Time to get my head out of the sand, HELP

angelmommy_2

I've finally taken my head out of the sand and admitted we have a debt problem.

At the moment I am a full-time mum and hubby works full time. We're both 27. Our child is 3 and attends nursery (free funding only).

We have the following debt:

Credit card 7100
Credit card 3560
Bank o/d 1930
Band o/d 930
Bank o/d 1400 (gets repaid monthly by wages then we use it again)
Bank o/d 2800
Loan 10,000
Loan 4,000

We own our house (mortgaged) and hubby brings home 1450 per month after tax. I claim child benefit (81.60 per month) and child tax credit (42.85 per week) but we do not qualify for anything else despite me checking a million times.

So how did we get ourselves in this mess?

Well when I was working, I repaid my credit card all the time, we had 1500 o/d but that was all and I was repaying that too. Then I lost my job and found out I was pregnant, so the credit card began to mount with baby essentials as hubby's wages paid the bills and little else.

We sold our house and made no profit, bought another house (my dad paid the deposit, we don't have to pay him back) and stupidly put all the legal fees on the overdrafts thinking we could pay them back slowly.

The house required renovating, some of which was expected but mostly wasn't, it was just one problem after another. So we took out a 10,000 loan for home improvements and later a 4,000 loan both over 5 years. We tried to sell the house but due to market conditions would have ended up worse off. Where we live, the average 2 bed house in the area for my child's nursery/school and hubby's work, are on average 650-700 per month minimum, so it did not make financial sense to rent as our mortgage is less than that and at least it would be going somewhere other than a landlord's pocket.

Since then, we have lived off the overdrafts and credit cards for everything including the big stuff like car insurance.


So you're probably thinking, WHAT AN IDIOT. I know, I just got in over my head and had no idea how bad it was.

So what have I done so far?

I am searching for a part time job but it is difficult as I need to balance it with nursery to avoid childcare costs which would make us worse off. My child cannot attend nursery any different hours or extra hours as the nursery is oversubscribed (so badly that the kids there turning 3 can't get their free funded hours as they just don't have any extra days/hours). I would work mornings/nights but haven't found anything yet. We have no family free to babysit and nearest friends/family live 60 miles away and work full time.

My child starts school Sept 2014 and I will return to work full time then, which will help pay off debts.

We sold one of our cars and used the money to pay some of the debt, we kept the cheapest-to-run car as it is essential due to where we live and travel.

We sold all the stuff we could on eBay, from furniture to clothes etc. Some made us nothing, some made a bit and the money went towards debt. We did all the usual bits of switching utility suppliers etc too. We got rid of hubby's mobile phone (he was given one from work paid for) and mine is PAYG which I rarely top up (not even once a month lol). We get all the benefits we are entitled to. We have cut down on the food shop (work in progress as I want to cut it down more).

And the above debt is what remains :mad:

I just don't know where to start!! I don't want IVA/bankruptcy, I just need to keep us afloat until I can go back to work and earn enough to help pay it off.

Here are our outgoings, per month:

Mortgage - 620
Petrol - 40
Food - aiming for 200
Bills - 100
Loan - 200
Loan - 120
Credit card repayments - 150ish
Credit card repayments - 80ish

Incoming per month:

1450 wages
81.60 child benefit
170 child tax credit


We do not go out at all (haven't done since birth of child when debt began to rise) and I mean ever. No takeaways, cinema, meal out, nothing. The odd day trip for our child never costing more than £10 is about it. No clothing, drinking, games etc. Nothing.

Yet the debt is rising and I feel like the small amounts I pay into the overdrafts cover the next month's interest and that's it. For example, we pay £30 into the overdraft which is £1930, the next month's interest is about £35.

I just need some advice! The 2800 overdraft is most important as the bank keep sending us letters telling us to pay a certain amount because don't pay into it. The other overdrafts are lower priority for this reason.

Oh and due to me not working and all the credit we have, our credit ratings are poor. Though we have never ever missed any payments of any kind.

katy_ann

I didnt want to read and run but what I would suggest is that you post an SOA (statement of affairs) link here http://www.stoozing.com/msoc/soacalc.php . You must have other outgoings such as car insurance/maintance etc. But you've definatly come to the right place! Good luck on your DF journey x

Trajal

Hi there,

I agree that you definitely need to post an SOA properly breaking down every single bill. My electricity alone comes to more than all your combined bills. I can't imagine that's right.

