Untangling our financial disaster

Readytochange

Hello,

DH and I have reached the point where we're both desperate to change our shocking spending habits and take some responsibility for the awful debt we are in.

We have always had some debt, however it has totally gotten out of control over the last 5-6 years. Our income has increased significantly over the last 5-6 years however despite this, our debt has increased alarmingly. This is totally our own fault. We have spent without thinking. We have wasted money on things we don't need. We have ran up enormous credit card debts. consolidated and then done it again and it has to stop now.

We stop using our credit cards last October, mainly as we were almost maxed out with no chance of getting any new cards or 0% transfer deals. We haven't added to the debt since then, however our spending is still disorganized, chaotic and at times, out of control.

We have no excuse for this mess. We have good jobs and more then enough income to live a decent life. We have just been greedy and took our eye of the ball. We are both weary with it now and agree that things have to change immediately. We are both 40 with 2 young children and the reality is that our level of debt is starting to prevent us from living the life that we want to lead. We would also like to build up some savings to support our kids with university etc. We are so ashamed if the mess we have created.

I have put together a SOA based on our recent spending. I have tried to be as accurate as possible but I know that there are errors as apparently we have money left over but we dont!

I have considered all of our options. -

1. Sell the house and pay off the debts - don't really want to do that.
2. DMP or IVA - I have take advice and apparently this is not appropriate for us as we can afford our repayments
3. Knu

ckle down and sort out our spending - I think that this is the only way.


Here is the SOA. Please be gentle.

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2

Monthly Income Details[/b]
Monthly income after tax................ 1800
Partners monthly income after tax....... 3324
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 5124

Monthly Expense Details[/b]
Mortgage................................ 519
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 130
Electricity............................. 50
Gas..................................... 90
Oil..................................... 0
Water rates............................. 33
Telephone (land line)................... 26
Mobile phone............................ 60
TV Licence.............................. 12
Satellite/Cable TV...................... 38
Internet Services....................... 27
Groceries etc. ......................... 480
Clothing................................ 215
Petrol/diesel........................... 210
Road tax................................ 5
Car Insurance........................... 70
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 320
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 10
Pet insurance/vet bills................. 0
Buildings insurance..................... 30
Contents insurance...................... 21
Life assurance ......................... 32
Other insurance......................... 0
Presents (birthday, christmas etc)...... 200
Haircuts................................ 30
Entertainment........................... 500
Holiday................................. 250
Emergency fund.......................... 0
Total monthly expenses.................. 3358


Assets
Cash.................................... 0
House value (Gross)..................... 250000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 257000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 84000....(519)......1.79
Total secured & HP debts...... 84000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
loan...........................25000.....410.......7.9
credit card 1..................10400.....230.......6.9
credit card 2..................4800......98........6.9
very...........................1800......97........0
Argos..........................500.......18........20
credit card 6..................4800......48........0
credit card 5..................3000......30........0
credit card 4..................6000......197.......19.9
credit card 3..................7200......247.......22.9
Total unsecured debts..........63500.....1375......-


Monthly Budget Summary
Total monthly income.................... 5,124
Expenses (including HP & secured debts). 3,325
Available for debt repayments........... 1,766
Monthly UNsecured debt repayments....... 1,375
Amount left after debt repayments....... 391

Personal Balance Sheet Summary
Total assets (things you own)........... 257,000
Total HP & Secured debt................. -84,000
Total Unsecured debt.................... -63,500
Net Assets.............................. 109,500

elsien

Two cars, £34 insurance and no maintenance costs at all? And you need an emergency fund.

If you're not sure where the surplus is going, that's what you need to find out. Scrutinise the bank and credit statements to see what you're overlooking, then you and OH keep a spending diary for a month.

The elephant in the room seems to me to be the nearly £1000 a month on presents, holidays and entertainment. How much are you willing to cut that back to make a dent in the debts?

Willing2Learn

You need to find where that £427 is going. For that, I recommend that you both start keeping spending diaries, where you write down whenever money is being spent. That £427 would ideally be going toward paying down the debt. How come your monthly groceries budget is so high?

Edit: You need an Emergency Fund to stop you spending on credit when unexpected stuff arises.
Also, have you thought about starting a savings snowball? Maybe having savings targets will help you both to learn new budgeting skills.

