Facing up to it

Doogie4074

I've been part-owner of a small company for 20 years. We've been through a tough period in the last two years and for about 18 months myself and the other directors waived our salaries in order to continue paying the staff. Unfortunately this coincided for me with some unavoidable spending following a death in the family overseas, and the combination means I have run up really scary credit card, loan and overdraft debt.

The company is now on a somewhat better footing since late last year, but I'm still having to take a reduced salary of £2000 pcm compared to around £2800 a couple of years ago. My partner works part time and brings in £525 pcm.

I know we're luckier than most, with a flat worth more than double the mortgage debt, but in recent months the situation has become overwhelming, and Christmas - despite spending the absolute minimum and doing almost everything off Nectar points - has really pushed us into sleepless stress.

We want to move, and I know we could find somewhere cheaper and use the difference to pay stuff off, but we'd still need a mortgage and I'd be worried that we'd struggle to get one. One option I've considered is selling up and renting, then re-establishing a good credit score over six months of that, and then trying to buy.

We've never been flash with cash but I'm certain almost everyone around us thinks we are doing well and has no idea of the reality. The pressure this adds with people expecting us to be able to go out for meals / join them on holidays etc. is probably one of the biggest stresses.

I've thought about posting here for months, and haven't. I honestly don't mind if nobody replies, but if anyone has advice that would be brilliant too. This is really about me writing it down and facing up to it.

Thanks.

I did a SOA:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2000
Partners monthly income after tax....... 525
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2525

Monthly Expense Details
Mortgage................................ 810
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 170
Electricity............................. 68
Gas..................................... 67
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 15
Mobile phone............................ 45
TV Licence.............................. 5
Satellite/Cable TV...................... 30
Internet Services....................... 30
Groceries etc. ......................... 250
Clothing................................ 10
Petrol/diesel........................... 150
Road tax................................ 30
Car Insurance........................... 40
Car maintenance (including MOT)......... 40
Car parking............................. 20
Other travel............................ 30
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 20
Buildings insurance..................... 25
Contents insurance...................... 0
Life assurance ......................... 30
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 8
Entertainment........................... 20
Holiday................................. 50
Emergency fund.......................... 50
Total monthly expenses.................. 2063


Assets
Cash.................................... 0
House value (Gross)..................... 340000
Shares and bonds........................ 0
Car(s).................................. 1000
Other assets............................ 0
Total Assets............................ 341000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 144000...(810)......3.47
Total secured & HP debts...... 144000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Sainsb MCard...................13600.....400.......16.9
Barclaycard....................14000.....400.......18.9
BoS............................1000......50........18.9
Bank overdrafts................4500......0.........0
Sainsb loan....................4500......220.......5.5
Total unsecured debts..........37600.....1070......-


Monthly Budget Summary
Total monthly income.................... 2,525
Expenses (including HP & secured debts). 2,063
Available for debt repayments........... 462
Monthly UNsecured debt repayments....... 1,070
Amount short for making debt repayments. -608

Personal Balance Sheet Summary
Total assets (things you own)........... 341,000
Total HP & Secured debt................. -144,000
Total Unsecured debt.................... -37,600
Net Assets.............................. 159,400

Created using the SOA calculator at stoozing.
Reproduced on Moneysavingexpert with permission, using other browser.

Pixie5740

I wouldn't be in such a hurray to sell your home if it can possibly be avoided. Renting can be quite uncertain with you never being more than 12 months away from having to move again. Also, one you factor in the costs of buying and selling property it might not be worth your while and all the hassle.

Your partner works part time, could (s)he try to get full time work because with an increase in income and a bit of tweaking of your SOA (get rid of satellite tv, cheaper mobile contracts, reduce grocery spending) then you could make up that £608 shortfall.

If that's not possible then I would go for a DMP (whether self managed or through one of the debt charities) over selling your home.

