Best way to use this money

getmeouttahere

My wife and I have been given a financial gift to the sum of £5000 from my mum which was intended to help us finish renovating our house. Instead, we want to use this to try and make a dent in our debts to help us keep afloat.

Our current minimum monthly payments are in the region of £800 per month more than what I get paid so part of me says to concentrate on the highest monthly payments.

Our SOA is below so please can anyone suggest the best way to use the £5000 please?

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 0

Monthly Income Details
Monthly income after tax................ 1550
Partners monthly income after tax....... 0
Benefits................................ 86
Other income............................ 0
Total monthly income.................... 1636

Monthly Expense Details
Mortgage................................ 611
Secured/HP loan repayments.............. 222
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 135
Electricity............................. 50
Gas..................................... 50
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 15
Mobile phone............................ 80
TV Licence.............................. 12
Satellite/Cable TV...................... 30
Internet Services....................... 30
Groceries etc. ......................... 80
Clothing................................ 0
Petrol/diesel........................... 120
Road tax................................ 10
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
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..................... 22
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1487


Assets
Cash.................................... 0
House value (Gross)..................... 180000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 180000


Secured & HP Debts
Description....................Debt......Monthly.. .APR
Mortgage...................... 134000...(611)......2.79
Hire Purchase (HP) debt ...... 8100.....(222)......??
Total secured & HP debts...... 142100....-.........-

Unsecured Debts
Description....................Debt......Monthly.. .APR
Capital One CC.................768.53...27.37.....34.9
Capital One CC.................722.41...25.00.....34.9
Vanquis CC.....................2774.90...116.24.....39.9
Vanquis CC.....................1500.00...76.00.....39.9
Aqua CC........................1489.66....63.69.....35.9
Aqua CC........................1736.71....85.11.....35.9
Barclays Loan..................2364.74......144.3.....4.3
Jacamo.........................1364.76...71.93.... .34.1
Woolworths.....................387.04....41.02.... .39.7
Very...........................793.85...44.98.... .44.9
Very...........................2550.16...71.22.... .44.9 (£1600 of which is interest free til March 2015)
Littlewoods....................1398.37....122.82.... .0
Littlewoods....................1219.92....80.08.... .0
Nationwide CC..................2470.00......40........0
Barclaycard CC.................391.17....8.6.......34.9
Total unsecured debts..........21932.22..1018.36....-


Monthly Budget Summary
Total monthly income.................... 1,636
Expenses (including HP & secured debts). 1,487
Available for debt repayments........... 149
Monthly UNsecured debt repayments....... 1,018.36
Amount short for making debt repayments. -869.36

Personal Balance Sheet Summary
Total assets (things you own)........... 180,000
Total HP & Secured debt................. -142,100
Total Unsecured debt.................... -21,932.22
Net Assets.............................. 15,967.78

lizzy23

This is just my opinion, at nearly £900 short a month, and 22k of unsecured debt i would use the 5k for what it was intended, and speak to one of the debt charities, could your wife not get a job to up your income, the only thing that stands out as expensive on your SOA is the mobile phones,, you must be getting deeper and deeper in each month, good luck with what ever you decide to do

19lottie82

I agree, from what you have posted, your debt is only going to get worse. You need to speak to a debt charity.

Also, I don't think that's all your spending every month. Less than £20 a week on all food / drink and household items for 2 people?

No birthday or Christmas presents, or entertainment, ever? Same with haircuts and clothes?

Tixy

How are you managing repayments at the moment? However you use it you will still have a significant shortfall each month.

What is the plan after you have used it to clear some debt? how will you make repayments? are you going further in to an overdraft each month? or borrowing funds from credit cards etc?

I would seriously consider speaking to one of the debt advice charities. If the debt is split between 2 people then it may be sensible to use the money to clear the debt in one person's name and for the other to enter a DMP or some sort of debt plan.

moohound

Hello and welcome to the forum.

If you paid off £5000 worth of the debts with the highest interest you would still be short each month and how would you find the shortfall?

You would be back in the same situation in a few months time, having spent the £5000 and being no better off.

Have you been living on credit cards for a while? A lot of the cards are on twice, do you have one each?

If it was me I would call StepChange and arrange a DMP, use £4000/£4500 to pay off the creditors which might give you the most trouble with not stopping interest and keep £500/£1000 as an emergency fund. A DMP would take over 10 years to clear at £149 a month, this is a long time. The other solution is if your partner gets a job if at all possible.

