Getting myself debt free - consolidation?

EssexHebridean

Ryan, I'm also going to suggest that you re-read the first few paragraphs of this post from three years ago... Previous MSE post

Willing2Learn

ryanm8655 wrote: »

I don’t have £700 surplus every month, until recently I’ve spent every spare penny generally. I have a credit card with a limit of £1000 that I clear in full each month and use as my spending money, once it runs out I stop spending. That’s been my version of budgeting for the last 6 months.

I’ve based the SOA on a new proposed budget. Can prepare one based on actual spending, it’ll add a heap of eating out and going for drinks essentially. It’d be adding about £700 to the entertainment column...

I strongly recommend allocating the £700 to categories within your monthly budget. That way you will have every penny budgeted down to zero and you will be in control of your finances. (Tip: Have a google of zero-based budgeting)

Since this website is about money saving, it would not be MSE of you to consolidate your debts in to a loan as you will be paying out funds as interest. It would be much more MSE to allocate a sizeable chunk of that £700 toward reducing your current level of debt. You could eliminate your debts really quickly that way.

If you think zero-based budgeting could be the thing for you, then I recommend you take a look at a budgeting program called YNAB (You Need A Budget). It is a subscription service and is not cheap (They do a free two-month trial though). If you can get your head around the YNAB methodology, (zero based budgeting), then it might be something that would work for you. They do live video tutorials where you can interact with their tutors. YNAB helped me change things around successfully, so that instead of always being in debt, and losing money paying interest and fees, I am now able to save toward several savings goals and live a comfortable lifestyle.

https://www.youneedabudget.com/landing/ar-high-2-month/

Halfie

EssexHebridean wrote: »

Some of my points may have already been made but I'm going to apply them directly to your comments as that may prove more effective. See comments in red:
<snip>

I think I love you. This is all spot on.

Ryan you need to take heed of this. You’ve been in this situation before and poor decisions then have lead to this situation now. You wanted to be able to put a deposit on a house in 2019 when you posted 3 years ago. Don’t make the same mistake again.

ryanm8655

Thanks for the replies again. All very useful and grateful to Essexh for going through and responding point by point...

Aware I’ve been in this situation before, Christ what I would give to go back and clear it all swiftly ha. A bad break up followed shortly after that thread and the next spending spiral began...

But that is what I meant when I mentioned in a previous post that I’d tried consolidation before and was aware of the traps.

Also I’m not taking about consolidating the lot, just the interest bearing cards where it reduces the interest rate. And I assure you I would not use the cards...

You’re right, I do need to get into budgeting and writing everything down...much like a diet, without recording everything there is a tendency to underestimate...

In terms of immediate next steps:
1) set payment on all credit cards to a quid above current minimum.
2) Refine budget so that all money allocated, including increasing emergency fund allocation.
3) Based on the above I should know how much I can afford to clear down debt, then there is a decision re: strategy.

Once the above is done I am minded to get a loan, clear some cards and use the new 0% offers to shift more to 0%. Getting it over a 1 year term and paying £900ish on that. I know that makes everyone nervous, but it is the right thing to do provided I don’t then spend on the cards...which I won’t...I’ve learned my lesson.

Also wasn’t intending to make light of mental health issues when referencing depression...poor choice of words...but I am well aware of mental health issues and how money difficulties can exacerbate or even cause them...my own situation is a symptom of that if I am honest and I went to counselling at my own expense to resolve those issues.

Thanks!

kangoora

3 years ago you owed £13,000 and took out a consolidation loan, You're now back here 3 years later with £28,000 of debt and asking about a consolidation loan - has the penny dropped yet?

I wouldn't care to bet much money that you won't be here in another 3 years time with £40k+ of debt.

Some comments of yours stood out for me apart from the £500 'needed' for eating out and clubbing/socialising - a lot of people on here feed a family of 4 for a month on £200.

You 'need' a new suit and 2 new pairs of jeans for a wedding - do you not already own a suit or any trousers/jeans?

As for buying shirts and wearing them once, words fail me........

One tip - When i needed a suit for work I'd buy 1 jacket and 2 pairs of trousers off the mix and match suit shelf. As trousers wear much quicker than jackets (my jackets spent 80% of the time in work on the back of my chair) you get double the life out of your suit for the cost of an extra pair of trousers.

You need a fundamental shift in your thinking that I'm still not sure you have made, one way is 'pay yourself first'. After creating an emergency fund then set aside money for debts, essential bills & food and a separate (sensible) pot for 'spends'. Keep this up when debts have been paid off except the money that went on your debts should now go into savings for a house deposit.