Sometimes I think about selling my home to buy somewhere else but it's better the devil I know. I know what what work has been done and still needs to be done on this property. I can't really be arsed to go through it all somewhere else.

sourcrates

Hi,

So lets look at your realistic options here.

Any form of Bankruptcy is out of the question.

That leaves either an IVA (Individual Voluntary Arrangement) or possibly a lump sum IVA.

Your other option is a debt management plan (DMP).

There is the option of selling the house, paying off your debts, and buying somewhere cheaper, however i understand that may be a last resort, rather than a first response.

So a DMP at approx £400 a month would take around 7 years to clear your debts assuming all interest was stopped.

An IVA paying a similar monthly amount would be done in 5-6 years (in year 5 you are expected to remortgage, if this is not possible, then an extra year is normally added to the arrangement).

So those are your options, i would suggest getting advise from National Debt line or stepchange before committing to anything.

System

Some of those expenses are quite high.

For example we're spending £60 a month for gas AND electricity, you're paying more than that for each of them. Change providers, turn the dial down on the thermostats, make sure you're using energy saving bulbs throughout the house, don't leave lights on unnecessarily, if you've got thermostatic radiator valves, close the doors on rooms not being used, wash pots by hand instead of using a dishwasher.

£40 a month on car insurance also seems high but it does depend on where you live, what you drive, your claims history.

£40 a month on maintenance is way over the top even for two cars. A service a year at an independent shouldn't be more than £150-£200. MOT tests can be found for £35 each.

£45 mobile phone. Have you analysed your usage? If you have the ability to manage your mobile phone account online do so then go to https://www.billmonitor.com, put in your online log in details and it'll analyse your bills and let you know what you use and need, not what you think you need, and suggest alternative tariffs. Get a SIM only deal, keep your phones and don't upgrade them.

You're spending £75 a month on phone, internet and TV. Currently its sale time and Sky and BT have offers on. If you're on Sky see what channels you actually watch and see if they are available on BT TV's ultimate package which is only £12 a month. You can do phone, internet and TV for half what you're currently spending.

sourcrates

Tarambor wrote: »

Some of those expenses are quite high.
For example we're spending £60 a month for gas AND electricity, you're paying more than that for each of them.

I have just had to renew my Electricity deal, as its coming to an end, not one new supplier could come anywhere near the £50 per month i have been paying, prices are rising across the board, all new suppliers where at least £30 a month more, i eventually opted for a new fixed tariff, with my existing supplier, at £10 a month more than i currently pay.

After checking all the comparison sites thats the best deal i could find.

Doogie4074

Thanks very much to those taking the time to respond.

In terms of cutting costs, we've pared back a lot, but Virgin Media (the phone, TV and internet is one package, I did a rough breakdown) have just hiked prices for a second time. I'm looking again at options. The energy bills are way out I think because our provider put us on too high a direct debit. We built up a credit which I was able to take some cash out of before Christmas. That's the second thing on my list to look at. Mobile phones is more tricky - I already cut my own down to a pretty cheap SIM-only, but the other one is tied to a deal for a while. That amount has actually come down from about £60.

In terms of the car stuff, I probably over-estimated because we had to get two new tyres last month. Need to look properly at the annual spend. It's not an expensive car. Insurance is high though. Will look at that.

Thanks for advice re other options. I think the move may be easier to cope with as we have been talking about doing it for a while anyway. But it's getting the mortgage that's the worry.

[Deleted User]

Doogie4074 wrote: »

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2000
Partners monthly income after tax....... 525
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2525

