My debt-free plan - £35,236.02...

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BeBopTalulahBeBopTalulah Forumite
17 Posts
Seventh Anniversary Combo Breaker
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I had my ‘pre-lightbulb’ moment about 3 weeks ago after watching a YouTube vlogger explaining how she cleared thousands in debt and has a wonderful lifestyle now. I thought ‘ooh, that would be nice’, without really understanding how much of a problem we have. She advocated an envelope system, keeping it really simple and having 3 main budgets: bills (direct debits and guaranteed monthly payments that don’t change, including fuel); Groceries (anything consumable on a monthly basis); and ‘Other’, basically any optional/variable monthly expenses. So I now have 2 plastic wallets that I deposit cash into each week, and once it’s gone, it’s gone. £65 for grocery and £50 for ‘other’.

I started hanging around the MSE boards and reading the threads. Very slowly it dawned on me just what a state we are in. I completed a SOA (just out of interest of course…). £35,236.02 in debt. This is the actual, official lightbulb moment. I feel nauseous and emotional. I think of our son and his future. Part of me is glad that I have 3 weeks of budgeting under my belt, as it makes me feel like I’m now ACTING on it, rather than just worrying and contemplating.

Since deciding to ACT, I have transferred most of our credit card debt onto some 0% interest deals, so 3 CC have become 5. I now just need to work out where to start with repayments.

Circumstances
Adults 2
Children 1
Pets 2 cats and 2 small dogs
No. of cars 2

Income (after tax and childcare vouchers)
Me £1000 (variable) – I work set hours, but in shifts (days, nights etc.)
Husband £2,600
Property rental £420
Child benefit £80
Total Income £4,100 (includes £486 deduction for childcare vouchers)

Secured debt Balance Monthly APR
Mortgage £110,906 £536.00
Mortgage 2 (rental) £42,000 £313.07

Unsecured debt
CC 1 £4770.92 £300 18.9% (0% for 12 months)
CC 2 £5,941.44 £133 (2.25%) 7.9%
CC 3 £2,850 £57.00 (2%) 18.9% (0% for 27 months)
CC 4 £2,900 £65.25 (2.25%) 18.9% (0% for 30 months)
CC 5 £3,953 £90.92 (2.3%) 18.9%
Overdraft 1 £1,800 - 1.5% monthly
Overdraft 2 £1,003.91 £40.00 1.5% monthly
Loan 1 (consolidation) £1,526.55 £197.42 11.9%
Loan 2 £6,570.36 £251.89 9.9%
Loan 3 (maintenance) £1,619.84 £92.35 4.9%
Student loan ~£2000.00 £199.00 1%
Parental loan £300.00 £0
Total unsecured debt: £35,236.02 £1,446.83

Savings £700 £100
We pay our child benefit directly into a savings pot for our son which is held in low risk shares.

Outgoings Monthly
Mortgage £536.00
Groceries £320.00
Childcare £0 (£486 from salaries pre tax)
Oil £125.00
Electricity £49.50
Council Tax £146.00
Home insurance £33.15
Landlord insurance £33.27
Landlord other £9.00
Road Tax £31.06
Car insurance £44.63
Mobile phones £86.79
Life/Critical illness £86.52
Dental £6
Gym membership £75.00
Broadband/Landline £23.50
Union/Professional £14 + £165 yearly
Pet insurance £36.65
Charity £33.66
Printer ink £3.49
Cineworld member £17.90
TV licence £12.37
Haircuts £8.00
Cleaner (yes, I know…) £80
Spotify £9.99
Birchbox Subscription £12.95 cancelled
Audible £7.99 cancelled
National Lottery £18.00 cancelled
Postcode Lottery £10.00 cancelled

‘Other’ – clothes, beauty, sports, hobbies, toys, books, takeaways, days out, parking, bedding plants, luxuries, scented candles and all other frivolous, optional or enjoyable expenses - £200.

