Slightly Terrified Newbie

ZenJen

Hi all, I'm Jen.

This post is my tentative first step in to finally conquering my 'money phobia'.

This year I'm coming up to my 33rd birthday, and my 15th Anniversary of being with my husband, but it recently hit me that I'm still acting like a teenager when it comes to my money.

It's not that I'm in danger of going under, I'm treading water...just.

The biggest problem is that I HATE anything to do with thinking about money or numbers or finances. I've never paid any national insurance despite being self employed for years. I have absolutely no plans for a pension. We're still renting our house and have never thought about saving for a deposit so we can buy one. We often get into pickles because we forget to pay bills or payments.

But worse of all, the debt (and interest payments) is piling up. We owe a horrible amount of money, most of which we accrued during our younger years (we have calmed down a bit now on the spending front!). We're still paying for our mistakes through the nose, though. Every month we lose almost £200 just in interest payments on our 5 different overdrafts.

This madness has to stop.

I figure I'm not going to sort my entire financial pickle out overnight, but clearing our debts would be an excellent place to start.

So here we go, I want to be debt free by my 35th birthday.

That gives me 2 and a half years to clear almost £14,000. :eek:

Someone please tell me I at least have a chance

Any support (and maybe a stiff brandy) much appreciated!

Jen x

FireWyrm

ZenJen wrote: »

This post is my tentative first step in to finally conquering my 'money phobia'.

Why are you phobic about it? Is it because you think you have less than you do, or do you spend more than you have, know it, and ignore it? Answer those questions and you're half way there.

ZenJen wrote: »

It's not that I'm in danger of going under, I'm treading water...just.

Then you are going under. All it takes in one simple mistake, one unexpected bill or rotten piece of luck and you are sunk. Getting control now, gets you what you want in life in very short order. The bottom line is, own every penny, know where it goes, what you spent it on and why you spent it. There are numerous tricks, but that's the bottom line. We sleep walk into debt by simply not paying attention most of the time.

ZenJen wrote: »

I've never paid any national insurance despite being self employed for years. I have absolutely no plans for a pension.

:eek:
Wow!. What are the tax implications of that as far as HMRC are concerned?

ZenJen wrote: »

We often get into pickles because we forget to pay bills or payments.

Yep

ZenJen wrote: »

But worse of all, the debt (and interest payments) is piling up. We owe a horrible amount of money, most of which we accrued during our younger years (we have calmed down a bit now on the spending front!). We're still paying for our mistakes through the nose, though. Every month we lose almost £200 just in interest payments on our 5 different overdrafts.

Yes. Your first job is to get out of the OD. The next is to figure out what your fixed monthly outgoings are (be ruthlessly honest here) and then, to figure out how much you have left out of the month after paying those. That is what you have for debt repayment. How frugal you are with the semi-fixed outgoings (like food and fuel) will determine how long it takes you to dig out of the debt.

ZenJen wrote: »

This madness has to stop.

Then stop it. It is that simple.
Grab a copy of YNAB (you need a budget), the last 3 months of bank statements, some pens, paper and a calculator and start figuring out how much you are spending and where. If you are feeling adventurous, post an SOA on here for more ideas about where and how to cut that budget down to something sensible.

ZenJen wrote: »

That gives me 2 and a half years to clear almost £14,000. :eek:

Someone please tell me I at least have a chance

Yes you do - IF you stick to a budget and make it work. No frivolities, no messing around. You have to be serious or it doesnt happen on its own.

loveka

Hello.


A piece of advice is to start paying the national insurance now, as well as backpaying the 6 years they will allow you to pay. This will cost you just under a grand now. It is SO important. Time goes so terribly quickly and before you know it you will be my age and still not paid it. How do I know? Because I am my age and plucked up the courage to call them last month! They are great, they don't tell you off, are very helpful.


Priorities change as we get older. Retirement is probably so far from your mind now, but in 12 years it will start to creep into your consciousness! If you don't pay your national insurance you wont get a state pension. pound for pound class 2 contributions are probably the best investment you can make! Please phone them and make this the priority.

iolanthe07

OP, are you talking about voluntary NI contributions? If not, you need to address this without delay. As loveka writes above, contributing towards the state pension is an absolute no-brainer.

Danni-R

We've all been there in some way or another.

But like loveka says, get it sorted now whilst you can. Post the SOA and take on board the advice and you'll soon be scooting through the debt!

asparagus1968

don't be scared, you can do this if you are determined to.
heres a link for the SOA......

http://www.stoozing.com/calculator/soa.php

ZenJen

FireWyrm wrote: »

Why are you phobic about it? Is it because you think you have less than you do, or do you spend more than you have, know it, and ignore it? Answer those questions and you're half way there.

