Overspent and What Do I Have To Show For It?

metalhead41

Hi, I thought I'd start my own debt free diary just to try and keep track of things more than anything...

Anyway, a bit of background, I've just turned 34 and have been in debt for what seems forever (probably from around the age of 19). My biggest issue is that I've just always overspent, luckily as the years have progressed, I've earned more to cover the spending and haven't actually had a bill bounce since 2008, so that is a positive I guess.

I'm getting to an age now where I'm constantly being told to buy a property, which whilst I would love to do, I can't afford to save for the deposit with these debts in place (at the start of the year it was around the £25k mark). I looked at this debt and what I have around me and you know what? I can't really show anything for it.

So, late last year I made a conscious decision to get myself out of this, first change was to up my credit card payment to a fixed amount with the plan of switching to a 0% card when I could get it down a bit (at the time it had around £15k).

In May, I got a promotion at work with payrise to take me up to £45k and a £4k bonus (very lucky I know), so £2.5k went straight on the overdraft which I then got reduced by the bank and the rest went on the credit card. I've been living within my means and not dipped back into the overdraft since and the additional money in my salary goes straight on the card so that hits it even harder.

At the start of August, I realised that the card is now down to £10.6k so I've now managed to shift that onto a 29 month 0% card. I'll continue paying as I have been onto there and then (hopefully) my bonus next year will go straight onto it as well which should mean I can have it cleared by August next year.

The plan after that is to switch what I was paying on the card to additional payments on my loan which will then be cleared for Jan 21 and then finally switch all that money onto my vehicle HP which will have me debt free for March 21.

After all of that, the money will then finally start going towards a deposit for a property. By my calculations, if I'm good for 3 years I could have a sizeable deposit and be in a position to get onto the ladder before I hit the age of 40.

So anyway, sorry for the ramble there, but I hope to keep this updated when I remember!

MovingForwards

Welcome to the wonderful world of diaries, where support and encouragement will always be around!

metalhead41

Howdy, hope you are all keeping well in these strange times, just thought I'd check back in 7 months on from my first post to give an update.
I've been continuing to pay as much as I can off of the credit card, I've now got it down to £7.4k remaining. It would have been less, but I had to spend on it last month to cover an unwanted largish expense. But still, considering what I was owing last year, I'm starting to see the finish line on this now.

Now for my dilema, with things as they are, I'm really at a point where I am just fed up with living in this poky 1 bed flat. I guess my question is (knowing that my end goal is to get my own place), should I continue paying all I can each month on this 0% card, or seeing as there is still 21 months of the offer rate on there, should I maybe reduce my payments on it slightly and start putting some of the additional money aside into my help to buy ISA?

Cheers in advanced! 

savingholmes

It really depends how secure your job is. Do you have any kind of emergency fund? 3-6 months would be best. Do you perhaps need to start there? We've bought homes in the past despite debt - however when you move that often leads to lots of new spending - so it's not just your deposit and fees to think about but also money for moving and for getting things how you want them  afterwards. It can be very tempting to buy a brand new house and think nothing needs doing - yet these often lead to big expenses putting up light fittings, lawning and fencing the garden etc so are rarely as low maintenance as you would expect. 

I am not surprised in this environment that a flat is a struggle - however sad it may be - if the economy tanks you could get a great deal if you wait a little. Having said what I did above - it is also true that a rising property market has also given us equity - one of our biggest sources of wealth... outside our pension. Currently though until a vaccine or similar solution is found - we are likely to be in a falling market.... which as a new buyer could go in your favour as long as once you move you don't need to sell for 5-10 years.

metalhead41

You raise a few good points there, as it stands (touch wood) my job is secure. I don't currently have any type of emergency fund as I've been putting as much as possible into clearing the credit card debt over the past year. So for sure, I know that I need to start to save before I can contemplate moving realistically, it's just a case of when do I start that process? 
By my calculations and all being well, the card will be paid off by the end of this year (I know my original post said August, but that was being reliant on getting full bonus at work which is likely not to happen now). If I dropped my payment down by £200, I could put that in the HTB ISA with the card payments extending to complete in April next year (still well inside the 0% offer period).

Mr87

I'm going to follow this thread as in one way your situation sounds similar to mine - young, promising career that breeds financial complacency.

I don't know the specifics of HtB ISAs but I know they are a no brainer for saving for a house deposit : 25% bonus, right? You literally could not get anything remotely as good as that on a risk free basis, so I'd encourage you to start now if home ownership is your ambition. If you look at the T&C s you might be able to withdraw some of the cash (obviously without the 25%), so it could double up as an emergency fund if you put all your spare cash in it. That way, if you need it, it's there. If you don't need it (touch wood) you can try to get your 25% on the maximum possible. If you max out your HtB isa you can then save for a separate fund. Make sense? 

blue_eyed_girl123

Are you thinking HtB or Lifetime ISA, with the latter you can put in £4000 at anytime before the end of this financial year (April 2021), so you could save and then make a decision in April. LISA needs at least a year though, so depends how quickly you are wanting to move, but 25% bonus is a no-brainier 😊. So you could open now with £1 and make a decision later.

metalhead41

I took out the HtB just before they closed them down in November, so will probably focus on that as one of my saving plans, I will try to get as much in the ISA for the bonus along with another savings account once I have a bit more "disposable" income.
Realistically, as much as I would like to move in the next month, that's not going to happen, so it will be whenever I have enough together for the deposit...

Sarahwithlove

If your credit card is in a 0% period then I would consider paying into the h2b or more toward your loans to reduce the interest on that or get some on your savings as long as you make sure you pay off enough on the cards to clear it by end of the 0% period. I think as hard as it is being in a small flat you need to accept that at the moment you can't move and try and find ways to cut back more or earn more money. Do u have anything you could sell? 

metalhead41

That's a good point, I could make overpayments on the other loans to save some interest. In actual fact, I've been so focused on getting rid of the credit card, I've forgotten I could do that. I've just had a look at the accounts, the HP is down to 2,124 now, so IF/WHEN I get my work bonus, I could just get that paid off and gone (saving me 126 a month from my outgoings) 🤔. 
In other news, I've just received my in credit payments back from my old electricity supplier (255 😁), so I've just moved 200 of that into the HtB ISA.
I'll work out the figures later, but I think I can reduce my credit card payments to 350 a month (down from 650) to still have it paid off by the end of the 0% period, put 200 into the HtB per month and 100 extra on the Santander loan.
I see a plan forming 😁
Oh, I am trying to sell a few things that no longer fit (dropped 3.5st in weight), but don't have a lot extra I can sell. 

Sarahwithlove

Sounds like a much better plan, you can save on a lot more on interest that way and you'll have money in the h2b by the time all your debts are cleared