From debt to Dr. Debt-free!

moneyphd

I've been a very long time lurker, and love reading everyone's DF diaries, but I've been thinking for a while about committing to my own diary to motivate me to finally get debt-free! I have been in some sort of debt for as long as I can remember, definitely since I was a student at 19. But, now that I have a mortgage, a good steady income, and not too much debt, I want to push on to get rid of my debts and build up some substantial savings.

This is all kinda of ironic since I am doing a PhD part time on how people think and feel about money - I'm so nosy about how people spend their money and how they get into debt! In my case, the debt came from going on lots of holidays and not caring about taking on debt to pay for them, plus when I bought the house I borrowed to put down new carpets and buy a new shed (which I have painted pink!) I've never been in more than £6k of debt - it's always been manageable - but I'd like a bit more cash in my pocket for emergencies, put in a new kitchen and bathroom and update my car when needed. I want to be able to do these things without getting into debt.

I'm not in too bad of a position, but the idea of having an extra £300+ free a month to save, or spend on doing up the house, or just to increase my emergency fund, is so appealing!

So, here are the debts, as of today:
Student Loan: £2087, paying £166 per month via DD (need to ring them to tell them of a final payment made in September of £172 before I started to pay via DD that needs to be knocked off the balance). It's too awkward dealing with Student Finance, it's not easy to overpay, so I will let this debt run. This will be paid off in 13 months (roll on Jan/Feb 2020!)

MBNA £1,540.10 0% until 13/11/2020 Minimum payment £25 - plan to overpay by however much is needed to a minimum of £50
Barclaycard £2077 0% until 11/4/2021 Making a fixed monthly payment of £50
Sainsbury's Bank £1439.37 0% until 23/11/2020 Minimum is £32.39 - plan to overpay by however much is needed up to a minimum of £50.

So, total credit card debt stands at 5056.47. By December 2019 I aim to have reduced it by a minimum of 1800, so it must stand at the most at 3256.47.

Then, when the student loan is paid off, I will use that money to pay off the credit cards. This should mean that, following this plan, I will be debt free in less than 2 years.

Which isn't good enough!!

I'm so fed up of having this debt. Plus, I bought my house just over a year ago and I really want to overpay the mortgage - I have overpaid by £100 per month since taking it out.

Current mortgage position: £91,140.60, 3.09%, 28 years and 8 months remaining.
Once I have paid off my debts, I aim to overpay my mortgage by a total of £300 per month so that I can be mortgage-free by my early 50s.

Will set out in my next post how I plan to pay down the CC debt quicker...

beanielou

Happy shiny new diary.
What a really interesting PhD

System

We are your audience for your PHD. Good luck with it all.

blue_eyed_girl123

I plan to do a PhD from Sept 2019, don't know if you're fussed about budgeting software but students get one year free on ynab, just search for it online if it would be useful . Good luck with the debt and the researching

moneyphd

Hi beanielou, Cumbria lass, thanks for your good wishes.
blue_eyed_girl123 - I've tried Ynab before. I really liked it but having to update it manually was a bit of a pain...Love the idea of living off last month's wages and ageing my money. I'll think about giving it another go, especially if I can wangle another free year.
Good luck with your PhD plans, I'm only 3 months in but really getting a lot out of it - it is looking at cognitive biases when making financial decisions. Unfortunately, knowing a little of the theory hasn't stopped me from making irrational decisions!!

moneyphd

My SOA:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2321.05
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2321.05

Monthly Expense Details
Mortgage................................ 503
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 112
Electricity............................. 40
Gas..................................... 40
Oil..................................... 0
Water rates............................. 25
Telephone (land line)................... 0
Mobile phone............................ 11
TV Licence.............................. 12.37
Satellite/Cable TV...................... 0
Internet Services....................... 60
Groceries etc. ......................... 285
Clothing................................ 25
Petrol/diesel........................... 30
Road tax................................ 16
Car Insurance........................... 33.33
Car maintenance (including MOT)......... 33.33
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 10
Pet insurance/vet bills................. 40
Buildings insurance..................... 33.33
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 25
Haircuts................................ 6
Entertainment........................... 125
Holiday................................. 45
Emergency fund.......................... 50
Charity................................. 5
Gym..................................... 16.99
Lottery................................. 18
Total monthly expenses.................. 1600.35


Assets
Cash.................................... 4000
House value (Gross)..................... 120000
Shares and bonds........................ 0
Car(s).................................. 3100
Other assets............................ 0
Total Assets............................ 127100


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 91140....(503)......3.09
Total secured & HP debts...... 91140.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Student Loan...................2087......166.......0
MNBA...........................1540......50........0
Barclaycard....................2077......50........0
Sainsbury's....................1439......50........0
Total unsecured debts..........7143......316.......-


Monthly Budget Summary
Total monthly income.................... 2,321.05
Expenses (including HP & secured debts). 1,600.35
Available for debt repayments........... 720.7
Monthly UNsecured debt repayments....... 316
Amount left after debt repayments....... 404.7

Personal Balance Sheet Summary
Total assets (things you own)........... 127,100
Total HP & Secured debt................. -91,140
Total Unsecured debt.................... -7,143
Net Assets.............................. 28,817

blue_eyed_girl123

That sounds like a really interesting topic , and knowing and doing can be two different things in lots of situations - not just financially . Not sure exactly about my topic yet but it's Education based.

Looking at your SOA, £400 p/a for home Insurance seems quite high - any particular reason?

enthusiasticsaver

Interesting phD and yes I am sure you will get loads of material from here. I have often thought that money decisions are primarily determined by personality types (planner, impulsive, live for today) but can also be affected by upbringing (parents attitude to money) and environmental pressures from peers, partners and children.

