DFW Debt_Denier

Debt_Denier

Okay so here goes, I put this in debt free diaries but perhaps it belongs more here.
OH and I have well paid jobs. We have a reasonable sized mortgage and 2 primary school aged children.
Total debt:
Car loan £5267.24 paid monthly £232.53 just under 2 years to go @4.4%
CC1 £705.84 balance this month cleared in full each month
CC2 £265.68 as above
CC3 £2423.29 @ 0% which finishes in July 2016
Mortgage £98700 on 2.49% fixed rate to June 2016 we have looked around and should be able to get 1.79% with £999 fee when we remortgage.

The majority of the debt was racked up when OH changed jobs last year meaning I had to cut my hours quite a bit to accommodate his new commute and he needed newer car. I reduced my income by about 40% but we didn't change a thing. I am now back up to full time so we are back on an even keel but we learned nothing so we need to get out of denial. We have never made a late/missed payment on anything but we still spend every penny we earn.

Is this the right strategy?
The plan is to clear CC1 and CC2 at the end of this month and keep them for emergencies and big purchases but keeping dd at 100%
Then clear CC3 and cut it up at the end of April.
The next thing OH wants to do is overpay the car loan as quickly as possible and then start overpaying the mortgage @£500 per month and save £500 per month.
He has read on here a post about not saving when you have debt but we have no savings at all...well £5 in an ISA.
We do both buy AVCs for our final salary pensions and I think of that as long-term savings. We can't access until we retire.

Debt_Denier

I've done our SOA. Very embarassing we really should have money:
Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2067
Partners monthly income after tax....... 1843
Benefits................................ 137.6
Other income............................ 0
Total monthly income.................... 4047.6

Monthly Expense Details
Mortgage................................ 676.5
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 136 - based on my guess for 16/17
Electricity............................. 51
Gas..................................... 40
Oil..................................... 0
Water rates............................. 49.98 based on my guess for 16/17
Telephone (land line)................... 31.4 all family overseas so have to have landline. Also includes broadband
Mobile phone............................ 49.98
TV Licence.............................. 12.12
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 600
Clothing................................ 100 - no idea to be honest i don't buy much but children forever outgrowing clothes/shoes
Petrol/diesel........................... 120
Road tax................................ 0 - new and efficient car
Car Insurance........................... 43.5
Car maintenance (including MOT)......... 26.5 still under warranty but will need tyres etc soon
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 180
Other child related expenses............ 144 (sports lessons for 2)
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 16.6 (includes contents)
Contents insurance...................... 0
Life assurance ......................... 22.88
Other insurance......................... 4 (travel)
Presents (birthday, christmas etc)...... 100
Haircuts................................ 25
Entertainment........................... 0 no idea but this must be where money is going
Holiday................................. 250 all family overseas so have to travel to them
Emergency fund.......................... 0
newspaper subscription.................. 5
netflix................................. 5.99
save for children....................... 60
political party membership and union.... 24
gym..................................... 29
Total monthly expenses.................. 2803.45


Assets
Cash.................................... 0
House value (Gross)..................... 185000
Shares and bonds........................ 0
Car(s).................................. 8000
Other assets............................ 0
Total Assets............................ 193000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 98700....(676.5)....2.49
Total secured & HP debts...... 98700.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
CC1............................706.......20........16
cc2............................266.......20........16
cc3............................2423......25........0
car loan.......................5267......232.5.....4.4
Total unsecured debts..........8662......297.5.....-


Monthly Budget Summary
Total monthly income.................... 4,047.6
Expenses (including HP & secured debts). 2,803.45
Available for debt repayments........... 1,244.15
Monthly UNsecured debt repayments....... 297.5
Amount left after debt repayments....... 946.65 this is the £1k we think we can save 500 and Overpay mortgage £500 once we get rids of debts

Personal Balance Sheet Summary
Total assets (things you own)........... 193,000
Total HP & Secured debt................. -98,700
Total Unsecured debt.................... -8,662
Net Assets.............................. 85,638

gettingtheresometime

Do you need 2 cards for emergencies?

