Debt advice needed

mg278

Hello,

I am in urgent need of some advice and help on how to deal with our debt and this seemed like the first place to come to before I did anything.

Myself and my partner are currently in around £45K worth of debt, I am not 100% sure how it spiralled up so much but it just feels like a couple of years ago I felt like I was in control and it was all manageable but poor money management since then and a lot of head-burying has left us where we are now and I don't know what the best approach is to go forward.

I have completed the SOA below and I've looked into the different options available but I don't know whats best for us and if anyone here has been in a similar situation to us that can give advice as to the best course of action. I feel like we both have good earnings so we should be able to do this I just feel so lost with it all and I am genuinely not very good with maths/numbers/money which I think is why we are where we are.

I genuinely can't remember the last time I had a good nights sleep for worrying about all of this and the stress is taking its toll on me.

The debts been there and growing over the years but I feel like we've genuinely had our light bulb moment now and we are determined to get rid of all this debt.

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1989
Partners monthly income after tax....... 2100
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 4089

Monthly Expense Details
Mortgage................................ 529
Secured/HP loan repayments.............. 146
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 140
Electricity............................. 27
Gas..................................... 27
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 0
Mobile phone............................ 50
TV Licence.............................. 14
Satellite/Cable TV...................... 0
Internet Services....................... 38
Groceries etc. ......................... 150
Clothing................................ 20
Petrol/diesel........................... 140
Road tax................................ 11
Car Insurance........................... 42
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 450
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 22
Buildings insurance..................... 8
Contents insurance...................... 8
Life assurance ......................... 62
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 20
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 50
(Unnamed monthly expense)............... 0
Total monthly expenses.................. 2004


Assets
Cash.................................... 0
House value (Gross)..................... 160000
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0
Total Assets............................ 163000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 110000...(529)......1.5
Hire Purchase (HP) debt ...... 2757.....(146)......0
Total secured & HP debts...... 112757....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Loan - Zopa....................12000.....463.......23
Lloyds Overdraft...............3350......120.......0
Barclaycard CC.................3400......110.......22
Loan - Lloyds (OH).............4400......171.......0
Lloyds CC (OH).................4500......45........0
Barclaycard CC (OH)............9500......175.......21
Lloyds Overdraft (OH)..........2500......90........0
Store Catalogue................2000......90........12
MBNA...........................3800......100.......20
Total unsecured debts..........45450.....1364......-


Monthly Budget Summary
Total monthly income.................... 4,089
Expenses (including HP & secured debts). 2,004
Available for debt repayments........... 2,085
Monthly UNsecured debt repayments....... 1,364
Amount left after debt repayments....... 721

Personal Balance Sheet Summary
Total assets (things you own)........... 163,000
Total HP & Secured debt................. -112,757
Total Unsecured debt.................... -45,450
Net Assets.............................. 4,793

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

Thank you

pab233

Hi mg,

Before I make any comments, I'd just like to reassure you that your situation isn't uncommon - it's where I found myself a few years ago and I managed to get out of it.
More qualified people will come along and make comments on your SOA but I would like to ask if the £721 left after debt repayments real or an ideal view? I.e. do you really have that spare at the end of every month or does it disappear into an unbudgeted hole such as eating out, day trips, etc? If it is genuinely available then I think that you should be able clear the debts in around 2 years.

Other people may (or rather will!) have a different view, but the first debt(s) that I would aim to get rid of would be the overdrafts. I assume that the payments to these relate to charges, and that the amount you are paying towards them doesn't actually reduce them? That was certainly the case for me. The effect was that I was permanently in overdraft and the reason that I got rid of the overdraft first was the psychological effect of not seeing a - at the start of my balance month after month. But this is where others may disagree.

Good luck in your debt-busting.

mg278

Hi Pab,

Thanks for your response, I really hope so as I can't remember what it feels like to not have this weighing down on me.

I think I probably should have been clearer in my first post I missed out a lot of details;

You are right, the two overdraft payments are just the monthly fees we incur, which jumped up when Lloyds changed their fee policy last year. We both basically live in our overdrafts all the time.