There is only one way out of debt and being able to save for a house deposit, which with your income and outgoings should be eminently achievable - spend less than you earn...........

JayRitchie

ryanm8655 wrote: »

Thanks again for the replies!

I don’t have £700 surplus every month, until recently I’ve spent every spare penny generally. I have a credit card with a limit of £1000 that I clear in full each month and use as my spending money, once it runs out I stop spending. That’s been my version of budgeting for the last 6 months.

I’ve based the SOA on a new proposed budget. Can prepare one based on actual spending, it’ll add a heap of eating out and going for drinks essentially. It’d be adding about £700 to the entertainment column.

Re: clothing, I have so many clothes that I really don’t need to buy any more, that’s mainly based on the fact I’ll need a couple of pairs of jeans and a new suit for weddings but other than that I must have about 30 shirts, plenty of shoes and trainers, lots of coats etc. Can see where a chunk of money has gone over the years...while I had access to plenty of credit I’d do things like buy a shirt to go out in when I wasn’t near home and stupid things like that. I could probably sell clothes to fund new necessity purchases tbh have a number of shirts I’ve only worn once...

Stick to bottom up budgeting. The benefit in finding out what you are spending is that you don't miss major items. You have a good idea what your costs are so all good.

Look, as noted above by everyone consolidation loans are generally a bad idea. Plus - and I don't have much recent knowledge about loans - will you really get one at a decent rate of interest? I could understand borrowing £29k at 7%. If you had no debt and wanted a flash car you could do that easily. However no-one will lend you this to pay off credit cards.

You might well do better targeting zero percent balance transfers. Perhaps others can advise?

Lets look at the reality:

- you can easily afford repayments so no get out of jail cards

- You owe £29k of which about £12k is zero interest (but another £7k will charge interest from August). At present you are running up about £4k a year in interest - the £6k of payments you are making are not really doing any more than standing still. From August the interest pay increase to about £5.5k a year.

- Your base budget includes debt payments of £500 a month and leaves a surplus of £700 a month. So £1,200 a month to repay debts. This increased by £200 a month when you move, and you can easily spare £250 from the entertainment and holiday budgets. We are now at £1,650 a month.

I cant get excel working at the moment but as a fag packet figure if you pay this amount off after a year you would be down to about £13k of debt. You can probably beat this by getting better rates on cards.

So - one tough year and you are on the home run. Its really not that bad. Lots of us have done this, and that would be a pretty normal budget for someone trying to buy their first place in London.

If you do this you'll probably be able to get zero or low interest balance transfers. If you don't you risk the interest rates increasing, or messing around for years with debt hanging over you. Maybe you can get a cheaper loan? I don't know - lenders attitudes change regularly.

GazNicki

With the money you currently have now, you could clear off your Tesco card in one fell swoop. You could clear off one of your highest interest charges in 5 months.

I’m sorry, but your budgeting is all wrong IMO.

You need to throw everything you can into a debt and pay it off. You can snowball that repayment plan quite easily if you work your spreadsheet out right.

ryanm8655

Thank you for the replies and advice once again.

Appreciate not all of you have time to read all of the posts, particularly when you are helping so many people...but I’m not talking about getting a loan for the lot.

I wish I hadn’t put consolidation in the title now. But if I’m here again in three years time with £50k of debt then I’ll buy you all a beer/lemonade before declaring myself bankrupt.

The main reasoning behind a small (relatively) loan is to minimise interest rates...not put everything on a smaller monthly payment plan and get more cards. Hence I’m talking about borrowing over a year and paying as much as 900/1000 a month. That would be 10k at about 16/17%, which is less than the cards I would pay off using it and would open up some more 0% space.

Jayritchie - that’s a helpful and eye opening way of putting things. That interest is crazy. Down to 13k within a year would be dreamy to be honest and it’s good to see it isn’t a pipe dream with the right budget. Also means at minimum payment I’m looking at 20 years or so of debt, certainly eye opening. Very motivating to sort things out.

tori.k

Have you played with the numbers on a reverse snowball
Take you broke budget ( the bear necessity) and throw every spare penny at the smallest balance and start balance transferring to the 0% that they open up.
Sometimes you got to acknowledge but ignore the interest and just dig yourself out.

If you keep doing the same thing you can't expect a different outcome.
You tried consolidation before it hasn't worked, Life has a habit of happening regardless of our financial situation.
Best of luck

ryanm8655

The 2 cards that send me a 0% email every month are the Barclaycard and one of the mbna cards - the others don’t but they do have much smaller minimum payments so perhaps that’s why.