1st step - need help & advise please

Needserioushelp

Hi all

I'm in my late 20's, living with partner and 2 year old, both work full time with a joint income of £50,000. This is a new pay increase for us, both starting new jobs recently which bumped our household income up by £15,000.

Our income is pretty good right? Problem is me, money literally burns a whole in my pocket, I cannot stop spending whether its clothes, things for my son or food. I've pretty much been in debt since I was about 19. It was controlled about 2 years ago and I was paying things back very slowly but in the last year its gotten out of hand. The only thing I am literally paying is childcare, car insurance. Some other things like my mobile get paid when I get cut off etc.

Our rent and council tax is so far behind that I'm too scared and embarrassed to call them, everyday when I get in the front door I dread seeing what letters have arrived and worry that one day we will get kicked out of our house or some big bailiff will turn up.

I've been looking online for advice but its so confusing, which is why I thought I would register and post in this forum hoping I will get some responses. I have seen loads on the debt management plans and IVA's? If that's correct but don't know what if any would help us seeing as a have a good income I just don't know what to do with it.

Really appreciate any feedback.

Thanks

Pixie5740

First of all don't panic. Every debt problem has a solution.

Rent and council tax are priority bills so above all others these should be paid even if that means missing payments on credit cards and loans.

A good starting point would be to put together a statement of affairs to get a handle on what you have to pay out each month. You can also keep a spending diary to see how much you spend on all those little extras which can add up to be a massive hole in your budget.

Contact one of the debt charities such as CAP UK or Step Change for help and advice. Whatever you do, do not pay a company for debt advice.

Does your partner know about the debts?

hiddenshadow

Deep breaths. There is a solution (probably several), you just need to find the one that works best for you.

Second the advice to do a SOA and especially a spending diary - once you know what you tend to purchase (and what triggers spending) you can control it.

I hope the debt charities can help and give advice. From personal experience, ignoring the debt and hoping it will sort itself out doesn't tend to work (shame, really!). Your landlord and the council surely know that you're behind on payments, so phoning them up won't mean you're "outing" yourself or turning yourself in. It may be embarrassing to do, but if you can agree a payment plan with them then you don't have to live in fear of eviction/bailiffs. (And worst case if they won't agree to anything that works for you, at least you know in advance and can prepare.)

If you've just gotten a pay rise of 15k - congrats! You've been managing to survive on less than that up to now, so you should be able to use the extra pay to catch up on bills/debts and get ahead. It may take some time, but you've spent a decade (or close to it) getting into/staying in debt, so slow and steady will get you out of it.

Needserioushelp

Hi Pixie5740 & hiddenshadow, thanks for your advice.

My problem is I don't know how to begin filling out the SOA. I haven't a clue how much I should pay each company monthly let alone how much the outstanding balance is. Obviously I should be paying them more to pay for current use and to clear the balance if you know what I mean.

My partner does know, not fully but he is aware. I would love if he took control of it because he doesn't spend money like me. He will literally use his card for petrol in the week and that's it.

I am a council tenant and feel like they haven't picked up on the rent arrears, if they had they would have written a long long time ago, same with council tax.

Will one of these helplines actually help or will they just ask me all my outgoings etc?

Pixie5740

The debt charities will help you and can suggest solutions such as a DRO, DMP, IVA, whatever is best suited to your particular situation.

You do need to have an idea of income and expenditure though. That's where the SOA comes in. Look at your last 12 months of bank statements and bills to get the figures.

How do you treat finances in your family? Do you have separate bank accounts? A joint account for joint bills such as rent and council tax? Do you assume responsibility for the household finances?

Even if he is not aware of the extent of the debts does he at least know that the rent and council tax are in arrears.

asparagus1968

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


fill in the above, you won't be able to do all of it straight away, keep plugging at it until you have a full picture of whats' what.
post in on here if you can, we've all been in/still are in debt to some extent so pass on our ideas/experience.


Really think you need to look at the council tax as I think that is one of the ones that can get you into trouble.


