Debt, Debt and MORE Debt!!

TheRoders

I'm DONE with playing around and trying to get my debts in order. This time I have a plan!! I'm going to give the Snowball Method a try and hopefully it will get me back in the black ASAP.

I have just taken on a new job. It's a 3 year contract so I am setting myself a goal to pay off 99% of my debt by the time I finish. My current debt list stands at:
Overdraft 1 - £650 (no min monthly payment)
Oak Furniture Land - £476 (£14.23 a month 9.9%)
DFS - £652 (£21.05 a month 0%)
Trotec - £1642.00 (£100 @ 0% - Long Story!)
Mum & Dad - £2800 (no min monthly payment)
Hubby Barclaycard - £1400 (£30 0%)
Overdraft 2 - £2000 (no monthly payment)
Santander Personal Loan - £5700 (£157 @ 6.9%)
MBNA CC - £6675 (£70 @ 0%)
Barclaycard CC - £8250 (£200 @ 6.9%)
Black Horse - £22,000 (£221 @ 11%)

Looks a lot written down but I have spent 2 weeks planning how I am going to tackle them. I will be throwing £1400 a month to service all the debts and my calculations show that I will pay the 1st 3 off by November, then another 4 next year and the remaining ones (not including Black Horse) in 2019....

I have to tackle this now!! We are on good wages between the both of us (75K in total) but these are crippling us!!!

Update -
The great news is that this month I cleared the one overdraft. I have also reduced my Lloyds CC to £1000 limit from £5000 and I've closed the £650 overdraft!!

I have juggled the figures based on all your fab advice and am throwing on average £1800 to the debts every month while still being able to put a bit away for a holiday next year The payments total £800 a month so an extra £1000 a month towards the debts should see them gone (apart from Black Horse) by June 2019. Can't Wait!!!

Fosterdog

Well done on deciding to tackle this head on.

Are you sure you can't put more towards debt repayments each month? £1400 when between you you earn a little over £6000 a month is a low amount. On those wages the first three debts could easily be cleared in the first month.

Black Horse is the highest interest so you want to get rid of that as soon as possible as it's costing you the most. When do your interest free deals run out and what will the new interest rates be? With snowballing it is paying off the debt with the highest interest first, then the second, then third and so on until the debt is clear. The difficult part for you us that currently your highest debt is also the highest interest, you need to find a balance between paying that off and clearing 0% balances before offers end.

Fill out an SOA http://www.stoozing.com/calculator/soa.php

It will show you what is being spent and where to help you gave a better idea of what should be left over each month. If you don't have what it says you should have then you need to keep a spending diary to find out where the extra money is going.

I know it seems daunting but you are earning a very good wage so as long as you can stick to a plan you will be debt free before you know it.

TheRoders

Thanks for your reply.....

I will do an SOA but I already have it all in my spreadsheet to the penny. Our wages after tax are not 6K unfortunately. They come in at £2850 (45K) for me and £1800 (30K) for hubby. Hubby's pay fluctuates as he gets a monthly bonus so from anywhere from £1800 - £2100 a month. £1400 is the max I can put towards them which leaves me £300 a month disposable income which is for family entertainment, clothes etc and I put £400 a month to savings as we are trying to do our house up.

tempus_fugit

My observations, for what they are worth, shown below. Other more experienced folk will provide more insight. But the obvious things to me are:

1) Fuel outlay of £300 a month seems high. Can this be reduced by using alternative methods of transport, car sharing etc?

2) Food shopping very high, this could be reduced considerably by at least £100 a month.

3) Savings. How much savings do you have at the moment? If you have a decent emergency fund I would suggest redirecting the £400 to the more urgent matter of paying off your debts for a while.

4) £1200 for Christmas is a luxury you can't afford really.

5) What is the AutoNet the payment for?

6) Energy bill seems high. Can you get a cheaper deal?

7) Sky could be reduced or eliminated until your debts are paid off.

Obviously there may be specifics in relation to these outlays. Once you get a full SOA up, this should explain things better so that more detailed/appropriate advice can be given.

MEM62

Savings, Christmas and 'disposable' = £800 per month. Food £400 per month. You have the ability to throw considerably more money at clearing your debt if you want to do it sooner. It looks to me as if you are not willing to make the lifestyle changes needed to make the extra commitment.

Of course that is absolutely your choice but, if I had debts of that magnitude, I would be choosing a more short term pain to clear the debt sooner.

EssexHebridean

Agree with some of the observations already made.

What family size is that food budget for? As a rough guideline you should be able to spend less than half that if it's just two of you (especially as you account pet food separately), with the amount increasing by a small increment for each additional person (child) in the household.

Look at Martin's guide to driving economically to reduce running costs for the cars, and bearing in mind your high income account to set aside money for car insurance monthly ready to pay up in full when renewal comes along - there's no sense in paying the "loading" to pay over 12 months when you don't need to do that. Similarly with the road tax - paying the DVLA for this monthly costs a premium - switch to paying in six monthly or annual payments and set the money aside each month as you have been to cover. If Autonet is breakdown cover then go through the comparison sites and see what comes up - this is a lot of money for breakdown insurance. I cover both our cars for just over £100 a month with AXA.

Is your water metered? If not and there is only two of you in the household you would likely save money by switching to a meter - worth investigating this.

