New Year, New Diary, New User

Samwise_the_Frugal

Hi all! I'm de-lurking to put my DFW musings on paper in the hopes that it keeps me on the straight and narrow in 2019...

A bit of background - I'm a US expat living in sunny Scotland. I've been here for several years now but, frustratingly, my debts span two continents. I'm quite lucky to be in a great job (which will see a pay rise in August 2019), own a flat (which is currently rented to stellar tenants), and have a wonderfully supportive DH (who has only been the DH for a few months now). DH has his own property, which we live in together, and I contribute a share towards the mortgage and various expenses - that's why my SOA doesn't include so many of the usual culprits. When we started officially living together, DH and I had the awkward chat about my high level of debts (all of which at the time were student loans) and he very nicely suggested that I pay slightly less towards the house costs so I could throw everything at them. The plan is to re-evaluate the situation once I'm debt-free and on a higher salary.

So, without further ado, here's the state of the union:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2

Monthly Income Details
Monthly income after tax................ 1800
Other income............................ 737
Total monthly income.................... 2537

Monthly Expense Details
Mortgage................................ 413.00 *1
Secured/HP loan repayments.............. 375.40
Management charge (leasehold property).. 50
Mobile phone............................ 50
Groceries etc. ......................... 120
Other travel............................ 53
Buildings insurance..................... 40
Entertainment........................... 80
Gym..................................... 24.99
Cineworld............................... 17.90
Payment to DH........................... 500
Total monthly expenses.................. 1311.29

Secured & HP Debts
Description....................Debt.......Monthly...APR
Mortgage (main)................71274.70..(302.9)....3.03%
Mortgage (sub).................14722.70..(72.5).....4.23%
Total secured & HP debts...... 85997.40

Unsecured Debts
Description....................Debt......Monthly...APR
Credit Card....................4123.00...30........0% *2
Student Loan 1 ................17028.90..306.9.....9.625% *3
Student Loan 2.................12291.20..150.8.....8.625% *3
Student Loan 3.................5036.70...83........9.625% *3
Total unsecured debts..........38479.80..570.70

Monthly Budget Summary
Total monthly income.................... 2,537.00
Expenses (including HP & secured debts). 1,311.29
Available for debt repayments........... 1,225.71
Monthly UNsecured debt repayments....... 570.70
Amount left after debt repayments....... 655.01

Savings
N'wide 5% Account ...................... 1,389.00 *4
Current Account (no interest) .......... 883.00
Other Savings Account (0.20%) .......... 6.83
US Account (converted) ................. 3,494.76 *5

(Created using the SOA calculator at stoozing. Reproduced on Moneysavingexpert with permission, using Firefox browser.)

And the fine print:

*1 - I'm currently overpaying my mortgage slightly (direct debits are set for £413 in total when the monthly payments should be £375.40). This is leftover from the time before I understood a. how interest really worked and b. just how high my student loan interest rates were! My deal is up in 2023.

*2 - My cc is 0% until January 2021 so there are 24 payments until the deal is up. The vast majority of this spend is on wedding/honeymoon costs. DH has offered to make some payments to this but given how much he contributes proportionally to the household already, I'd rather clear it myself.

*3 - My student loans are in USD and are paid from a US account I have (I've converted the figures to GBP). The interest rates are atrocious and variable - in the last year alone they have rocketed from c. 6% to where they are now. I've looked into refinancing them but the position is incredibly complicated because of my expat status. For the time being, it seems best to keep transferring money to my US account to pay them.

*4 - This account earns 5% interest on up to £2,500 until Aug 2019 (at which point it goes down to 1%). My goal is for this to be a "rainy day, busted boiler" account and to maintain it at £2,500.

*5 - Transfer fees absolutely have been killer (seriously, about £40 per transfer between the two accounts in various fees!) so I took the view that I'd be better making transfers less often but for higher amounts. The upside is that I have six months worth of payments in the account ready to go. The downside is that I need to prepare well in advance for overpayments. The term for Loan 1 is up in 2024, Loan 2 in 2028 and Loan 3 in 2031, so I'd like to be able to have them all paid off early - by the end of 2021, if I can.

Here's the plan:

Immediate Goals

• Cancel the Cineworld card (which I never use) and put this money towards the credit card
• Student loan payments for the next two months to go to 5% savings account to reach the £2.5k threshold - after that, I'll start stockpiling them in my other savings account
• Add £130 of my monthly amount left to the credit card payment (£178 monthly will ensure it's cleared off by the time rate is up and give some leeway for emergencies)
• Transfer the bulk of my current account to the other savings account for interest (leaving a £100 float)
• Put £500 of my monthly amount left to the other savings account (again, to stockpile this for student loan payments)

Longer-term Goals

• Have £4k in the other savings account by June 2019 to transfer to my US account for student loans
• Have £7k in this account by December 2019 to transfer / make a larger overpayment
• Pay off my smallest student loan (which also has the highest interest) in 2019.

And that's all she wrote (for now)! Any advice or constructive feedback is very much welcome.


TL;DR: Hi! And cheers to being debt-free (or at least closer to it) in 2019! :j

Moneywhizz

Hi and welcome to the forum. It sounds as if you have worked everything out and have a good plan in place. Obviously it is your student loans that are really crippling you. Doesn't sound like the US system is as favourable as the UK student loans. Not only are they high interest rates, but you are paying extra for transfer fees and will also be losing out when the pound drops against the dollar. Have you tried to get finance here to pay them off?
Regarding your SOA, there do seem to be some categories missing. Nothing for clothes, presents, health, toiletries, holidays, miscellaneous. It is very difficult to stick to a budget long term unless it is realistic and allows you to cover all the expenses that crop up. Your mobile phone cost is quite high, are you locked into a contract.
Hope this does not seem negative, just trying to help you along the way on your journey to debt freedom.

