Reality check - Debt clearance starts now!

PedroMatias

Statement of affairs complete, and I've got a jaw-dropping £35,000 of debt in my late twenties.

Admittedly, £20,000 of that is Student Loan and I'm ignoring that in my debt-free mission - I haven't included it on my SOA, and it sneaks out of my pay packet each month. It'll be clear in under 5 years at the rate I'm paying it off.

The rest is detailed below. Not including Student Loan, I want to be debt-free by my thirtieth birthday - Christmas next year in other words. Ambitious, but just about do-able. Here goes...

Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 1
Number of children in household.........
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax................ 2700
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2700
Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 600
Management charge (leasehold property).. 10
Council tax............................. 103
Electricity............................. 60
Gas..................................... 0
Oil..................................... 0
Water rates............................. 22
Telephone (land line)................... 12
Mobile phone............................ 35
TV Licence.............................. 15
Satellite/Cable TV...................... 0
Internet Services....................... 10
Groceries etc. ......................... 75
Clothing................................ 50
Petrol/diesel........................... 100
Road tax................................ 12
Car Insurance........................... 62.76
Car maintenance (including MOT)......... 40
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................................ 10
Entertainment........................... 100
Holiday................................. 100
Emergency fund.......................... 0
Lottery................................. 8
Total monthly expenses.................. 1434.76

Assets
Cash.................................... 2000
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 3500
Other assets............................ 2000
Total Assets............................ 7500

No Secured nor Hire Purchase Debts
Unsecured Debts
Description....................Debt......Monthly...APR
Watch..........................333.31....66.67.....0
Parental.......................9433.97...725.6.....0
Credit card....................3468.8....75........15.9
Car finance....................2900.69...139.5.....0
Total unsecured debts..........16136.77..1006.77...-

Monthly Budget Summary
Total monthly income.................... 2,700
Expenses (including HP & secured debts). 1,434.76
Available for debt repayments........... 1,265.24
Monthly UNsecured debt repayments....... 1,006.77
Amount left after debt repayments....... 258.47
Personal Balance Sheet Summary
Total assets (things you own)........... 7,500
Total HP & Secured debt................. -0
Total Unsecured debt.................... -16,136.77
Net Assets.............................. -8,636.77

Reproduced on Moneysavingexpert with permission, using IE browser.

findingmyownway

Well done for posting.

Your 'outgoings' don't look too bad at all. All I would say is are you sure you REALLY only spend your budgeted amounts on food/clothes and entertainment. If you're sure then thats great . If you're not sure then I suggest keeping a spending diary so you know exactly where you're starting from. On that note, where does your 'spare' £260 go?

You're clearly earning a good salary - any opportunity to increase this via overtime?

You say you have £2000 savings and are saving £100 for a holiday. Ideally these should be put towards interest-earning debts. Its very silly to have money sat there earning little interest (3% max?) and paying out 15.9% on your credit card.

Your debts are quite interesting in themselves, certainly not the typical ones people often post on here....

Unsecured Debts
Description....................Debt......Monthly...APR
Watch..........................333.31....66.67.....0
Is this actually for a watch?? Do you really need it? This debt could be totally cleared with your savings but as it is at 0% then probably better left as it is.
Parental.......................9433.97...725.6.....0
You are paying a huge chunck back to them every month. Do they need the cash that quickly? It would be far better to pay off your CC first. What did you spend the money on?
Credit card....................3468.8....75........15.9
This is the one you need to focus on. With £2k in the bank and money to spare on your SOA you really should be throwing far more than the minimum payment at this.
Car finance....................2900.69...139.5.....0
Is this at 0% forever?

PedroMatias

findingmyownway wrote: »

Well done for posting.

Your 'outgoings' don't look too bad at all. All I would say is are you sure you REALLY only spend your budgeted amounts on food/clothes and entertainment. If you're sure then thats great . If you're not sure then I suggest keeping a spending diary so you know exactly where you're starting from. On that note, where does your 'spare' £260 go?

You're clearly earning a good salary - any opportunity to increase this via overtime?

You say you have £2000 savings and are saving £100 for a holiday. Ideally these should be put towards interest-earning debts. Its very silly to have money sat there earning little interest (3% max?) and paying out 15.9% on your credit card.

Your debts are quite interesting in themselves, certainly not the typical ones people often post on here....

Unsecured Debts
Description....................Debt......Monthly...APR
Watch..........................333.31....66.67.....0
Is this actually for a watch?? Do you really need it? This debt could be totally cleared with your savings but as it is at 0% then probably better left as it is.
Parental.......................9433.97...725.6.....0
You are paying a huge chunck back to them every month. Do they need the cash that quickly? It would be far better to pay off your CC first. What did you spend the money on?
Credit card....................3468.8....75........15.9
This is the one you need to focus on. With £2k in the bank and money to spare on your SOA you really should be throwing far more than the minimum payment at this.
Car finance....................2900.69...139.5.....0
Is this at 0% forever?

Thanks for the response! We get prepaid a flat amount of overtime at work, and I'm unlikely to break the bank. Over the next year I'll be expecting about £2-3k in salary extras. I'm not a big spender on clothes, and certainly not over the next year. Entertainment... mainly at home or pub, but again, I'll be watching the spends. good spot on the food - I think thats a fair underestimation, but with my renewed spendthrift vigour I don't think it'll be too short of the mark!

My target next year is debt clearance - I could easily free up spare cash each month, but this is a pay-off-at-maximum rate jobby! The £2k quoted is my current bank balance, I'd like to keep that as a 'float' so it's instantly available.