My experience is that if you keep a cc 'just for emergencies' there's a little voice in your head that keeps reminding you that you've got and aren't you worth a little treat now and again?

Also if you're not spending on cc3 cut it up now otherwise the temptation might be for you to keep that for emergencies also.

Debt_Denier

gettingtheresometime wrote: »

Do you need 2 cards for emergencies?

My experience is that if you keep a cc 'just for emergencies' there's a little voice in your head that keeps reminding you that you've got and aren't you worth a little treat now and again?

Also if you're not spending on cc3 cut it up now otherwise the temptation might be for you to keep that for emergencies also.

Good advice re CC3. Will do that. I have never actually taken it out of my purse to use. It was a cash advacne when I was first part-time and we were very stuck as we had already booked aholiday with family and couldn't back out but I will cut it up to be safe. I thought it made sense to have at least one CC in the family for emergerncies but I know you are right. A bit scary to chop them all up when we literally have no savings so no back up. Maybe I will chop up 2 and 3 now and get them to massively reduce the limit on CC1. I think the limit is about £13k at this stage.

tallyhoh

£600 on groceries, is this just food & household stuff or are there cigarettes etc? its an awful large amount

Debt_Denier

tallyhoh wrote: »

£600 on groceries, is this just food & household stuff or are there cigarettes etc? its an awful large amount

No cigarettes although I must confess to the odd bottle of wine at the weekend. Thats our cash for the month I suppose. I use it to buy food, toiletries, school dinners, the very occasional trip to the cinema, days out... anything we need to have to cash for.
So everytime (and it is very oftern) my children need a couple of pounds for school it comes out of this pot. The thing is that is the money I think of us as having to spend so we spend it.

tallyhoh

Perhaps a spending diary is the way forward. you can see the areas where you could cut down out of £600. Also gym, sport lessons & political party membership, any way of getting these cheaper or even cutting out. Does your local college do any of the sports activities?

Debt_Denier

tallyhoh wrote: »

Perhaps a spending diary is the way forward. you can see the areas where you could cut down out of £600. Also gym, sport lessons & political party membership, any way of getting these cheaper or even cutting out. Does your local college do any of the sports activities?

I keep meaning to do a diary but I always forget after about 2 days.
I have to confess I can't give up the party/union they are my identity and my social life.
The gym is pretty cheap and gives me free parking in town and free swimming for the children (I pay for lessons in a different pool but this is a fun pool with slides etc)
I think the children's sporting acticvities could be reduced. Would have to think about that though and I have to admit I am not keen

crazy_cat_lady

As tallyhoh says - a spending diary will really highlight where the cash is going.
When I first started I was horrified how much I was spending (and wasting) on food and groceries. It's still my biggest weakness now although I can get by on less than £300 a month easily.
I have 2 kids that do 4 sports clubs between them at a total cost of £72 per month - I don't know if that's particularly cheap or yours are particularly expensive.

triple_choc_chip

Well you have learned something and that is that you cannot manage when one income drops by 40%. It is lucky it was temporary and as such a useful event to give you reason to re-focus. Spending every penny each month is clearly not the way to go.

I would separate budgeting from savings: the things you have identified that cost during the year but not every month, clothes, holiday, xmas, water rates, TV licence? Add up and divide by 12 and squirrel this in an instant access account. That's going to account for about £400 a month.

With interest rates on mortgages so low it may be better to save an emergency fund equal to six months of the higher net pay first, which would enable you to ride out any future periods of a drop in income and not incur debt.

Only once you have this in place would I advise you to overpay the mortgage. If you do qualify for a lower interest rate this summer perhaps consider keeping payments the same as now and decreasing the number of years left to pay?

triple_choc_chip

Debt_Denier wrote: »

I keep meaning to do a diary but I always forget after about 2 days.

Keep it really simple. I keep a pocket diary in my handbag and record my spends in the evening usually whilst cooking dinner. At the weekend I write totals at the bottom of the page for food, toiletries, parking, fuel, kids, carp etc.