Long-time lurker needing to make tough decisions

odessitka

Dear forumites,

I've spent a long time reading the various threads, looking for inspiration to drag myself out of debt. I've been in debt since I was 20 (now 33), when I borrowed money from the bank to go on a holiday I had promised to save for (and failed to do so, obviously). Since then it's been a series of band-aid solutions, credit cards to cover debt payments, consolidation loans to pay off credit cards. For various reasons I have moved countries a lot in the last 13 years, bouncing between Australia, UK and the US (all for work) and travelling to other countries a lot for work also. I now have debt in all three countries (AU, US, UK) So one added complication of my attempts to drag myself out of my financial black hole is that I need to pay debts in three countries, transferring money between accounts and losing a lot in the exchange rates (this also means I cannot direct debit any but my UK debts, but must physically remember to transfer money in order to make the payments each month, something I don't always manage to do...). I am going to post a separate SOA, but essentially my debt comes to around £20,000, and is made up of one credit card (which I defaulted on and therefore am now paying a collection agency for), one personal loan (a consolidation loan), and one student loan.

I'd love people's advice on how to turn my financial life around. I've been struggling with this for a long time, and know that I need to learn new financial habits. I make a decent wage (although I also live in London so I pay hand over fist for living expenses) and in theory have a reasonable amount of money left over after bills each month. And yet every month I live pay-check to pay-check, unable to save because I give so much of my salary to debt repayments, and even then barely managing. My partner (who is incredibly good with money, and despite making less money than me manages to save and thinks debt is the devil) is understanding and supportive but is starting to despair of me changing my ways. I don't want this to threaten my relationship and so have decided it's time to make a big change!

odessitka

Here's my SOA. I've not entered anything under partner's income because in theory we have separate accounts (and I'm trying to pay off my debts myself in part to be able to demonstrate to him that I can). In reality he often bails me out each month, despite making less money than me...

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2543
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2543

Monthly Expense Details[/b]
Mortgage................................ 0
Secured/HP loan repayments.............. 493.65
Rent.................................... 850
Management charge (leasehold property).. 0
Council tax............................. 75
Electricity............................. 15
Gas..................................... 15
Oil..................................... 0
Water rates............................. 18
Telephone (land line)................... 0
Mobile phone............................ 32
TV Licence.............................. 7.5
Satellite/Cable TV...................... 0
Internet Services....................... 17
Groceries etc. ......................... 240
Clothing................................ 150
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 32
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 20
Entertainment........................... 420
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2385.1

Assets
Cash.................................... 200
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 200


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Secured Debt.................. 7599.76..(261.7)....22<
Student Loan 2.................1684.7...(83).......6<
Student Loan 1.................4703.07..(100)......6<
Personal loan 2................1400.6...(48.95)....22
Total secured & HP debts...... 15388.13..-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Credit Card....................1318......100.......6
Total unsecured debts..........1318......100.......-


Monthly Budget Summary
Total monthly income.................... 2,543
Expenses (including HP & secured debts). 2,385.15
Available for debt repayments........... 157.85
Monthly UNsecured debt repayments....... 100
Amount left after debt repayments....... 57.85

Personal Balance Sheet Summary
Total assets (things you own)........... 200
Total HP & Secured debt................. -15,388.13
Total Unsecured debt.................... -1,318
Net Assets.............................. -16,506.13

GarthThomas

Is your SOA accurate? If so, what did the debts come from? Like many posted on here, you have. A primary surplus (without debt servicing you'd have an excess), so either life was very different in the past, or you've underestimated some categories, and have been running a deficit for years.

Edited to add, I see that some of the debt is student debt, but the rest, what was that from?

moneyfacts

Hi, well done for starting the journey.

You need to reduce your entertainment to £50 per month and use the rest to clear your debts. You don't need to spend money to enjoy life

odessitka

Thank you for the tips! Yes my SOA is accurate, but as you suggest, my circumstances have changed. Most of the debt was built up in my 20s when I was travelling the world and living on a considerably smaller salary than now. I no longer need to rely on debt, but my problem is I also cannot seem to pay it off.

