Facing upto the debt mountain

m_c

I've ummed and ahhed about starting a thread on here for a while, but having read through a few of the threads, I've decided to go for it.


So, after far too many years not really paying attention to spending, just paying a bit above minimum payments, and if I'm being brutally honest, being too scared to add up my total debts, after Christmas I finally sat down, went through all my statements, and made a spreadsheet.


It was good, in that after making some effort to be a bit more frugal last year, and despite making a couple major purchases, my debts as of the end of 2016 totalled at just over £20,000.
It was seeing the figures laid bare that really made me think. In December alone I paid £314.60 interest.


As of the end of 2016, the debts were as follows-
£-1200 in current account overdraft
£-790 GM card (had been closed since Beneficial/HSBC stopped the GM card)
£-1850 Barclay Card
£-3900 Capital One Card
£-6500 Tesco Card
£-6000 Bank Loan


I'm employed on a reasonable wage (take home around £2k a month, with about half of that available after essential expenses), and also self-employed doing a few things on the side (mostly ebay sales, and some event work).


My first goal was to wipe out the GM Card, as I wanted that account fully closed. At the time I wasn't sure how having it would affect my credit score, so I didn't want to start applying for any new cards until it was paid in full. Thankfully Decembers pay check was a bit higher than normal, and business sales had been pretty good, so the first thing I done was pay the GM card of in full. It actually took an extra month, as I had to pay the final interest of £11.92, but such is life.


My next goal was reducing interest, but as I already mentioned, I wanted to wait until the GM card was fully closed, to get my credit history as good as possible, so was going to wait another month before applying for some 0% offers.
However I had signed up to the MSE Credit Club when it was launched, but I never got any valid results due to my account not being able to get matched to Experian. To my surprise, at the start of January, I got an email saying my Credit Score had been updated. Logging in, and having a nose around as you do with new things, it listed a Virgin Money card, with 0% balance transfer for 24month with no transfer fee, and I was 95% guaranteed to be accepted.


Roll forward a couple weeks, and I had £7300 transferred with 0% interest for the next 2 years. My Capital One and Barclaycard were cleared, and the Tesco Card dropped to £3800.
During January I also made the most of some eBay offers so I only paid £1 on auctions, and had a good cull of stuff that was lying around which gave a good boost to the finances.
At the end of January, my total debt was £-18800. A change of nearly £1400.


February also turned out a good month. A few more big items were soldI got a 0% offer through on the Barclaycard, so the remaining Tesco balance got transferred, so the only debt I was then paying interest on was the bank loan. As I'd like to buy somewhere soon, I made the decision to up my overdraft and get as much as possible into a Help to Buy ISA via the maximum £1200 opening month deposit. I do pay for a premium bank account mostly for mobile insurance and breakdown cover, but it also means I get a cheap overdraft. Having a £2000 overdraft, and getting to around £-1800 costs me about £15 extra for the month. Business sales also gave a welcome boost, along with selling a few more items.
At the end of February, my cash net worth was £-16700 (i.e. £-17900 of debt plus the £1200 ISA), a change of over £2000, but the big bonus for me, was I'd over halved what I was paying in interest, to £145.


March started of with good intentions. I had a couple weeks of leave to use up, and had planned to put some much needed extra effort into the business to get some new product lines on the go, but sod's law struck. A new machine I only bought last year died with some rumbling, and funny smells. Some head scratching, doodling, and the eventual decision that if I was going to modify it, I may as well do it how I want it rather than as cheaply as possible, around £1500 was spent on the required bits. I also decided to modify another machine to make making the bits for the dead machine far easier, so all in all, in March the business cost me over £2500. The silver lining is it means I won't be paying any tax on the business for the 16/17 tax year, but it also means it won't of made a profit.
Despite all that, my end of month figure rose by over £200 to £16450. Interest cost dropped to about £50, but was offset by the BT fee of £115 from last months Barclaycard/Tesco transfer.


