Tidying up the mess

BabyStepper

I'm glad you like it kitten, think I may have found a balance of the correct order vs. quick wins paying things off in full. I'll wait to hear what enthusiastic saver thinks about it. I do feel more certain but also aware that the plan could fall to bits if the roof falls off, a chimney collapses, OH loses his job, whatever. Really hoping for a very quiet next 6-7 months to at least get part of the plan under my belt. Fingers crossed!

I still have my thermometer getting coloured in every time we reach a milestone and that's very motivating. Can't wait to phone Santander to get my overdraft reduced then cancelled in full. Wow. What a day that'll be and I guess my first goal to focus on.

enthusiasticsaver

BabyStepper wrote: »

Thanks kitten868, I did misunderstand you, motivation is a big factor too so the Hitachi loan might be paid off sooner. I think I need a combination of sensible decisions with a bit of quick progress for motivation thrown in to keep me going. I'm not sure if such a balance is even possible but here goes.

Given recent overpayments to the Barclaycard I have reduced the monthly payment to £35, same as Halifax and Santander. Lloyds at £15, MBNA at £60 and Hitachi at £42.20. Total minimums per month are £222.20. This will leave £1,177.80 every month to allocate wherever. I really need to think this through properly. We have an interim month in March when only minimums will be paid due to cashflowing house repairs. Anything extra that month will go to the house maintenance pot. Then we can get started. Here are the things I need to think about, please bear with me.

Overdraft needs to go first. Agreed

Santander finishes its 0% deal first so needs to be a priority. Agreed

Halifax and Lloyds are on such long deals that they really need to wait until last.yep, agreed

Lloyds is small and I will be tempted to pay it off sooner for a quick win. Not a problem if it does not derail the plan to pay off the bigger debts within the deal period as those have the potential to be most expensive if you don't get them repaid in time.

MBNA is huge and scary. Ideally I would want to wait until I have the most available I can every month to pay it down but this means waiting until last so that won't work.

I am desperate to pay off the Hitachi loan.

BC 3 can get paid off in 1 month.

BC3 and MBNA finish their deals in the same month early next year. Hitchi due to finish at around that time too.

Keeping all that in mind, here is my revised plan...

April and May £1000 to overdraft and £177.80 to Santander. Overdraft gone.

Along with minimum payments during this time, Santander will then be at around £2,660. It will take 3 months to pay it off anyway so is there any harm in...

June Pay off Hitachi (around 400 by then) remainder to Santander. Hitachi gone.

July and August Santander. Remainder to MBNA. Santander gone.

Now MBNA and BC3 finish their deals in the same month so...

September BC3. BC3 gone.

I will then tackle MBNA with full force. It should be considerably smaller by then and with BC3, Santander and Hitachi paid off I'll have £1,290 to throw at it along with the £60 minimum payment. This leaves it a bit longer than is ideal, but I will have until February to pay it off and if the worst came to the worst, I would just need to push my DFD back a bit. With long deals on Halifax and Llloyds that would be ok. No balance transfers or anything. The thought of simplifying things, having fewer payments on my budget, not having to look out for DDs going out, feeling the success of paying things off in full, is all very appealing.

My brain now feels like it's about to go on fire so I'll stop there. Please feel free to point out any glaring mistakes/omissions/reasons why this plan might not work. The only thing I can see is that I will want to pay off Lloyds but it will really need to wait.

I think your plan is good and see no glaring pitfalls. As you say if something happens in the next year to stop you paying the £1400 a month then you have a few options. Delay the DFD and either BT or pay a month or so of interest. The Halifax and Lloyds deals are so long though I really only would pay minimums until those big beasts like MBNA and Santander are gone.

As you say the trickiest time is when you have the three deals all finishing at the same time BC3 and yes the easy win is to get rid of that in one month. It should be down to around £1000 with the minimums from March until August. If you manage to clear the Hitachi loan in June that gives you £1350 to chuck at MBNA which by October should be down to just over £5k so that is 4 months to clear that so it should still be gone by January and enough to get rid of Lloyds too leaving just Halifax to go.

The possible pitfalls I can see are that either the income from your self employment hits a tricky spot and you are no longer able to take the £1500 a month wage. I am just playing devils advocat here.

Or you get an unexpected large bill which cannot be delayed until next year meaning the debt payments have to reduce. Your options then would be delay DFD and pay a BT fee or interest. I am looking forward to seeing you nailing this.

PositiveBalance

Hi Babystepper,


You are doing really well. :T


The nice thing about your plan is that as you are closing your accounts you are rehabilitating your credit score so if it comes to the last card and you need to push back your DFD you will probably be in a position to do a final BT to give you a little while longer to get rid of your last debt, if necessary.



About Dave Ramsey... He says himself that it's not easy to become a millionnaire, otherwise everyone would do it. I often wonder about how much of his philosophy translates directly to the UK as quite a number of the people who call into his show have eye-watering salaries ($100K+) and US 401K retirement vehicles seem a lot more adaptable than the traditional pensions which we mostly have over here.



I think he is mostly right, though. While it's often not easy for people to 'get ahead' for a variety of reasons, it's often what we do with the money that we get and how focused we are with using it correctly that makes the difference and that's not related to how much is coming in, rather the attitude of the earner.


I'm not going to lie, though...having a €100K income and my current standard of living would make it a lot easier!

DrSpendLittle

Hi Babystepper, I think your plan looks good. I really enjoyed the satisfaction of clearing balances one by one. It's great for motivation. I can see why you'd want to do it. I started with 4 debts and now only have one. The last one was my biggest (£9.1K at LBM) and it had around £7K left on it by the time I got my snowball to it. Its nice chipping away at it knowing its my last one.

