Stupid spending and debt situation

shteca

As of today I am in debt to the tune of £37,467.87

I am 28 years old and have two kids. I am self employed and earn around £55,000.
I am coming to terms with how much of a mess I have got myself in and just wanted to post about it and get any help that is out there.

Where did it all start: I guess I have always spent what I don't have obviously but always looked to push the problem of money off.

Two years ago I had a very bad year at work. My income was irregular and I started to spend money I didn't have.
I have recently started cutting back on my spending as much as possible but it seems like there is always something else that crops up.

Here is how it is all broken down:

• Sainsbury Loan - £13,528 - 3.2% - £307.46 monthly repayment
• Ikano Loan - £10,910 - 9.8% - £308.56 monthly repayment
• Natwest Overdraft - £7,187.54
• MBNA - £5,842.33 - 16.9% - paying min payments

I had a car with Mercedes Benz that I owed £16,000 on as of two months ago but I managed to sell the car and it ended up only costing me £1,500 which was an incredible moment.

I bought my flat 3 years ago for £8,500 and currently owe £66,952 I have just finished doing a FULL refurbishment on the flat which has so far cost me £6,000 and my friend who is a Estate Agent reccons it is now worth £120,000.

I feel like I am in a huge hole. Work is good at the moment but it is always drips and drabs when I get income due to the nature of my work.

What am I looking for? Well mainly just a place to write down how much of a problem I have and also for maybe a bit of support. I am not finding things easy at the moment and need to take more accountability for the STUPID mess I have got myself in. I feel like I have pushed myself back so far in life with these stupid decisions.

Question: Which debts should I start paying off first?

Any help or advice would be much appreciated.

[Deleted User]

Personally I would sell the flat if it is now worth 120k pay off your debts and find some where to rent.
Then you can start again older and wiser.
Good luck

shteca

I am really starting to feel that way but this is my home. It is a really horrible idea after making the place my own

System

Hi,
Didn't want to read and run. Well done for getting here and welcome.
Selling your house is an option but not necessarily one you need to go for. By tackling your debt head on, learning how to better live within budget and adapting to the challenges this brings, you are more likely to make a life change which will set you up far into the future. If you sell up now, sort the debt, you'll be risking putting yourself in a similar situation again.

Someone will be along shortly to post a link for a SOA, statement of affairs which is really useful tool to help assess your situation, and get good advice on how to focus your efforts and energies.

You can start a diary if it helps too. Loads of inspiration on seeing how others are paying things down.

With an income of £55k, even if irregular, you should be able to make dents in this fairly quickly. Irregular income is a challenge in itself, and helped get us in a financial hole, but tools like YNAB can help massively, and perhaps (providing you can meet minimum payments) your first focus should be building a buffer so you are never spending current months money to live, but always operating a month or two ahead, so you can cushion yourself from income variances. You can use YNAB for managing business budgets as well as personal.

Hope to join you on the journey. Ramble x

shteca

Thank you very much. I have started keeping an monthly reconciliation of my finances as a sort of SOA. The past two months have been extremely expensive as I was getting rid of my car and doing up my flat. So hopefully this month will be the first true month that I start budgeting.
Keeping a diary will be a great idea for me. I struggle to say no so having somewhere to write it down will really help me.

Sncjw

Why not sell up isn!!!8217;t it better to clear the debt and get w fresh start. You make your other house a home too

Autumnella

I wouldn't sell. I think that's a terrible idea. Then what? Rent and have to pay out rent which probably costs more than the current mortgage or buy a new property with a possible worse mortgage rate due to current financial situation.

What about a remortgage to clear your debt? Problem with getting more debt to pay debt is once the debt's clear you end up spending it again, whereas when you work to clear it you learn your lesson and are less likely to make the same mistake.

Start on the overdraft and MBNA first. Make sure you contact the bank after paying the overdraft payments and reduce the overdraft amount so there's no temptation to respend.

System

Autumnella wrote: »

I wouldn't sell. I think that's a terrible idea. Then what? Rent and have to pay out rent which probably costs more than the current mortgage or buy a new property with a possible worse mortgage rate due to current financial situation.

What about a remortgage to clear your debt? Problem with getting more debt to pay debt is once the debt's clear you end up spending it again, whereas when you work to clear it you learn your lesson and are less likely to make the same mistake.

Start on the overdraft and MBNA first. Make sure you contact the bank after paying the overdraft payments and reduce the overdraft amount so there's no temptation to respend.

I agree, selling the family home is nearly always a bad idea. You'll never get on the ladder again and repercussions further down the line are immense. The first think I would say is that you have a very good wage to service those debts, so I'd wager you could do it with a abit of help and a tight belt. Post you SOA so we have a better idea.

Jox

Well done on facing the debt! That's the first step. And selling the car was a good move. I would say put the SOA on here and people can help you see where to reduce costs.

Cut out takeaways and expensive entertainments, it may be hard on the kids for a while but get them on board and explain why you need to cut down. Find cheap / free methods of having fun with the kids, walks in park etc, fresh air is free!

Cut down on shopping bills, meal plan, buy yellow sticker food, charity shop clothes, find ways to reduce your expenditure and put it towards the debt.

You can snowball the debt, google it for more info

At some point maybe you can get a 0% credit card and move debts there?

Hopefully you'll get some more suggestions soon.

Paul_DNAP

In general terms you clear debts off in order of those that are costing you the most to service.

You don't state how much you are spending servicing that overdraft, but if you're getting fees and stuff on that it could be the most expensive debt you have.

Balance transfer the card to a lower or 0% APR card, keep up paying minimum (or just over min) payments.

Then look at if you can get the loans paid off sooner, but not all loan agreements allow this without penalty.



Keep on trying your best to continue the quell the urge to spend unless necessary, in particular spending money refurbishing your flat for any purpose other than to make it nicer to live in - yes it's increasing the value of the flat, was but unless you fully intend to liquidate the asset then that's only a gain on paper and it is locking cash away and won't help clear your debts. What you could do it postpone those projects until (a) your [near] debt free and/or (b) wanting to max the value for an upcoming sale.

Ilona

Tripierj above, from Chicago, is promoting a money lending company. Ignore sneaky spam.

Ilona