Just a few initial thoughts:

lovetobeloaded wrote:

In
My salary - £1500 per month
Hubby - £1300 per month

Out
Mortgage £780.00 TOTAL APPROX. £120,000 Abbey Are you tied in? Can you get a better rate elsewhere?
Council Tax £110.00
Water £29.00
Gas/Elec £54.00
Home phone/internet £35.00
Mobile phone £25.00 Could you look at a cheaper tarrif or PAYG
Window cleaner £6.00 I hate to say it, but....stardrops, hot water, vinegar!
Car insurance £55.00
Other insurance £45.00 INC REDUNDANCY, CRITICAL ILLNESS ETC.
Personal loan £606.00 NORTHERN ROCK £25000 (about 6.9%, got 3.5 years left - did this for consolidation and a bit extra!) Have you got PPI on this - if so, make sure you're not duplicating the cover as you already have some insurances in place.
M&S Card (balance transfer 3.9% life) £180.00 (min payment)
Next furniture £50.00 0%, only few months left
Mattress £42.00 0%, about 4 months left
First Plus loan £205.00 YIKES - The Carol Vorderman syndrome led me to think that taking a £20000 loan against my house was a good idea! Dare not even find out what the penalties would be for overpayment/early etc.
Golf membership £65.00 VITAL to keep us both sane, no other hobbies.
Sky TV £38.00 Could you go onto Freesat?
TV licence £11.00
Contact lenses £25.00 Is this for 2 people? If just for one of you, you should be able to find cheaper - there is an article on the main site about cutting contact lens costs
M&S (spending 0% 12 months) £125.00 (min payment)
Lottery £12 I know it's hard to give up because you 'never know...' but it would be an extra £144 per year saved if you stopped playing
Petrol - £120 per month This sounds a lot - do you have a long commute etc? Can you cut down on non-essential journeys (much easier in summer lol!)Food - £150 Is this for 2 people? It's not bad, but there could be savings to be made - have a look on the Old Style boards for cheap but delicious meal ideas, and use stardrops and microfibre cloths for all your cleaning!
total - £2771

However we are £1100 overdrawn in one account and £900 overdrawn in the other.

Don't know where to start with paying stuff off, reducing outgoings etc. A couple of your debts finish within the next few months - when they do finish, use this money to throw as much as possible at your highest APR debt - have a look at the snowball calculator here to see the effect of this.
Planning to start a family this year so don't know how we will make repayments when salary reduced.

Planning to sue the Bank, HSBC, for unfair charges, approx £3000. This would make quite a dent in your debts - sort out your parachute account today (in case HSBC decide they would prefer not to have your custom once you have sued them) and get the first letter written

Good luck and keep posting, will enjoy hearing about your progress.

all_hours

How much will the salary be reduced by. Will you be giving up work completely?

The obvious things to cut back on are sky + golf subs + window cleaner. Then in a few months you also won't have the Next or mattress payments so that frees another £90 a month.

What are the APRs on the overdrafts? Look at whatsthecost.com/snowball.aspx to see the order to repay the debts. Pay the minimum off the others and any over payment on the highest APR.

If you stop work to have a baby will the petrol costs go down?

You should probably do another SOA for when you aren't working so you can see if you would manage then.

Also, if the above SOA is accurate you wouldn't have run up the latest debt on the M&S card. Start a spending diary - write down everything you spend.

Snaggles

Yes, I would second the spending diary too - it's amazing (and frightening!) to see everything you have spent in black and white - it is a really good way of understanding exactly what you are spending your money on. I've recently started joining in with the 'How much have you spent/will you spend today' threads, because it really motivates me not to buy things just 'for the sake of it', which is the problem I have had in the past.

lovetobeloaded

Thanks so much for responding.

A few answers to queries..

Tied in on mortgage until Aug 07, then will defo look to change
3 months into phone contract so 9 still to go before I can leave
Yes - I probably could wash my own windows - lol
No PPI on Northern Rock loan - this could be the easiest one to overpay, reduce term etc
Will look into Freesat
Contact lenses are for 2 people, I did a good check for the cheapest
The petrol is mainly for commuting, 40 mile round trip daily
Will try to cut down food and have started to cook from scratch
Will open parachute account and start reclaiming process
I am not pregnant yet (I don't think!) but would like to take 3 months off work, so first month would be around 90% of salary and then SMP
Petrol would go down when off on maternity
Yes, there is more spending that I just can't identify! So will defo do a diary.

Thanks again.

You have given me the kick-start to make a plan, start a diary and work out some kind of repayment strategy.