At the end of March, things stood roughly as follows-
£-1000 Current Account
£-4100 Barclaycard
£-850 Capitalone (I still use this for my main spending, as it gives the best cashback)
£-4000 Bank loan
£1400 HtB ISA


Which means since the end of last year, my finances have improved by over £3800, and I'm on track to pay less than £50 interest per month.
The main reason being due to finally sitting down, adding things up, and facing the stark reality of my debts.
However, if it wasn't for the MSE Credit Club, I would very likely still be paying far more interest.

m_c

And just to add a bit history, I recently sat and went back as far as I could get a complete set of statements, which was May last year (my Capital One card got stopped for fraud twice last year, and they only show the previous account number statements online, so any statements before that I have to manually request).


As of the end of May 2016, I owed £-24,100, and paid £316 interest.


I happened to be looking at a reasonably expensive holiday after a colleague mentioned a certain location that I'd quite like to visit. With the interest alone I paid in those last 8 months of last year, which was over £2600, I could of had that holiday. That thought alone drives home the true cost of my debt, and how I could of visited far more places had I been more sensible several years ago.

m_c

As of the end of April, figures were as follows-
Overdraft - 1299.70
Barlaycard - 4047.68
Capital One - 1389.32
Tesco - 0
Loan - 4024.95
Virgin - 7154.73
And the HtB ISA is upto 1600, leaving my overall balance at -16316.38, which is a 117.10 improvement over last month.

I'm happy with that, considering things were looking as though they were going to go the wrong way.
I had a relatively good month business wise, with one outstanding invoice being paid, and online sales having a very good couple weeks, so I was able to transfer 500 into the current account and reduce the overdraft.

Total interest cost for the month was 37.87, which I'm really pleased with. It's about 12% of what I had been paying in interest at the start of the year.


I've got a money transfer offer from Barclaycard this month, so I could transfer £1500 for 3.9% (£58) on a 18month 0% deal, and clear the overdraft, but I'm hoping to be out the overdraft completely within the next couple months. As it stands, the overdraft only cost me £13.37 this month, and it was well used this month, so the transfer fee is roughly 4 months worth of overdraft fees, which makes doing a money transfer not really worth it, provided I don't need any unexpected lumps of cash.


I have been considering changing credit cards. I'm using the Capital One for day to day spending as I get cashback on it, and I aim to pay it of every month so I'm not paying any interest (I've managed that for 3 months now!).
The Barclaycard and Virgin cards, I'm not using for spending as they've currently got 0% transfer deals on them, and I'd like to keep them separate for now. I could get cashback with the Barclaycard though.
And I've stopped using the Tesco Card, as I rarely used the clubcard vouchers. The only reason I'm keeping it for now, is for emergencies.


I'm torn between keeping the status quo until I get a couple thousand saved in the current account (best interest option), then closing the Tesco card, waiting a couple months then opening a new card with a 0% purchase offer. This would mean it'll be over 6 months since I got the Virgin card, and available credit will of dropped, so my chances of getting a new card should hopefully be boosted.


Or just trying to get a 0% purchase card now, and hope I get it, so I can close the Tesco card, and get a head start in boosting cash levels.


My concern is with my current debt levels, at the end of April I'm at 51% credit usage. Taking the Tesco card out the mix, that jumps to 69%.
I'm going to wait and hope my Credit Club report starts working again this month, as I'd like to see what it suggests.

Bobarella

Good luck with your repayments, you sound organised.

m_c

Thanks Bobarella.
Organisation is key, but if truth be told, I'm finding things a bit mundane and demotivating just now. The first few months it was very motivating to see a big change in things, but now it's just a case of waiting between paydays to make any real difference.
I know the extra expense for the business was the big culprit over the past couple months, but it's caused a far bigger knock to my motivation than I expected :-/


There are a few things I'd really like to buy, but I'm determined not to until I'm comfortably out the overdraft, and the van is mot'd (must check the date, but I think it's got another couple months..). I'd like to change it, but if I can nurse another year out of it, I should have cash to buy something newer and not have to resort to more debt.