Total expenses + debt payments £3,582.06
Difference between income and expenses +£517.92

Emergency fund £0

Extra info.
Our mortgage is on minimum payment at the moment, but we did overpay (£720) for several years when we first moved. As a result, we have some equity. Mortgage balance is currently sitting at £110, 906, and we paid £143,000 for our house 4 years ago.

The grocery budget has been reduced to £320 from £500+. £65 goes into an envelope each week, plus we have a 6 weekly bulk delivery of free-range chicken. We try to eat as little meat as possible (I only buy higher welfare), but husband feels very hard-done by. The chicken breast delivery is good value compared to the supermarket. Apart from that, I will buy the odd roasting joint and steak mince, and once a year we get half a butchered family-reared lamb at cost price which is a HUGE saving for us. I cook from scratch, and I feel that I cannot sacrifice any more of the grocery budget without compromising on quality/nutrition. This budget includes all household items, soap powder, cleaning sprays, toilet rolls etc.

Our childcare bill is £486 and our employers use the childcare voucher scheme, so that comes off before tax and I haven’t included it in our expenses.

Oil is expensive. We were paying £75 a month for heating oil, but ended up in some arrears over winter so we’ve increased that to £125 for the time being to try and build up a pot for this coming winter at a lower rate/litre. We use Powershop for electricity, so buy packages of energy to suit our needs, this has worked out cheaper on a monthly basis, but it’s difficult to keep track of as you’re buying £15 here and £8 there.

I have a rental property that I bought 10+ years ago when I was a student (pre-financial crisis obviously!!). A relative left me a chunk of money and I had no idea what to do with it, so I bought a flat. I don’t make any profit on this, but it pays for it’s self more or less. I have never saved any money to pay for maintenance, so a lot of our credit card debt has gone on one-off things in the last 2 years, like a new roof, windows, boiler etc. My biggest mistake was not treating this like a business… We have plans to sell the property very soon, appointments made for valuation and quotes gathered for costs. I’m hoping to get £20-30k for my £11k investment 10 years ago….I don’t even know if that was worth it.

We pay a lot for life insurance and critical illness cover, because despite being a complete numpty with most of our finances, I am actually a very risk-averse person (honestly!). If one of us dies, both mortgages are paid and our son would be ok. I’m worth more dead than alive.

This SOA is somewhat incomplete, because I’m not sure how to budget for certain things. We don’t buy a lot of clothes, and certainly not on a monthly basis. I buy good quality and make it last, and our baby has managed on gift cards and family hand-me-downs. I can’t remember the last time I had a haircut, and I don’t spend much on make-up or jewellery. My money-wasting passions are sewing, crafting and nice homewares….I have mountains of fabrics and enough kit to open a haberdashery. I love pens and stationary…..and nice paper that I never do anything with, but it looks so nice in the drawer

The problem my husband has (as do I to some extent) is that we feel like we should be able to do x, y and z, like some sort of entitlement for years of hard work. ‘We have a good income, so why the hell can’t we do what we like??’ It’s also deeply embarrassing to admit that we have a debt problem when we earn a good living. Like….what is the excuse when you have the means to pay for it?

I realise since making a few changes that we have £500+ of extra cash each month, but we never saw that before. We lived from payslip to payslip, never feeling poor but never really having anything to show at the end of the month. I’m struggling to believe that this cash WILL be there at the end of the month if we stick to this, even though the numbers speak for themselves. I’ve started in the middle of the month, so I’m yet to see any real difference, but I feel extremely motivated and my husband seems to be on board since I gave him the grand total….

I have no idea if I’ve approached this the right way, or what to actually do now. So please, let rip
July 2018 -£34,581.02 Snowball Plan first victim - Overdraft 1 - £260/£1800 Debt-free April 2020:T
«13456

Replies

  • Good luck paying it all off! You sound like you know what you're doing and how you're going to get there so I look forward to hearing about your progress!
    ETA x
  • mitch2509mitch2509 Forumite
    42 Posts
    Good luck on your journey to financial freedom!
  • UncannyScotUncannyScot Forumite
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    Hi and welcome :D

    Once you have the figures in front of you it is quite a revelation isn't it?
    Now you know the where the money is going, you can look at cutting out what isn't needed and reducing where possible on what is.

