Debt-Free in 3 Years!

arc2014

Today I have made the decision that I will be debt free before we get our first mortgage. Hopefully we will be looking to buy in 2022/3, which gives me 5 years to become debt free & help save for a deposit.

I have completed an SOA (below) and worked out what I owe and it is in the region of £13,000 (including interest and a £1200 overdraft). I'm hoping to have this paid off by 2020.

I have a few small debts (the debt collection section is actually 4 separate balances ranging from £20-£1420), so hopefully 3 of these will be gone by the end of the year

Once I have paid off everything I plan on taking out a credit card with a very low credit limit, using it to pay for fuel or something similar, and paying off every month, to improve my credit file.

I had a few years of being young and stupid with money, followed by a surprise baby and being the sole earner for a 3 person family, whilst on maternity leave. I've never really recovered financially from that period, and now my partner is the higher earner, he has taken responsibly for 75% of the monthly household running costs, leaving me the money to get myself out of this mess. I'm going back to work after having our 2nd baby on Monday, so will have my first wage in the middle of September.

I'm feeling very positive & have set my mind to this so I WILL achieve it.

arc2014

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1300
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 70 Hubby pays £70 towards loan as I gave him some of the money
Total monthly income.................... 1370

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 180 Paying over 12 months
Electricity............................. 87
Gas..................................... 100 Currently paying arrears on gas & electricity, will lower in 8 months
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 28
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 150
Clothing................................ 0
Petrol/diesel........................... 60
Road tax................................ 0
Car Insurance........................... 45
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
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................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 650


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1900
Other assets............................ 0
Total Assets............................ 1900

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Personal Loan..................4800......213.......49.7
Logbook Loan...................1000......170.......187
Debt Collection................2160......45........0
Total unsecured debts..........7960......428.......-


Monthly Budget Summary
Total monthly income.................... 1,370
Expenses (including HP & secured debts). 650
Available for debt repayments........... 720
Monthly UNsecured debt repayments....... 428
Amount left after debt repayments....... 292

Personal Balance Sheet Summary
Total assets (things you own)........... 1,900
Total HP & Secured debt................. -0
Total Unsecured debt.................... -7,960
Net Assets.............................. -6,060

System

arc2014 wrote: »

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1300
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 70 Hubby pays £70 towards loan as I gave him some of the money
Total monthly income.................... 1370

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 180 Paying over 12 months
Electricity............................. 87
Gas..................................... 100 Currently paying arrears on gas & electricity, will lower in 8 months
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 28
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 0
Groceries etc. ......................... 150
Clothing................................ 0
Petrol/diesel........................... 60
Road tax................................ 0
Car Insurance........................... 45
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
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................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 650


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 1900
Other assets............................ 0
Total Assets............................ 1900

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Personal Loan..................4800......213.......49.7
Logbook Loan...................1000......170.......187
Debt Collection................2160......45........0
Total unsecured debts..........7960......428.......-


Monthly Budget Summary
Total monthly income.................... 1,370
Expenses (including HP & secured debts). 650
Available for debt repayments........... 720
Monthly UNsecured debt repayments....... 428
Amount left after debt repayments....... 292

Personal Balance Sheet Summary
Total assets (things you own)........... 1,900
Total HP & Secured debt................. -0
Total Unsecured debt.................... -7,960
Net Assets.............................. -6,060

I can't really see much to trim. Obviously, the gas and electric are incredibly high. I pay £58 in total for both for a 3-bed semi and two people.

arc2014

They are indeed, we had a smart meter fitted and changed contract at the same time. For some reason we weren't charged for 2 months and then apparently we were being charged wrong! Now playing catch up. Once the arrears are paid off it should be half if not less, for 4 of us in a 4 bed detached. From our recent charges I'm hoping it will be more in the £75-£80 range.

System

I think if you've got a supportive partner who is shouldering much of the out goings, you're just going to have to dig deep and spend most of your spare cash out of your earnings on clearing your debts for the next two years. If you put all the remainder, I think you'd be clear in a couple of years. Get rid of the logbook loan and debt collection first of course, then seek to re-negotiate your payments/term with the loan (assuming it's a legit company compared to the other dubious creditors you have!) to spread the cost a litte further to reduce your overall payments.

enthusiasticsaver

I think the logbook loan and personal loan and overdraft should be the priority due to the high interest charged. However the debt collection will be on your credit record so if you want a mortgage at some point then this will need clearing. The council tax is high. Are there arrears on that too?

Does your partner cover all other bills? If so I would put the whole £292 spare to the logbook loan so in two to three months this would be gone. 187% interest is criminal :eek:

enthusiasticsaver

At some point can the loan be renegotiated? 49% is very high. I am guessing your credit record must be very bad so be prepared for it to be a while before you can borrow for a mortgage or anything else.

arc2014

That's exactly my plan. I just need to keep reminding myself that it won't take forever but similarly it isn't going to happen overnight. I'm sure once I start seeing my balances lowering it will give me the motivation to spend every last penny on them!

arc2014

The plan is:

- Logbook Loan
- Debt Collection
- Personal Loan

I want to get it sorted now before we're in a position to buy so I have the time to improve my credit record.

No arrears on council tax, we just live in a band E house! Luckily partner is dealing with everything other than council tax, gas & electric & the shopping!