Stupid spending and debt situation

System

Have you taken a look at YNAB yet (You need a budget.com) - it does cost money (there's a free trial and training) but this might really help getting your head around what you can / can't spend.

Working_Mum

Hello shteca,
I am self employed and was in your position when my husband left me 10 years ago!!

I wrote a big list of everything that I owed, the interest rate, balance, minimum payment and date the payment due.

I wrote a list of all of my direct debits, what they were for, amount, expiry and when they were due to be paid out. I cancelled the ones which were not necessary and made a note of renewal dates for insurances/utilities etc and got better rates shopping around at renewal time (this is my habit now!!).

I took a long hard look at all of my income (self employed/maintenance from ex/ family allowance etc) and in particular the DATE I was generally paid. I changed my direct debits payment dates to be able to coincide with when I had payments coming in from my business. I made minimum payments on credit cards etc before due dates and when I got pennies in from my various sources.

I set myself a weekly CASH budget for food/fuel/socialising and withdrew that each Thursday morning - I paid everything in cash!!!!!! If there was not enough money in my purse I learned to say no and do without.

I read Dave Ramsey and I snowballed my debts. You can buy his books online quite cheaply, he has a YouTube channel or you can read his learnings for free!!

I learned what my triggers for spending were by keeping a spending diary (still do and find it a mindful experience) - I checked my bank accounts every morning (so no hasty surprises) and I slowly wrestled control.

I did an inventory of everything I owned from food to toiletries - I realise that I hoard food when I feel stressed! I didn't buy anything I already had. I shopped with a list after meal planning and unearthed the delights of A1di/L1dl shopping - tracking all spends in my lovely book!!

By doing this I had a proper look at what the current landscape is - used my self employed skillset to get a smart plan together and then cracked on!!

Personally I would do my absolute utmost to keep my home and that is a good motivation to stick to my budgets etc.

Writing a diary will help you keep the faith!


Good luck

((hugs))

WM x

Working_Mum

I forgot to ask - who are PayPlan??? Have you paid any money for their advice?? If so please stop!!! There are lots of resources which are free and will do the same job!

((hugs))

fatbelly

shteca wrote: »

I am speaking to Payplan at the moment. Has anyone dealt with them? Having a look at Trust Pilot and the reviews are so mixed. Mostly five star and one star.
Is this a good direction for me to go down or should I do it alone?

Payplan are fine. They are one of two organisations (Stepchange the other) who will organise a debt management plan without charging a fee. Their advice is pretty sound. At CAB I am allowed to refer to either organisation, and I refer to Payplan occasionally.

shteca wrote: »

I feel the same way. I have a serious spending problem and although it would probably cover the loans I need to work at my personal problem with finances along the way. I think the hardest thing for me is just saying no.

And unless you get to grips with that any strategy is doomed

shteca wrote: »

The thought of selling my home just made me sick. I want to do everything possible not to have to do this. As you say, it would end up costing me more in rent than i pay in total for my flat.

Then don't sell, or consolidate. Look at a dmp or reorganise your finances so you can make the contractual payments.

It's not clear at the moment that you are insolvent so I would not rush into an IVA without doing a lot of research so that you fully understand how they work and getting several quotes. With the income you have, you should be able to service this debt.

Let's have a closer look at a statement of affairs.

Edit: and here's Martin's guide for dealing with your overdraft

https://www.moneysavingexpert.com/banking/cut-overdraft-costs

Zola.

I wouldn't sell the home, as you may end up in that rent trap where you find it hard to generate funds to buy again for a long while..... but I would seek professional debt advice to try to consolidate it all.

I would also look to what ways you can lower your expenses to be as lean as possible. Track every expense. If you dont give up the luxuries and sill spending, you will never get out of debt. You have to be the captain of the ship and own it.

Check out mrmoneymustache blog.

We all have made stupid mistakes with money, life is life long learning. You have time on your side but you have to be strict and get out of debt ASAP.

shteca

EssexHebridean wrote: »

Selling a home to pay off unsecured debt is generally not a great idea. Your earnings are good and you have a good bit of equity in your home if the estimated value is correct - as long as you can make your (presumably quite low) mortgage payments then I'd say tackle the debt another way - giving up the security of owning your own home, in favour of renting, particularly when there are children in the equation too, would be a last resort I'd suggest, and it doesn't sound as though you're there yet.

First step as others have said is a full and honest SOA (Statement of Affairs) the link to this can be found in the "sticky" post at the top of the board, and also in my signature. FRill it in accurately - it needs to reflect your situation as it is now as a "hopeful" SOA doesn't help anyone! Remember the things that come out annually or quarterly as well as monthly stuff. that SOA will form the basis of the budget that you need to live by - and if you post it into here we can take a look and see if there are any savings to be made that you might have missed.

First thing to clear is the Overdraft - overdrafts are what I always describe as "dangerous debt" as they can be called in at any time so work on getting shot of that as a priority. Then MBNA. Is there any chance that you might qualify for a balance transfer card to reduce that one a bit as the interest rate is a bit yuck!

A quick questions, would it be a good idea to remortgage my flat to remove all the equity and use the money to pay off my debts.
So lets say I could get it valued at £120,000 would it be a good idea to remortgage to 85% of the value and take say £35,000 to pay off the most expensive debt?

Pixie5740

shteca wrote: »

A quick questions, would it be a good idea to remortgage my flat to remove all the equity and use the money to pay off my debts.
So lets say I could get it valued at £120,000 would it be a good idea to remortgage to 85% of the value and take say £35,000 to pay off the most expensive debt?

No it wouldn't. You'd be taking unsecured debt and securing it against the roof over your head. What happens if your income drops or a client doesn't pay you? Not only that but as mortgage terms tend to be a lot longer you could easily end up paying more interest.

First you need to put together a statement of affairs to find out where you are financially. Then you can see if you have enough money to snowball your debts or if a DMP would be a better option.

System

If you remortgage, as well as the risk to your home, you will be paying interest on that debt over the term of your mortgage so what you could potentially sort in 3-4 years, will e dragging behind you for possibly decades, and costing you a fortune in interest.

Paul_DNAP

shteca wrote: »

Your comments are giving me so much hope. I need to start budgeting and take responsibility for this mess I have landed myself in. I would be tempted to take another credit card at 0% but it is just further pushing off the problem.
I spoke to PayPlan today and built a budget with them. I am not sure if going down the IVA route would be best.

That is exactly the tactic that I think will help here - move the credit card to 0% and stop that debt growing for a year (maybe two) while you focus on tackling one of the other ones (e.g. the overdraft).
IVA would be absolutely the last resort, it has serious consequences on your financial future and credit rating for many years to come and should not be seen as an easy-out.

enthusiasticsaver

If you have an income of £55k then you should be able to deal with that debt without going down the route of IVA or DMP. What is your credit history like? Do you have any defaults?

If you can move the credit card to a 0% deal that will help. Tackling the overdraft should be your priority.

You need to firstly start tracking every penny you spend and start building an emergency savings account so you are not tempted to use credit if you have an unexpected bill. Budgeting is the key to you getting out of this mess. Selling your flat is a bad idea as is remortgaging.