Am I being sensible

pusb

Hi. I've just been looking at my financial situation, and I've scared myself by how much debt I have. I know I'm not in as difficult situation as lots on here, but I know how easy it is to slip into serious debt.

Here is my situation:

In terms of debt, I currently have:

Loan at 8.6% APR - £10275.32 outstanding (but with an early repayment available of around £9300.00

Credit Card 1 at 0% APR - £1048.14 outstanding (0% until Feb 20)

Credit Card 2 at 0% APR - £4866.08 outstanding (0% until Apr 20)

So total debt is currently £16,189.54

As of Christmas 2019, I want to be debt free. I want to be able to look at getting on the housing ladder by the end of 2021.

Presently I live on my own, however the house I live in is my Dad's, but he has moved away to live by the coast. As he has no mortgage on this place, he is happy for me to pay him just £100 "Rent" (Which covers the Gas, Electric & Water).

I have in terms of savings:

General savings account with £5445.00

Help to Buy ISA with £7900.00

My plan is to use the £5445.00 to pay down part of my loan, which will reduce my debt to £10744.00.

I will still also have the savings in my Help to Buy ISA in case of an emergency. I don't want to use that money for debt repayments as I am entitled to a govt bonus on that for when I eventually do come to buy a house. Should be worth about £3k.

My monthly budget will then be as follows:

Income -1639.06
Expenditure
Rent 100
Sky 40
Loan 144
Loan Overpayments 800
charity 10
Phone 20
credit cards 80
Petrol 110
Food 130
Haircuts 10
Special/Unforeseen purchases 120
Lottery 18
Buffer 57.06
Total 1639.06

My loan allows overpayments to be made, which will reduce the total amount owing (due to the interest being lower), so if I can make the regular payments of £144, and make an overpayment of £800 each month, together with using my savings I calculate that I can have the loan paid off by May.

That would then leave me with £944 to pay off the credit cards each month. I calculate that by June, (after making minimum payments each month between now and then), I would owe £894 on Credit Card 1, so the £944 that I had been spending on the loan could then cover this.

Then from July onward, I would owe £4549 on Credit Card 2 (after making minimum payment from now to then). At that point I would have £944 freed up from loan repayments, £28 from credit card 1 minimum repayments, and £50 from credit card 2 minimum repayments, so a total of £1022 a month to pay against credit card 2. This would get it paid off by November.

Now the question is, does this look realistic? Am I likely to leave myself too short each month?

Also am I being sensible in blowing £5k of savings on debt repayments?

Dobbibill

You may benefit from completing a SOA. Here's the link
http://www.stoozing.com/calculator/soa.php


You've got petrol listed but not MOT or car repairs, there's no Council Tax, Sky yet no TV licence. There are a few gaps. I like your thinking with the snowball method though.

pusb

Dobbibill wrote: »

You may benefit from completing a SOA. Here's the link

You've got petrol listed but not MOT or car repairs, there's no Council Tax, Sky yet no TV licence. There are a few gaps. I like your thinking with the snowball method though.

Good point about car repairs etc.

My Dad still pays the council tax, TV license & building insurance etc in exchange for me looking after the house.

pusb

Completed the SOA, had to used some different fields for certain things, but here it is:

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1639
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 1639

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 100
Management charge (leasehold property).. 0
Council tax............................. 0
Electricity............................. 0
Gas..................................... 0
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 20
TV Licence.............................. 0
Satellite/Cable TV...................... 40
Internet Services....................... 0
Groceries etc. ......................... 130
Clothing................................ 10
Petrol/diesel........................... 110
Road tax................................ 12.5
Car Insurance........................... 33.33
Car maintenance (including MOT)......... 70
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 15
Haircuts................................ 10
Entertainment........................... 120
Holiday................................. 0
Emergency fund.......................... 57
Lottery................................. 18
Charity................................. 10
Total monthly expenses.................. 755.83


Assets
Cash.................................... 13345
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 500
Other assets............................ 2500
Total Assets............................ 16345

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Loan...........................9300......144.......8.6
Credit Card 1..................1048.14...28........0
Credit Card 2..................4866.08...50........0
Total unsecured debts..........15214.22..222.......-


Monthly Budget Summary
Total monthly income.................... 1,639
Expenses (including HP & secured debts). 755.83
Available for debt repayments........... 883.17
Monthly UNsecured debt repayments....... 222
Amount left after debt repayments....... 661.17

Personal Balance Sheet Summary
Total assets (things you own)........... 16,345
Total HP & Secured debt................. -0
Total Unsecured debt.................... -15,214.22
Net Assets.............................. 1,130.78

Created using the SOA calculator at
Reproduced on Moneysavingexpert with permission, using other browser.

determined_new_ms

I don't see why you couldn't do this. We paid off £16k in 10 months. Although there were 2 of us we had all the costs of running a house and paying rent. We literally cut everything to the bone, our groceries was so low, we allowed ourselves £50 each pocket money each month then threw everything at our debts.

Anything we wanted to do that year - i.e festivals/socialising/activities/holidays we committed to raising extra cash. We had students for about 6 months and saved that money, we ebayed things/changed banks for the bonus to raise additional cash for 2 festival tickets

Dobbibill

Now you've done the SOA, it looks like you can make significant overpayments on that loan.

All the best with the debt busting.

Toonsy

Just an idea but instead of overpaying by £800 per month on the loan why not save that £800 or even overpay by £400 and put the other £400 away and when the lump is big enough pay the remainder of the loan? It gives you something to fall back on if any unexpected large bill occurs (car repair etc).

pusb

Toonsy wrote: »

Just an idea but instead of overpaying by £800 per month on the loan why not save that £800 or even overpay by £400 and put the other £400 away and when the lump is big enough pay the remainder of the loan? It gives you something to fall back on if any unexpected large bill occurs (car repair etc).

Mainly because I don't trust myself not to spend it lol.

I just feel as though I need to be rid of the debt as quickly as possible, and have to force myself into paying it off as I go along

Dobbibill

As interest is calculated daily, the more you pay off sooner, the less overall interest you will pay so this is a good idea to throw as much as possible as overpayments.

Mnd

If I were you, I would not buy lottery tickets,

Exodi

My 2¢;

a) stop doing the lottery, it's essentially a poor tax and £18 is a significant amount to be throwing into a bonfire every month.
b) it seems absolute madness to me you have a loan for over £10,000 at 8.6% APR and simultaneously have savings of £5500 at likely 1% interest., just ponder the concept.. again, throwing fistfuls of money into a bonfire every month.
c) I know you're seeking Independence but if you father hasn't expressed any urgency for you to leave, I really wouldn't rush to, especially as you're saving £500-1000+ a month vs those that rent.

I estimate you earn around £24,000 p/a, typical mortgage lenders might offer up to £108,000. You'd have around £15,000 (£18,000 inc bonus) in your HTB by end of 2021 for deposit, I won't include savings as you still have a £10,000+ debt to clear. I think if you were to browse Rightmove, you'd have trouble finding much for £126,000. You'd also have an LTV of about 17%, naturally you'd save a lot of money in the long run if you could get this to 25+%.

People are usually keen to move out because 'they're paying somebody elses mortgage' but that's not the case for you and to be frank, £100 for Gas, Water, Electric, TV License AND Council Tax is an absolute steal, the council tax on it's own would be more than this, you're in a very advantageous situation that I'd be reluctant to end any time soon.