How to become debt-free?

Sammywr

Hi

I am new to this forum and was recommended by a friend.

We are in alot of debt (obviously or we wouldn't be here) and struggling to pay it all back monthly. What we do pay back just seems to cover interest and isn't actually reducing anything (apart from a loan we have that is going down very gradually). We need to reduce our monthly payments as we are using a credit card to pay for food and yet not able to clear it, as originally planned when we first took it out.

Our monthly spend is around £200 more than we are getting in and therefore we are eating into our overdraft which won't last forever.

We really need some advice on what to do. Is it worth going to a debt management company? If so how will that affect our credit rating, which is currently really good.

Many thanks in advance

antonic

http://www.makesenseofcards.com/soacalc.html

Fill in the above Statement of Affairs and post it here (delete the html bit or you wont be able to post it).

People will then make suggestions on how to maximise your income and reduce your outgoings.

Keep a spending diary so you can see where your money is going.

If you decide to go down the DMP route make sure you use a FREE one (like Christians Against Poverty, Stepchange (was CCCS) or Payplan).

DO NOT use a fee paying one as your lining their pockets and extending the time it will take you to be DF.

Hope this helps and post away if you have any more questions.

NinjaSavingKat

Yup as above - lets us know how much you owe exactly....as in get out those bills / CC statments etc.. fill in the SOA, post up a signature and join in the debt-busting fun. Watch out though, MSE is addictive and we are here to help!!!

Sammywr

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 3
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1770
Partners monthly income after tax....... 0
Benefits................................ 433.04
Other income............................ 0
Total monthly income.................... 2203.04

Monthly Expense Details
Mortgage................................ 355.6
Secured/HP loan repayments.............. 314.80000000000007
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 131
Electricity............................. 48
Gas..................................... 49
Oil..................................... 0
Water rates............................. 45
Telephone (land line)................... 28.25
Mobile phone............................ 65
TV Licence.............................. 12.12
Satellite/Cable TV...................... 57.45
Internet Services....................... 0
Groceries etc. ......................... 600
Clothing................................ 0
Petrol/diesel........................... 100
Road tax................................ 11.7
Car Insurance........................... 31.28
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 54
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 14.98
Pet insurance/vet bills................. 35.07
Buildings insurance..................... 49.27
Contents insurance...................... 0
Life assurance ......................... 24.91
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 21.97
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2049.4


Assets
Cash.................................... -1500
House value (Gross)..................... 185000
Shares and bonds........................ 0
Car(s).................................. 4500
Other assets............................ 0
Total Assets............................ 188000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 177500...(355.6)....0
Secured Debt.................. 11262.6..(314.8)....0
Total secured & HP debts...... 188762.6..-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Storecard......................1015.68...75........0
Credit card....................6363.52...118.......0
credit card....................830.23....22.39.....0
credit card....................784.07....15.01.....0
Credit card....................3445.46...82.99.....0
Total unsecured debts..........12438.96..313.39....-


Monthly Budget Summary
Total monthly income.................... 2,203.04
Expenses (including HP & secured debts). 2,049.4
Available for debt repayments........... 153.64
Monthly UNsecured debt repayments....... 313.39
Amount short for making debt repayments. -159.75

Personal Balance Sheet Summary
Total assets (things you own)........... 188,000
Total HP & Secured debt................. -188,762.6
Total Unsecured debt.................... -12,438.96
Net Assets.............................. -13,201.56

Sammywr

Have posted everything above. Hope it makes sense - I just copied and pasted.

Sammywr

I need to also mention I have only posted my DH income. I am self employed and my earnings are very small and often sporadic - One month I earnt £300, the next £50

NinjaSavingKat

Hey there - thanks for that.

Now then lets see. You need to weigh a few things up. You are in a dire predicament where you are spending more than you earn.

This has to stop. No questions. So - what do you really NEED to survive. Below is what I would do.. but the rest is up to you..

• Cable / Satellite = Get Rid. Get a freeview box.

• Groceries = Reduce to £350. Shop ahead / buy bulk / don't buy individual items etc. There is SO much info about this - 1 family on here spends £250 for 2 adults and 2 children...
• Whats is entertainments? = Get Rid. Make your own entertainment in the great outdoors.
• Pet insurance? = how many do you have? Shop around maybe?
• Gas and Leccy = when was the last time you challenged them on your actual usage or shopped around?
• Life insurance? = Get Rid. I know this sounds drastic but any money from your unfortunate demise might well just go straight to debts if you don't get them sorted now negating the need for this altogether and leaving your partner or you high and dry!