Readytochange

Hi, the car insurance was an error. I have updated and edited the SOA.

fatbelly

Is clothing an error too? £215 per month?

Readytochange

fatbelly wrote: »

Is clothing an error too? £215 per month?

Ashamed to say that it isn't a mistake, however it will not be happening any more. We got into terrible habits of buying clothes for ourselves and the kids practically every weekend.

jue

Hi Readytochange
Well done on taking your first steps, that must have been incredibly difficult to do.
The first things that strike me are.... £500 on entertainment per month? This is in your current situation something you need to re evaluate. It can be reduced for sure.... and the difference used against the credit card debt, once an emergency fund is established.
You don't allocate any money to car maintenance. .. but cars always need this.
Does your life need 2 cars? Something to think about? Do you live in an area with good public transport?
Holiday budget? Can this be halved and holiday taken every two years? Or look at other ways to have a holiday?
Your food budget can most likely be reduced. ... have a look at the old style board for this. ... these guys can really help. Planning is key.
Lastly would it be really that bad to sell up, pay off the debts and start again afresh?
Hope some of this helps, or even makes you have food for thought.
Sending you and your family kind wishes for the future :-)

sam.4000

Readytochange wrote: »

Hello,

1. Sell the house and pay off the debts - don't really want to do that.
2. DMP or IVA - I have take advice and apparently this is not appropriate for us as we can afford our repayments
3. Knu

ckle down and sort out our spending - I think that this is the only way.


Here is the SOA. Please be gentle.

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2

Monthly Income Details[/b]
Monthly income after tax................ 1800
Partners monthly income after tax....... 3324
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 5124

Monthly Expense Details[/b]
Mortgage................................ 519
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 130
Electricity............................. 50Is ewverything switched off that you don't need, have you looked at comparison sites?
Gas..................................... 90Turn down the heating by a couple of degrees
Oil..................................... 0
Water rates............................. 33
Telephone (land line)................... 26
Mobile phone............................ 60when your contract come to an end change to sim card only deal 10 each
TV Licence.............................. 12
Satellite/Cable TV...................... 38 this needs to go, freeview
Internet Services....................... 27
Groceries etc. ......................... 480this could be cut, meal plan and dropping brands could help shave £100 off this
Clothing................................ 215Get rid, only buy when you really need e.g. shoes for children
Petrol/diesel........................... 210
Road tax................................ 5
Car Insurance........................... 70
Car maintenance (including MOT)......... 0there shouls be something in here
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 320
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 10
Pet insurance/vet bills................. 0
Buildings insurance..................... 30this seems high especially with contents, shop around
Contents insurance...................... 21
Life assurance ......................... 32
Other insurance......................... 0
Presents (birthday, christmas etc)...... 200 £ 2400 per year you could easily halve this
Haircuts................................ 30could you go to a college to have hair cut, even this could be cut
Entertainment........................... 500this needs to go, there are plenty of free things you can do, have a look at local sites in your area £6000 in a year could pay off lots of debt
Holiday................................. 250again cut till you have paid off debt, could go on short break if needed or UK based cheap holiday
Emergency fund.......................... 0you need to have something here and save the money into an account for when something breaks
Total monthly expenses.................. 3358


Assets
Cash.................................... 0
House value (Gross)..................... 250000
Shares and bonds........................ 0
Car(s).................................. 7000
Other assets............................ 0
Total Assets............................ 257000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 84000....(519)......1.79
Total secured & HP debts...... 84000.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
loan...........................25000.....410.......7.9
credit card 1..................10400.....230.......6.9
credit card 2..................4800......98........6.9
very...........................1800......97........0
Argos..........................500.......18........20second one to target
credit card 6..................4800......48........0
credit card 5..................3000......30........0
credit card 4..................6000......197.......19.9third debt to target
credit card 3..................7200......247.......22.9 (highest interest so target this first for over payment)
Total unsecured debts..........63500.....1375......-


Monthly Budget Summary
Total monthly income.................... 5,124
Expenses (including HP & secured debts). 3,325
Available for debt repayments........... 1,766
Monthly UNsecured debt repayments....... 1,375
Amount left after debt repayments....... 391

