SOA - Any advice gratefully received 14 January 2020 at 1:06PM edited 30 November -1 at 12:00AM in Debt-Free Wannabe 36 replies 3.6K views

sunflowerlady

I’d never buy someone something that I wouldn’t want to receive myself. I’ve always put a £10 budget on kids party gifts but I think from now on I’ll just put £5 in their card instead. It cuts my spending on this by 50% and then they can either save it or buy something they want. As for Secret Santa, I actually made half of it this year (bought the rest for the £10 budget) and the ungrateful recipient moaned about it in front of everyone! I won’t be partaking next year! Teachers - I arrange the collections and buy vouchers because I know this is what the teachers want and it keeps it to £5 per child.

I actually can be quite savvy but these credit cards are weighing us down.

Happier_Me

For kids birthday parties, we cut back by only allowing the kids to go to parties in their immediate friendship group. If an invite arrives and I haven't at least heard the child's name mentioned regularly then my kids would not be going to that party.

If you stick to this SOA AND throw your £300 surplus at your debt AND your husbands bonus you could be debt free well within the next three yeass. That assumes the interest rates you quote are correct. So why not focus your energy on sticking to this budget and securing that surplus? Yes, you could make some savings on that SOA and there is a job to visit every line to either reduce costs by shopping around or asking if the spend is a genuine need or not. But you can address this in a few short years just be being disciplined.

I have a question though (and it is meant with good intentions...) If you have genuinely been living to this budget for a while, then your debt should have reduced by around £15k over the last 12 months... is this the case or are you kidding yourself that your spending is under control?

middleclassbutpoor

Do not consolidate debt into your home.

You have £2k in savings and you have £6k in investments. I would cash in the investments and take £1k from your savings. This will leave you with £1k as an emergency fund.

Use the £7k against your debts

Secured Debt.................. 2070.7...(275)......0 (ends Jan21)

Unsecured Debts

Description....................Debt......Monthly.. .APR

Credit Card....................2877.96...100.......0
(overpaying each month)

Overdraft.......................500.......0....... ..0

Store Card.....................1000......90........23.9

You should then be able to apply the remaining amount to

Overdraft......................1800......0........ .0

You have mentioned you are overpaying on lots of your debts. How much are you overpaying including your mortgage? It looks like if you can stick to your budget above, you will have at least £770 to put towards overpayment with the £465 more per month you have freed up by using your savings and investments. I would then look at repaying the overdraft off with this next.

I would pay £1 more than min balance on all your remaining credit cards and put your mortgage back to minimum and then apply all these overpayments to your £770 above and clear your debt through the avalanche/snowball method to your remaining debt of approx £36k.

You need to budget your way out of this and you need to get control of your spending. You earn good wages but you are living well beyond your means at the moment carrying all of this debt.

Ways you can squeeze more out of your budget - increase your income, reduce groceries, reduce your mobile phone costs, stop going on holiday, don't save any more into your emergency fund, spend less on birthdays/Christmas. Use your bonuses.

I had £48k of debt and a good wage and Im nearing the end of my journey with my personal debt so it can be done with a bit of sacrifice. You need to think that you could clear this within 18-24 months if you knuckle down.

I would ensure that I fully close down accounts once repaid.

monetxchange

Halving the present spend would be a great start. I personally can’t see the point of you putting a fiver in a card for a friend and then that friend putting a fiver in a card on your birthday and thus passing the same fiver around, but it’s important to keep some items on the budget that bring you enjoyment.

I would question whether you’re that “savvy” though. Are you sure you’re not in a bit of denial about your spending? You say it’s built up over a while, but to amass £42k of unsecured debt is huge and indicates a fairly consistently high spend over your budget month on month.

Andyjflet

As above, £40k of CC debt is a lot but then you know this.

I would look up Dave Ramsey, watch the videos and podcasts and then sort yourself out which you should do quite quickly.

BS 0 Bring your OD up to date £0
BS 1 Save £1000 emergency fund
BS 2 Start paying down your debts in a snowball method, take the smallest balance (for quick wins and good feeling !) so the store card of £1000 and throw everything at this, stop all other saving and investing at this point. Pay the minimum balances on the other payments.

You could knock this out reasonably fast with focus, that means not holidays or luxuries.

Once the store card is paid off then close it and throw the £90 a month at the £2877 credit card.

Get a budget sorted, also consider cashing in your bonds of £6000 and adding that to the debt snowball.

sunflowerlady

I've been busy since my last post.


1. I have put together a spreadsheet of all debts (credit cards, store card, loan, overdrafts) - and unbelievably I found a CC that I forgot we had . The spreadsheet includes the balances at Jan 2020, the interest rates and their expiry dates, the minimum payment that is needed each month, and when the payment is due. I have sorted this list into priority of highest interest rates first (plus the two overdrafts) and I have made a plan to round all the minimums up to the nearest £10 on all the 0% debts and concentrate on paying off the priority debts.


2. I have put £250 per month on a Standing Order to an account in DH's name - this is to cover Emergencies, Car Maintenance, Social events and Birthdays/Christmas.


3. Holidays - we are committed to one in May - its all inclusive and 95% paid for so cancelling it would not make sense. We had a booking on a hotel for October, it was only reserved with free cancellation but we were planning (without any idea how would pay for it without reaching for the CC) on going so would have had to pay for that plus flights, plus spending - I have cancelled the reservation. On top of all that, we had been discussing a BIG holiday for 2021 which would have cost in excess of £10,000, Today, we have told our friends that we are not going and why.


