New year new me? I hope so!

livewire82

Ok so first up, for some reason I've had to create a new account on here as my email address wasn't recognised, perhaps due to lack of activity. Therefore my account may show as a newbie but I've been a part of the MSE community for many years.
Now onto my case....
Debt has spiralled for me over the past few years and it's getting no better. I'm married with 2 young children and live in a 3 bed house for which I have a mortgage. I have been running my own business for the past 2 years since turning my back on the London rat-race to give me greater flexibility and give me more of a chance of making something of myself instead of just being another cog in the wheel. In doing that, I chose to take a pay cut, but if things go as I intend for them to this year, I may be close to being back to where I originally was financially by the end of the year.
Making that sacrifice to chase my dreams has come at a price and ontop of my mortgage, I now find myself with around £20k worth of shot term debt.

I decided to look into consolidating this debt today with a loan application to see if I could reduce my outgoings by extending the borrowing period but my application was turned down. It's the first time that's happened to me and it stings a little but all I can do is move on and looks at alternatives.

The probably I have is having 2 little mouths to feed as we'll as our own on top of childcare fees and all our other necessary expenses, we're struggling to break even each month. My wife has a fairly modest salary as working in the education sector, she only works term time and earns pro-rata; a double edged sword as we save on more childcare fees but she earns less. We've discussed downsizing our house but as we've only been in this house for 3 years, for all the fees buying and selling costs ontop of looking at how little difference it could make financially, it has to be a non-starter. Besides, we use all the space we have. We certainly don't have more than we need.

The house we bought needed quite a lot of work. I was naive to the fact I could just fund the cost on a credit card without enough through about the repayments and so here I am. The only saving grace is (touch wood) I've never missed a payment although it seems to be coming an increasing challenge.

I'll shortly post my SOA. Any help or advice would be appreciated. I'm not expecting to be offered a solution, I got myself into this mess and I'm the one would will have to get out of it. But if I can start to get a bit of normality back in my life, it'll be a step in the right direction.

livewire82

Statement of Affairs and Personal Balance Sheet

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

Monthly Income Details
Monthly income after tax................ 1896
Partners monthly income after tax....... 1046
Benefits................................ 137
Other income............................ 0
Total monthly income.................... 3079

Monthly Expense Details
Mortgage................................ 997
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 178
Electricity............................. 60
Gas..................................... 40
Oil..................................... 0
Water rates............................. 24
Telephone (land line)................... 12
Mobile phone............................ 70
TV Licence.............................. 13
Satellite/Cable TV...................... 0
Internet Services....................... 25
Groceries etc. ......................... 320
Clothing................................ 0
Petrol/diesel........................... 80
Road tax................................ 45
Car Insurance........................... 90
Car maintenance (including MOT)......... 20
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 120
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 36
Buildings insurance..................... 59
Contents insurance...................... 30
Life assurance ......................... 15
Other insurance......................... 23
Presents (birthday, christmas etc)...... 25
Haircuts................................ 15
Entertainment........................... 80
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2377


Assets
Cash.................................... 0
House value (Gross)..................... 82000
Shares and bonds........................ 800
Car(s).................................. 2000
Other assets............................ 2500
Total Assets............................ 87300


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 0........(997)......0
Total secured & HP debts...... 0.........-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Loan...........................6324......197.......3
Credit Card....................10948.....146.......0
Credit Card....................828.......50........5.9
Partners Credit Card...........7115......142.......5.9
Overdraft......................1500......42........0
Overdraft......................1500......35........0
Total unsecured debts..........28215.....612.......-


Monthly Budget Summary
Total monthly income.................... 3,079
Expenses (including HP & secured debts). 2,377
Available for debt repayments........... 702
Monthly UNsecured debt repayments....... 612
Amount left after debt repayments....... 90

Personal Balance Sheet Summary
Total assets (things you own)........... 87,300
Total HP & Secured debt................. -0
Total Unsecured debt.................... -28,215
Net Assets.............................. 59,085

Unicorn_cottage

Hello!

A few questions - are the apr's for your debts correct? Am especially looking at the overdraft costs?

What are your other assets?

Have you got a good accountant

livewire82

Hi Unicorn Cottage. Thanks for your response.
The APRs are correct. I'm not 100% sure about the overdraft but a just get charged a flat fee for the usage of the overdraft and that will never change. There is no interest applicable.

Our other assets are mainly jewellery (engagement/wedding rings). Besides that, there's not a great deal of valuables. TV's, laptops are only worth a few hundred £ which I don't think I've included.

Regarding our accountant, we're happy with the one we use at the moment. Their fee is pretty average but I'm always happy to keep my options open!

DrEskimo

Probably a blessing you got turned down for a loan. If you don't address the reasons for why you are in debt, you could have easily seen you debt doubled...

Couple of things jump out to me immediately. Firstly the buildings insurance. Is it really £59 per month? Seems awfully high.

