Our SOA

ShiftThisDebt

Dobbibill wrote: »

Fresh eyes on a SOA are often just food for thought.

I'm glad a few of the suggestions have been helpful.

I wish you well with your debt free journey.

DB

Thanks - I just realised I forgot to comment about snowballing.

I did actually run a calculation through a snowballing site yesterday after reading about it on a threadon here and played with how much money we can throw at this debt once we've settled properly into the new house.

Depending on if we can get a 0% balance transfer will obviously have a big effect on the time it will take to pay the credit cards off, but I'm confident we can have them paid off within 2 years if we can get a 0% deal or 3 years if we can't.

ERICS_MUM

If I'm reading your SOA correctly, you should have £748.86 left over after all your expenses and debt repayments. What happens to it ?

ShiftThisDebt

ERICS_MUM wrote: »

If I'm reading your SOA correctly, you should have £748.86 left over after all your expenses and debt repayments. What happens to it ?

Hi,

Yes - basically with my wage increase this month that is an extra £300 plus my SIL is nowliving with us so that's £165 = £465 of "new money" for us.

Throughout the past 12 months our outgoings were very similar - the rent on our old house was almost the same as our mortgage is - so we had a little bit of spare cash which we saved however we had to spend that on solicitors fees for the house move.

So going forward from today, yes we will have quite a bit of extra cash each month and it is with this money I hope to slash the debt quickly!

ERICS_MUM

The risk is with any surplus "on paper" is that it disappears ! My failing is expensive cups of cappuccinos, magazines, impulse buys of posh biscuits etc. Also I take cash from the ATM instead of paying with my debit card and I get through it like water, end up having to use the debit card anyway. If I didn't curb these extravagancies I'd have no surplus left. So now I put the money away as soon as I get paid so I'm not tempted.

You might be more disciplined than I. !!

ShiftThisDebt

ERICS_MUM wrote: »

The risk is with any surplus "on paper" is that it disappears ! My failing is expensive cups of cappuccinos, magazines, impulse buys of posh biscuits etc. Also I take cash from the ATM instead of paying with my debit card and I get through it like water, end up having to use the debit card anyway. If I didn't curb these extravagancies I'd have no surplus left. So now I put the money away as soon as I get paid so I'm not tempted.

You might be more disciplined than I. !!

I think me and DW have both been guilty of exactly these things in the past. However we are better at that now, but not perfect. We both love a Costa for example!!

Neither of us had a handle on our finances until about 3 years ago when I decided to retrain which meant going back to uni. This meant money would be tight for a year or so.

I spent a couple of days negotiating the best deals I could, including saving a whopping £600+ on car insurance (NEVER EVER AUTO RENEW!!! OUCH i learnt that lesson!) We cut back on as many bills as we could and saved nearly £1000 a year.

I got such a buzz from that that I have kept a spreadsheet of our outgoings and incomings and always enjoy the challenge when its renewal time for a bill!

However it was only when I had this document that I realised just how much money we are wasting servicing credit cards. It's frustrating and actually during my year at uni we had to add more stuff onto the credit cards to get through.

However all we want to do now - and thankfully we're in a decent position to do it relatively painlessley compared to some other DFW's on here - is pay of the debt, particulalry the credit cards with all the interest on them. We don't spend on them anymore and I have managed to overpay a little bit on the barclaycards which is a small start.

DandelionPatrol

ShiftThisDebt wrote: »

Thanks - I just realised I forgot to comment about snowballing.

I did actually run a calculation through a snowballing site yesterday after reading about it on a threadon here and played with how much money we can throw at this debt once we've settled properly into the new house.

Depending on if we can get a 0% balance transfer will obviously have a big effect on the time it will take to pay the credit cards off, but I'm confident we can have them paid off within 2 years if we can get a 0% deal or 3 years if we can't.

Even if you cannot get 0% balance transfer, try to get a lower interest rate card. You can then shuffle debt to that by making your normal spends on the new card, paying monthly minimums on that card, but paying the balance on the new card off the card with highest interest. The interest you are paying is punitive and anything you can reduce that by is better in your pocket.