Will post a debt free date when I have done all this!!

CLAPTON

it's alot easier to see your fianancial situation if you re-arrange your SOA
so that

a. income (as you have already)

b. spending including mortgage and any secured loand but do not include unsecured loans

c. total of spending as above

d. now you can easily seee how much you have remaining to pay off the unsecured debts (i.e. income minus spending

e. then list all the debts, debts amount, minimum monthly payments and APRs etc.
and of course total of debts and total monthly repayments are.

So you will then be able to see if you can afford the debt repayment or the size of the shortfall.


income: can you increase income...overtime, parttime jobs to help reduce the debts.

spending : you have things missing that you realistically need to include..clothes, car tax, servicing, RAC/AA, MOT, allowance for repairs, you need something in for socialising, and are you sure you only spend 150 on food/groceries, any newspapers/magazine, haircuts, you have optical but any dental/medical costs, work related lunches/coffees.

I would suggest you start a spending diary to find out where all the money actually goes and review any of the one off or annual spends and include those.

once you have done that and re done the SoA you will be able to see how much is actually available to repay debts and then your will be able to review the options for resolving the situation.

lovetobeloaded

Thanks Clapton

When I get home from work, I will dig out all the paperwork from files to identify interest rates and terms.

I am sure there is a lot missing from spending and I hope my diary will help to show where it all goes.

I have just started as a Virgin Vie consultant to try and increase income.

Will re-post when I have a clearer picture.

Cheers.

Snaggles

Just a few additions to my previous post:

lovetobeloaded wrote:

Tied in on mortgage until Aug 07, then will defo look to change A mortgage with a new lender could take 2-3 months to set up, so you can start looking well in advance, just make it clear to any new lender that you can't draw down until August due to Early Redemption Penalties
3 months into phone contract so 9 still to go before I can leave They might be willing to reduce your tariff to a lower monthly charge
Yes - I probably could wash my own windows - lol Yes, sorry to point that one out
No PPI on Northern Rock loan - this could be the easiest one to overpay, reduce term etc
Will look into Freesat
Contact lenses are for 2 people, I did a good check for the cheapest
The petrol is mainly for commuting, 40 mile round trip daily
Will try to cut down food and have started to cook from scratch
Will open parachute account and start reclaiming process
I am not pregnant yet (I don't think!) but would like to take 3 months off work, so first month would be around 90% of salary and then SMP I would work on having 6 months off, just to be on the safe side, then if you are ready to go back earlier, it's a bonus.....I speak from experience!!
Petrol would go down when off on maternity You would also have child benefit - not much I know but every little helps!
Yes, there is more spending that I just can't identify! So will defo do a diary.

Best wishes, Snaggles xx

Bestthingsinlifearefree

Welcome to MSE,:beer:

You have been way, way, way over spending. On your income you should be building up savings not falling into debt.

You both need a massive light bulb moment. Now.

If you lost one salary you would be in big, big trouble very quickly.

I would cut back on everything now.

Good luck.:T

Bestthingsinlifearefree

One other qu: The mortgage is 120K.

What is the guestimate value of the house ?

gallygirl

lovetobeloaded wrote:

Hi All

Golf membership £65.00 VITAL to keep us both sane, no other hobbies.
Sky TV £38.00 ahem.........
Lottery £12 ahem again......
.

TBH, looks like shopping was your hobby . I really hope you've had your lightbulb moment, else little soon to be bubba will be in designer gear for 1st yr of life then in homeless hostel. Sorry to be blunt, but you really shouldn't be planning on anything that will have additional costs at the moment. What if you have a bad pregnancy and have to give up work???? SSP is a lot lower than your salary. The best thing you could do before having a baby is get your finances well and truly sorted.

Something has to give... the golf is not vital. You ned to change your mentality on this. A roof over your head and food on the table are vital. Golf is a luxury. £65 is a lot of money each month, almost £800 a year. You cannot keep this up, in addition to everything else. Realistically would you play if you were pregnant / had a small baby????

If you can justify keeping it the sky tv should go, as should the lottery. That would be a lump off your debt each month. Once you have checked about extra payments on the loans etc you'll be in a better position to judge the best way ahead.

Try putting your details into the snowball calculator
http://www.whatsthecost.com/snowball.aspx to calculate your debt free date. Then see what a difference that extra £50 makes.

Sorry, this post sounds really harsh. I do sympathise with you, being in debt is awful, but you really need to fundamentally change your way of thinking. Get rid of the debts and get your freedom back.

Good luck.