Secondly your mortgage. Given the house value it seems very high, but without the amount of rate it's hard to know. Perhaps it's on a relatively short term?

Do you actually have surplus each month, or do you tend to get further into debt due to overspending. Is all the debt from the house work?

There are a few areas where cuts could be made, but perhaps the income side of the equation is where you could make bigger strides. Is there a career plan for both of you that would mean boasting your earnings?

EDIT - Apologies just realised you discuss your career in terms of your own business and your partner being part-time.

JayRitchie

Hi

Where do you live? Do you need two cars?

Unicorn_cottage

Buildings insurance..................... 59
Contents insurance...................... 30

Is this really every month? £1068 is astromomical! My buildings and contents insurance for a 2 bed is less than £150.

Willing2Learn

Hi,

And here is my take on your SOA:

• Is your council tax paid across 10 months or 12 months?
• Are your water rates paid across 10 or 12 months and is it metered?
• Your mobile phone costs are expensive. You should consider SIM-only contracts as they are cheaper.
• As others have said, your buildings and contents insurance is ridiculously high

livewire82

Thanks for all the recent replies.

Some answers to questions…

Buildings insurance: seems I have supplied incorrect information. To break it down, I pay the following amounts per month for insurances (not including car or pet insurance):
Buildings/Contents: £29
Critical illness protection: £59
Mortgage protection: £15
Income protection: £14
Family protection: £9

House value: the outright value of my house is approximately £320,000. The value I have given is just what I owe, i.e. the equity I have. I am on a 5 year fixed rate mortgage and have just over 2 years left on that term.

I find that I don’t have surplus funds at the end of each month. My living costs with all my current commitments are all covered but sometimes with additional commitments like childcare fees, birthdays, christmas, etc, it exceeds income hence the high borrowing amount on credit cards.

There are a few savings that I could make which I will be looking into soon but I agree that I am more likely to make more of a difference with increased income. As I run my own business I have to take the rough with the smooth but it does at least give me hope.

We have 2 cars. Both are needed. My wife works about 20 minutes away in the car, not on a bus route and whilst I do the majority of my work from home, I regularly have client meetings that I have to attend.

I believe my council tax is paid across 11 months.

My water is not on a mater and is paid over 12 months.

The mobile phone costs I have listed are household costs; mine and my wife’s. On average we each spend about £35 per month each.

DrEskimo

livewire82 wrote: »

Thanks for all the recent replies.

Some answers to questions…

Buildings insurance: seems I have supplied incorrect information. To break it down, I pay the following amounts per month for insurances (not including car or pet insurance):
Buildings/Contents: £29
Critical illness protection: £59
Mortgage protection: £15
Income protection: £14
Family protection: £9

House value: the outright value of my house is approximately £320,000. The value I have given is just what I owe, i.e. the equity I have. I am on a 5 year fixed rate mortgage and have just over 2 years left on that term.

I find that I don’t have surplus funds at the end of each month. My living costs with all my current commitments are all covered but sometimes with additional commitments like childcare fees, birthdays, christmas, etc, it exceeds income hence the high borrowing amount on credit cards.

There are a few savings that I could make which I will be looking into soon but I agree that I am more likely to make more of a difference with increased income. As I run my own business I have to take the rough with the smooth but it does at least give me hope.

We have 2 cars. Both are needed. My wife works about 20 minutes away in the car, not on a bus route and whilst I do the majority of my work from home, I regularly have client meetings that I have to attend.

I believe my council tax is paid across 11 months.

My water is not on a mater and is paid over 12 months.

The mobile phone costs I have listed are household costs; mine and my wife’s. On average we each spend about £35 per month each.

Ah OK, so the mortgage amount is around £238k? The mortgage payment seems sensible given that figure.

It's a lot of insurance, but presumably you feel it's worth having and the payments are fair given the level of cover?

I think the next step would be to do a more detailed SoA to work out exactly how much you are spending in all areas so you can draw up an accurate budget and give every £1 a specific role. Getting to a point where you are not adding to the debt I think is the first stage. From there you can decide how much you want to cut back and throw at the debts to pay them down.

I don't think you are overspending in many areas, so I think it will be difficult to make massive savings to clear the debt quickly. It will be a case of creating a good game plan and sticking with it.

Wishing you the very best with it. Will chime in with any advice I feel I can give :money:

livewire82

Hi DrEskimo

Yes that's correct about the mortgage.

As for the insurances, I signed up for all of these following advice from a FA but I do wonder if it's all a bit OTT. You just know that if I cancelled something I would then need it. It's all a bit of a risk but I'm not sure what the best decision would be.

Thanks for the advice. My first step is to cut up my credit cards and be stricter on myself. I rarely carry cash on me ode to the fact I dont actually have any budget, yet I still find myself making contactless card payments and that can get out of hand because you never see the physical value of what you're spending. I'm going to see if I can trim my outgoings and if that frees up any cash for necessary spending then I can withdraw that from my bank account, although debt repayments will always be the priority.