Untangling our financial disaster

enthusiasticsaver

There is a lot you can cut down on and you need to find the missing £391. The groceries, clothing, entertainment, holidays, presents and contents/buildings insurance are all very high for a family of your size and in your situation. You could easily save at least £1000 on those categories but you should allocate something to emergency savings so you are not tempted to resort to credit when an unexpected bill comes in.

It is good you have not spent on credit since October and your income is easily enough to sort this out but it involves keeping much tighter control on your spending and getting used to living within your means. I think if nothing else the thought that minimums only are £1375 a month and you have no savings so would be up the creek without a paddle if one of you lost their job would be enough to stop me spending that amount of money each month. Try both keeping a spending diary. Maybe use cash for a while to see if that stops you spending thoughtlessly.

Readytochange

Thanks for all of the posts. i have been bed ridden with tonsilitis for the past couple of days so I haven't had chance to respond. On the plus side, I haven't spent any money!

I appreciate your words of support and encouragement. I have already identified a few areas that I missed on our SOA. Seemingly small things such as netflix, kids kickboxing etc etc, however collectively they total around £150 so that explains where some of our 'spare' £391 is going. I will do another full SOA at some point when I have got all of the info together.

I did complete the Stepchange debt remedy tool, however it looks like a DMP is not appropriate for us. Would any of you guys recommend us going into any sort of debt management. I understand that this would stop all of the interest. Does the fact that we are not in arrears make a DMP inappropriate?

EssexHebridean

Honestly, on your incomes, I wouldn't. For a start it will make a mess of your credit history - and as homeowners that's probably best avoided.

To sort this situation out literally ALL you need to do is to start spending sensibly, making a budget and sticking to it. Draw a line under your money no object lifestyle and view that as history - and additionally you'll be taking steps to educate your children about managing money sensibly too.

enthusiasticsaver

No, a DMP is not appropriate for you as you can easily afford minimums and it will ruin your credit record. There is no way that £500 on entertainment, £215 on clothes and £200 on presents would be allowed on a DMP. Target the high interest debts first. That Argos could be paid off in one month just by no clothing spends and reduced entertainment. If you have been paying out for clothes every weekend you should have enough to last without spending anything for a few months.

Readytochange

I know you're right. I suppose it's just the lure of no interest, although i expect that a DMP wouldn't be allowed, even if we did pursue that option.

I would love to be able to speak to others in this level of debt. I don't see many on here in this level of unsecured debts.

fatbelly

Post on debt-free diaries for support

https://forums.moneysavingexpert.com/forumdisplay.php?s=&daysprune=&f=177

You are not un-typical. I looked at four threads at the top of the pile. They started at debt levels:

82k, 56k, 25k, 18k

If it seems people are discussing smaller debts than those you have, you have to remember that's where they are now, not where they started.

Zero interest is available, albeit usually with a small upfront fee, on credit cards, as you know. It's just that your files are showing 'issues' at the moment. Keep your files clean and get credit limits lowered as your debt shrinks, and you will get your cards back on 0%

GDB2222

Lots of good advice here.

We used to have two cars, but we easily manage with one these days. We walk to the shops, which gives us exercise and limits the amount we can buy.

I spent under £60 buying my phone outright. I'm amazed at the need for £60 a month contracts. I spend £1-2 pm PAYG on calls and have mobile data switched off unless needed for something specific.

Your situation is obviously different but you should think about what you really need to spend money on.

getmore4less

Readytochange wrote: »

I know you're right. I suppose it's just the lure of no interest, although i expect that a DMP wouldn't be allowed, even if we did pursue that option.

I would love to be able to speak to others in this level of debt. I don't see many on here in this level of unsecured debts.

Its all relative you have a big income so you have big debts.

£5k income £60k debts that's a multiple of 12 times net income

Plenty of people on here are at that multiple and higher and on lower income that makes it harder to pay off.

The reality is that is looks scary because you don't have a plan.

The SOA is a snapshot to get started, it takes a while to get it to reflect reality and that needs a good hard look at previous spending and a spending diary to catch the things you(and everyone) forget.

Don't worry this is standard it can take a few months to get the SOA matching the real world..

The plan(which is at least a year in detail) does a few things.

1. makes you prioritize where you allocate in advance so you don't just spend and run out.
2. finds all the things that need saving up for and need money putting aside.
3. give an idea how much can be put towards the debts
4. gives target Debt free day.

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.

This is a great start and a good basis to make a plan.

One question have you really not used the cards so the debt has been going down since Oct?

I said go back a year in a previous post but if the no CC has been working I would just go back through Nov,Dec,Jan to populate the SOA.

This had Xmas so may be on the high side but that is good as it is better to have the categories high rather than low.

Review those 3 months and add in all the bills that come in the other 9 months
Check how much the average car bills were for the last 2 year and get those in the SOA as well

The next step is to make sure that the things that need saving up for get the money put aside.

Given you say you are still a bit chaotic.

I would pay off the Argos £500, but not overpay any other debts yet.

I would try to set an initial target of £3,000 for the spends inc mortgage.

Track this very closely with the spending diary and see how things go this should include putting the money aside for the things that are to be paid in later months.

You then have around £1,400 going on the debt.

That leaves £700 to put into the emergency fund
Stick 2 more lines in the assets.
Emergency fund
Saved for bills

Out of the chaos comes order.

You can't take full control till you know where it all goes and that takes time when you start from scratch.

I think with a bit of work you could get down to £2,500 spends


The reality is if you can pay the current £1,400 to your debts and cover everything else without any new borrowing you are debt free in under 5 years.

The scope to bring this forward is there but it needs the plan.

If you can get spends down to £3,000 consistently debt free in 3 years.

Go cold turkey a few months and spend £2,500 you will soon knock a few more months off

Once you are comfortable your SOA is looking good for a full year and you have some emergency funds and the savings for future spends is happening overpay the Debts.

JayRitchie

Hi

Hope you are feeling better. Its well worth looking through the history on this forum to see people with similar situations to your own. Perhaps also look through 'mortgage free wannabe' to get any idea of what people living below their means spend.

I'd also spend some time watching Dave Ramsey videos. Your situation is more comparable to many of his calls than most on here - you have a lot of debt but a low mortgage and good income so a lot to look forward to once its cleared.

Just a query to help consider your long term financial position - you have two cars worth £7k between the two? When are these likely to need replacement? How reliant on cars are you?

JayRitchie

Oh, sorry - and to add - do you have a mortgage renewal date or are you on a mortgage length type deal where you pay base plus x% for the life of the mortgage?