Baby steps

tillypops

Hello

I am thinking about trying to follow the Dave Ramsey baby steps method. Baby step 1 is to set up an emergency fund of £1000, then baby step 2 is to start snowballing debt. The problem is I haven’t a clue how to start saving for the EF and I’m worried it will take me 2-3 months to put that aside, meantime i’ll Be paying interest on debt. I’m just not sure where to start and wondered if anyone here has done this method or has any advice? I have filled in a SOA. Many thanks

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1000
Partners monthly income after tax....... 1300
Benefits................................ 220
Other income............................ 82
Total monthly income.................... 2602

Monthly Expense Details
Mortgage................................ 501
Secured/HP loan repayments.............. 495
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 30
Gas..................................... 30
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 62
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 38
Groceries etc. ......................... 200
Clothing................................ 20
Petrol/diesel........................... 100
Road tax................................ 2.5
Car Insurance........................... 16
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 200
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 65
Buildings insurance..................... 7
Contents insurance...................... 7
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 1915.5


Assets
Cash.................................... 0
House value (Gross)..................... 140000
Shares and bonds........................ 0
Car(s).................................. 4000
Other assets............................ 0
Total Assets............................ 144000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 116000...(501)......3.8
Secured Debt.................. 8000.....(495)......0
Total secured & HP debts...... 124000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Bcard..........................189.6.....5.........18.9
Hfaxcard.......................2153.37...45........19.45
Sainscard......................2655.55...26........0
Mbna...........................4653......46........0
Tescard........................5545......55........0
Total unsecured debts..........15196.52..177.......-


Monthly Budget Summary
Total monthly income.................... 2,602
Expenses (including HP & secured debts). 1,915.5
Available for debt repayments........... 686.5
Monthly UNsecured debt repayments....... 177
Amount left after debt repayments....... 509.5

Personal Balance Sheet Summary
Total assets (things you own)........... 144,000
Total HP & Secured debt................. -124,000
Total Unsecured debt.................... -15,196.52
Net Assets.............................. 4,803.48

BookmobileBadGirl

Hello,

I should start by saying that I am not a Dave Ramsey fan but if it helps you get debt free then that is all that matters.

Looking at your SOA, do you really have £500 left each month? If so that would only take you two months to save up your emergency fund. You are already paying interest on the debt, the amount you would build up in two months is nothing in the bigger picture of your debt.

Your mobile phone cost is high as is your internet, can you look at new deals?

Are you really paying £65 a month on pet insurance? This seems very high

theoretica

The problem with that SOA is it does not look like it reflects reality - if it did you would either not have got into debt, or be rapidly paying it off. Can you really live off those figures and nothing else at all?


Look back over your bank and card statements for the last couple of months and see where your money has really been going so you have the information you need to decide what to change.

Dobbibill

Hi - welcome to the forum.


You have a car but nothing for car maintenance and MOT. Even a new set of wipers, oil, tyres etc all need to be accounted for so you need something there.

Do you really not spend anything on entertainment?
If you really have that much left every month then you will fly through the debt busting and could start by clearing the Bcard in one hit and putting the remainder for an EF. Then add the EF to your SOA so you are putting something in it each month.

If you don't you need to keep a spending diary to see where you are losing over £500 per month.
A SOA sometimes takes a few tweaks to get it spot on - revisit your statements and SOA, you will get there, it just takes time.

BabyStepper

Hi

I'm also a DR fan and had the same doubts about saving up the emergency fund...why do it when that money could be paying off debt? However, now I'm a bit further down the line of paying off debt I can honestly say the emergency fund has been one of the most helpful things I have done. In order to pay off your cards you need to stop using them. Things ALWAYS come up that you didn't expect, and you need a way to fund them. The credit cards cannot be your emergency fund. You are trying to change your behaviour here and that means no spending on the cards.

Good luck. As someone said, if your budget is correct you will have £1k saved in no time.

enthusiasticsaver

The logic in setting up an emergency fund is that it should get you out of the habit of turning to cards when you have an unexpected bill as babystepper says. Personally though I would go for a £500 EF as you have more than £2300 on 19% interest or thereabouts. I also would do it over 5 months until you get rid of the interest charging debts.

Your soa has gaps though and you should allocate the £509 surplus to that as undoubtedly you are spending on those but not allocating money to the missed categories.

I would put £50 initially into a car maintenance pot or savings account and allocate £50 to entertainment. Do you never get a takeaway, do soft play with your child or take them swimming etc? I would put £100 monthly initially into an EF and the rest spare to the Barclaycard at £189.60 as that is an easy win and gets rid of a debt. Then I would tackle the Halifax card which will take longer.

tillypops

Thanks for all the replies! I forgot to mention in my post that we usually start the month 200-300 overdrawn but I have drawn up a zero based budget this month and hope we will start next month at 0 (baby step 0).
I have updated my SOA with the suggestions for entertainment and car maintenance although so far we haven’t had to spend anything on it yet. It hadn’t occurred to me to budget monthly for that sort of thing as our usual reaction to a bill like that would be credit card , which is why we are in the debt we are now!

My pet insurance is high because unfortunately my dogs are getting older and insurance companies think this is a good reason to bump the price up. I always shop around for the cheapest and this was it. I wouldn’t not have it though just in case! Phone bill is hubby & I combined, we use a lot of data so I don’t think we could reduce that by much until the phone element of the contract is paid up.

I think I will try as suggested and start off with a £500 emergency fund and then begin by paying the barclaycard off.


ont=courier new]Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1000
Partners monthly income after tax....... 1300
Benefits................................ 220
Other income............................ 82
Total monthly income.................... 2602

Monthly Expense Details
Mortgage................................ 501
Secured/HP loan repayments.............. 495
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 30
Gas..................................... 30
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 62
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 38
Groceries etc. ......................... 200
Clothing................................ 20
Petrol/diesel........................... 100
Road tax................................ 2.5
Car Insurance........................... 16
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 200
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 65
Buildings insurance..................... 7
Contents insurance...................... 7
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 10
Haircuts................................ 0
Entertainment........................... 20
Holiday................................. 0
Emergency fund.......................... 10
Total monthly expenses.................. 1965.5


Assets
Cash.................................... 0
House value (Gross)..................... 140000
Shares and bonds........................ 0
Car(s).................................. 4000
Other assets............................ 0
Total Assets............................ 144000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 116000...(501)......3.8
Secured Debt.................. 8000.....(495)......0
Total secured & HP debts...... 124000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Bcard..........................189.6.....5.........18.9
Hfaxcard.......................2153.37...45........19.45
Sainscard......................2655.55...26........0
Total unsecured debts..........4998.52...76........-


Monthly Budget Summary
Total monthly income.................... 2,602
Expenses (including HP & secured debts). 1,965.5
Available for debt repayments........... 636.5
Monthly UNsecured debt repayments....... 76
Amount left after debt repayments....... 560.5

Personal Balance Sheet Summary
Total assets (things you own)........... 144,000
Total HP & Secured debt................. -124,000
Total Unsecured debt.................... -4,998.52
Net Assets.............................. 15,001.48

Fireflyaway

I watch Dave every day on youtube! The good news is you do have money left over. Beans and rice remember! You should have an emergency fund in no time. Have you shopped around for the pet insurance?