I just don't know where to begin with this

dreaming

To be honest I would do a retrospective spending diary - i.e. check all your bank/credit card statements (say for the last 6 months) and see where you have spent the cash, and then allocate each payment to a category on your SOA. For example, you have £100 per month allocated to clothing in your SOA but then went out and spent £250 on clothes for your son, plus you "picked up" a few bits for yourself and say you do this fairly regularly. If you allocate this to the clothing category, plus the eating out into the entertainment one, then you will see what you really are spending all your cash on. It's quite surprising, and can be quite frightening. I did it myself when I was looking to retire early. I thought I was fairly frugal, with just the odd treat - a nice bottle of wine on a Friday night, some nice food for the weekend, an occasional magazine - thrown in. When I tracked it I realised that instead of one of these items being an odd treat, I was really buying all of them every week and was easily spending at least £20 a week on treats. If you did this you may find that instead of spending £100pm on clothes (quite high for me but not too unreasonable as I guess you both have to look smart for work, and kids seem to grow like weeds) you may really be spending twice, or thrice, as much
Good luck anyway on sorting it all out.

SuperHung

I think you are in a very good situation, so need to set up a spending/indulgence budget. I do notice that you have a lot of credit cards, I think you should set an aggressive monthly target and pay off the credit/loan with the highest interest rates. Cut or cancel the credit cards with the highest interests once you paid it off.

I have two credit cards both have rewards/cashback. My weekly food budget is 50-60 pounds a week (feed 2 adults and 2 kids). We eat out once every two weeks, I pay for one meal out and SO pay for the other meal.

trailingspouse

A couple of thoughts.



A spending diary is a must. You absolutely need to find out where your money is all going.


Another thought, to guard against those odd little spends - a coffee here, a sandwich there. Multiply the amount by 10 - that's how much it would cost you if you did it every working day for two weeks. So a £2.50 coffee will cost you £25 if you do it every day for two weeks - it really does mount up.

And also multiply by 50 to work out (roughly) how much something would cost if you did it every week for a year - £20 on a takeaway on a Friday? That's £1000 a year.


I think a bit of soul-searching to work out why you're spending the way you do would be help you to avoid doing it again in the future once you've paid off all your current debts.



All the very best to you - you've got this.

JayRitchie

salXYZ wrote: »

Wow - so many replies. Thank you all so much. I will try to address questions below -

Cars - we need two cars. husband commutes 60 miles per day ( hence high fuel cost) and I need my car for school drop offs and running son around etc. My husbands car is only 5 years old so we have no plans to replace that in the next few years. My car is 11 years old and at the moment it's running fine. I do worry about what would happen if it dies as I would not want credit. Equally I would not want an old banger. I was involved in a very serious car accident 20 years ago and I am a very nervous driver. I would need something that I felt safe in, although it wouldn't need to be new or expensive.

Ok. So you have around £60k of debt at the moment and are paying about £17k a year of which about £7.5k is interest.

If you carry on paying the same but without increasing the debt it will take 5-6 years to clear (I haven't run the numbers properly). You'd be left with a pretty nice disposable income so not all bad. However you'll likely have to factor in two cars in this time (cost ?£20k?) and may need house repairs etc for which you have no funds or budget.

Looking at your SOA you have £1,600 spare every month. The food budget can be cut by £150 a month and present by £50 leaving £1,800 to accelerate the payments. My advice is generally to go tough for a year:

- its no worse than people saving for a mortgage in more expensive areas are doing
- playing endlessly with budgets just becomes a hobby and is pretty dull. Watch you tube instead!
- if you are used to spending money at will you tend not to have a sense of what is worthwhile and what is not. Its easier to simply spend nothing on non essentials for a while (especially if you have a comfortable home and cars to get out for a day) than try to compromise.
- Its much faster to get rid of the expensive debts.
- if you do need to borrow for cars or emergency repairs you have a better chance of decent rates

Lets say you take £1800 out of next months pay packets. You pay off the Very loan immediately. That will save £900 a year in interest - thats a good reward for a boring month! You also free up £120 of payments giving you £1,920 the next month.