Personally I'd say to put together a proper SOA - that spreadsheet is all well and good but I bet there are things there not accounted for - it's often worth looking at a different way of doing things to make sure you've covered everything.

With the amount you save per month I'd raid the savings you already have and just shift the overdraft immediately. OD's are a horrible form of debt due to the uncertainty - the bank can pull it away from you and insist on repayment at any time. Plus with your income being overdrawn is ludicrous. Just get it cleared.

Be careful you don't look at the snowball figures back to front as well - you're currently looking at a list that shows 0% deals ahead of interest bearing debts.

I take it that the credit cards are all cut up and you're not using them any more?

Once the debt is gone, budget to save for things you would previously have used finance for - so stuff like furniture - again with your combined incomes you shouldn't need to use credit for this sort of thing.

TheRoders

Some background for you..

There are 3 of us in the family.

My hubby works away during the week. We have converted a T5 into a camper and he stays in that during the week. So he uses £40 a week in diesel doing a 300 mile round trip.

My commute is 60 miles a day at £35 a week.

Atleast £30 a week is spent on food for him for the week. It would certainly be cheaper if he was at home and I could make him packed lunches.

AutoNet is the van insurance.

Water is not metered and I think it would be higher if I did do that.

Gas and Electricity is the lowest I can get as I shop around monthly.

I don't have any long term savings. My savings are used to do up the house.

The CC's are all from when my business was in trouble until I got back into full time work and closed the business.

The £100 a month covers birthday and Christmas. I won't be cutting back on that.

The £1400 I have calculated is based on me not having to give up some of the luxuries I have like Sky.

The Sky includes TV, Broadband and telephone.

TheRoders

Oh, and I'm having to tackle the debt in priority order as they are calling in the £650 overdraft currently and then Trotec have also given me a deadline (they undercharged me for my laser cutter and only realised 2 years down the line!! Long story!!) I also NEED to pay my mum and dad back as my dad ASAP.

Lucylocks

I assume from above you have a child - do you receive child benefit? If so this could go to your 'Christmas fund' freeing up some monthly spend toward debt. £25 per week is a heck of a lot on dog food! Can you bulk buy at somewhere like countrywide to save on this.

I appreciate how hard it is to give up on indulgences like sky, phone contracts etc however.... if your bank are calling in your overdraft it suggests you are in some difficulty and you really do need to pay bits down as a matter of urgency else potentially things could get a lot worse.

Sorry if I sound like the voice of doom - we've all of us been in difficulties hence being on this forum - I've had to seriously reevaluate my personal priorities which has been a difficult lesson.

TheRoders

Yes. One child.

My child benefit goes into his savings account for his future.

My dog is on a raw diet which works out about £3-£4 a day. I've tried lot's of other diets but they make him very ill!

I have just moved over to SIM only on my phone account and am waiting for hubby's contract to end before doing the same with his.

They are only asking for the one OD as it was my business account which has now closed.

I am going to start looking at Aldi/Lidl for my shopping. Currently use Asda and hopefully get it down to £75 a week giving me £1500 a month to service the debts.

Any more and I think we will be depriving ourselves too much and struggle. This way it will be manageable.

EssexHebridean

First stop - SOA. Second stop - a spending diary to confirm where anything that isn't being accounted for goes (there will be stuff, trust me!)

The OD1 gets paid back from this month's surplus - that's that gone and dealt with. You don't have a choice if they're recalling it anyway.

That's a decent price for Sky - as you're not accounting anything else for entertainment then I have to say that seems reasonable.

3 people in the household means you can knock at least £150 off that current food budget - is there some form of fridge in the camper? If so there is nothing to stop OH going down the packed lunches route. If no fridge then there's still the options like soup, jacket potatoes etc which are obviously cheaper than him buying a sandwich each day for example.

The £150 you save on the food budget start sticking aside into a savings account - when you hit 1k in there that's your emergency fund covered. Don't touch that unless you actually face an emergency. I'm confused though - you say you save £400 a month? Where is that going if you have no long term savings? If you're immediately spending it on home improvements deal with the debt before you do any more to the house.

So after your agreed payments to the debts you have a little over £500 spare per month to start overpaying - correct? Personally I'd add the £400 savings to that, plus whatever else you can shave off anywhere - maybe compromise on the birthday/christmas budget and knock £10 a month off that to start with? That's a heck of a big spend! is there value in the laser cutter if you're no longer using it? Could you sell it to pay off at least part of the outstanding amount?

If you can free up initially £1k a month then that's:
Month 1: OD1 paid plus chunk of OD2
Month 2: OD2
Month 3: OD2 plus chunk of Oak Furnitureland
Month 4: Remainder of oak furnitureland plus chunk off Mum & Dad
Month 5: Mum & dad

By the time you hit month 5 you've got rid of 2 "dangerous" debts (overdrafts that can be recalled without notice) plus one interest bearing. You've also started making good inroads into your Mum and Dad's money too. Remember to add the original payment from Oak Furnitureland into your monthly amount available for debt repayments once that one has gone. Similarly once the emergency fund hits 1k you have another £150 from the food budget to throw at other debts. Once you reach the point where you start clearing off debts and adding in their monthly payments that's when you really start seeing movement.

Good luck!