The £721 left over is where we aim to be from our next payday, in reality this would have been spent like you say on little things like the odd day out, midweek trips to tesco or the shop for meals etc, takeaways at the weekend, drinks at the weekend etc. and many other things.

Me and my partner still have separate bank accounts and our own monthly payments and as above, our own debts. As you can see my debt is a lot higher than my partners, i also have more of the outgoings as I run the car and I also earn less, so in reality, of the £721 left at the end, the large majority of this will be my partners wages and I usually have little to nothing left in my own account, so it was usually my partner paying for the odd trips, meals,drinks etc.

We're both aiming to cut out all this unnecessary spending. I've always followed MSE to cut our spend on our bills, insurances and tv/internet etc. so I feel like our household bills aren't overly bad, its just we've never properly addressed our debts and since the arrival of our little one in 2017, now childcare has kicked in its started coming to a head.

Thank you.

EssexHebridean

OK - reading between the lines of your second post this is actually probably slightly inaccurate as firstly it sounds like it may be an aspirational SOA - ie where you'd like things to be, or think they should be, rather than what actually happens - correct? if so then you have two options - the first is to redo it as at "right now" - so what you've REALLY been spending on each area. It will shock you rigid but may be a good way forwards. the alternative is that as from now (because we are, after all, at a good point in the month for it!) you stick to those figures you have input AND look to make savings where we are suggesting, where possible. In some ways that's a quicker way of dealing with things but it doesn't come without problems - not least the fact that you're unlikely to get out of the overdrafts that fast, so for a while at least, it'll be wrong every month!

Secondly - the combined figures on here but semi-separate finances in reality make a rather skewed picture. Best way of dealing with this? Pool resources. Split joint expenses proportionately according to who earns more, keep your own accounts for your personal expenditure, and attack the debts together. That's easiest, by miles, but is a personal thing as to whether people want to do that.

Comments on the SOA in red as usual, anyway

mg278 wrote: »

Hello,

I am in urgent need of some advice and help on how to deal with our debt and this seemed like the first place to come to before I did anything.

Myself and my partner are currently in around £45K worth of debt, I am not 100% sure how it spiralled up so much but it just feels like a couple of years ago I felt like I was in control and it was all manageable but poor money management since then and a lot of head-burying has left us where we are now and I don't know what the best approach is to go forward. One step at a time - that's how. You've taken step one already - well done!

I have completed the SOA below and I've looked into the different options available but I don't know whats best for us and if anyone here has been in a similar situation to us that can give advice as to the best course of action. I feel like we both have good earnings so we should be able to do this I just feel so lost with it all and I am genuinely not very good with maths/numbers/money which I think is why we are where we are. It's fine, by the end of this process you will be proudly thinking of yourself as someone who is good with their money - trust me, I've been there!

I genuinely can't remember the last time I had a good nights sleep for worrying about all of this and the stress is taking its toll on me. The next time you have a good night's sleep should be tonight - as you've taken the toughest step by sticking your hand up and asked for help

The debts been there and growing over the years but I feel like we've genuinely had our light bulb moment now and we are determined to get rid of all this debt.

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1989
Partners monthly income after tax....... 2100
Benefits................................ 0 Do you not qualify for child benefit, even?
Other income............................ 0
Total monthly income.................... 4089