Get everything out in the open with your partner-you are a team!


good luck

hiddenshadow

Needserioushelp wrote: »

My problem is I don't know how to begin filling out the SOA. I haven't a clue how much I should pay each company monthly let alone how much the outstanding balance is. Obviously I should be paying them more to pay for current use and to clear the balance if you know what I mean.

I would ignore that bit for now and focus on all your other spending. Once you know how much you have left once your living expenses are covered, then you can begin to deal with debts and paying them back. It's no good assuming that you have to pay £100/mo only to figure out that once you add everything up you're overdrawn by £250/mo.

The debt charities should be able to help with this, but even if you just have your income/expenses, that'll be a big step. For example, say you have £200 left over once you pay everything in a month. If you owe 4 separate amounts, you now have the information to offer them £50/mo against the balance - or a different amount if it makes sense to spread it out proportionately, or if something like council tax/rent is a much bigger priority than anything else. Unless/until you communicate with them and explain your situation, they're going to assume that you're just frittering your money away on lotto tickets and you could pay whatever they decide your payback amount should be.

Lenders would much rather get their money back (either in part, or in full but much more slowly) than have to chase you to get it. They may even agree to a nominal payment (say £5/mo) to show that you're attempting to pay back in good faith until you can get things sorted out and work out a proper payment plan.

My partner does know, not fully but he is aware. I would love if he took control of it because he doesn't spend money like me. He will literally use his card for petrol in the week and that's it.

A few things I've found that help limit spending (does require you to act like your bank money is the ONLY money you have/will ever get, and thus you can't use a credit card or overdraft):
- set up direct debits as close to pay day as possible so that the money leaves your account before you spend it. I have mine set up on the 1st/2nd of the month as DH and I get paid towards the end of the month (but not on a guaranteed day)
- text alerts about balances. You could have a bank account that is ONLY for monthly living expenses - once you know what those should be, put that amount in the account at the start of every month and have text alerts when the balance gets below certain thresholds - once you get the alert that you have (say) £50 left in the account, no unnecessary spending (e.g. beyond food/work transport) until the next month
- envelope system. Some people use cash in envelopes (£50 in the grocery envelope, £20 in the transport envelope, etc); we've had great success with budgeting software called You Need A Budget. It sets up virtual "cash envelopes" so that you don't need the physical cash (can pay with a debit card/bank transfer/direct debit/cash), but it still keeps track of what you've spent in the month and lets you know how much you have left to spend. If you've set aside £20 for clothing this month and you just spent that in a sale, you know that there's no point entering a clothing store until next month as your budget is used up
- freezing credit cards (literally). A lot of people are wary of cutting up credit cards (what if there's a genuine emergency?) but a trick I've used is to put them in a tin, fill with water, and put in the freezer. It's still there if you desperately need the card, but as it will take several hours to thaw you can't just grab it and buy something spur-of-the-moment.

I am a council tenant and feel like they haven't picked up on the rent arrears, if they had they would have written a long long time ago, same with council tax.

They may not have acted on it, but you must be on a report somewhere. You could be in a long backlog of tenants they need to communicate with, or it might be a backlog of 1 and they could show up today. Point is you won't know until you talk to them. (The chances of them just not noticing no rent or council tax payments seems pretty nonexistent though!)

Good luck - I know it seems overwhelming, but you can start with small steps (like identifying income/expenses) and then move forward. Every step you take (no matter how small) in the right direction is progress - and (for today) even stopping moving in the wrong direction is a brilliant start.

sourcrates

I would sort out your rent and council tax arrears first.
Any unsecured personal credit can wait, the council will pick up on your arrears, and they have a tendency to instruct bayliffs pretty sharpish.

Priority debts must come first, otherwise you may find yourself in a lot of trouble.

Needserioushelp

Thank you everyone for your comments, I have a lot to do and think about over the weekend, I need to learn to change my whole mindset on money. Buying clothes and coffees etc I just don't need to do it.

-taff

Have a look at this page, and use the demotivaor tool to see how much you really spend on coffees, clothes etc, it can be a bit frigthening if you tot it up over the year....
http://www.moneysavingexpert.com/family/stop-spending-budgeting-tool