Re your soa. Your buildings insurance is high, presumably that includes contents? Do you price comparison and pay annually to keep the cost down? Lottery is a grey area. Statistically you are most 7nlikelyvto win a major prize but some are in a syndicate and don't want to risk removing themselves in case there is a win and of course there are the worthy causes too. Depends on situation but you have a £400 surplus so you have some wriggle room.

Really good emergency fund though, interest free on credit cards and not over committed.

I was a debt counsellor, hence my presence here. We made a conscious decision to allocate a percentage of our disposable income from our mid twenties to overpaying the mortgage ( interest rates were higher then in the 80s and 90s) and overpaying pension. We also did savings accounts for holidays, cars and home improvements. I thoroughly recommend that course of action once you have some spare disposable income. Always cheaper to borrow from yourself (unless on 0% of course).

moneyphd

Adjusted SOA:

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 0
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 2321.05
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 2321.05

Monthly Expense Details
Mortgage................................ 503
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 112
Electricity............................. 40
Gas..................................... 40
Oil..................................... 0
Water rates............................. 25
Telephone (land line)................... 0
Mobile phone............................ 11
TV Licence.............................. 12.37
Satellite/Cable TV...................... 0
Internet Services....................... 60
Groceries etc. ......................... 285
Clothing................................ 25
Petrol/diesel........................... 30
Road tax................................ 16
Car Insurance........................... 33.33
Car maintenance (including MOT)......... 33.33
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 10
Pet insurance/vet bills................. 40
Buildings insurance..................... 16
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 25
Haircuts................................ 6
Entertainment........................... 125
Holiday................................. 45
Emergency fund.......................... 50
Lottery................................. 18
Gym .................................... 16.99
Charity ................................ 5
Total monthly expenses.................. 1583.02


Assets
Cash.................................... 4030
House value (Gross)..................... 120000
Shares and bonds........................ 0
Car(s).................................. 3100
Other assets............................ 0
Total Assets............................ 127130


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 91140....(503)......3.09
Total secured & HP debts...... 91140.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Student loan...................2087......166.......0
MNBA...........................1540......50........0
Barclaycard....................2077......50........0
Sainsburys.....................1439......50........0
Total unsecured debts..........7143......316.......-


Monthly Budget Summary
Total monthly income.................... 2,321.05
Expenses (including HP & secured debts). 1,583.02
Available for debt repayments........... 738.03
Monthly UNsecured debt repayments....... 316
Amount left after debt repayments....... 422.03

Personal Balance Sheet Summary
Total assets (things you own)........... 127,130
Total HP & Secured debt................. -91,140
Total Unsecured debt.................... -7,143
Net Assets.............................. 28,847

moneyphd

Thanks Blue_eyed_girl123 and enthusiastic saver for your helpful replies.
Blue_eyed_girl123 - I work in education too and contemplated doing a Professional Doctorate in Education but decided against it in favour of my first love, Psychology. Although, I've just had some pedagogic research published and I've got three more small Education-based projects currently on the go, which I'm really enjoying! What kind of topics are you interested in?

The house insurance was an error - I've re-done my SOA - I'm now a few pounds better off a month:rotfl:

Yes, I'm quite pleased that I've built up my emergency fund over the last year after decimating my savings to buy the house. I do a little bit of self-employment that earns me a bit of extra cash per year so that has provided a bit of a cushion. This is ongoing for the next two years so it will see me through paying off the debt.

Lottery - I know it's not rational but I know two people who have won a significant amount of money (£1m+) and I enjoy daydreaming about winning! Plus, a small amount goes to charity.

moneyphd

January is a tough month - I've got the following to pay for, on top of my usual bills:

Self assessment tax bill: 660 (31 Jan)
Professional liability insurance: 85 (19 Jan)
Professional subscription: 85 (not sure when this needs to be paid)
Car tax: 190 (1 Feb so could come out of Feb pay)
MOT/Servicing: 400 guesstimate (before 1 Feb)**This is the only one I'm worried about!!
Insurance: 400 (380 lowest quote so far) (before 9 Feb)
Total=1820

Also have to pay: PhD fees: 1000 (1 Feb but this will be covered by the PhD loan that will be paid on 1 Feb so I'm just listing this for the sake of completion)

I've got 4030 'locked away' in an emergency fund, but I really don't want to dip into this (plus 3000 is not accessible until the end of the month anyway, I think).

I have 1630 left in my bank account, £2.15 in Monzo, a tenner in Costa points, a free coffee at work, a free half a chicken at Nando's(!!) (I'm really accounting for every penny here!) after paying all my other regular monthly bills. This amount can be thrown at the annual bills listed above.

So the bad news is, I might have to dip into emergency fund to get through the month (to be fair, part of the emergency funds are really savings for these exact costs, I knew they were coming!) But, I don't want to dip into them if I can help it, I'd rather use up the odd £1500 I have 'left-over'.

The good news is: all the essentials for the month petrol, food are covered.
The bad news is: I need to raise a bit of extra cash to cover the shortfall and for any personal spends.

I'm expecting a bit of extra cash (£50 from switching banks 1 year ago, around £80 interest - although I don't know exactly when these will be paid - and £360 from self employment, which is due around the 20th of the month, maybe later). This is will cover the shortfall of £190, with £300 left over.

Which feels more than comfortable. The only bill I'm worried about is the MOT. My car's in good nick (as far as I can tell) but you never know with these things. I think 400 is erring on the generous side - I really hope it covers the cost. If it does, I have £300 to play with for the month for personal spends...