I am phobic partly because I was so dreadful at maths at school, and because numbers genuinely make me feel a bit sick.

I guess some of that is just making excuses, though.

FireWyrm wrote: »

Then you are going under. All it takes in one simple mistake, one unexpected bill or rotten piece of luck and you are sunk.

I think this is what I'm not letting myself think about and why I've been putting my head in the sand. And yet you're so right. My husband only has to lose his job, or get sick, and we're totally, utterly, sunk.

FireWyrm wrote: »

Wow!. What are the tax implications of that as far as HMRC are concerned?

I'm pretty good with my Tax, it's just the national insurance that I've not been paying. I think it largely affects me and screws myself in terms of a pension or state benefits, rather than risking running me into any legal trouble.

FireWyrm wrote: »

Grab a copy of YNAB (you need a budget), the last 3 months of bank statements, some pens, paper and a calculator and start figuring out how much you are spending and where. If you are feeling adventurous, post an SOA on here for more ideas about where and how to cut that budget down to something sensible.

Ok, so here is my SOA


NB - Our situation has been complicated over the last 12 months by the fact that my husband got a new job in a different city, but I had several major contracts to finish before I could relocate and join him. This has led to us having to rent 2 different houses for the last 8 months, which I paid for out of my salary.

We've now pretty much relocated and only have one house and set of bills, and are living together again which is wonderful. But it also means I'm out of a job. This SOA reflects our new circumstances:

Income -

My Salary - Currently nothing as my company recently closed down as part of my relocation (also, was sick of it!). Need to look for a new job ASAP.

Partners Salary - £2,100 per month

Total = 2,100

Outgoings

Council tax = £110
Rent = £595
Gas about £60 per month
Electric about £60 per month
TV License = £12
Virgin Broadband - £30 per month
Train travel - Work & Personal related - £250 (approx)
Food - £350
Socializing (including presents etc) - £250
Misc stuff Clothes, books, furniture - £100 per month (approx)
House Insurance - £12 per Month
Interest Payments on Overdrafts - £150 per month approx
Mobile phones - £65 per month (for both)
Westfield Health insurance - £24.40

2,068.40

Debts

Halifax Overdraft on Current Account 1 - £1,100 - (paying £1 interest per day)
Halifax Overdraft on Current Account-2 - £500 - (paying £1 interest per day)
Halifax Overdraft on Current Account 3- £300 - (paying £1 interest per day)
Natwest Overdraft on Old Student account (partners) - £2500 - Paying around £30 interest per month
Barcleys Overdraft on Old Student account (mine) - £2500 - Paying around £30 interest per month
Debts to Family = £7000

Total Debts = £13, 900

FireWyrm wrote: »

Yes you do - IF you stick to a budget and make it work. No frivolities, no messing around. You have to be serious or it doesnt happen on its own.

Thank you so much for your help and no nonsense encouragement, it's so much what I needed!

ZenJen

loveka wrote: »

A piece of advice is to start paying the national insurance now, as well as backpaying the 6 years they will allow you to pay. This will cost you just under a grand now. It is SO important. Time goes so terribly quickly and before you know it you will be my age and still not paid it. How do I know? Because I am my age and plucked up the courage to call them last month! They are great, they don't tell you off, are very helpful.

I think this is very good advice.

Quite heartening to know that they don't tell you off!

Maybe I shall give them a ring on Thursday morning (I'm travelling tomorrow) just to get the ball rolling in terms of payments.

Do they let you make the back-payments in instalments, or does it have to be a one off sum?

FireWyrm

ZenJen wrote: »

I am phobic partly because I was so dreadful at maths at school, and because numbers genuinely make me feel a bit sick.

Get over it. Sorry, but you are an adult. You dont need to be a mathematician to do basic arithmetic which is all you need. You have this much money, you subtract your fixed debts and what you have left, you apportion between your debts as you see fit. If you use Excel and set up the formulas, all you have to do is plug in the data. You could use a budgeting program and I highly recommend YNAB for this purpose, once again, it does most of the legwork for you. You have to understand the questions you are asking and the answer those tools are giving, but it isnt outside the abilities of every competent adult.

ZenJen wrote: »

I guess some of that is just making excuses, though.

Yes, but you already knew that.

ZenJen wrote: »

I think this is what I'm not letting myself think about and why I've been putting my head in the sand. And yet you're so right. My husband only has to lose his job, or get sick, and we're totally, utterly, sunk.

Scary thought isnt it. You are living from hand to mouth and if you think the government is going to pick up the pieces and cosset you, you are sadly mistaken.

