My Terrible Financial Situation

asparagus1968

Hi. This would be my list of to do..
Fill out SOA.
See if the credit cards can be transferred to 0% interest
Cancel any direct debits you don't need.
You already have an emergency fund- excellent
You already know all the debt you have- excellant
You know what you are aiming for- excellant
You have got some allies here to help you along the way��
You'll smash this.get planning.good luck

tori.k

It would be worth putting up a SOA, once you have a balanced budget that fit's your needs your probably be surprised how much you have actually have left over.

The debt didn't go on in a day so it's not going away in a day ( see someone correct me :rotfl:)but no matter how we feel about money there is no hopeless situation ever as their is always options regardless how big the debt is.

we have almost ten years on you age is just a number, folding a business last year see us starting from scratch well actually at the moment now -6k but oddly now actually enjoying the journey it's showing us what is possible even on a min wage jobs.

You already decided that you wanted to improve your lot in life you worked hard to achieve this so this is just now your next challenge, set your goals and go and get them just like you did with a better job. then lets us know how your going along, the debt free diaries is a great platform for this and the next person along will appreciate it, best of luck

engineer_amy

Stormer79 wrote: »

I make the minimum payment each month because I wanted to build to some money up to replace my old car (which I've done) and have some money available in case of an emergency. I'm aware that's not the best strategy....

Its absolutely the best strategy! you need an emergency fund. Most people on here would advise to have a fund of at least 3 times your monthly outgoings (or net monthly salary) as a back up in case you were suddenly out of work for any reason.


Personally, I would aim to build the emergency fund first, while paying the minimums to the cards, then once that's built up, throw all your available money to the cards and get it cleared.


Are you currently paying interest on your cards? And is your credit file in reasonable shape? If yes to both those questions, apply for a balance transfer card with a long 0% introductory period. Transfer some or all of the debt to this (depending on the limit) and reduce the interest you are paying. This way all payments to the cards reduce the debt immediately and you aren't lining the banks pockets with interest.

beecher2

You say you've got a work pension but want to pay into a private pension too - can I ask why? Do you know how much your existing pension is expected to pay out when you retire? Can you make Additional Voluntary Contributions to it? Might be an idea to post on the Pensions forum for more help on this.

enthusiasticsaver

Firstly I would say a massive well done for realising that you don't want your situation to continue and for not ignoring warning bells. Many others have left it until their debts are much higher before doing something about it. As you say £7700 is a lot of money but you may have gathered from the tone of some comments it is certainly not the worst situation to be in but the sooner you clear the debts and concentrate on saving the better.

The priority should be getting rid of all unnecessary expenditure, clearing the credit card debt and building up an emergency savings account. If you have a works pension look at increasing your contribution rather than a new private pension but that needs careful looking at first. Go on pensions board for advice. Is all the credit card debt on 0%?

AngiBear

Hi Stormer79,

For a moment there I actually thought I had posted under a different name as your situation kinda mirrors a bit, although I am a couple of years older than you.

I had my LBM a good few months ago when I had about £15,000 worth of debit on a CC and loads of savings but I thought it would be good to keep on paying the minimum on my credit card but keep saving too. The worst point came when I checked my savings account and was given a measly 1p interest, it probably cost them more to send me the statement telling me about the 1p interest! So I took some of my savings out of my account and paid down my credit card.

I now have about £7,000 on my credit card and sometimes feel like you do. You pay it then when the interest gets added on it grows again. The thing that keeps me going is seeing that I went from owing a 5 figure sum to a 4 figure sum and keep reminding myself that I don't actually own anything that looked like my debt was and try to live within my means putting every spare bit of cash I get into my CC until I get it down to 3 figures!

I would follow everyone's fantastic advice and pay off your debits before you start saving or worrying about your future. Hey, chances are most of us are working until well into our 80's now anyway! (insert smiley face)

Stay focused on what you are doing and allow yourself at least one treat once a month, even if its a takeaway or a sticky bun from Greggs because you do deserve something nice even when you are paying off debts (thats my opinion anyway and I would argue with anyone not to enjoy a chocolate and cream donut from Greggs)

Anyway, I wish you good luck in all that you do and I don't even remember having this much fun actually spending on the credit card originally!

stingey

Stormer79 wrote: »

Thanks for coming back to me - I really have only just come to terms with this and that I need to get it sorted. It does seem that I need to address the debt first and look at savings and pension later so I'll rebudget with that in mind.

Do you find it difficult to spend money on other things? - for example, I need to visit Japan/HK in April of next year so will be building savings for that trip - I feel this will inevitably impact on my efforts at debt clearance and am feeling a lot of anxiety over it.

I do find it difficult to spend money on things that I really need. This is why it's making me so angry at times. I can't do the things I want to do because of the overhanging debt. It's putting my life on hold.

You've said your trip is needed, I take it, it's an essential trip. If so it will impact on the overall time to clear your debt as you need to save, but then things like this would crop up in life anyway. Replacing a washing machine etc. I think the important thing is to differentiate between needs and wants. If it's needed then I think the debt is livable for another few months/years.

EssexHebridean

I'll echo what others have said - it's not *that* terrible, however, if it's bothered you, then it's become a problem.

It does sound like you're on the right track though.
- Step 1 - Get your SOA done so you can see what goes where and what you *should* have left over
- Step 2 - build an emergency fund - start with a target of £1000 then continue to add a sum to it each each month for even more security.
- Step 3 - Sort yourself a proper budget including setting money aside for things like annual expenses, car insurance, contents insurance, that sort of thing. Paying up front where you can afford to do so is a lot more financially savvy than paying extra to pay for things in instalments
- Step 4 - work out what you need to cover your trip next year, open an offshoot savings account off your current account and set a monthly transfer across to it for the monthly proportion - so if you have a cost of £2500 with 15 months until you go, for example, you need to set aside £166 a month to cover it up front. then you can stop worrying about what it will cost and relax in the knowledge that it's paid for.
- Step 5 - throw everything spare at the debts in order of the interest rates - so highest rate first. If you can switch the card to a 0% one then even better - then it's a simple matter of diving the total amount by the number of months the 0% is, and so long as you don;t spend further, that's you all sorted. You would still have the option to pay extra to clear it sooner if you felt that suited you better.
- Step 6 - once the debt is gone, start a savings plan or additional pension for your future - or, better still, consider setting aside money into a LISA ready for putting a deposit on a property to buy.

National_Debtline

Hi

There’s some good advice from everyone here. I think checking whether you can get a 0% balance transfer credit card is a great idea as it would help you focus on clearing down the balance.

Remember that if you use the SOA link tallyhoh gave you can post your figures into this thread. That way we can get a better overview of your finances and give advice.

James
@natdebtline

Stormer79

engineer_amy wrote: »

Are you currently paying interest on your cards? And is your credit file in reasonable shape? If yes to both those questions, apply for a balance transfer card with a long 0% introductory period. Transfer some or all of the debt to this (depending on the limit) and reduce the interest you are paying. This way all payments to the cards reduce the debt immediately and you aren't lining the banks pockets with interest.

I'm paying 21.9% APR (which I only discovered last night, I knew I was paying some but again, was thick and never bothered to check). I have no idea if my credit file is in good shape and wouldn't know how to find out - so advice there would be great. I'll explore the balance transfer card as that sounds intelligent and would stop me throwing my money away.


Thanks