DFW no.672. Step 1 - My SOA.

Hobbin_Rood

Hello everyone, I've had my lightbulb moment! I need to deal seriously with the debt I've got. I've managed to reduce it from over £10,000 to circa £6500 over the past 3 years or so. This has been done by living as frugally as possible (e.g. I've been donated a washing machine, TV, PC, mobile phone and vacuum cleaner during this time). This has been really hard at times – I'm still young(ish!) and hardly ever go out or have money to spend on non-essentials.

If you're interested in finding out how I got into this mess, see this previous thread:
http://forums.moneysavingexpert.com/showthread.html?t=382027
(for info: I didn't take it any further with my ex, it seemed pointless)

I know I could do so much better by getting 0% deals etc. For info: I work full-time, live alone in a one bedroom house I'm renting from Housing Association. So, first things first. My SOA:

Monthly Earnings:
Salary - £870

This is after deductions of £68.00 for Civil Service pension and £9.40 Union dues. I'm considering coming out of the pension, as I don't intend to stay in this job for long. Surely the benefits come only after decades of service? 3 years so far, plan to stay another 2 years tops. I know it's short sighted but could do with extra £68 per month. After all I might not live to retirement age at this rate!

Monthly outgoings:

*NB* - Soon to be paid:
Cycle scheme - http://www.cyclescheme.co.uk/
£23.38 per month directly from salary for 12 months. Effectively I'm getting a bike for 49% of the RRP - moneysaving or what!? Waiting on the paperwork, probably commence next month. This should be offset by savings on public transport.

Rent – £236
Council Tax – £105
Virgin Media– £25
Elec – £20 (£60 per ¼ next due Oct)
Gas – £20 (pre-payment meter, really need to look at this!)
Magazine subscription – £2.90
Contact lenses – £12
Gym – £18.90 (haven't used for about 12 months, NEED to cancel!)
5-a-side footy – £28 (2 games per week £3.50 ea)
TV licence – £11.36 (monthly direct debit)
Public transport – £25 (will reduce - getting a bike soon & walk some days)
Co-op Visa – £5 (min. payment)
Halifax M/card – £105 (min.)
Ulster bank M/Card - £41 (min.)
Entertainment – £50 (beers / nights out etc – this can top £100!)
mobile phone – £5
toiletries/cleaning – £15
food – £150 (need to cook more and bring packed lunches to work)
TOTAL – £870.22

I think I've covered most things there. I hardly ever buy clothes (I've got t-shirts 6 years old!) and get a haircut every 2 to 3 months. As stated I don't buy much that isn't essential. It's plain to see I'm just scraping by. I can see savings by cancelling the gym and magazine, being more sensible with food, cutting down on beers/nights out and perhaps with utilities. I may e-bay / car boot stuff and take on an extra part-time job or try and find another full-time job with a better salary. Any other ideas for extra savings or income very welcome.

Debts – currently paying

Credit Cards:
Co-op: £31.00 @ 17.5% p.a. - nearly paid off!
Halifax: £5084.85 @ 6.95% p.a. for life of balance (interest £30.00 per month approx)
Ulster: £1327.26 @ 0% until 21st September then 18.324% p.a.
Total: £6443.41

I have an MBNA card (credit limit £10,400) with nothing on it. I called them and they have an offer of 0% on balance transfers until the date of my statement in June 08. 3% transfer fee which I work out as £193.30 if transferring the whole £6443.41. Sounds good, apart from the fact I'll be losing my 6.95 for life of balance on the Halifax card. But I plan to close the other cards and imagine i'll be able to get similar or better deals in June...thoughts anyone? I need to move fast before the end of 0% on the Ulster.

Authorised Overdraft - £351 at end of last month. Rate is 18.9% p.a. Not sure how much this is costing me, as when my wages go in I'm in credit. It's only about halfway through the month that it slowly creeps up to a big minus after I've paid bills etc.

Debts – dormant

DWP social fund loan - £160 (stopped direct debit payments of £20 per month in 2005 after new IT system was installed & haven't commenced them again. Original amount was £640).

Student Loans – Have no idea of the amount owed, need to look into this! Don't take any payments at present, as I earn under £15,000pa.

These will have to be paid at some point, but I can forgot about them for now...
-

Any general hints or tips most welcome, cheers! This is the start of a serious attack on these nasty debts, wish me luck! Sorry for the length of post but it pays to be comprehensive to get the best advice, no? Happy to answer any questions...