So - month two you pay off the £800 card. Its just a small hassle you don't need to monitor any more, and dump £1,100 on the HSBC card reducing that balance to about £1,740 - which you clear the next month.

Your free cash is not up to £2,000 a month. I'll guess you'll need some for Christmas (£500?). Take your pick of the credit cards to tackle next. Lets say you chose to go for the MBNA card. You should be able to clear that by the end of March or April.

At this stage you loosen your budget by the £250 a month saved on repayments allowing yourselves a bit of fun money each month. You still have about £9k of expensive credit cards left to pay off - but these will go within five months so long as you pay £2,000 a month even allowing a bit for replacing household items etc. Put a bit against one of the loans and safely within a year you will have loans of about £30k but at somewhat decent interest rates.

At that point your family position is very different and you have a good think about what to do next. I'd imagine upgrading your car is the priority, and best done when not in a mad rush.

Scrimps

I agree with what everyone else is saying about budgeting for treats. I always think that my treat money will easily last the month and perhaps carry over to the next month but it never carries over!. It's just coffees, some beers, maybe swimming, a haircut at the college every few months.. it still seems to go quick.

You need to budget for it so you can control it. DH and I have £100 each to do with as we wish, no questions asked, no guilt or shame but absolutely no more! Every other penny is accounted for, even though we're now debt free.
A 9 year old must have expenses. You should definitely work those out.

Once you have figured out what you want to spend for each category in your budget, re-do your soa and you'll see what dates you will start cleaning each debt by.

The uncontrolled spending is such an easy thing to fall into with credit availability, at least you have realised now and you can set about fixing it.

SlowAndSteady

Reading your posts it seems like we might be in similar-ish boats. SalXYZ. I'll be following your journey with interest - hopefully we can support each other!

clairebeth

I completely agree with what JayRitchie has said. Tighten your belt and pay it off just as described. The Very amount first and foremost.

A couple of other things:

Set up standing orders to pay your debts on payday. You can adjust the amounts each month to reflect your debt snowballing plan.

Get Monzo accounts. My hubby and I have a personal one each with our 'fun money's on it, which is transferred by standing order each payday and that's what we're have for coffees and pizzas/ nights out for the month.

We then have a joint Monzo card that has our grocery budget (£250 a month for 4 people) on it, and then we use the 'pots' on this account to put aside for car costs, kid's clubs, yearly payments, Christmas etc. Again, all calculated and transferred by standing order on pay day.

Challenge yourself to meal plan/ batch cook/ freeze, and shop at Lidl/Aldi.

Declutter - Less is More! No one really needs all that stuff they buy! Change your mindset about what you bring into your house so that you think twice or thrice before you buy something, and then you can sell the things you no longer need and put it towards your debt!

Some great things to look at are:

Tidying Up With Marie Kondo on Netflix

The Minimal Mom on YouTube (she is really watchable and talks about how she and her family have managed to declutter, live a simpler life and manage their finances easier).

Follow #declutter365 on Instagram

Watch Living Big in a Tiny House on YouTube to see people living with less by choice.

Use Ebay, Facebook and Gumtree to sell your stuff. We buy most things second hand. Sell your son's toys and clothes that he is to big for and the clothes you never wear.

Good luck!

skintdaddy79

I, too will give this a follow to see how you're doing. In a similar situation with about 12k of CC debt due to overspending ect... I've had my 'lightbulb' moment and am chipping away at my debt . It's reassuring to know i'm not the only one!!

EssexHebridean

Others have already looked at the SOA however there was some stuff in this post that I felt worth commenting on. Before that though - it's rare that I disagree with Fatbelly but on this occasion I think he's a long way out on his suggested car maintenance figure. You need to think about servicing - which will happen more often than annually on that commute for your husband) - MoT tests for both cars - tyres (again your husband's commute will mean you burn through those quicker than the average) screenwash, wiper blades....even washing assuming you take the cars to the jetwash. That all adds up.

