Considering DMP - SOA advice please

AliceBanned

HappyMJ wrote: »

Part of the point of my post is that it isn't on your SOA. You have £2,040 of income written down yet haven't made provision for your pension contributions and then state in a further post your income is now only £1,919. Accuracy with the SOA is very very important. If you are showing an excess my advice is as it stands to make your minimum repayments and do everything possible to avoid a DMP but if you are showing no excess then the advice is different.

If you do go onto a DMP you could find your mortgage interest will increase by much more than the £310 a month that you are saving by making £90 of contributions so it's important you avoid a DMP. You're on a very good rate of 1.99%. When that expires you won't be able to remortgage with a DMP and will be at the mercy of whatever the bank wants to charge you which is usually the SVR at 4.5%.

I agree about the accuracy - it is something I struggle with. Being vague makes it easier to squander money.


Good advice on the DMP. I think SC were a bit keen on encouraging it to be honest but my gut feeling was try to avoid at all costs. Now I'm finding I have more money than I thought and can cut down more than I thought. I'd rather sell my car than go on a DMP..I can get to work without it but it would cost me more, and I can't do much else without it as I live in a semi-rural area. Think I could go without for 6 months though if I decide to sell it - just get a moped or something.

AliceBanned

PS my mortgage was on 5.89% until 1st August this year. :eek:.


I was a FTB and it was that or nothing. So things have improved..silly to go on a DMP after all that hard work.


The value of the property has also risen by £15k - my shared ownership bit alone. I think this is what tempted me into overspending - oh my property is there as a backup but now I realise that was silly and slightly dangerous.

HappyMJ

AliceBanned wrote: »

PS my mortgage was on 5.89% until 1st August this year. :eek:.


I was a FTB and it was that or nothing. So things have improved..silly to go on a DMP after all that hard work.


The value of the property has also risen by £15k - my shared ownership bit alone. I think this is what tempted me into overspending - oh my property is there as a backup but now I realise that was silly and slightly dangerous.

Although your share is worth £78,000 on paper I really wouldn't put that figure down on the SOA. A shared ownership property is much more difficult to sell. It also makes your net worth look higher than it actually is. I'd stick with the last valuation you received and deduct 10% to account for selling costs....so maybe £70,000 or even less. Sometimes you need to make it look like it's really bad and you have no net assets so the SOA scares you into spending less each week. At the moment your SOA actually looks quite good and comfortable, by the sounds of it it's not really.

AliceBanned

HappyMJ wrote: »

Although your share is worth £78,000 on paper I really wouldn't put that figure down on the SOA. A shared ownership property is much more difficult to sell. It also makes your net worth look higher than it actually is. I'd stick with the last valuation you received and deduct 10% to account for selling costs....so maybe £70,000 or even less. Sometimes you need to make it look like it's really bad and you have no net assets so the SOA scares you into spending less each week. At the moment your SOA actually looks quite good and comfortable, by the sounds of it it's not really.

I know what you are saying but I happen to have bought a flat five mins' walk to a mainline station - 25 mins into London so it really is a bit of a bubble - even shared ownership. The flats in my block - SO or not - have recently sold within 24 hours with a queue of people at open days. That is why on balance I risked buying a SO property - I wouldn't have bought just any old one as I know they can be hard to sell. I will put a conservative figure down though but Zoopla is not too far off. Other websites value it even higher.

AliceBanned

HappyMJ wrote: »

Although your share is worth £78,000 on paper I really wouldn't put that figure down on the SOA. A shared ownership property is much more difficult to sell. It also makes your net worth look higher than it actually is. I'd stick with the last valuation you received and deduct 10% to account for selling costs....so maybe £70,000 or even less. Sometimes you need to make it look like it's really bad and you have no net assets so the SOA scares you into spending less each week. At the moment your SOA actually looks quite good and comfortable, by the sounds of it it's not really.

Not all SO properties are difficult to sell. The ones in my block typically go within 24 hours and we keep getting leaflets begging us to put them on the market. It is five mins' walk to a mainline station, 25 mins into London. In this climate I think that is a conservative valuation. I happen to have bought in the home counties in an area that was not in a bubble, so it was a good price two years ago and now that London is impossible for so many people the bubble is moving out.


I know what you are saying about making it look worse though to discourage spending and will bear that in mind. The mortgage lender also valued it at £78k when I shifted products a month ago.