    Some things to consider;
    Gym membership seems high at £75. I use PureGym for most of my gym training £13.99pm and I am fortunate enough to have cheap and unlimited access to a mates gym / dojo for everything else; sparring and so on (MMA). I help put his team through the mill and my mate also gets a share of my home brew production each month :D

    Cineworld membership. Unless you are in the habit of visiting the cinema frequently is this really needed?

    Mobiles. Maybe look at going sim only? If you have a decent handset it is worth considering when contracts are up ;)

    Always look for ways to save on your outgoings.

    You can and will get the debts gone. Folks on here are really supportive and are happy to help :D
    BUGGRITMILLENIUMHANDANDSHRIMP I TOLD EM! - Foul Ole Ron
    It is important that we know where we come from, because if you do not know where you come from, then you do not know where you are, and if you don't know where you are, then you don't know where you are going. If you don't know where you're going, you're probably going wrong.
    R.I.P. T.P.
  • SystemSystem Forumite, Community Admin
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    Hiya. Welcome and good luck.
    With your variable income, and need to get budgeting, it might be worth checking out YNAB, which is a budgeting app. It does come at a cost but it will help you save money for non regular spends like clothes etc. There's a link in my signature.
    If you have already found £500 a month you will be able to get this sorted in no time.
    You could stop the charity donations too?
    There's a certain joy in setting saving targets for stuff you enjoy and achieving them - far better than guilty splurges!!
    Good luck xxx
  • enthusiasticsaverenthusiasticsaver Forumite, Ambassador
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    I would start on getting rid of the overdrafts. Then CC5. You have a decent income so if you start to be more aware of how much money you are spending and where you will be in a much better position. I would get rid of the cleaner. You also need some emergency savings.
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  • BeBopTalulahBeBopTalulah Forumite
    17 Posts
    Seventh Anniversary Combo Breaker
    Forumite
    Day 1

    Good morning and thanks for the comments so far.
    Hi and welcome :D

    Once you have the figures in front of you it is quite a revelation isn't it?
    Now you know the where the money is going, you can look at cutting out what isn't needed and reducing where possible on what is.

    Some things to consider;
    Gym membership seems high at £75. I use PureGym for most of my gym training £13.99pm and I am fortunate enough to have cheap and unlimited access to a mates gym / dojo for everything else; sparring and so on (MMA). I help put his team through the mill and my mate also gets a share of my home brew production each month :D

    Cineworld membership. Unless you are in the habit of visiting the cinema frequently is this really needed?

    Mobiles. Maybe look at going sim only? If you have a decent handset it is worth considering when contracts are up ;)

    Always look for ways to save on your outgoings.

    You can and will get the debts gone. Folks on here are really supportive and are happy to help :D

    The gym membership is a contentious issue. We don't use it, it doesn't pay for it's self, husband feels that it's important for our plan to improve our overall health (the plan we've made but haven't actually done anything about....) It's a privately run leisure centre with council funding, and for our £75 we have unlimited use of a great gym, swimming pool, sauna etc. etc.

    The cinema membership is going. We don't use it much since our son was born, it isn't paying for it's self either.

    We will discuss mobiles too. I'm going to look at reducing our packages. Both phones are fairly new I'm afraid :(
    Hiya. Welcome and good luck.
    With your variable income, and need to get budgeting, it might be worth checking out YNAB, which is a budgeting app. It does come at a cost but it will help you save money for non regular spends like clothes etc. There's a link in my signature.
    If you have already found £500 a month you will be able to get this sorted in no time.
    You could stop the charity donations too?
    There's a certain joy in setting saving targets for stuff you enjoy and achieving them - far better than guilty splurges!!
    Good luck xxx

    Thank you. My income is variable by about £300 each month depending on how many antisocial hours I have done, but £1000 is my minimum, so I'm confident that if I build my budget around this I'll have spare cash.