I agree that I should reduce my entertainment budget. By entertainment I have included eating out, seeing friends, the cost of taking flowers to a dinner party or a bottle of wine to a work event. I am sure I could cut this down, but I'm not sure I could cut it to £50 without offending some people! I also need to think about the balance between what is sustainable and what is needed; if I cut my budget for everything but food to £50 a month I expect I would quit trying to be debt free almost straight away and slip right off the wagon. But perhaps a sustainable goal is to halve the current amount? I could take out £210 at the beginning of the month in cash, put it in an envelope, and tell myself that is the amount I have for 'extras' involved in entertainment...

zippygeorgeandben

Do you really need to spend £150 on clothes each month?
Do you actually have £1800 of clothes you still wear in your wardrobe?

swimminginaseaofdebt

Welcome to the boards. This is my first time commenting on a person's SOA and I'm pretty sure a few other folk will be along to give you some better suggestions! I've put some comments in red below and hope it helps in some way.

odessitka wrote: »

Here's my SOA. I've not entered anything under partner's income because in theory we have separate accounts (and I'm trying to pay off my debts myself in part to be able to demonstrate to him that I can). In reality he often bails me out each month, despite making less money than me...Might it be helpful to keep a spending diary? If your OH is bailing you out that suggests you are spending more than what is listed on your SOA.

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 2543
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2543

Monthly Expense Details[/b]
Mortgage................................ 0
Secured/HP loan repayments.............. 493.65
Rent.................................... 850
Management charge (leasehold property).. 0
Council tax............................. 75
Electricity............................. 15
Gas..................................... 15
Oil..................................... 0
Water rates............................. 18
Telephone (land line)................... 0
Mobile phone............................ 32
TV Licence.............................. 7.5
Satellite/Cable TV...................... 0
Internet Services....................... 17
Groceries etc. ......................... 240 Is this for one or two people? If one it can be cut down a bit.
Clothing................................ 150 I'd definitely be looking at reducing this. If you need new clothes for work on a regular basis perhaps you could purchase second hand?
Petrol/diesel........................... 0
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 32 This seems cheap for London. Admittedly, I've only every been there as a tourist so aren't clued up on travel costs.
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0 Do you never buy presents for people?
Haircuts................................ 20 Could you look at reducing haircuts to every second month?
Entertainment........................... 420 Definitely look at reducing this. Could you invite friends around for some food/drinks rather than going out? When going to dinner parties could you take a dish or some home baking instead of buying flowers?
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2385.1

Assets
Cash.................................... 200
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 200


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(0)........0
Secured Debt.................. 7599.76..(261.7)....22<
Student Loan 2.................1684.7...(83).......6<
Student Loan 1.................4703.07..(100)......6<
Personal loan 2................1400.6...(48.95)....22
Total secured & HP debts...... 15388.13..-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Credit Card....................1318......100.......6
Total unsecured debts..........1318......100.......-


Monthly Budget Summary
Total monthly income.................... 2,543
Expenses (including HP & secured debts). 2,385.15
Available for debt repayments........... 157.85
Monthly UNsecured debt repayments....... 100
Amount left after debt repayments....... 57.85

Personal Balance Sheet Summary
Total assets (things you own)........... 200
Total HP & Secured debt................. -15,388.13
Total Unsecured debt.................... -1,318
Net Assets.............................. -16,506.13

moneyfacts

The point is that you cannot afford your current lifestyle, so therefore it needs to change (doesn't mean it gets worse). In terms of eating out and buying flowers for dinner parties, this is the obvious starting point.

Focus on a changing how you live and your attitude towards money rather than simply shaving your budget a bit.

I'm not judging, I was in £25k of debts years ago due to bad money management and I underwent a journey which lead to a happier life.

If you work hard, you deserve to be financially stable, which is so important for your mental wellbeing

Fosterdog

You really do need a bit of a harsh reality check if you want to pay off your debt but don't want to cut back on your lifestyle. Try not to think of it as you missing out on things now but that you are taking a break from some things and once your debt is cleared you will have even more left over to do what you want with, whether that is going back to expensive socialising or putting the money away into savings for a house deposit or a nice holiday.

You have the debt down as secured but what is it secured against if you don't own a home or car?

If your food budget is just for you then really scrimping and saving you could get it down to less than £100 a month but even with lavish meals and expensive brands one person can live very comfortable off £150 of groceries a month. Add to this the amount you spend on eating out and it is an awful lot on food each month.

The clothing needs dealing with, if you really do spend that or more each month on clothes then by now you should own enough clothes that you'd never need to buy any again. Either stop buying more or cut your budget right down and start selling clothes you already have, eBay will make it very easy to do and all that extra money can go on your debts.

Haircuts again, go less often or find somewhere cheaper.

Finally the £420 for entertainment is an obscene amount, cut back to going out less often, do you really need to take flowers to a dinner party and wine to work events? As suggested host your own dinner party at home, much cheaper than going out.

There is easily £350-£400 of savings a month to be made while still living lavishly, and easily £550-£600 a month if you really cut back (but still allowing a little bit extra for you)

Now you just have to decide how important paying off the debt is because it could be cleared easily in less than eighteen months with your income and then you would have a fresh start with £1500 a month left over after rent, council tax and utilities have been paid.