Monthly Expense Details
Mortgage................................ 810
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 170 - Is this over 10 months? If so, going to 12 months will reduce it to £141-66.
Electricity............................. 68 - This is high, especially with both of you out of the house, at least some of the time.
Gas..................................... 67 - This is high, especially with both of you out of the house, at least some of the time.
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 15
Mobile phone............................ 45 - This is high for just two phones. Go PAYG/sim only ASAP.
TV Licence.............................. 5 - This should be £12-12.
Satellite/Cable TV...................... 30 - Get rid ASAP.
Internet Services....................... 30 - This plus the land-line is £600pa. :eek: Check comparison sites for a much better deal.
Groceries etc. ......................... 250 - this is lot for two people. You should be able to trim it back.
Clothing................................ 10
Petrol/diesel........................... 150
Road tax................................ 30
Car Insurance........................... 40
Car maintenance (including MOT)......... 40
Car parking............................. 20
Other travel............................ 30
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 20
Buildings insurance..................... 25
Contents insurance...................... 0 - You need this. Cost will be ~ £10pm.
Life assurance ......................... 30
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 8
Entertainment........................... 20
Holiday................................. 50 - You can't afford this.
Emergency fund.......................... 50
Total monthly expenses.................. 2063


Assets
Cash.................................... 0
House value (Gross)..................... 340000
Shares and bonds........................ 0
Car(s).................................. 1000
Other assets............................ 0
Total Assets............................ 341000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 144000...(810)......3.47
Total secured & HP debts...... 144000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Sainsb MCard...................13600.....400.......16.9
Barclaycard....................14000.....400.......18.9
BoS............................1000......50........18.9
Bank overdrafts................4500......0.........0
Sainsb loan....................4500......220.......5.5
Total unsecured debts..........37600.....1070......-


Monthly Budget Summary
Total monthly income.................... 2,525
Expenses (including HP & secured debts). 2,063
Available for debt repayments........... 462
Monthly UNsecured debt repayments....... 1,070
Amount short for making debt repayments. -608

Personal Balance Sheet Summary
Total assets (things you own)........... 341,000
Total HP & Secured debt................. -144,000
Total Unsecured debt.................... -37,600
Net Assets.............................. 159,400

Created using the SOA calculator at stoozing.
Reproduced on Moneysavingexpert with permission, using other browser.

My comments in red.

velocity_girl

Is your mortgage on a SVR? I ask as that is a relatively high rate these days for your LTV. If so, you could look at switching products with your lender onto a cheaper deal. If your lender offers decent retention products you may be able to do this all yourself online, picking a deal and switching without any credit or affordability checks (which it looks like you'd struggle to pass). My own lender has existing customer deals with no fee for that LTV as low as 1.54% or 1.64% if you want to fix.

Obviously if you are on a deal with an early repayment charge or your lender doesn't offer follow on deals then this doesn't apply but worth checking.

The other obvious places for savings to be made have mostly been mentioned already (gas/electricity, TV, groceries, holiday fund, and your partner increasing hours).

On_my_way

Hi

You can sort this out.

I would not recommend moving as that will still cost you.

Just some of my ideas that might help you:

* Your partner works part time, can they increase their hours? You can't really afford the luxury of them working part time at the moment. Even an extra ten hours a week income from them would pay your grocery bill
* Do you have any Gold etc that you could sell? The Moneyshop and others on most high streets will buy it for reasonable cash. I recently sold a 9ct gold necklace for £45 to them. Again this money will be very helpful to you

Good Luck - between you things are solveable but you need to be a team

EssexHebridean

Welcome to DFW and well done for facing your situation head on too. I'll have a rake through yiour SOA and see if I can come up with anything to add to other comments.

Doogie4074 wrote: »

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2000
Partners monthly income after tax....... 525 I think your partner needs to find a way of increasing this.
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2525