Looking at the SOA, the mobiles are high and the food shopping is really low, do you really only spend £80 a month on food?

You have also put on diesel and road tax, but not maintenance, but at the top it says you don't own a car.

Good luck with it.

getmeouttahere

Thanks for all the advice so far.

At the moment my wife is unable to work due to disability (she gets DLA but only at £86 per month).

I understand what you are saying when you say to use the £5000 for its intended purpose but I don't want to neglect our responsibilities and if there's the slightest chance of getting out of this hole, I'd rather do that than have the house finished and still be having sleepless nights worrying about finances.

I filled in the debt remedy form on the StepChange website and they wouldn't let me put just £80 per month for food (they recommend something like £180 minimum), so they calculated that we had zero money each month to pay unsecured debts. They advised a Token Payment Plan of £1 per month to each creditor but said that each creditor would still add interest to the debts so this isn't something I'm keen on doing.

If we really had to, £80 per month on food is doable (89p Iceland ready meals, etc).

Up to now, we have been selling possessions to meet monthly payments but we are at the point now that we have nothing left that we can sell.

The thing I keep thinking is that if I use the £5000 to clear say the Barclays Loan (at £144 per month) and say the highest balance Vanquis CC (at £116 per month), that's £262 per month less that we have to find.

leicestersq

My advice here would be to give that money back to your mum. Tell her you are grateful, but that you have a debt problem, and you need to resolve it first.

If you have that cash, then it may become available to the creditors to seize.

I would seek advice on dealing with the debt, and going into some sort of debt management plan. Others will advise which is the best to go for.

lizzy23

getmeouttahere wrote: »

Thanks for all the advice so far.

At the moment my wife is unable to work due to disability (she gets DLA but only at £86 per month).

I understand what you are saying when you say to use the £5000 for its intended purpose but I don't want to neglect our responsibilities and if there's the slightest chance of getting out of this hole, I'd rather do that than have the house finished and still be having sleepless nights worrying about finances.

I filled in the debt remedy form on the StepChange website and they wouldn't let me put just £80 per month for food (they recommend something like £180 minimum), so they calculated that we had zero money each month to pay unsecured debts. They advised a Token Payment Plan of £1 per month to each creditor but said that each creditor would still add interest to the debts so this isn't something I'm keen on doing.

If we really had to, £80 per month on food is doable (89p Iceland ready meals, etc).

Up to now, we have been selling possessions to meet monthly payments but we are at the point now that we have nothing left that we can sell.

The thing I keep thinking is that if I use the £5000 to clear say the Barclays Loan (at £144 per month) and say the highest balance Vanquis CC (at £116 per month), that's £262 per month less that we have to find.

But you'd still be £600 per month short and have 17k of unsecured debt,, to be perfectly blunt,,, you are sinking fast,, and i don't think you've had your LBM yet, with that shortfall you would be 7k further in debt in 12 months time, so all you've done is bought yourself 8months grace, i would take step changes advice and just pay the £1 they won't add interest for ever,

getmeouttahere

lizzy23 wrote: »

But you'd still be £600 per month short and have 17k of unsecured debt,, to be perfectly blunt,,, you are sinking fast,, and i don't think you've had your LBM yet, with that shortfall you would be 7k further in debt in 12 months time, so all you've done is bought yourself 8months grace.

I know we're sinking fast, that's why I am here asking for help. StepChange has recommended a Token Payment Plan rather than a DMP. I don't understand that as the debt will forever be increasing if I'm only paying £1 a month but interest is piling up.

lizzy23

getmeouttahere wrote: »

I know we're sinking fast, that's why I am here asking for help. StepChange has recommended a Token Payment Plan rather than a DMP. I don't understand that as the debt will forever be increasing if I'm only paying £1 a month but interest is piling up.

but you can't afford to pay it so does it really matter,,,,,,,,,,,, my sister in law was in a similar position and has been paying £1 to her creditors for as long as i can remember,,, at the end of the day they're right you dont have any spare money

getmeouttahere

lizzy23 wrote: »

but you can't afford to pay it so does it really matter,,,,,,,,,,,, my sister in law was in a similar position and has been paying £1 to her creditors for as long as i can remember,,, at the end of the day they're right you dont have any spare money

But I don't get the mentality that it's better to pay £1 per month while the interest increases by £60+ per month than to try and come to an arrangement with creditors to freeze interest (which so far StepChange haven't mentioned).