Monthly Expense Details
Mortgage................................ 529
Secured/HP loan repayments.............. 146 Is this for the car, by any chance? how long remaining on it, anyway?
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 140 paid over 10 months? Or 12? If 10, remember you have a "free month" this month. You may want to switch it to 12 months from the new financial year.
Electricity............................. 27 On the best deal you can be for this and your gas?
Gas..................................... 27
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 0
Mobile phone............................ 50 How soon are either of you at the end of or approaching the end of a contract so you can go SIM only?
TV Licence.............................. 14 Are you sure? That would be an unusual amount for it...
Satellite/Cable TV...................... 0
Internet Services....................... 38 Best deal you can get?
Groceries etc. ......................... 150 This is good - IF it is what you're actually spending...
Clothing................................ 20
Petrol/diesel........................... 140 Have a read of the main site's guide to driving economically, never use the car for a journey you can practically walk instead, and think about combining journeys - so get the shopping on the way home from work, that sort of thing.
Road tax................................ 11Do you pay this monthly? If so work to putting aside money to pay annually as it works out cheaper.
Car Insurance........................... 42 Bought through a comparison site to check you're on the best deal?
Car maintenance (including MOT)......... 20 Now I'll be honest and say that on the sort of mileage I presume you're doing for that fuel bill to be so high, this isn't going to be enough, Think about Servicing, MoT Test, tyres, screenwash, wiperblades, taking it to the jetwash to clean it rather than doing it yourselves with a bucket & sponge....
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 450 Are you making use of any of the schemes to help with this? someone else will be along with more detail than I have but there's a few options if I remember rightly
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 22
Buildings insurance..................... 8
Contents insurance...................... 8
Life assurance ......................... 62
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0 Not realistic - try again.
Haircuts................................ 20 Every month? Do you make sure this gets set aside?
Entertainment........................... 0 Again, not realistic - I bet you spend something!
Holiday................................. 0
Emergency fund.......................... 50
(Unnamed monthly expense)............... 0
Total monthly expenses.................. 2004


Assets
Cash.................................... 0 So he's the first challenge - where's the money you set aside for car maintenance, emergency fund,. etc?
House value (Gross)..................... 160000
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0
Total Assets............................ 163000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 110000...(529)......1.5
Hire Purchase (HP) debt ...... 2757.....(146)......0
Total secured & HP debts...... 112757....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Loan - Zopa....................12000.....463.......23
Lloyds Overdraft...............3350......120.......0
Barclaycard CC.................3400......110.......22
Loan - Lloyds (OH).............4400......171.......0
Lloyds CC (OH).................4500......45........0
Barclaycard CC (OH)............9500......175.......21
Lloyds Overdraft (OH)..........2500......90........0
Store Catalogue................2000......90........12
MBNA...........................3800......100.......20
Total unsecured debts..........45450.....1364......-


Monthly Budget Summary
Total monthly income.................... 4,089
Expenses (including HP & secured debts). 2,004
Available for debt repayments........... 2,085
Monthly UNsecured debt repayments....... 1,364
Amount left after debt repayments....... 721 OK - so first off you need to find this - that's £8652 a year - OR in context, more than the sum of both your overdrafts.

Personal Balance Sheet Summary
Total assets (things you own)........... 163,000
Total HP & Secured debt................. -112,757
Total Unsecured debt.................... -45,450
Net Assets.............................. 4,793

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

Thank you

So - spending diary for you both to track down that "missing money" - it must be going somewhere, and you HAVE to find it - it's key to the whole situation. You know how much you should have left - but there are also a few areas where I think you're going to find you're spending more than you think you are, and writing down all spends will help with that - it also helps make you accountable.

If I were you I'd talk to the other half about pooling resources financially - so open a new account for bills - maybe think about the santander lite cashback account - can't recall it's proper name right now - that you can pay ALL your bills from each month and it will pay you cashback in return. Are you still using credit cards at all? if you, bluntly, you need to stop. Cut them up, retaining one only stashed somewhere safe at home to use to cover you until you've built an emergency fund.

This is fixable, but it's going to be a long haul job. You sound like you're well able for it though so good luck!

DaveTheRave100

Have you tried speaking to a debt management company? They can deal with your lenders on your behalf and (if appropriate) put you on a debt management plan.

Benefit - they might be able to freeze interest, negotiate lower monthly payments etc.