Life can and does get in the way. But see it as a challenge and a test to your resolve. Some days you'll rise to the challenge, others you'll be deeply frustrated, others you'll throw the towel in and think its all too much. But you'll still be moving forward. The pace may slow or speed up but you'll still be moving forward.

I remember fondly of a time when I'd snowballed all other debts and was left with my last one. I was super excited to make my first big £1,000 payment to it. A few days before that, I broke a tooth and had to spend £300 at the dentist :cool: Even my DF was sad for me. But, I'm still here and I'm nearly done. Life does get in the way but ultimately it makes you stronger.

BabyStepper

Thanks for your thoughts, lovelies. :A General opinion seems to be that this plan could work, so I'm going with it. OH is on board and we have a few weeks to get ready. I feel strangely nervous about it but plan to do it anyway. Nothing ventured, and all that.

Weak spots, definitely the possibility of my income reducing and also a large unexpected bill. Or even more than one bill. Thanks enthusiastic saver, absolutely right. I need to protect against these things as best I can.

I still haven't looked at my business account to see how I can save money and accrue a buffer as fast as I can. One thing that comes to mind, more walking and fewer bus fares. I'm going to use some of my March spends for a new pair of trainers to support my feet and challenge myself to zero buses in March.

I'm going to look over my business account and see what my total expenses are for a year, including everything, website domain, business cards, registration fees, cpd, the whole lot. Then divide into a monthly figure and anything over that every month, whether or not it is spent that month or needs to be saved, will be considered the buffer.

The house maintenance fund will not survive this house repair and is likely to be reduced to £0. This needs to be increased asap as it's the only area I can foresee a big unexpected expense. We have a monthly amount going into this fund but any extra would be very good. Our families live relatively close by, the kind of distance that in an emergency we could get there with less than £30. I'll keep thinking about emergencies and unexpected things. Feel very fortunate right now not to have a car to maintain.

I cant think of anything else right now but the challenge is set. It's a massive challenge but the rewards will be great.

BabyStepper

All the quotes are in and were fairly similar so we've gone with the guy we liked the most. He has other work on for the next week or so and will get to us after that. We won't need to pay until March, just as well. I'm hoping it all goes smoothly and no other problems are discovered.

We got our final bill from our old utilities supplier, bigger than we were expecting at £300. We have £200 from OH's inheritance but will need to find £100 from somewhere. Choices are: reducing our spends in March or borrowing from the emergency fund then repaying it at the end of March. We decided to manage with less spends next month. I'll pay this bill once pay day arrives. It seems important to start our latest plan with all bills paid and an intact emergency fund.

If we manage to stay in budget in March, don't overspend, handle any difficulties in an MSE way, then the prize at the end is a massive amount off the debt. I think I'm almost ready, I can't see anything else coming at me, almost good to go.

I'm getting back into the habit of walking to work. I feel better for it but my old trainers are completely done. Looking forward to a new pair.

I've started working on a budget for once we're debt free (optimistic but I do enjoy fiddling with numbers). Pensions will be reinstated immediately. Then a week's long beach holiday paid in cash (shouldn't take more than one month's debt repayment cash, possibly less). And we don't really know what will happen next.

The emergency fund will need an extra £9k. At the moment me and OH are thinking we want to stay with our MSE/frugal ways and get it built up as fast as we can. It will depend on a few things: if the £250 spends money per month is enough, if we have managed to build up a house maintenance fund while paying off debt, if I have managed to make a buffer in my business account, if we can continue with no car, how we feel about waiting to make mortgage overpayments and how we have managed with any surprises along the way.

My more sensible head is saying we could do all of these things simultaneously if a lot slower. Increase our spends (so we feel the benefit of no debt), slowly build up the emergency fund, house fund if need be and the car fund, make small mortgage overpayments like GlendaSugarBean and just give ouselves an easier time.

I guess we won't know until we get there. And I am getting ahead of myself. It's nice to daydream though. For today we are on track.

BabyStepper

Just a quick update to keep me on track.

I was able to take a £1500 wage this month. Great.

The final utilities bill has been paid in full.

Walking to work is going well and saving money.

Me and OH have slightly reduced spends this month but think we can manage.

There is cash in the pot for the house repairs but still waiting for this to happen.

And all of this means I don't need to check the joint account repeatedly for bills going out. Moneywhizz this made me think of your good advice, quite pleased I've made it to this stage. Everything is becoming simpler to manage all the time.

The plan is to pay minimums this month and keep the budget on track for the first big debt overpayment at the end of this month. So far so good.

enthusiasticsaver

Sounds like you are on track and ready for the debt reduction plan once the house repairs money saved.

BabyStepper

enthusiasticsaver wrote: »

Sounds like you are on track and ready for the debt reduction plan once the house repairs money saved.

I think we are pretty much good to go. Forgot to mention the emergency fund is still intact and also it looks like I will end this month with almost £200 buffer in my business account. Just need to deal with things as they happen. I'm pretty determined nothing is going to derail this plan! (Hope I'm not tempting fate! )

Moneywhizz

It's a pleasure to have been some help to you. Your diary is a real success story and I'm sure will be an inspiration to many who are paying off debts. It is great to see that you are now so relaxed and know exactly what is happening with your budget. Not only that but you are actually enjoying working out what you will do when you are debt free. I can't imagine that you will ever be in debt again.