working towards a debt-stress free life

BabySteps234

Hi,I have been dealing with debt as a fairly low priority for years now. Originally following divorce 10 years ago and raising children on low income (and paying thousands out in divorce costs as well as running a home / oil heating bills i hadn't saved for and living beyond my means). However I have always met all payments on time and was lucky enough to be able to manage my mortgage. Fast forward 10 years - I remarried 2 years ago. My husband has a decent income but has debts which have followed him for the past 25 years and he has never looked at them but paid min payments. These debts were almost £50k when we met but I moved him onto 0% cards and used his savings to pay off the rest. so he currently has about £30k on cards.. I am looking to move all of my card debts (£13k) onto it and try for £5k to take off his. Does this sound sensible? It would give us a bit of breathing space and I hope release almost £200 to pay off debts.
Any advice appreciated - this is the first time I have sought help and truly embarrassed by these huge numbers, but I am desperate to be debt free so we can enjoy our life together without constant worry about money.

Also I forgot to add to the bill that my hubby pays £300 a month in child support. I also think we must pay out more in food as never any money left each month. On a positive note this is the first year in our whole adult lives that we have paid for christmas ourselves without reaching for credit cards!

Statement of Affairs and Personal Balance Sheet:
Household Information
Number of adults in household........... 2
Number of children in household......... 3
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 1500
Partners monthly income after tax....... 2700
Benefits................................ 0
Other income............................ 500
Total monthly income.................... 4700

Monthly Expense Details
Mortgage................................ 390
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 155
Electricity............................. 78
Gas..................................... 0
Oil..................................... 45
Water rates............................. 45
Telephone (land line)................... 20
Mobile phone............................ 65
TV Licence.............................. 15
Satellite/Cable TV...................... 0
Internet Services....................... 20
Groceries etc. ......................... 600
Clothing................................ 150
Petrol/diesel........................... 250
Road tax................................ 5
Car Insurance........................... 0
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 100
Other child related expenses............ 50
Medical (prescriptions, dentist etc).... 11
Pet insurance/vet bills................. 33
Buildings insurance..................... 20
Contents insurance...................... 15
Life assurance ......................... 11
Other insurance......................... 0
Presents ...... 100
Haircuts................................ 50
Entertainment........................... 0
Holiday................................. 100
Emergency fund.......................... 0
Total monthly expenses.................. 2358
Assets
Cash.................................... 0
House value (Gross)..................... 385000
Shares and bonds........................ 0
Car(s).................................. 9000
Other assets............................ 0
Total Assets............................ 394000
Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 76000....(390)......4
Total secured & HP debts...... 76000.

Unsecured Debts
Description....................Debt......Monthly...APR
Family (mortgage) loan..30000.....250.......0
CC Halifax.....................3757......37........0
cc Sainsburys..................4186......93........0
DFS SOFA.......................500.......31........0
HB NUBA CC.....................5835......100.......0
HB MBNA CC.....................10230.....160.......0
HB Virgin CC...................10619.....160.......0
Hb Next card...................1200......80........29
CC MBNA........................900.......40........29
CC Bank of Scotland............4845......50........0
Total unsecured debts..........72072.....1001....
Monthly Budget Summary
Total monthly income.................... 4,700
Expenses (including HP & secured debts). 2,358
Available for debt repayments........... 2,342
Monthly UNsecured debt repayments....... 1,001
Amount left after debt repayments....... 1,341

Personal Balance Sheet Summary
Total assets (things you own)........... 394,000
Total HP & Secured debt................. -76,000
Total Unsecured debt.................... -72,072
Net Assets.............................. 245,928

Exodi

You mention a prenuptial agreement, where are you living?

If I'm understanding you correctly, I would deem it unwise to move unsecured debt into secured debt.

If your SoA is accurate, the vast majority of your debt is on 0% interest already so it seems nonsensical to move this on to 4%?

Also, do you really have £1341 spare a month? If so, I'd look at snowballing your debts, paying off the ones with the highest APR first, and then the 0% deals that finish sooner.

Lastly, massive kudos for providing the level of detail you have in your first post. Very rare and massively useful.

enthusiasticsaver

That soa shows £1341 left. Do you overpay the debts or is that £1340 an overspend? You have no emergency savings and I cannot believe you spend nothing on entertainment? Where do you save your gifts money and car maintenance money? Presumably you do pay car insurance as there is nothing showing in there either? Even if you pay in full each year you should divide the yearly amount by 12 and save that every month so it is waiting to pay the next years premium.

Good points are that you have sufficient income to sort this and most is on 0%. The 2 debts Next and MBNA should be repaid first and if that £1341 spare was really spare then you could clear those in 2 months. I suspect though that you either have not accounted for something in you soa or you actually pay more to the debts than £1001 each month.

My plan would be to open two savings accounts to help with your budgeting. One is for emergency savings so you are not tempted to turn to credit when you have an unexpected bill and one is for annual spends like insurances, holidays, car maintenance, presents fund and pet emergency costs. I would tackle the Next and MBNA first to get rid of the interest charging debts as 29% is high.

I don't think you should stick any debts on your mortgage. Also 4% is very high for a mortgage with a low LTV so is that because you have a bad credit rating or have you not bothered to move it to a better deal?

You can sort this with better budgeting and a more disciplined approach to money.