Comments on below post in red.

salXYZ wrote: »

Wow - so many replies. Thank you all so much. I will try to address questions below -

Cars - we need two cars. husband commutes 60 miles per day ( hence high fuel cost) and I need my car for school drop offs and running son around etc. My husbands car is only 5 years old so we have no plans to replace that in the next few years. My car is 11 years old and at the moment it's running fine. I just had to unexpectedly get rid of my 11 year old owned-from-new Clio thanks to a corrosion issue from a no-fault accident years back when the car was practically new. Mechanically I'd have kept her for years yet. I think at that age of car you REALLY need to be starting to think about and plan for replacing, even if that doesn't happen immediately. I do worry about what would happen if it dies as I would not want credit. Equally I would not want an old banger. You're presumably comfortable with the safety level of your current car? Remember that cars are generally speaking only getting safer - so a newer version of your current one is likely to be even better than what you have from this aspect. 2012 registered vehicles can be had from £1000 - £1500 easily enough now.I was involved in a very serious car accident 20 years ago and I am a very nervous driver. I would need something that I felt safe in, although it wouldn't need to be new or expensive.

We do have contents insurance - I just put the one figure for building and contents but we do have this. We have been burgled twice so this is important for us.

In terms of where the £1600 goes, I agree that this is a shocking amount of money. I have sat today and really thought about this and it's quite clear where a lot of our money goes. I will give you an example of the sort of madness that we have allowed to happen -

3 weeks ago we went into town on Saturday morning. Early start so breakfast in Debenhams. Our son needed some new clothes so we spent a couple of hours shopping for him. I like next and Debenhams and I must have easily spent £250. Coffee in Costa before more shopping. Husband bought a new sound bar for the TV and I picked up some work clothes. We then went for lunch at Carluccios before heading home. Total cost for the day - somewhere in the region of £450. Absolutely crazy now that I look at it with a different perspective, however this is something that we would do quite regularly. And if you do that or something similar twice a month, that means you're throwing away nearly ELEVEN THOUSAND POUNDS a year almost without thinking of it.

Something else this flags up is that the clothing spend on your SOA is wildly inaccurate - you say £100 a month in there and yet in one fell swoop in that shopping spree you spent - what - close to £300?

We also like to go on holiday and have weekends away so we pretty much have a balance to pay most months. I have looked back at last year. We went to Menorca, Lanzarote as well as a mini break in rome and several weekends in the UK. Last year we must have spent about 7K on travel which is also ridiculous given our current financial situation. From now start to set aside an amount each month to budget for a holiday. It doesn't have to be anything fancy of flashy - but must a week away somewhere at a sensible cost. others will say you shouldn't do this until you're debt free but allowing for your overspending in other areas I think there is enough easy savings to be made, plus that surplus, to allow for this. It's also probably an important part of your "financial rehabilitation"

I will often pop in Salisbury's on my way home, even when we have plenty of food at home. I can easily spend £50 on things that we don't need. It wouldn't be unusual for me to do this a couple of times a week which again is absolute madness. This is an easy one - just stop making those stops.

My husband is less of a day to day spender, however he does like gadgets and will spend money of electrical items - sound bar, posh coffee machine etc. All unecessary.

So there we have it. We have no excuse. We have good jobs and we have simply allowed our lifestyle to run away with us. We are both ashamed and embarrassed about our debt level. We have buried our heads in the sand for too long telling ourselves everyone has debt and that it's normal. I am quite sure that most people do not owe 60K in loans and credit cards!

On a positive note we are in full agreement that we need so tackle this now. I have cancelled next years holiday today losing a deposit of £240, however we cannot afford the £4200 balance! We have also done a big shop at Aldi today, buying enough for two weeks worth of meals. It cost £72. We will need to pick up milk, bread etc but this is a massive improvement on our usual £100 online shop from Sainsburys. A tip for you here - shopping fortnightly can suit some people, but not everyone largely beause those "bread & milk" shops can still lead to additional spending creeping in. Try shopping weekly and buying EVERYTHING you need for the week - bread will freeze, milk too come to that although you shouldn't need to. Meal plan, write a list, and stick to it. make additional shopping trips the exception, not the rule.

I know that the real test will be whether or not we are able to sustain this new life!

TheAble

Do you read Mr. Money Mustache? I would recommend - it could change your whole perspective.

Here's a pertinent article to get you started:

https://www.mrmoneymustache.com/2012/04/18/news-flash-your-debt-is-an-emergency/

Good luck