ZenJen wrote: »

I'm pretty good with my Tax, it's just the national insurance that I've not been paying. I think it largely affects me and screws myself in terms of a pension or state benefits, rather than risking running me into any legal trouble.

Fair enough. I work under PAYE so I never have to worry about it, but I will sooner or later because there wont be a state pension when I come to claim it. It is high on my priority list to fix.


Your SOA is nowhere near detailed enough for a solid budget plan to be in place. Use the links provided above to do a proper one. You need to be ruthlessly honest. For a start, how much do you spend on haircuts a month, clothes, animal food if you have pets, coffees, magazines etc.

ZenJen wrote: »

Income -

Total = 2,100

Outgoings

Council tax = £110 10 months or 12?
Rent = £595 Exactly?
Gas about £60 per month About? You need hard facts
Electric about £60 per month So, £120 combined? I have a three bed terrace with 3 kids. My DD is for £100 combined fuel and we will get our final quarterly bill for the year in a few days - we are set to be at least £400 in credit.
TV License = £12
Virgin Broadband - £30 per month TV as well?
Train travel - Work & Personal related - £250 (approx) Not nearly accurate enough - you need those statements. I'll almost guarantee it is way worse than you think
Food - £350 For two? I feed 2 adults and 3 children on £250 and we eat like horses. How is this managed? Weekly shopping or 'ad-hoc' down the local 'convenience' store? Those stores are only convenient for fleecing customers. Produce is 30% more expensive from one of those stores than a larger store. If you go every day or so, you can be looking at somewhere north of £500 spent on bits and bobs monthly.
Socializing (including presents etc) - £250 Yikes? Every month? This has to stop
Misc stuff Clothes, books, furniture - £100 per month (approx) So, at least £350 a month is going on stuff you dont need and probably didnt want either until you saw it in a shop...sensible?
House Insurance - £12 per Month Hmm....this is awfully slim, what do you get for this amount? Review your policy - I bet it isnt as comprehensive as you think it is
Interest Payments on Overdrafts - £150 per month approx Good god!
Mobile phones - £65 per month (for both) Review and go PAYG if you can
Westfield Health insurance - £24.40

2,068.40

Debts

Halifax Overdraft on Current Account 1 - £1,100 - (paying £1 interest per day) Right, if you ditch the frivolities and halve your food budget, you'll pay this off in two months
Halifax Overdraft on Current Account-2 - £500 - (paying £1 interest per day) Ditto, one month
Halifax Overdraft on Current Account 3- £300 - (paying £1 interest per day) Ditto one month
Natwest Overdraft on Old Student account (partners) - £2500 - Paying around £30 interest per month With your other ODs and their fees gone, you pay this off in approximately 3-4 months flat
Barcleys Overdraft on Old Student account (mine) - £2500 - Paying around £30 interest per month As above
Debts to Family = £7000

Not impressed with the interest you are paying on each of those....any chance of rolling the student loans up into a single debt? Consolidation loans can sometimes be useful, but only if you stick with it. Where they go wrong, is people spend on whatever the line of credit was as well as consolidate thereby ending up with two debts, where there was only one. In this case, these are ODs, so is there anywhere you can stash them at 0%?
Total Debts = £13, 900

ZenJen wrote: »

Thank you so much for your help and no nonsense encouragement, it's so much what I needed!

No problem. That ought to get you started.

ZenJen

FireWyrm wrote: »

Get over it. Sorry, but you are an adult. You dont need to be a mathematician to do basic arithmetic which is all you need. You have this much money, you subtract your fixed debts and what you have left, you apportion between your debts as you see fit. If you use Excel and set up the formulas, all you have to do is plug in the data. You could use a budgeting program and I highly recommend YNAB for this purpose, once again, it does most of the legwork for you. You have to understand the questions you are asking and the answer those tools are giving, but it isnt outside the abilities of every competent adult.

Firm but fair, methinks.

FireWyrm wrote: »

Your SOA is nowhere near detailed enough for a solid budget plan to be in place. Use the links provided above to do a proper one. You need to be ruthlessly honest. For a start, how much do you spend on haircuts a month, clothes, animal food if you have pets, coffees, magazines etc.

We still have a lot of stuff in boxes. But I will prioritise doing a much more detailed SOA over the next few days. Thanks for your comments on what I cobbled together thus far - especially r.e. the strategy for paying off the overdrafts. Lots of food for thought, and once you start to break it down it all becomes a bit more doable.

FireWyrm

ZenJen wrote: »

and once you start to break it down it all becomes a bit more doable.

My father once said "When eating elephants, proceed one bite at a time". Whenever I am overwhelmed or confused by the size of a problem, I say this to myself and then start from the beginning with bite-size solutions to little problems first.