It can be tricky to juggle things around, especially when it looks like you are already economising and living efficiently, but if you break down absolutely everything there can sometimes be small things found which when grouped together add up.

However, you do seem to have some headroom here - about £190 based on your current numbers.

If that is true then theoretically you should be able to start to snowball some of your debts - starting with the higher interest ones. There is a calculator around here somewhere which is handy.

By the way, I often found it incredibly helpful to pay a small debt off in its entirety even if it isn't the highest interest account. This does cost marginally more but it clears one account and gave me the motivation to keep going as I was seeing progress not just in terms of the monies owed in total but also the total number of open debts. Food for thought.

Get the SOA up, get the snowball calculator done and let's see where we are.

Good luck - and well done for working out that you are in over your head before it is too late. The headroom you have should be plenty to keep you floating until you get a job and can then work to repay everything else faster.

angelmommy_2

thank you so much for your replies, as a new user I cannot post links but here is the text version of the SOA


Amount (£)
Monthly Income (after tax) 0
Partner's Monthly Income 1450
Benefits 252.88
Other Income (e.g. maintenance payments) 0

Enter your monthly expenditure

Amount (£)
Mortgage payment (from secured debt table below) 621
Secured/HP loans (from secured debt table below) 0
Rent 0
Management Charge (e.g. on leasehold property) 0
Council Tax 105
Electricity 40
Gas 40
Oil 0
Water Rates 38
Telephone (land line) 15
Mobile Phone 0
TV Licence 13
Satellite/Cable TV 0
Internet Services 0
Groceries etc. 200
Clothing 0
Petrol/Diesel 40
Road Tax (car) 21
Car Insurance (including breakdown cover) 66
Car Maintenance (including MOT) 0
Car Parking 0
Other Travel
Childcare/Nursery 0
Other child related expenses 0
Medical (prescriptions, dentists, opticians etc.) 0
Pet Insurance/Vet bills 6
Building Insurance 11
Contents Insurance 11
Life Assurance 0
Other Insurance 0
Presents (birthday, christmas etc.)
Haircuts 25
Entertainment 0
Holiday 0
Household Emergency Fund (e.g. for repairs) 0

Enter SECURED debts and Hire Purchase (HP) debts
Enter ALL your mortgage, secured and HP debt details here.

Debt description Debt (£) Monthly payment (£) Annual Rate (%)
Mortgage 105000 621 6.1
Secured debt 0
Hire Purchase (HP) 0


Enter your UNsecured Debts e.g. credit cards
Debt description Debt (£) Min Pay (£) Annual Rate (%)

Credit card 3560 85
Credit card 7100 164
Overdraft 930 20
Overdraft 1930 35
Overdraft 1400 42
Overdraft 2800 35




Enter the value of your assets
Asset Value (£) 0
Cash 0
House value (gross) 118000
Shares & bonds .
Car(s) 1000
Other assets (e.g. endowments, jewellery) 0


Additional Information
Optional information, but very useful for anyone reviewing your SOA.

Number of adults in household 2
Number of children in household 1
Number of cars owned 1



Summary of Monthly Income, expense and surplus
Total monthly income: £1702.88

Expenses (incl. HP & secured debts): £1252

Available for debt repayments: £450.88

Unsecured debt repayments: £346

Surplus (shortfall if negative) £104.88

Personal Balance Sheet Summary
Assets: £119000

Secured & HP Debt £-105000

Unsecured Debt £17720

Net Assets £3720




Please note car stuff like repairs/mot are done by hubby for free at his work

Trajal

Sorry could you include the % rates on your unsecured debts please?

Orange_Ena

Hiya

Welcome to MSE. Well done on facing up to things and taking your head out of the sand. Like others have said, you've come to the right place.

With regards to a job, have you thought about child minding? I don't really know much about it but is it worth looking into?

Also, take a look at the old style board - great advice on saving money on shopping, different challenges etc. Batch cooking is always a help to if you're not already doing it.

Good luck on your journey to becoming debt free.

katy_ann

Hiya giorgio992, you need to post a new thread on the main message board as not to hijack angelmommys thread We can all offer advice to you there

angelmommy_2

I don't know the %s apart from the 2800 and 1400 overdrafts are at 18.9%

retepetsir

Well done for posting

It's really worth finding out the % interest rates in order to prioritise which to pay off first and lower your debt in the quickest possible way.

Is there any chance of lowering your 'haircuts', £25 per month seems to be quite a lot per year, £300 in fact.

You don't have to go down the bankruptcy route, a Debt Management Plan might be an option (DMP).