AliceBanned

Sorry I thought the first response had disappeared and not been posted! Didn't mean to repeat the same thing twice more or less!:D

foxgloves

Hello Alicebanned,
Well, you sound rather like how I used to be years before the LBM, when I lived on my own in a city. I earned less than you are earning now, but it was still sufficient to live on plus have treats, etc. However, I never ever budgeted & always overspent my monthly income. Every so often, mostly when I was aware that the cashpoint might say 'Insufficient funds' & spit my card out, or it might be refused at the till in the supermarket, I would decide I needed to tackle the debts. I would have a burst of enthusiasm for a while, cutting back on food (I'm a good cook, so no problem making frugal meals from scratch), buying own brand toiletries, etc, & doing free stuff with my leisure time. Then I'd work out I was still going to be really overdrawn that month too, & it was all going to take ages to clear & I'd get disillusioned and revert back to my old spendy ways. I lived like this between the age of 19 & my mid-40s, before the LBM well & truly struck.
The truth is (& I know you know this) is that debts don't occur overnight & once they have got to a certain size, they take time to pay off. Instead of looking at the overall figure & thinking 'I still owe £XXXX', you need to celebrate small goals in what you've paid off. Some people actually make a physical chart marked into £100 squares & cross off each £100 as they pay it off.
Back when I had lots of debt, I developed a mindset that I needed to pay it off in large chunks as small payments wouldn't be worthwhile, but when I finally got a grip on things & truly learned to budget, changed tack & kept telling myself that every £ saved was another £ freed up to throw at the debt. I applied this everywhere.......from using the '99p Shop' for everyday toiletries to making an extra portion of dinner to freeze for a free meal another day. I sold lots of things on ebay & however small the item, every £ earned went into the debt. Meal planning & shopping strictly to a list cut loads off grocery spending and making a packed lunch each day & cutting down drastically on bought coffees when out & about was another saving. I'm sure you probably do all these things. My point is that unless you suddenly come into a windfall or secure a very well paid job, the debt is not going to disappear as quickly as you'd like it to, which means that the only way you can get rid of it IS hard slog. I agree that camping is an affordable holiday - we do it a lot to help us remain debt-free, it's fun & it's cheap - but it may be that you need 2 or 3 years of really putting every spare penny into debt repayment. It is good to get away every year, but does it make you feel better psychologically than getting rid of that debt a bit quicker?
As someone that didn't have a true LBM until her mid-40s, I can't stress enough how much I wish I'd done it earlier. The stuff I spent money on didn't result in me being any happier than I am now, living a simpler, but entirely debt-free (apart from the mortgage, of course) life.
Oh, & I just wanted to say about catalogues & companies which suck people in with 'Interest free credit'. Next time you see that on a leaflet, a catalogue or a sign in a shop, mentally re-write it as 'Interest free debt' because that's what it is. It's another debt. 'Credit' is too positive a word for adding another sum to your monthly outgoings.
Good luck with it. It IS doable if you really put your mind to it & don't deviate. The only person you're hurting if you keep flip-flopping on & off the debt-slaying-wagon is yourself. I know, because I've been there!
f x

AliceBanned

Thanks foxgloves. My salary has typically been a lot lower than it is now - £10k lower for a long time but I've been in this job for 7 years and built it up. Also we have been lucky as they have recession-proofed our salaries even though it is in the not for profit sector. On the down side I don't like my office that much and would like a change of career - but hey ho, for now repaying the debt must take priority, at least for a few months, over that.


I've just had beans on toast for lunch and am going to do some slow cooker recipes. I can cook quite well from scratch too so there is no excuse.


I actually preferred camping to sleeping indoors, it is fun isn't it?!:).


I am not sure whether this is a LBM because I have that habit of flip-flopping but I think it has to be really, otherwise the debts won't go away as you say. . It is staring me in the face as I have been on holiday and now struggling, but I need to keep this awareness when things loosen up a bit rather than thinking credit is money to spend. I think for me the best thing is to try to close as many accounts as possible. I am not sure whether Barclaycard etc would allow this whilst I have a balance. Not really necessary for me to go into an 'arrangement to pay' but I had to cancel the DD due on Barclaycard in 8 days' time in case the funds from my refund aren't in the account by then.

rockm87

Get something big and visual and stick it to the fridge!

your goal..

...or your debt...I've seen people colour in a new box everytime they pay off £50....

having something to remind you every day keeps you focused, and keeps you motivated.

foxgloves

I was the classic 'flip-flopper'....each time I'd think 'This is it', but it never was, as I'd make excuses for spending money & quickly go back to my old ways. Have you read my signature? My debt-free mantra really helped me (well, us, as I acquired a similarly indebted non-budgeting husband along the way!) & I still carry it around in my head if I think I might be tempted. The truth is that I don't think I could go back to how I used to be, & my husband feels the same way) because our lifestyle hasn't changed all that much. We still have most of the things we want, but we save for them instead of diving straight to credit so we can have them immediately. My debts started as a student. Back then, my Mum used to say 'You can't spend what you haven't got'. Of course you can, for a while, as there are so many streams of credit, but it's only temporary, because Pay-back time is lurking just around the corner & it can't be held at bay for ever. Look at it as a challenge. Ultimately, it's that old adage spouted on many a training course - 'The definition of insanity is doing the same thing, but expecting different results'. Carry on flip-flopping or truly take on your debts. The choice is yours. No-one can have your LBM for you, you have to be committed, but it sounds to me like your LBM is starting to stir. Could this be it? Hope so!
f x