SOA - Any advice gratefully received

theoretica

I suggest one of the first aims should be to get out of your overdrafts and stay out of them. This is psychological to set down a marker that you have stopped spending money you don't have and are committed to living in the black.

I agree with other posters that putting the debt onto the house doesn't seem a good idea, particularly as your stated aim is then to save. You would be borrowing money against the house, just to put into savings accounts against potential future need. Don't do it - pay off the debt and then save. Consider the future need when and if it comes and decide then, not now, if it is worth borrowing again, whether against your house or unsecured.

sunflowerlady

theoretica wrote: »

I suggest one of the first aims should be to get out of your overdrafts and stay out of them. This is psychological to set down a marker that you have stopped spending money you don't have and are committed to living in the black.

I agree with other posters that putting the debt onto the house doesn't seem a good idea, particularly as your stated aim is then to save. You would be borrowing money against the house, just to put into savings accounts against potential future need. Don't do it - pay off the debt and then save. Consider the future need when and if it comes and decide then, not now, if it is worth borrowing again, whether against your house or unsecured.

Coincidentally, we got a letter from the bank today stating that any overdraft above the £260 interest free one included with our account will go up to 35.6% as of 4th April. So the two overdrafts are def up there with the top priorities!!!!

sunflowerlady

EssexHebridean wrote: »

Some coments in red below:



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.

Thank you for your message, we do actually have access to a few savings accounts within our bank account so I will split them 4 ways! Thanks for the tip!!!

Friends were relieved I think, they have no debt but do have a couple of big purchases to make this year so it’s eased that for them.

Naomim

monetxchange wrote: »

I know many teachers and the majority of gifts get given away - they get hundreds of chocolates and “best teacher” mugs that they simply can’t get through them. Just get the kids to make a card. Secret Santa is inevitably tat - Poundland it is from future!

sunflowerlady wrote: »

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..

Sorry, not a rant directed at you Sunflower, but teachers gifts (including vouchers) drive me nuts. I hate the whatsapp messages suggesting we all put £5 in for Christmas for a teacher and the T/A's that's only taught your child for 6 weeks and then again at the end of the year. If you are in debt, that could be £5 you haven't got and I agree a card should be enough. I never put in the collections :mad: Was so pleased when eldest got into year 7 and that all stopped. Two more years for 10yo

Naomim

middleclassbutpoor

Sounds like you are getting a plan together.

I would highly recommend that you have a read through this

https://www.daveramsey.com/dave-ramsey-7-baby-steps?snid=start.steps#baby_step_1 - He has helped a lot of people with his method.

I would also consider using your savings to chunk down your debt quickly. One of the things that resonated with me is that you should look at your finances like a balance sheet. You have your assets on one side of the page and your debts on the other. You debts are borrowing for your assets in essence so if you ignore the house, you are borrowing £7k to have this in your savings and investments.

You could clear nearly 15% of your debt in a week. If you add in annual bonuses of £1500-£3k - that is 5-10% of your debts over a 2 year period.

Free up your income from these debts and tidy up your budgeting. I would be aiming to clear around 4-5% of your debt each month.

If you can't get that from budgeting with the income you have - you haven't done your budget as seriously as you could.

Think about it as a race, the longer you are in it, the more tired you will get. Aiming to get out in 2 years is where most people aim for when you apply the Dave Ramsey method. It works and in 2 years, with your income, your expensive holidays could be budgeted without breaking a sweat.

sunflowerlady

middleclassbutpoor wrote: »

Sounds like you are getting a plan together.

I would highly recommend that you have a read through this

https://www.daveramsey.com/dave-ramsey-7-baby-steps?snid=start.steps#baby_step_1 - He has helped a lot of people with his method.

I would also consider using your savings to chunk down your debt quickly. One of the things that resonated with me is that you should look at your finances like a balance sheet. You have your assets on one side of the page and your debts on the other. You debts are borrowing for your assets in essence so if you ignore the house, you are borrowing £7k to have this in your savings and investments.

You could clear nearly 15% of your debt in a week. If you add in annual bonuses of £1500-£3k - that is 5-10% of your debts over a 2 year period.

Free up your income from these debts and tidy up your budgeting. I would be aiming to clear around 4-5% of your debt each month.

If you can't get that from budgeting with the income you have - you haven't done your budget as seriously as you could.

Think about it as a race, the longer you are in it, the more tired you will get. Aiming to get out in 2 years is where most people aim for when you apply the Dave Ramsey method. It works and in 2 years, with your income, your expensive holidays could be budgeted without breaking a sweat.

I’ll have a look at that link, thank you!

I’ve been working on the spreadsheet tonight and have got down to zero in 23 months. DH has released some shares/investments tonight too but they take time to come in. With a bit of Xmas money, the shares/investments/DH Bonus and the next three months repayments, we will have cleared 20% by March. Both overdrafts, store card abc one CC will be gone. Then it’s going to be slow and steady from then on.

I’m amazed at what a bit of focus can achieve.

Thank you

sunflowerlady

In relation to the emergency fund, do people keep it at £1000 or do they keep adding to it?

OnlyPariah

£1000 is recommended as the amount to have in there as you start to tackle the debt head on. The idea is you don't spend any more on credit. Once the debt is cleared I believe most people aim at about 3-6 months of salary in there. It helps cover the real emergencies. Sickness, job less etc.

sunflowerlady

I’ve had a productive time unlinking my card from the Amazon account, eBay account and unsubscribing from countless emails that try and tempt me into spending money!!!! Also, I’ve been hiding/unfollowing FB pages that basically just want you to shop with them! ��

enthusiasticsaver

You have made a good start I think by not going ahead with a minimum £10k holiday (people always underestimate) as you have more than £40k debt apart from your mortgage. I suggest you divert mortgage overpayments towards your unsecured debt starting with overdrafts.

I also agree that putting a stop to teachers collections is a good idea. That is huge pressure to put on parents at an expensive time of year. I am sure teachers do appreciate vouchers but if you are going into debt then you cannot afford it and I am sure you are not alone. When did giving teachers gifts at Christmas start let alone the old lady down the road. Watch Martin Lewis program on catchup about Christmas presents and how to cut right back. I think you will find people will be relieved not to have to add to collections.

I agree you should split the savings further. One for car, one for gifts/xmas and one for emergencies. Social events could be lumped in with entertainment. Groceries is high. Are you using discount supermarkets and meal planning?

I would urge you not to put the debt on your mortgage. You are already paying almost £1200 per month on mortgage and existing secured debt. If either of you lost your job and your mortgage was even higher due to increasing it to consolidate your existing debt again you stand a very good chance of defaulting on your mortgage and losing your home as you would not be able to pay that mortgage on one salary. Debt consolidation never works and will just get you into a bigger hole.