Regards,
Hobbin Rood

asandwhen

The way to work out how much the pension will be worth to you is divide your salary by 60 and multiply it by the amount of full years you have/will be paying it. (this is for local government pension scheme) you will also get a lump sum of 3 x the pensionable salary.

ie - I have been paying into mine for 6 years and earn £29,000 so if I left my job now I would get the equivalent of £2900 per year and a lump sum of £8700.

bargainbetty

Hiya,

From your note saying that you pay approx £30 per month in CC interest, that means that 10 months on a 0% would effectively save you about £120 once you allow for the transfer fee. Then, as you say, you'd have to move it all again, probably incurring another fee. I'd be tempted to risk it, but it's your cash!

If you are unsure, why not just transfer the Ulster card now, and when that is cleared, throw the extra money at the Halifax card?

If you cancel the gym and subscription, and add any money you save on food/nights out, you'll bring those debts down pretty sharpish.

Good luck, fellow insomniac!

BBx

tealady

Dont forget a spending diary it can be an eye opener. A few quid here and there soon mount up. Don't forget cash back sites such as greasy palm and quidco, ebay/amazon anything that is not nailed down. I would also look at your gas and electric, prepay meters can be very costly. You may be able to switch gas/electricity suppliers (use a comparison website to check for any deals).

Prudent

Your food bill is very hill. I spend £90 a month for two. Set aside a set amount and only allow yourself to be food out of that money. Aim for £100 at first. If you cancel the gym and reduce your food bill to £100, it would free up £70 per month.
A part time job looks like a really good option. Perhaps you can try doing something you would like more than your current job with a view to cahnging your full time work eventually?

tyllwyd

BTW before you make any hasty decisions about quiting your pension, ask for advice on the Pensions board. I'm sure they will tell you that a civil service pension is the best value pension you can get for your money, so don't throw it away lightly.

CLAPTON

your income is rather low.. could you get a better job or parttime work?

I would suggest you stay in the pension fund... you won't get 68 back anyway as you have to pay tax on it (pension payments are tax free) and you will pay more NI.

Unless you need an expensive bike I can see no sense in spending 23 x 12 = 276 for a bike (even if discounted)... you can easily buy a brand new bike for 80 or less or get a free one from freecycle.

sarah0404

Hi, have you checked www.entitledto.co.uk ? Your earnings are quite low, so you may be entitled to claim working tax credit or maybe even housing or council tax benefit. Even if its just a few quid off, it would still be worth applying.

I checked out the link to the cycle scheme you mentioned. It looks like a really good idea. But I agree with Clapton. Try and get a free bike from freecycle first, or even a second hand one. £23 off your salary every month is quite a lot. Especially since your pension is coming off your salary too. That's almost £100 off your wages straight away.

Good luck!

Hobbin_Rood

Thanks for all the advice above.

I've now transferred over the Ulsterbank Mastercard to the MBNA to take advantage of the 0% offer. I'm still not sure about the Halifax, not sure it's worth discarding that 6.95% for life of balance - but I'm sorely tempted...!

The Cyclescheme has already went through. I did try to get a bike from Freecycle but all the ones offered go mega-fast. I thought it'd be worth getting the new bike due to the massive saving involved. A new bike less than £200 is of really inferior quality, so reckon it's worth getting a top class bike for such a low price.

I think I'll stay in the pension, seems like a good deal to me. I'm not entitled to any benefits, checked with that "entitled to" page. I need a bigger income, need to get that part-time job or move elsewhere with a better salary. Easier said than done though.

Still haven't cancelled that Gym membership, and the spending diary and budget for food looks good too..

Tustastic

Hobbin_Rood wrote: »

I need a bigger income, need to get that part-time job or move elsewhere with a better salary. Easier said than done though.

How about bar work? It sounds as though you enjoy pubs and clubs, why not get paid for socialising? Agree that you should also be looking for promotion or a better paid job elsewhere. Good luck on your DFW journey.

MissKJ

Don't forget Hobbin Rood,you can sometimes tansfer your civil service pension rights to other employers, particularly if you end up working for another government organisation. Can be worth a lot. I transfered mine over, and now as I get closer to thinking about my pension, it is such a relief the number of years it knocks off what I need to work before retiring.

In a nutshell, if you don't want to be skint all your life, you need to boost your earning potential. You don't want to be working long hours and underpaid all yor life. Have a really good think about it whilst you budget and chip away at your current debt.