Tahlullah

Keeping up the enthusiasm is a job in itself. We all go through periods where we wax and wane and start living from one pay day to the next, waiting for an injection of money to pay towards a debt.

Something positive will happen so you can get your mojo back!

Keep going. Sending you happy vibes.

Tx

The_Real_Cheddar_Bob

I will agree with the organised comment above. Good work.

m_c

It's surprising how making a big dent in the debt improves mojo, but I need to wait until next pay day for that to happen again.

On the plus side, it's getting into the busy period of year for my side business, so once all that work is done and the invoices paid, it should give a good boost, but it'll be the end of June into July before that'll show up.


In the shorter term, short of any disasters, total debt should drop below 15k this month.

m_c

May figures are in.

OD - 1484.57
BC - 3966.74
CO - 719.78
TB - 0
Loan - 3537.91
HtB ISA - 1800
Virgin - 7083.18

Giving an overall balance of -14992.18, which is an improvement of 1324.20.

I'm happy I got under 15k, as it was touch and go as to whether I'd get enough additional income in to hit that figure, however a rush of ebay sales over the last few days of the month meant I made it :-)
I am a bit annoyed the cost of using the overdraft was pretty high this month, as the fee came to 21.72. I knew it was going to be a bit higher, but wasn't expecting quite that high, which meant my total interest cost for the month was 42.44.

One thing I am finding really beneficial, is using only the Capital One card for spending, as it means I know how much I'm spending each month. This months statement is going to be a bit higher, due to a couple additional unplanned expenses. I've set a goal of 1100, but am hoping to keep it under 1000. Just means I need to spend less than 40 before next week.

This month, the goal is to minimise the overdraft. I'll hopefully also get paid for some event work this month, which would give a good boost to the figures and eliminate the overdraft.

And to add to my options this month, I received a letter from Barclaycard today with balance and money transfer offers. Both have a fee of 2.4% with 0% until June 2019 and December 2018 respectively.
If I took 1500 as a MT (that's roughly the max I could get with my current credit limit), that would cost me 36. Keeping 1000 in the current account would mean I should finish this month around a zero balance, however I'll be in the overdraft in a few days anyway, so I'll be paying some overdraft fees this month regardless.
I have crunched the figures in the loan repayment calc, and moving 500 to there would save me £16 in interest over the life of the loan.

The MT offer is very tempting, as I'm pretty sure it would save me money, plus give me a good kick to get out the overdraft. At last months 3.9% offer it didn't make sense, but this month it probably does.

My current medium term plan is get out of the overdraft, and aim to finish every month with the current account in credit, with any positive balance going towards the loan. Pay the loan off, then use the current account to build up savings to the point at which the interest rate drops (my current account is interest bearing, but I can't remember the rate or limit!). 1500 extra would certainly help reduce interest cost, but I'll need to run some figures to work out if it'll be enough to make the fee worth it.

m_c

Just a quick mid month update, now the dust is settling on a few weeks of work chaos.
I've definitely missed my CO spending target. A couple last minute business purchases pushed it over my planned 1100 limit, but only by 40.


That did prompt me to sit down and go through all my spending, and it turned out I spent 477 on business, so personal spending was under 700.
Only using the one credit card is certainly help me keep track of spending far better than before. My aim is to get regular spending under 500 a month, and save for anything extra, but I need to get the overdraft cleared for that plan to work.


Anyway, I'm off to finish making up some invoices, to try and get some money in and get a big dent made in the overdraft (or even cleared if everybody pays quickly!)

m_c

Minor near end of month update. The overdraft is no more :shocked:

Had an absolute hectic week, with little sleep, but enough people have paid their bills that the current account is going to finish the month with a positive balance. Might even be enough to justify a little additional loan repayment.