Monthly Expense Details
Mortgage................................ 810
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 170 Agree with Bob's suggestion about paying over 12 months. For this year, if you are paying over 10 months - remember you have 2 months coming up where you will be this amount better off. You need to pre-plan where you intend to use that money to ensure it doesn't just get frittered
Electricity............................. 68 High - but as you say maybe in part due to the DD being set high. Start taking readings weekly - use a smartphone app to keep track and compare week on week and month on month. Go round the house room by room thinking about things that are using power and can be reduced. If you have a smart meter or access to a monitor that attaches to the meter then that will tell you your real-time use and you'll be able to learn what uses high amounts. (Electric showers are a prime candidate here - think about setting a timer for showers for a while.
Gas..................................... 67 Is this just heating & water, or cooking too? The thermostat can be turned down a couple of degrees for a start. If cooking as well then think about making the best use of the oven.
Oil..................................... 0
Water rates............................. 20
Telephone (land line)................... 15
Mobile phone............................ 45
TV Licence.............................. 5 As bob said - £12.12
Satellite/Cable TV...................... 30 Brutal but for now, cancel this. Freeview is the way forwards.
Internet Services....................... 30 Also as said elsewhere you can beat the deal you're currently getting for this & your landline. Take a look at the main MSE site.
Groceries etc. ......................... 250 You can knock this down by at least £50, and probably more. Challenge yourself to meal plan for the next few weeks using as much as possible of the items you already have in cupboards, fridge and freezer. For fresh stuff think Aldi/Lidl if you have them nearby. Check their pick of the week and super 6 deals religiously every week and again, use that to plan your meals.
Clothing................................ 10
Petrol/diesel........................... 150 Cut out all unnecessary journeys - each time you go to jump in the car, think about whether you can walk instead. combine journeys where possible.
Road tax................................ 30 Are you paying this by monthly DD?
Car Insurance........................... 40 Again,being paid monthly I assume? Have you checked tomake sure you're on the best deal you can get? It's sometimes worth changing mid year.
Car maintenance (including MOT)......... 40 where are you setting this aside? You're not showing any cash assets?
Car parking............................. 20 See if there are options to park for free and walk a little further
Other travel............................ 30 Can this be cut down/cut altogether?
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 20
Buildings insurance..................... 25 Combined contents and buildings I take it? Again,l run the comparison sites to check you're getting the right deal.
Contents insurance...................... 0
Life assurance ......................... 30
Other insurance......................... 0
Presents (birthday, christmas etc)...... 30
Haircuts................................ 8
Entertainment........................... 20
Holiday................................. 50 Youn ne4ed to think whether this is really a priority for you at the moment
Emergency fund.......................... 50 where are you setting this aside? You're not showing any cash assets?
Total monthly expenses.................. 2063


Assets
Cash.................................... 0
House value (Gross)..................... 340000
Shares and bonds........................ 0
Car(s).................................. 1000
Other assets............................ 0
Total Assets............................ 341000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 144000...(810)......3.47
Total secured & HP debts...... 144000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Sainsb MCard...................13600.....400.......16.9
Barclaycard....................14000.....400.......18.9
BoS............................1000......50........18.9
Bank overdrafts................4500......0.........0 You're sure there are no charges at all for this?
Sainsb loan....................4500......220.......5.5
Total unsecured debts..........37600.....1070......-


Monthly Budget Summary
Total monthly income.................... 2,525
Expenses (including HP & secured debts). 2,063
Available for debt repayments........... 462
Monthly UNsecured debt repayments....... 1,070
Amount short for making debt repayments. -608

Personal Balance Sheet Summary
Total assets (things you own)........... 341,000
Total HP & Secured debt................. -144,000
Total Unsecured debt.................... -37,600
Net Assets.............................. 159,400

Created using the SOA calculator at stoozing.
Reproduced on Moneysavingexpert with permission, using other browser.

Is there any scope that your drawings from the company may be able to increase another notch soon?
Is there any scope that you can move any of the interest-bearing cards onto 0%?

Make sure you're submitting meter readings to your utilities supplier at least once a month - a credit at this time of year is no bad thing BUT it shouldn't be increasing, month on month. If it is, you're paying too much.

Because of the level of shortfall you're facing, and increase in income is really the only viable way of dealing with things if you don't want to go the IVA/DMP route. Even small increases will help - think surveys, using cashback sites etc. If your credit history will allow it then shifting some of the debt to 0% will help in the longer term as well.

System

Mortgage is quite high for your salary too. Have you thought of downsizing? £100 + for communications and TV is too much