    I can pause some of the charity donation. I will say 'pause', because it makes me feel slightly better about it :( My husband works with an organisation that, among other things, helps disadvantaged kids learn outdoor skills/water safety/kayaking etc. Some of our charity pot is his small monthly donation to that cause. I'd like to move that one slightly further down the cull list for now.
    I would start on getting rid of the overdrafts. Then CC5. You have a decent income so if you start to be more aware of how much money you are spending and where you will be in a much better position. I would get rid of the cleaner. You also need some emergency savings.

    Thanks for the advice. CC5 is my first victim. Not sure whether to just start a DD for a hefty payment, or wait until the end of the month and gather up what we have left? It's the actual practical application I struggle with. Looks good on paper, but doing it is more challenging I find.

    Today's Plan

    -Withdraw cash for my 2 budget envelopes (£ 65 grocery and £50 'other').
    -Need to do the weekly shop today, and I have used MySupermarket app to check where is cheapest. ALDI it is! :)
    -Working night shift tonight, so I need to keep it simple today. House is a bombsite after the weekend, so my priority after shopping is a full tidy round.
    -Organise dinner to leave for DH and DS + make a packed dinner and snacks for work tonight.

    Weekly Plan

    -Organise a larger regular payment to CC5
    -Cancel charity donation
    -Cancel cinema membership
    -Reduce mobile phone payments somehow
    -Batch cook one meal for the freezer (from what we already have)
    -Use the neglected savings account to start an emergency fund of £1000

    May be quite a small list, but we'll see how we get on with that.
    July 2018 -£34,581.02 Snowball Plan first victim - Overdraft 1 - £260/£1800 Debt-free April 2020:T
  • My five penneth I feel for you in a lot of ways but if you owe 35000 plus a lot needs to change. I am sorry if this is a bit blunt but your paying out a lot that you don't need to be or your overpaying on stuff.


    Outgoings Monthly

    Oil £125.00 I feel for you re this my other half lives in an area with no main line gas and I know oil heating is a bomb.

    Electricity £49.50 re this I would get on top cashback and visit a price comparison site and see if this can be reduced. If you don't have energy saver bulbs in buy them lol Start being abit tight if you go out and turn everything none essential off standby every little bit helps.

    Home insurance £33.15 With these again get on price comparisons sites again they seem high
    Landlord insurance £33.27 With these again get on price comparisons sites again they seem high

    Mobile phones £86.79 Same with this I pay for my sons mobile and mine and my partners and its 70quid for the three phones, and we both have s8's and my son has a giff gaff sim in an iPhone 6

    Life/Critical illness £86.52 Can I ask do you both smoke, that's high I understand being risk adverse but what would you prefer debt free with higher disposable income or this. I have a critcical illness policy which pays my mortgage off and leaves 100000 lump some for my son and partner and its two thirds that. Is the critical illness insurance decreasing term life insurance??

    Gym membership £75.00 re this if your not using it get rid, or look at the cheaper gyms, me and my partner pay 60 for our gym between us but we are 3-4 days a week usually. There must be cheaper options

    Pet insurance £36.65 re this I would stop it and put twenty to twenty five a month into a saving account build it up as an emergency fund/pet medical bill fund. Or plan b get on top cashback and look at quotes for pet insurance.


    Charity £33.66 re this I can understand the sentiment but I see at work (I am a financial advisor) people who owe 1000's who are repeatedly are paying a fortune to charity. Drop that to five pounds a month and that's straight away another 340 pounds you could clear off your debts.

    Cineworld member £17.90 I agree with uncannyscott

    Cleaner (yes, I know!!!8230;) £80 its an expense not needed £960 per year that would be nearly bye bye to an overdraft.
    Spotify £9.99 Swap for the free version
    Birchbox Subscription £12.95 cancelled
    Audible £7.99 cancelled
    National Lottery £18.00 cancelled
    Postcode Lottery £10.00 cancelled
  • BeBopTalulahBeBopTalulah Forumite
    17 Posts
    Seventh Anniversary Combo Breaker
    Forumite
    Thanks very much for the feedback.