Drawbacks - it could affect your credit score, you have to go through a detailed income & expenditure conversation

Or you could speak to the Money Advice Service - https://www.moneyadviceservice.org.uk/en/categories/taking-control-of-debt

It sounds like you're organised and you're both on a decent income, so I really do think it's possible for you to get yourself out of this situation. Good look to you!

mg278

EssexHebridean wrote: »

OK - reading between the lines of your second post this is actually probably slightly inaccurate as firstly it sounds like it may be an aspirational SOA - ie where you'd like things to be, or think they should be, rather than what actually happens - correct? if so then you have two options - the first is to redo it as at "right now" - so what you've REALLY been spending on each area. It will shock you rigid but may be a good way forwards. the alternative is that as from now (because we are, after all, at a good point in the month for it!) you stick to those figures you have input AND look to make savings where we are suggesting, where possible. In some ways that's a quicker way of dealing with things but it doesn't come without problems - not least the fact that you're unlikely to get out of the overdrafts that fast, so for a while at least, it'll be wrong every month!

Secondly - the combined figures on here but semi-separate finances in reality make a rather skewed picture. Best way of dealing with this? Pool resources. Split joint expenses proportionately according to who earns more, keep your own accounts for your personal expenditure, and attack the debts together. That's easiest, by miles, but is a personal thing as to whether people want to do that.

Comments on the SOA in red as usual, anyway



So - spending diary for you both to track down that "missing money" - it must be going somewhere, and you HAVE to find it - it's key to the whole situation. You know how much you should have left - but there are also a few areas where I think you're going to find you're spending more than you think you are, and writing down all spends will help with that - it also helps make you accountable.

If I were you I'd talk to the other half about pooling resources financially - so open a new account for bills - maybe think about the santander lite cashback account - can't recall it's proper name right now - that you can pay ALL your bills from each month and it will pay you cashback in return. Are you still using credit cards at all? if you, bluntly, you need to stop. Cut them up, retaining one only stashed somewhere safe at home to use to cover you until you've built an emergency fund.

This is fixable, but it's going to be a long haul job. You sound like you're well able for it though so good luck!

Hello Essex,

First of all thank you so much for responding, I think for me personally I didn't really know where to start and thought this forum might help so to have you respond after taking the time to look at my plan with such detail it really is much appreciated.

I think I started of the SOA with good intentions but didn't really put the thought or investigation into the actual amount of spend that's going unnoticed. I think once we do this, we'll have a better idea of what to curb or eliminate.

I think what I need to do is talk to the OH and see if we can start to pool our resources and work at it that way like you mention. Do you think that we should pick one overdraft and begin to pay that off, then move to the next, and so on with the credit cards? Or use less to try and pay them off at the same time? I'm not sure of the best approach.

In the meantime, I will have another go at the SOA with where we are now, to see where best to improve.

To answer some of the points above;

- Child benefit - Yes, we do get £80 a month which I should have added, this goes to my partner
- Secured/HP - This is my car finance, it runs until October 2020
- Council tax - If I switch to 12 months it looks like it will save me about £25 a month, obviously with no breaks as we have now but it is a saving for the majority of the year
- Electric/Gas - Currently on the best deal but our deal runs out in June though so I'm on the lookout now for cheaper
- Phone contract - this is my partners which runs until the end of this year when she will switch to sim-only
- TV/Internet - this deal runs out in June, it's not the most expensive but by no means the cheapest so we will need to review this soon to save money
- Car insurance - this is up in October, I think I can get it a few £ cheaper, but there is an early cancellation fee which I can't afford at the minute so I may need to wait
- Car maintenance and emergency funds etc. - The figure I put in my SOA, as I don't currently budget for these or have any savings, was more of a statement that we would start to put away this amount - however I need to review the amount as I don't think I properly thought about everything it should include.
- Childcare – My partner currently has childcare vouchers taken from her pay before tax so I haven’t included this (monthly average is £750 – 800, minus the £250 we get through vouchers)
- Savings for birthdays, Christmas and entertainment - even though it's usually quite ad-hoc we need to think about having this money budgeted for too as we currently just panic save the month or two before to afford it

Thanks again for your help, it's true that I think now we have spoken openly about it and started facing the problem by looking at ways to get out of debt, it definitely feels a lot better. I just need to put the hard work in now.