In a muddle with money - need help!

lollipop14

I accidentally put this on the diaries page and was re-directed here. I hope I now have the right place for posting!

Hi all,

This is my first post, and I'm really hoping for some help. I feel really out of control and a bit panicky about the state of our finances and I'm not sure what to do for the best to fix it.

I had a baby at the end of September and I'm currently on mat leave and earning SMP for the next few months at least. We've pretty much always been in debt but have always just coasted along making payments and not worried much about it. Up until now we've both had decent salaries, but have still probably always spent just a bit beyond our means. I've applied to go part time at work, I'll return full time in June (I'm a teacher), but will drop to 3 days/week in August. I really believe this is the best option for our family, on paper it seems as though we'll manage fine for money, but I feel like I regularly sit down and write out what I think is a realistic budget, yet we never seem to stick to it and I'm not sure where I'm going wrong.

We currently live in a 3 bed flat, but would like to move to a house. I've got it into my head that we should sell our flat, move in with my mum until we pay off our bank loan (I reckon approx 6 months), then buy a 3 bed house once we've done that. Ideally, I'd like to apply then for the help to buy scheme and move into a new build. The problem is, that we're not managing as well as I would've liked with the SMP I'm currently earning, and we've had a few unexpected expenses crop up. We don't actually have the money to pay for a home report, but I'm wondering if we should pay it using a cc or od, then pay that back once the flat sells? It does make me panic a bit to be getting even more into debt, but I feel like we need to sell the flat in order to make a decent attempt at clearing our debts, so I think the sooner we sell it the better.

I'd love to hear anyone else's advice or experience as I really am not sure what to do for the best.

Thanks in advance,

L xx

bambos

Hi lollipop

Congratulations on the birth of your little one.

You've definately come to the right place and there is a huge group of individuals who are a wealth of information on here.

Start with an SOA which will enable us (and you) to see exactly what's coming in and going out. We can then offer you some pointers on this.

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

lollipop14

Thanks bambos, I'm loving being a mum! It does make me worry 100 times more about pretty much everything though! Here's my SOA:

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1980
Partners monthly income after tax....... 550 (approx £1000 when p/time)
Benefits................................ 0 (receive CHB but put in savings for LO)
Other income............................ 0
Total monthly income.................... 2530

Monthly Expense Details
Mortgage................................ 587.1
Secured/HP loan repayments.............. 191 (personal contract hire deal)
Rent.................................... 40 (Money to pay mums mortgage)
Management charge (leasehold property).. 39.31
Council tax............................. 150
Electricity............................. 50 (not enough, currently £850 in red)
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 16.4
Mobile phone............................ 56.24
TV Licence.............................. 12.12
Satellite/Cable TV...................... 0
Internet Services....................... 7.5
Groceries etc. ......................... 300 (guess, as spend willy nilly on food)
Clothing................................ 0 (Buy adhoc when needed)
Petrol/diesel........................... 260
Road tax................................ 0 (pay £30/year on 1 car)
Car Insurance........................... 35.21
Car maintenance (including MOT)......... 0 (Don't budget for)
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0 (will be £246.50/month in August)
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 13 (Contact lenses)
Pet insurance/vet bills................. 0
Buildings insurance..................... 0 (Included in factor fee)
Contents insurance...................... 0 (Paid approx £80 for year)
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50 (always overspend!)
Haircuts................................ 12
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1819.88


Assets
Cash.................................... 0
House value (Gross)..................... 115000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 115000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 97567....(587.1)....4.74
Hire Purchase (HP) debt ...... 0........(191)......0
Total secured & HP debts...... 97567.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Loan...........................15558.....424.......4.5
CC 1...........................1703......38.84.....18
CC 2...........................1036......35........0
First Direct OD................330.66....0.........14.85
Natwest OD.....................360.48....0.........18.28

andyfromotley

Hi lollipop,

Ok well things aren't too bad, Outside of your loan you have a relatively small amount of debt totalling £4000 including your Electricity (which is a debt) Leaving you £19, 558 in total debt.

If you sell your house and move into mums you will walk away with about 15k after fees if it sells for what you want.