The watch was indeed a watch, bought on a whim. Mostly paid off, and it's at 0% anyway. The parental loan paid off a bank loan to save on the interest... it's my way of forcing myself to pay off my debt, but it was a promise and I don't really want to disappoint on that front - it'll only delay my goal anyway. If I get into difficulty, I can take a payment break if desperate. The car loan is about 8%, but the quoted balance includes all interest until settlement - that'll be priority two when the CC is gone.

The Credit Card... you're right, it's my first priority and any spare cash at the end of the month will now go towards it. I'm bringing a bit in by matched-betting, and it'll go straight onto the card too. It'll be gone in a few months

I've got into this through sheer idiocy, there's no way I should be in this much debt while being fortunate enough to bring in a moderate wage. Onwards and upwards.

Wobblydeb

PedroMatias wrote: »

My target next year is debt clearance - I could easily free up spare cash each month, but this is a pay-off-at-maximum rate jobby! The £2k quoted is my current bank balance, I'd like to keep that as a 'float' so it's instantly available.

The watch was indeed a watch, bought on a whim. Mostly paid off, and it's at 0% anyway. The parental loan paid off a bank loan to save on the interest... it's my way of forcing myself to pay off my debt, but it was a promise and I don't really want to disappoint on that front - it'll only delay my goal anyway. If I get into difficulty, I can take a payment break if desperate. The car loan is about 8%, but the quoted balance includes all interest until settlement - that'll be priority two when the CC is gone.

The Credit Card... you're right, it's my first priority and any spare cash at the end of the month will now go towards it. I'm bringing a bit in by matched-betting, and it'll go straight onto the card too. It'll be gone in a few months

I do wonder if you would be better off sending your £2k to the CC now. If you don't think they will reduce your limit, then you still effectively have an emergency fund (the credit card) but you immediately save on interest. If that doesn't feel comfortable, how about paying £1k or £1.5k to the CC? The only sudden cost I can see you incurring is car repairs, and most times that is a few hundred.

Otherwise, for the SOA have you remembered any glasses/contact lenses/prescriptions costs?

No car parking costs seems odd - even if you have a space for work, what about leisure travel?

PedroMatias wrote: »

I've got into this through sheer idiocy, there's no way I should be in this much debt while being fortunate enough to bring in a moderate wage. Onwards and upwards.

Is your net wage correct in your SOA? (money in your pocket after student loan repayment). Just when you say moderate wage, it doesn't ring true with £2,700 per month which puts you into the £50k pa region.

That's a thought - do you have any professional subscriptions that you've missed from your SOA?

findingmyownway

Wobblydeb wrote: »

I do wonder if you would be better off sending your £2k to the CC now. If you don't think they will reduce your limit, then you still effectively have an emergency fund (the credit card) but you immediately save on interest. If that doesn't feel comfortable, how about paying £1k or £1.5k to the CC? The only sudden cost I can see you incurring is car repairs, and most times that is a few hundred.

Is your net wage correct in your SOA? (money in your pocket after student loan repayment). Just when you say moderate wage, it doesn't ring true with £2,700 per month which puts you into the £50k pa region.

Yep, agree that of course he would be better off. No current account is going to be paying 15% interest. The OP's reluctance to do this does make my question the commitment I'm afraid. I don't mean to be harsh, but having 'savings' when you're in significant debt is meaningless.

Also - the holiday fund . That's £100/month you could be throwing at debt, and then have a really good holiday when you can afford it.

Agree £50k is more than moderate to most people, but i guess that depends on your background. Where do you live OP?

PedroMatias

Wobblydeb wrote: »

I do wonder if you would be better off sending your £2k to the CC now. If you don't think they will reduce your limit, then you still effectively have an emergency fund (the credit card) but you immediately save on interest. If that doesn't feel comfortable, how about paying £1k or £1.5k to the CC? The only sudden cost I can see you incurring is car repairs, and most times that is a few hundred.

Otherwise, for the SOA have you remembered any glasses/contact lenses/prescriptions costs?

No car parking costs seems odd - even if you have a space for work, what about leisure travel?

Is your net wage correct in your SOA? (money in your pocket after student loan repayment). Just when you say moderate wage, it doesn't ring true with £2,700 per month which puts you into the £50k pa region.

That's a thought - do you have any professional subscriptions that you've missed from your SOA?

Professional subs paid by work. Got a driveway and park at work for free. I honestly can't remember the last time I paid for parking.

£55k is about right, student loan payments (£350pcm) take it down a bit, so take home is £2.7-2.8k. I don't consider it particularly low or high, maybe moderate was the wrong word. But yeah, it's right.

Thanks for the advice on the credit card, maybe I'm not putting enough emphasis on it. I am slightly paranoid they'll drop my limit and leave me stuck, but I'll definitely reassess the situation and see what I can pay off. Thanks

PedroMatias

findingmyownway wrote: »

Yep, agree that of course he would be better off. No current account is going to be paying 15% interest. The OP's reluctance to do this does make my question the commitment I'm afraid. I don't mean to be harsh, but having 'savings' when you're in significant debt is meaningless.

Also - the holiday fund . That's £100/month you could be throwing at debt, and then have a really good holiday when you can afford it.

Agree £50k is more than moderate to most people, but i guess that depends on your background. Where do you live OP?

The holiday fund is due to a snowboarding trip for a best-friend's 30th, I'd have to have a proper excuse to get out of that.

As for the £2k, it's just my current bank balance, rather than savings. It'll be less at the end of the month, but I will definitely look at putting some on the CC. As I mentioned in the last post, I think I've underplayed it a bit. I didn't get to this point by being good with money Grateful for the advice, cheers!

p.s. I'm living in Lancaster...