4. Groceries - We are sitting down at the weekend to go through the bank statement and figure out where we are spending the most.


5. I love the idea of thinking of the big bad number as 100% and working in chunks of 1% at a time. We can pay 3 & 4% per month off, not including DH bonus (which is all going towards the debt) or my overtime (project for next 3 months).


6. How do I make one of those signatures for the bottom of my post? I want to put a visual of where we started and update it regularly.


Thanks all :A

Willing2Learn

If you have the forum setup the same as me, then you can access the 'Edit Signature' option by selecting the 'Quick Links' drop-down menu


And don't be hard on yourself for missing a debt out from your SOA. It can take several attempts before your SOA reflects real life. Having a spreadsheet is an excellent way to track where all your money is going.

sunflowerlady

Willing2Learn wrote: »

If you have the forum setup the same as me, then you can access the 'Edit Signature' option by selecting the 'Quick Links' drop-down menu


And don't be hard on yourself for missing a debt out from your SOA. It can take several attempts before your SOA reflects real life. Having a spreadsheet is an excellent way to track where all your money is going.

Thank you!!!!!

OnlyPariah

You've done really well admitting to yourself there is an issue and getting your SOA done. As W2L says it can take a few goes to get it to reflect the true picture.

Well done on cancelling the big holiday next year and the October break. It can be difficult getting used to not doing the things you want to do but you really need to break the habit and now and have a proper budget for these things. Once you've paid down the debt that is.

You've got a good surplus and by being more careful on your spends you'll have this issue resolved in no time.

EssexHebridean

Some coments in red below:

sunflowerlady wrote: »

I've been busy since my last post.

1. I have put together a spreadsheet of all debts (credit cards, store card, loan, overdrafts) - and unbelievably I found a CC that I forgot we had . The spreadsheet includes the balances at Jan 2020, the interest rates and their expiry dates, the minimum payment that is needed each month, and when the payment is due. I have sorted this list into priority of highest interest rates first (plus the two overdrafts) and I have made a plan to round all the minimums up to the nearest £10 on all the 0% debts and concentrate on paying off the priority debts. Are you paying these by direct debit? If so then you have just scored yourself another nice easy win here - as by setting up a DD for a set amount rather than the minimum, that payment stays the same, rather than falling over time as the one set to "minimum" would - meaning that as time goes on you pay off a little more each month without even noticing it. Note though - this ONLY works for cards that you are not using it - and do pay attention to any correspondence that tells you about a change in the minimum payment just in case it switches to a level above the payment you are making! (Unlikely but can happen)


2. I have put £250 per month on a Standing Order to an account in DH's name - this is to cover Emergencies, Car Maintenance, Social events and Birthdays/Christmas. Be very careful combining so many things into one pot as it can be very tough to keep track of how much you have in each area at any given time. I'm always particularly wary when people are combining regular spends (so in your case social events. presents) with "important stuff" - so car maintenance and EF in this case. It might be worth looking to see whether your bank allows you to open online savings accounts off the back of your main current account which might help make things simpler.


3. Holidays - we are committed to one in May - its all inclusive and 95% paid for so cancelling it would not make sense. Agreed - but agree between yourselves to manage with the clothes that you already have and make sure you budget carefully for any spending money that will be needed. (Also remember to budget for spends like sun cream etc!)We had a booking on a hotel for October, it was only reserved with free cancellation but we were planning (without any idea how would pay for it without reaching for the CC) on going so would have had to pay for that plus flights, plus spending - I have cancelled the reservation. On top of all that, we had been discussing a BIG holiday for 2021 which would have cost in excess of £10,000, Today, we have told our friends that we are not going and why. well done - who knows, maybe they are quietly breathing a sigh of relief too! That would be one heck of a big spend!


4. Groceries - We are sitting down at the weekend to go through the bank statement and figure out where we are spending the most. At the same time do an inventory of what is in your cupboards, fridge and freezer, and do a meal plan to make as much use of the things you already have for the next couple of weeks. Once that is done write a shopping list for ONLY the things you actually need - your challenge is to see quite how little it is possible to spend between now and the beginning of next month!


5. I love the idea of thinking of the big bad number as 100% and working in chunks of 1% at a time. We can pay 3 & 4% per month off, not including DH bonus (which is all going towards the debt) or my overtime (project for next 3 months). Yes - anything that gives you small goals to aim for can really help - good thinking!


6. How do I make one of those signatures for the bottom of my post? I want to put a visual of where we started and update it regularly.


Thanks all :A

Sounds to me like your lightbulb is very firmly ON!


For others reading - "an Aspirational SOA" was referred to earlier - we use this phrase to refer to an SOA which has been prepared either by someone estimating what they "think" they spend, or what they think that they "should" be spending - rather than what is actually the most helpful, which is the SOA which reflects exactly where your finances are right at the moment of writing. So as an example - someone puts that they spend £300 on groceries - where in fact they are spending £600 - but they know from having read other threads that this figure is too high - so they resolve that they will be changing things from now - and put in the lower figure. It's done with the right intent but means it makes it tougher to work out exactly where things are going wrong and how they can be turned around.