BabySteps234

Thank you so much for the replies.
I am honestly shocked that we are meant to have over a thousand pounds spare each month! We certainly never have anything left! We don't go overdrawn but get very very close to it! I was equally shocked by how much we earn between us too, we just kind of plod along really and one month quickly turns to another! This is the first month we don't have to pay for nursery fees - they were £600 a month so this will account for much of it which can be thrown at our debts.

I think I have secured a new mortgage deal at 2.2% - I couldn't change it before as I have only just completed six months full time work as I was part-time before so it was difficult to remortgage on just my income.

I'm going to take the advice on the snowball approach as I think the excitement of seeing the numbers roll back will inspire me to keep going! I will also try and put a little away (started a Christmas account already) but no, we have never budgeted for holidays or entertainment. We just never seem to have any money spare so god knows where it goes... I know a couple of things I missed off.... Saturday night take out probably equals £100 a month (horrible when you add up weekly bills!) kids clubs probably another £70 and car insurance is about £70 a month for both vehicles and £50 a month on an HP item. Still.... there is a substantial amount we have no clue where it goes!!!!

Also.... when opening an emergency savings pot and regular savings.... I see the sense as there is money to prevent reaching for cards but that means I repay the debts slower... is that the best thing? How much would you think is sensible to save over not repaying each month (on my calculations?) thank you

a_silver_lining

Mrsjmo you have done really well getting so much information into your first post.

I would add into your SOA all those extra expenses you mentioned. Have another look through your bank statements to see if you can pick up more information.

At the least it sounds like you will have the £600 nursery fees to snowball and not miss out of your budget? That could clear the two 29% cards in three or so months. You then have the 600 Plus 80 plus 40 to pay off your next card on the hit list

BabySteps234

I went through the statements and it seems we spend £800 a month on food! (At least!) 😳😳😳 .... beans on toast here we come! 😅 And we also spend probably £250 on clothes / books not £100, so that's an easy fix. I actually feel quite excited to know being debt free is within our reach! The big numbers are SO big it has felt overwhelming and impossible but when you break it down into small chunks then it doesn't sound so scary. I know at some point we got ourselves into this muddle but I look around and I can't see £50k's worth of stuff! We haven't really lived the high life ...it just kind of built up! Can't wait to see the number roll back and once we are free from this we are going to hammer the mortgage down and start on a nest egg! I'm going to try and work out finish dates for some of the cards too which I think will power us on!

kangoora

Books are an easy fix if you aren't buying the latest best sellers, especially for children. Support your local charity shop and get 2 for £1, worst case £1 - £1.50 each. Toys and games also can be really cheap.

Take a look at clothes in them also, my mum and sister regularly buy clothes from them and not because they can't afford to buy new either.

EssexHebridean

You've nailed it in one above Mrsjmo - taking it in small steps, baby steps if you like, makes everything feel more manageable. Amazing how running through a budget in detail focuses the mind on where money is going too, isn't it!

Start yourself a spending diary and question EVERYTHING before you hand over cash/tap the card. Spending these days is horribly easy and with so much use of contactless as well it's easy to not feel as though it's "real money" that's going out. For "routine" buys multiply the figure you're thinking of spend across the number of weeks in a year of whatever the routine might be - so a daily coffee on the way to work might only be £3, but over a regular working year that would be around £700. You've already established that takeaways cost you over a thousand pounds a year (Yes, see the impact that has!) and a £4 magazine once a week would be over £200 in a year.

As far as an emergency fund goes, as a homeowner running a car we'd usually suggest aiming for £1000 as a starting point - you can then add to that over time once the debts are gone but that is enough to pay for unexpectedly large repair bill on a car, or to replace two appliances going wrong simultaneously.

a_silver_lining

If you like the idea of breaking up your debt into small chunks then the 1% challenge might be worth checking out. I find it really motivational to see the %s build up, a lot nicer to focus on then the larger outstanding amount.

Mnd

2 points jump out at me, 1 is your mobile bill, and the other is presents. £1200 a year seems huge to me.

I agree the best thing you can do is to start a diary on here, and let everyone else here help track your progress.

Good luck

BabySteps234

Thanks; £1,200 on presents is a lot but I have 4 children and also we have 15 nieces and nephews so actually, it's a lot but probably not enough!
The mobile bill is for both of our phones. I have a year to run on my contract but will then (hopefully) just go onto a rolling contract so can save then.
How do I start the diary? Can this be it? I've started reading other people's and definitely think writing things down will be helpful.

Good news..... Paid off OH's NEXT card in FULL yesterday! £1306.61 of debt GONE! We joined ClearScore.com and noticed he had been using that account for 19 years!!!! Feels so good to have closed it! Next month it's goodbye to MBNA!
It's left us a bit tight for the month but I have been through all of our statements properly and we should be able to manage that most months. I've also put £100 into a Christmas account to start saving for that (as we never put money aside) and £100 into a saving pot to save the recommended £1000 contingency plan for emergencies. I'm also setting up a DD for £45 heating oil as we never set aside for that and end up with a £500 bill (which always has gone on CC!).

So glad OH is onboard. He finds it all so stressful he goes for the ostrich approach! He was shocked by the numbers but is happy to work and stick to my plans to get us out of debt. He is even trying to do us a meal planner and we are over £800 month on food (not £600 I thought!) so going to try slash that! More for debts!!!

We aim to repay £12,000 as minimum by this time next year and ideally our goal is £17,000 by Feb 2019! Feel like we have made a good start!