The most efficient way to deal with it is to then use that money to pay off your debt. Every penny you pay in interest is a penny wasted. Pay off the CC and then look to pay off the loan as soon as you have saved enough. Pay of the 0% interest over any time as its not costing you.

This will leave you with nothing, but will leave you totally DEBT FREE. A brilliant position to be in.

Now for the really good news. On that income, and your predicted wage with full time you can save MASSES, provided you stop spending so much. And i mean masses. You will see your savings accumulate really quickly. You will have to work out how much to give your mum to account for bills and food but outside of that you can live really cheaply. The key to this is to BUDGET, for EVERYTHING!!!! Given your current SOA you do not do this, theres lots of guessing, lots of blah spaces. For example, you do know that Christmas will be on the 25th Dec this year don't you? So budget for it. Your car will need serving? Budget for it. You get the picture. There are loads of tools on here to help with budgeting, i use a programme that i bought and it forces you to budget for EVERTHING. But you can save loads.

Oh by the way on your current SOA you are spending too much on food, mobiles, maybe car, birthdays, gifts etc. I say if you plan and knuckle down you could be in a very handy position in a year. Six months may be pushing it but i don't know how much deposit you need for your new place. But you must learn to live within your means or none of this will work.

Hope this helps. Good luck.

lollipop14

Thanks Andy. You're right, we definitely need to work on making a more realistic budget and sticking to it. I guess that' s what I struggle with as I always think I've budgeted for everything but it just never works out that way.

I think I rambled and my main question got lost. Is it silly to use an overdaft or credit card to pay for the home report to allow us to try and sell the flat and therefore move in with my mum?

Any other tips on how to overhaul our finances are also greatly received!

L x

kazwookie

Hi

What does this actually mean:- Secured/HP loan repayments.............. 191 (personal contract hire deal) what is a personal contract hire deal??

Also £40 to your mums mortagage, this is money you need at the moment.

Westminster

PCH / PCP is a car loan I suspect

lollipop14

Hi,

Yes the personal contract hire is car finance. It was a very stupid decision, as I'm effectively renting the car and need to hand it back after 3 years, but am tied into the contract for another 2 years. I thought about handing it back, but I think this has a negative impact on your credit rating as you're effectively then breaking the contract?

As for my mums mortgage, I know it seems ridiculous to pay it when I don't exactly have money to throw away. However, when my dad died 7 years ago my brother, sisters and I commited to paying her mortgage for her just to help her out a bit. I wouldn't feel comfortable stopping this as she's always been so amazing to us and although in the short term it's a bit painful to find the extra cash, in the long term it means more to her for us to keep paying it. Having said that, I could reduce the payment to £18 as the other £22 was a contribution to her car insurance (since she let me drive her car before I had mine) and a cleaner for her when she had her hip replaced (I was heavily pregnant at the time so doing her cleaning on top of my own wasn't really an option).

Thanks for the replies

X

andyfromotley

How much is the home report?

More good news in a way, if you were to move in with your mum you wouldn't have to pay rent (as you already pay her mortgage). Just a contribution towards bills. Lets say £200. When you are back at work you will have an income of over 3k. On your outgoings you could save a minimum of £2k per month, more if you really knuckle down.

Really its as simple as has been laid out.

1. Budget budget budget.
2. Cut out goings to the bone. (examine every outgoing and think how can i get this down to the absolute minimum? Or get rid of it totally. These forums are brilliant for advice on doing this
3. Save save save.

You can do this quite quickly. Moving into your mums is the quickest way to do this but you can still apply these principles even if you stay in your current home. Check your car contract it may not affect your credit. Speak to the company.

PinkPoppies

Although it is a lovely idea to put your child benefit away in savings for your baby I think you'd be better off throwing it at your debts in the short term- especially when you are paying 18%+ in interest on a couple of the CCs.

Once you are in a better position financially (and aren't losing money in interest) it will take you no time to build the savings back up to what they would have been.

lollipop14

It should be around £500 - 800. We were thinking we'd get a couple of estate agents out next week to get a quote and a valuation done and maybe take it from there.