There I have saved you at least / minimum of £355.

Now what are you going to do?


P.S ( please clarify what the £1500 cash is under assets? ... Is this in savings or a negative as it reads )..

happycamel_2

ok, thanks for posting, easy wins are satellite tv at £60 per month. Get freeview, you really can't afford £60 a month on that. Also £65 on mobiles is too much, go payg.

Your grocery bill is high. Two adults, 3 kids and pets isn't going to be cheap but you could get this down to £400 a month with careful shopping. Try to eat more vegetarian meals, cook from scratch and use the German supermarkets as well as the main ones.

Your water bill seems quite high, do you have a water meter fitted. We're heavy users with a relatively big house and pay £80 a quarter (about £26 a month).

Do you need to be paying for childcare if one of you has no income. If one of you is a SAHP then not using more than any free nursery provision saves another £60 a month.

You need to budget for haircuts (unless you're a hairdresser or know one that will cut for free) and for presents, you must be buying for the kids at Christmas/birthdays even if you go without yourselves.

So if you can make the savings I suggest above (get mobile down to about £20) and add in hair and presents I reckon you can shave £350 without too much difficulty. You need to look up the APRs on your debts and throw and extra money you can above minimum payments at your most expensive debt.

Can the stay at home parent make any cash? Avon catalogue, online surveys, selling on ebay (old possessions or homemade crafts), seasonal shift work while the other parent is at home.

Good luck and well done for posting.

FireWyrm

NinjaSavingKat wrote: »

.

• Groceries = Reduce to £350. Shop ahead / buy bulk / don't buy individual items etc. There is SO much info about this - 1 family on here spends £250 for 2 adults and 2 children...

£120 - £150 a month, I'm not kidding. It would solve allot of the OPs problems

NinjaSavingKat wrote: »

Life insurance? = Get Rid. I know this sounds drastic but any money from your unfortunate demise might well just go straight to debts if you don't get them sorted now negating the need for this altogether and leaving your partner or you high and dry!

Sorry, I've got to disagree with you here. They have a mortgage, this is money well spent to cover that in the event of a death. Dont get rid of this unless you absolutely have to. I know it doesnt look necessary now, but if you havnt got it....

Get rid of the pet insurance instead. You can put one of them down, you cant replace a productive family member, its the cold hard truth.

Sammywr

The £65 is for two mobiles but we are only 6 months into 2yr contracts so can't change, also I absolutely need my mobile for work and cannot change the number.
We have only just changed our Gas & Electric to fixed rate - it may be less than what I have put as we haven't had our first bill through.

Our water/sewage is £270 every 6 months - thats not even on a meter. I'm not even sure how I could change that or reduce it as I assume its a set figure. I have spoken to a friend with a meter and she spends considerably more than that so am reluctant to change.

Our Pet insurance is the least we can pay - it also includes £9.99 we pay to the vets a month which means we do not pay any consultancy fees or for yearly vaccinations. This was vital this year as we had to make several visits - what we have paid in the monthly fees so far still doesn't cover what we would have had to spend had we not had it.

The life insurance was something we had to take out as a condition of our mortgage - not sure if we can cancel it? Or even if I want to as I consider it vital if something were to happen to my husband.

We are already planning on cancelling our Sky as we have freeview, plus things like iplayer etc. I think out telephone/broadband is the best we could get - we looked into it recently and couldn't get a better deal. The entertainment things are also something we are planning to cancel but I thought I'd better put them on here anyway as we are currently paying for them.

We do not qualify for free childcare as we have a mortgage. This has already been looked into, and my son will not get funding till April. Although we may not have to worry about this as he is not settling at all so we may pull him out.

Haircuts we don't have - my husband used his own clippers and I haven't had a haircut in over a year. My children get theirs done once every 6 months - sometimes for free, or at the most £10 for all three.

The negative £1500 under cash is how much into our overdraft we are.

sistafromanothermista

Hi, i was in exactly the same position as you in May this year,i had my LBM and here i am now. By no means out of the woods but getting there and you can too. The snowball calculator is brilliant so use that if you can. Are all your debts on 0%?