Am I in too much debt?

Mikaelo

Hi, thank you for reading.

I've been trying to find out online if i'm in too much debt for what i earn/ how best to deal with it but am coming across a lot of bad advice from debt management companies who i can only assume want my/ the banks money.

I've never been too good with money and have since the age of 18 (i'm now 30) always spent more than i've earned.

This now totals to around £20'000 and my payments to the bank/credit card companies are £436.00 per month. the rest of my bills including rent, child maintenance, mobile phone etc take my outgoings before food to £1053.30.

I take home a basic salary of £1500.00 per month but can sometimes earn bonus depending on our department profit which can be between £0 - £500.00 in which case after tax as best possible scenario is £1900.00.

Am i being a drama queen, or is £400.00 'disposable' income normal? obviously if i earn maximum bonus it's easy enough but i definitely feel the pinch if i dont which at the moment is most months.

I guess i'd just like some advice from real people without hidden agendas so any comments would be greatly appreciated.

thanks again.

Tixy

Hi and welcome to the forum

Well I would say that is quite a high level of debt for your income. However the fact that you can afford your minimum payments suggest that you are not in the territory of needing to consider a DMP/wrecking your credit file.

In terms of the disposable income - what does that need to cover? have you already budgeted for things like food and travel costs etc? or do they all need to come out of that amount?

I would try to work out what your true disposable income is after budgeting for all known costs - we suggest using the statement of affairs template as that reminds you to budget for costs that don't necessarily happen each month (e.g things like insurances/presents etc). http://www.stoozing.com/calculator/soa.php

At the moment have your debts been increasing or decreasing over the last 6 months? if increasing then it sounds like you are still spending more than your income and will need to make some changes. If you do decide that you may need to consider a DMP you can get free impartial advice from one of the debt advice charities.

If its decreasing then perhaps just have a look at some of the areas you may be able to cut back so that you can throw a bit extra towards your debts each month and become debt free sooner.

I'd try to work your budget so that it balances without any bonus. Then on the months when you do get a bonus you will know it is spare to put towards the debts.

Sedge123

I would of a soa to identify exactly how much spare you have at the end if the month and then keep a spending diary to identify exactly exactly where all the spare is going. Hopefully you can then identify where you cs. Cut back and divert the money towards the debts.

Katzen

I have about £550 a month left over, from which I pay £135 into savings to cover things like car expenses and Christmas and around £100 towards our food/pet costs account. £400 would be a bit tight and would mean no booze in the shopping trolley and not much going out, certainly not spending much when I do, but it's do-able for me and how I live my life.

tallyhoh

I believe you are in too much debt if you can't pay then should you be made redundant tomorrow.

Sazzie23

Good point Tallyhoh

Redundancy, unexpected accident and illness have brought many a debtor to their crisis point....

I found some figures at one time which sort of explained what percentage of debt v income lenders considered appropriate, 18% springs to mind but I cant actually recall the exact calculation.

My advice, if your debt is going up, bring your spending down !

quantic

Its difficult to say what is normal in terms of disposable income, I earn a similar amount to you and my disposable is £950 but I live very frugally, I don't buy much, have the cheapest SKY package and a £10.50 per month mobile phone...

If I wanted to I could easily justify buying more expensive things or wasting money because its what others I know do, I could afford it (as in I could physically make the payment) and it would be seen as normal. To be honest though, I prefer to save.

Some people feel empowered by buying the latest thing, by wearing the latest clothes, by "treating" themselves - there is nothing wrong with that if it makes you happy. Personally, I feel empowered by not owing a penny except my mortgage and having a savings safety net behind me. I'm prepared to sacrifice some of the shiny things to get this.

Whats normal might not be right for you. So instead of asking that, I'd probably ask, does your lifestyle make you happy?

bargainbetty

Personally, I would look at your debt as a percentage of your overall annual income. Not allowing for mortgages or student loans (good debts), I would be worried if my total debt was higher than my annual salary after tax. If your basic is £1500 per month, which calculates to £18k pa. You say your debt is approx £20k.

It's only my opinion, you can ignore it, but I would say that for your income, yes, you have too much debt. If you can look into shifting some of the debt onto lower rate interest cards and throwing every spare penny at them to bring them down, I'd seriously consider starting now.

Good luck, whatever you do