Personal Balance Sheet Summary
Total assets (things you own)........... 257,000
Total HP & Secured debt................. -84,000
Total Unsecured debt.................... -63,500
Net Assets.............................. 109,500

comments in red above, it would be easy to get your debt down based on your income. I would suggest a spending diary for both of you so you can see where your money is going as there is more money you still not accounting for (£391) . Look at debt snowballing, take a look at the old style board to help cut food budget.

theoretica

Getting out of this will be possible, but it will need changes to your life - stop going anywhere near shops at weekends and look out free or cheap things to do. But realise that this is not all bad, especially for your children. They will be learning to live by watching you, and learning to budget and enjoy things which aren't expensive is hugely important.

System

Yes I can see an easy way out of this really. You have nearly £1800 to put towards debts anyway without tightening your belt. Clothes and entertainment could easily be halved...

stingey

Hi Readytochange

Yip the wake up call of 'what the hell have I to show for all this debt?!' It can be scary and bring you out in a cold sweat, BUT your strong enough to face it.

My husband and I were/are in a similar situation. The wake up call for us was a job loss 5 years ago. I came to this forum for help and there's so many amazing people on here who have the best advice.

For me it was the realisation of being conned into thinking that to be a valid member of society I needed all these things, high mobile phone contract, tv packages, new clothes on a regular basis etc. As I began to cut back I actually ENJOYED looking at my finances every month to see where I was saving money.

We saved money by:

1. Getting a Google Chromecast. We cast everything from tablets. We only pay for broadband an tv licence. Our current property doesn't have an outside areial and an inside one doesn't work due to the location. We can't get Freeview, but we found we didn't need it.
2. Called my mobile phone provider and told them (not asked) to offer me a better deal as my current phone was knackered and contract came to an end. I managed to get a new phone, lower monthly payment AND they offered me a lower and better broadband deal than my previous provider. You need to have a Plan B if this doesn't work. My Plan B was to buy a 2nd hand mobile phone and a payg SIM. The deal I got was so good, between the broadband and phone I was better off than getting a 2nd hand phone.
3. Getting the kids to wear clothing gifts. Yip, I know. Some of the stuff I would never had bought, BUT I saved hundreds ALSO it kept me out shops (and temptation).
4. Found other things to do than go to shopping malls. Stay away. Take the kids to libraries, community events etc. Take packed lunches to these, don't use the food vans.
5. Set out a monthly budget and weekly meal plan. (Check the Old Style forum). Cash from my food budget was a taken out of the bank and I pay for my food by cash. This means you can see the money disappearing in front of you and also let's you see visually how much you've saved. Shop around. To get the best deals I'll get my meat from the butcher (it lasts longer) and the rest of my shop from Lidl/Aldi/Farmfoods/Co-op (if I get discount vouchers through). Don't do all your shopping in the one place. Toiletries from B&M.
6. Check your bank account on a weekly basis.
7. Write out a spending diary. It's an eye opener.
8. Snowballed the debt. Get into the mindset that once one debt is paid, that monthly payment is added to another. It's not yours to play with.
9. Take lunches to work.
10. Holidays. We holiday in a caravan site in the UK. We don't go abroad. When we get there we go to the nearest cheapest supermarket. We don't shop on site, don't buy the events, only go to the free ones. Rarely use the restaurant, maybe first day and last night before going home. Do free things like the beach, walks etc. Give the kids a cash budget to spend on machines and entertainment. (Which gives them the experience of dealing with money).
11. Took unwanted items like suites/white goods, We needed a new suite, a family member was getting rid of theirs which was in good nick. We took it, it's lasted us years, especially in a time of mat leave and low pay. Don't be too proud. It can save you a fortune/better for your credit score AND better for the environment.

We've managed to pay down a hefty amount, still not out of the woods yet, but getting there. Just making small changes makes a huge difference to us and to be frank I am actually enjoying life being more frugal and realising what I NEED.

Forget what everyone else is doing, you may see other people have a great time (especially on social media) and wonder how they manage to afford all this. Log out/switch off and concentrate on your own family. The golden rule is: Everyone is in debt, they just don't talk about it. (Unless your here!)