    Yeah, utilities are quite expensive for us. There is nothing I can do about the oil. We have a wood burning stove, so on the colder days I light that instead of having the heating on. We haven't had the heating on since March, so we will be building up a good supply for the winter by overpaying. I promise I will compare electricity prices, but we've always done this anyway and buying packages worked out cheaper.

    Same with the insurance, we shop around and always compare quotes. Neither of us smoke, but our life insurance pays nearly £200k and is not reducing over the term. Critical illness cover was pricey, but I have a family history of cancers, and right now if one of us couldn't work we'd lose our house.

    Pet insurance is with Petplan and we are so pleased with them. We've already had several thousand pounds worth of vet bills since taking it out, and that doesn't affect our premium. One of our pets has had several issues, which would now not be covered by another policy.

    The mobile phones, cinema and gym membership are on my chop list (as mentioned above) and I will reduce these costs.

    As for the cleaner - I'm prepared for a bruising - she's staying for the momentt. I am about to start a new job, which will be full-time (no extra cash at the moment, but after a year I will have a significant increase and then again 2 years after that). I don't buy clothes, or drink much/go out, I don't visit the hairdresser or beauty products. The one thing that takes me to my happy place is having some help for to keep the house clean. I also consider her a friend now, and she has helped us out in so many ways, I just cannot ask her to leave now.
    July 2018 -£34,581.02 Snowball Plan first victim - Overdraft 1 - £260/£1800 Debt-free April 2020:T
  • Thanks very much for the feedback.

    Yeah, utilities are quite expensive for us. There is nothing I can do about the oil. We have a wood burning stove, so on the colder days I light that instead of having the heating on. We haven't had the heating on since March, so we will be building up a good supply for the winter by overpaying. I promise I will compare electricity prices, but we've always done this anyway and buying packages worked out cheaper.

    That's what my other half is doing I think she is paying 60pm and if its on its only for drying school clothes if the weather is yuk. An idea might be re this is perhaps shopping round re suppliers of the oil. My partner has a large oil tank in her back garden I cant remember how many litres it is, she spoke with the neighbours and we found which was the cheapest to fill there was 3-4 main suppliers.

    Same with the insurance, we shop around and always compare quotes. Neither of us smoke, but our life insurance pays nearly £200k and is not reducing over the term. Critical illness cover was pricey, but I have a family history of cancers, and right now if one of us couldn't work we'd lose our house.

    If you want to keep it fine but look at a term decreasing one, ie the more you pay off the mortgage the lower the premiums become.

    Pet insurance is with Petplan and we are so pleased with them. We've already had several thousand pounds worth of vet bills since taking it out, and that doesn't affect our premium. One of our pets has had several issues, which would now not be covered by another policy.

    The mobile phones, cinema and gym membership are on my chop list (as mentioned above) and I will reduce these costs.

    And the charity???

    As for the cleaner - I'm prepared for a bruising - she's staying for the momentt. I am about to start a new job, which will be full-time (no extra cash at the moment, but after a year I will have a significant increase and then again 2 years after that). I don't buy clothes, or drink much/go out, I don't visit the hairdresser or beauty products. The one thing that takes me to my happy place is having some help for to keep the house clean. I also consider her a friend now, and she has helped us out in so many ways, I just cannot ask her to leave now.

    re this ie the cleaner hmmmmmmm I work nights full time, my partner is a teacher and she has two children a dog and two pet rabbits and we get buy without one. lol You have kids right??? Pay them to help, my partners kids get pocket money for doing jobs. 80quid per month is a lot of money too some ie me lol that's nearly two weeks food shopping.
  • BeBopTalulahBeBopTalulah Forumite
    17 Posts
    Seventh Anniversary Combo Breaker
    Forumite
    We have a 15 month old - housework is generally like running through treacle. If I paid him he'd keep the money but continue pulling the fresh laundry out of the drawer I'd just filled :laugh:

    I can 100% see how unreasonable it is, but I can live without wine, chocolate, make-up, blow drys and clothes. I don't know if I can live without my cleaner...
    July 2018 -£34,581.02 Snowball Plan first victim - Overdraft 1 - £260/£1800 Debt-free April 2020:T
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