HappyMJ

DandelionPatrol wrote: »

It is a rule of thumb. If your unsecured debt is more than 6 months income you are well in debt and you need to take serious corrective action - eg stop sky and cut the entertainment and holiday budget. If it is 3 months then you just need to pay it off and not take out any more.

High earners could probably afford to have more debt [but if they do, you question their money management] those with limited income cannot afford so much [and if they don't have any, you admire their ability to manage].

Given that loan from your brother, you will be in serious bother if you lose an income, so I would suggest you need to take serious corrective action to reduce debt.

No more than 6 months income as unsecured debt! Where did that figure come from? I owe more than a years basic wage as unsecured debt but as the interest rates on my own debts are so low (mostly 0% and maximum 4%) it's manageable. I thought it was based on the interest. Does that mean I should attempt to increase my wage to double the value of my unsecured debt?

Just checked my own credit report I have £27,500 outstanding. Should I be earning £55,000? Is that gross salary or net which would require £82,200 gross salary to net £55,000? I actually earn £19,000 basic wages and pay £80 a month in interest. I didn't think it was that bad.

DandelionPatrol

HappyMJ wrote: »

No more than 6 months income as unsecured debt! Where did that figure come from? I owe more than a years basic wage as unsecured debt but as the interest rates on my own debts are so low (mostly 0% and maximum 4%) it's manageable. I thought it was based on the interest. Does that mean I should attempt to increase my wage to double the value of my unsecured debt?

Just checked my own credit report I have £27,500 outstanding. Should I be earning £55,000? Is that gross salary or net which would require £82,200 gross salary to net £55,000? I actually earn £19,000 basic wages and pay £80 a month in interest. I didn't think it was that bad.

Your situation is exceptional, given your interest rates are so low and perhaps for other reasons. If you are not vulnerable to interest rate rises nor to loss of income, then your situation is sustainable.

With a mortgage, which applies to OP, there is an added dimension of vulnerability to interest rate rises. You could not even argue that having a fix on the mortgage is an amelioration, unless the debt is likely to be substantially gone by the end of the fix.

OP's interest rates are significantly higher than yours and reflects the norm for people with around 6 months income. For people seeking a mortgage, especially FTB, that level of debt will significantly impact their chances of a mortgage on affordability.

The rule of thumb is entirely personal, based on observation. Some who are already living to their income on their monthly SoA are already feeling the squeeze at 6 months income as debt. Others, such as OP, can carry the debt if their circumstances remain unchanged, because on their monthly SoA, their expenditure is under control. For the latter, of course the risk is to carry on maxing out the credit, which is very tempting when the monthly SoA is showing it all works. And of course the longer people live like this, the greater their risk of an adverse change of circumstances.

OP can plainly afford the credit on the current SoA, but the vulnerability to change of circumstances means that OP should not take any comfort from your debt ratios.

cakeforbrains

Martin's definition of a debt crisis is:

1) Are you struggling to pay all basic outgoings, eg, mortgage, rent, energy bills and credit card minimums?

or

2) Are your debts (excluding your mortgage) bigger than a year’s after-tax income?

Useful article here

ShiftThisDebt

DandelionPatrol wrote: »

The rule of thumb is entirely personal, based on observation. Some who are already living to their income on their monthly SoA are already feeling the squeeze at 6 months income as debt. Others, such as OP, can carry the debt if their circumstances remain unchanged, because on their monthly SoA, their expenditure is under control. For the latter, of course the risk is to carry on maxing out the credit, which is very tempting when the monthly SoA is showing it all works. And of course the longer people live like this, the greater their risk of an adverse change of circumstances.

OP can plainly afford the credit on the current SoA, but the vulnerability to change of circumstances means that OP should not take any comfort from your debt ratios.

I totally agree with you. We can afford everything fairly comfortably right now however we do want to get rid of this debt ASAP because we don't want it hanging over us especially, as you say, because of an unforeseen change in circumstances.

To be honest I won't be looking at debt ratios. All I know is we have a significant amount of debt and we want rid of it and are committed to getting rid orbit as soon as we possibly can.