Samwise_the_Frugal

Thanks Moneywhizz! And no, it doesn't seem negative at all - it's always useful to get external views on these sorts of things. Years of spending habits have left me a bit adrift!

As for expenses, I'm quite lucky not to have any health costs. Ugh, yes, my mobile phone cost is a contract - £22 is for the plan and £28 is for the phone itself (which will end in another year and a half). Toiletries are included in my groceries bill (other than shampoo and toothpaste I don't go in for much!). But point taken on clothes, holidays and miscellaneous - I find this hard to estimate because they tend not to be a regular, monthly spend but one offs. What do other users tend to do for these types of expenses?

I haven't tried to get finance here - I briefly considered it a few years ago, but was frightened by what seemed like large rates/monthly payments (joke's on me considering the student loan rates!!). But you raise a good point: a lump sum loan, while still having a relatively higher interest rate, would allow me to pay off most (if not all) of my students loans in one go. And then I'd only have to pay the monthly payments (or overpay) - there wouldn't be any further transfer fees or currency fluctuations.


Thanks again!

Moneywhizz

It might be worth looking online at what rates you might be offered. If you have a mortgage in this country that you pay regularly and a secure income you might be able to get a decent interest rate loan. Normally that wouldn't be a wise thing to do the way student loans are set up in this country but given your circumstances it may be a good option for you. What would happen if you weren't working and unable to finance the student loans in the US? In the UK, if you don't earn a certain amount you don't have to pay the loan back.
As far as budgeting for other expenses you should try to estimate how much you are likely to spend on presents, clothes over the year and begin to put that away in a monthly "pot". It obviously takes a few months to start building up but once established means that you always have money in the "pot" when needed and don't have to try and find it from your monthly pay. You can either keep this money in a separate account, or have a spreadsheet showing what the amount of money in your bank is actually set aside for. I would also recommend a monthly miscellaneous amount of cash to keep in your purse for the odd little things that crop up - lunch out, a magazine, birthday card or just a little treat for yourself. it makes living on a strict budget much more manageable and enjoyable.

EscapingTheAlarm

Good luck with your journey. Those student loans are big but hopefully they were worth it to help you get the career you were aiming for! You sound like you've got a good plan in place so good luck and just keep going, even when it feels never ending!
ETA x

Samwise_the_Frugal

Good luck with your journey. Those student loans are big but hopefully they were worth it to help you get the career you were aiming for! You sound like you've got a good plan in place so good luck and just keep going, even when it feels never ending!
ETA x

Thanks ETA! I do feel that the loans were worth it (as it means a big boost in salary and good benefits), it's just hard to see the woods for the trees at this stage! I'm positive that in ten years I'll be grateful, it's just hard to feel positive about them when you log in to your account and see so many red numbers... Baby steps!

What would happen if you weren't working and unable to finance the student loans in the US? In the UK, if you don't earn a certain amount you don't have to pay the loan back.

Ugh, whizz, it's pretty awful there - it doesn't matter how much you earn (or don't earn), they expect you to pay it back. And the interest is all compounded, so taking a "payment holiday" costs you infinitely more. The good news is that I'm at the stage where my monthly payments are going more towards reducing the capital than paying interest, but I'm at the starting point of the snowball, so the progress is hard to see!

As far as budgeting for other expenses you should try to estimate how much you are likely to spend on presents, clothes over the year and begin to put that away in a monthly "pot".

That's a great idea. My original plan was to have £655 a month available for debt repayments (and that's after chucking money at my emergency fund). I was going to put £130 to my CC debt and the remaining £525 towards the student loans. I think what I'll do instead is allocate £125 to a "lesser emergencies" fund (presents, clothes, treats) - if, at the end of 2019, there's still funds left, I can always chuck that to loans too!

I also looked into the idea of a personal loan and talked it over with DH. I think it's sensible, but I'm going to wait to the summer to apply as a. I'll be on a bigger salary (so hopefully better lending terms) and b. it should give me some time to see what happens to the exchange rate post March.

Now to get on to updating my spreadsheets...

beanielou

Happy shiny new diary.
Baby steps are always good

Samwise_the_Frugal

Cheers to 2019! Hopefully it is a great debt-free, debt-reducing or lifestyle-change year for everyone! :T

I got a generous (and unexpected) gift from an auntie that went straight towards my debts, so updated totals are below.

Unsecured Debts
Description....................Debt
Credit Card....................4123.00
Student Loan 1 ................[STRIKE]17028.90[/STRIKE]15902.80
Student Loan 2.................12291.20
Student Loan 3.................[STRIKE]5036.70[/STRIKE]4720.08
Total unsecured debts..........[STRIKE]38479.80[/STRIKE]37037.08

I keep repeating "baby steps" to myself. It's encouraging to have a plan, and if everything works well, I'll be completely debt free by the end of 2021. I'll have to be inspired by small steps of progress and not get discouraged!

I've come up with what is hopefully a more realistic monthly budget that will allow me to put some money aside for presents, clothes, wee treats. It's been a No-Spend Year thus far, but I don't think that will remain the case :rotfl:

Thrice

Morning Samwise, how are you getting on?

That was a very generous gift from your auntie, how kind!! x