Really needing help with debt spiral

jmb1

Fixed closed

monetxchange

I’ll have a look at the outgoings when I get a minute, but do you have any scope for adjusting the payment plan with HMRC? I know from experience how tough they can be on demanding large amounts to repay. I’m self employed as a sole trader so it might be different impact wise on your business, but I many times let HMRC send the debt to a collection agency instead as they were much more flexible in repayments.

monetxchange

1 PCP loan, £280 per month, £8000 owing. 1 year to run. £5k balloon payment. (I intend to pay that and keep the car, whether that’s by taking out a loan at that point or other means currently unavailable but might be by then). - DO NOT DO THIS. You can ill-afford the car as it is. It’s ludicrous to take on even more debt when you’re already crippled. Hand the car back and buy a cheap run around. That’s all you can manage.
Current incoming/outgoing budget: 
INCOME
MY SELF EMPLOYMENT £1,959.91*
MY EMPLOYMENT £1372
PARTNERS EMPLOYMENT £688.33
TOTAL £4,020.24
*Self employment monthly average figure is skewed upward as actually have far higher sales over Christmas period nov/dec - For variable income, do a fresh SOA each month so you can see where you are at that month in terms of money.
HOUSEHOLD EXPENSES MONTHLY
1 payment plan with HMRC for £8k (set up early February after paying them £4k and rather than once again using a credit card to pay the shortfall of last/this year’s tax bill). (£732 per month- Included in business outgoings total)
Tesco Personal Loan Repayments -206.43
Northridge Car PCP Repayments -243.96
Total Credit Card Repayments -272
House Insurance -31.88
Council Tax -106.6
Water Rates/Meter -38
Gas -55
Electricity -55
Cleaning Products/Cleaner -10 - Get rid. Do your own cleaning. buy cleaning stuff at Lidl, eg 60p bleach sprays.
Sky Broadband, phone TV -65 - Very high. Get rid of the Sky TV and watch free view. Shop around for a cheaper broadband.
TV Licence -12.83
Mobile Phones (x3) -60 - for two people, three phones? Get rid and get £8 SIM only contracts.
Life Insurance -66 - any reason for such a high package? Do you have lots of kids? Health conditions? It might also be the drinking and smoking that's pushing this up...
Travl Insurance -1.6
Food and Household Shopping -400 - You could at least half this. Cook from scratch, batch cook, freeze stuff. Get to Lidl or Aldi. Start to love veggie food. Read Jack Monroe or £1 meals blogs.
Eating Out -100
Coffees/Sandwiches/Snacks -50 - This plus Eating Out is just mindless spending. Cut it way back/out until you’re debt free.
Drinks for Home -50
Drinking Out -200 - Both these categories are extremely high, not to mention not particularly good for you. Stop going to the pub until you’re clear. Could you switch to cheaper drinks for home? Lidl have an amazing range of wines and craft beers.
Cigarettes -300 (I know, we're idiots, a no-brainer) - You said it yourself. Seek help to help you stop - try patches, vapes, anything to start with to get this money wasting and unhealthy habit kicked
Car Maintenance -50 - Are you actually putting this aside? Very high for a practically new car. Another reason to give it back!
Car Insurance -40
Car Tax -17.06
Petrol/Diesel -150
Child cash ISA -10 - You can’t afford this until you’re clear.
School meals -50 - get them into packed lunches instead
IT/Computing (eg Anti-virus etc)-10 - You can get this free. Do a quick google search. Get rid
Pet Food -31
Shopping for Fun -50 - so more frittered money? Stop this, track every penny so you can see where your hard earned cash is disappearing to
Days Out -50
Caravan weekends -166 - You can’t afford this until you’re clear. Cut it right back. Maybe do one or two a year for the kids. You have the van - so it could be done dirt cheap. Plan!
Dentist -30 - seems a lot. How often do you all go?!
Barbers -15
Clothes -40
Son university fund -43.75 - how old is he? Is he far enough away from uni that you could pause this until you’re straight?
Christmas & Birthdays 125 - Going to have to be trimmed... token/no gifts for adults, manage expectations for kids
Amazon Prime/Music Unlimited -7 - l
Amazon Kindle/Audiobooks -10 
Magazines -3 This and the above category - cancel. You can get all these things through your local library’s online catalogue FOR FREE straight to your devices
Caravan storage -35
Caravan Insurance -28 - can you recoup some of the high caravan expenses by renting it out at all?
I REALLY desperately need help and advice here. I'm not sleeping at night and by day am in constant worry so any help to get out of this is much appreciated. Please be gentle though!

Maybe I wasn’t gentle, but honestly all comments are because I want you to see that you can sort this - but at the moment you’re living way outside your means. You need to start budgeting, living frugally and stop frittering money. you work hard - why waste it?!

Don’t think about consolidation. I’m not sure you’ve fully had your lightbulb moment yet judging by the comments  about taking a loan to pay off the balloon payment on the car, so why would trying to clear debt with a loan make your spending habits change?  Don’t do it. You’ll end up with double the debt.

First, sit down and work out everything that goes in and out and scrutinise it carefully. Can you boost your business? Can you sell the caravan - it’s taking up a lot of money and how much do you actually use it? You can sort this. You just need to accept that big changes have to be made.

theoretica

jmb1 said:

MY SELF EMPLOYMENT £1,959.91*

BUSINESS OUTGOINGS MONTHLY
30% Tax savings -757.04
HMRC Payment Plan -732
PAYE employee tax -140.4
Accountant -52
TOTAL BUSINESS OUTGOINGS MONTHLY -£1681.44*

The obvious targets are tobacco (£3600 a year), drink (£3000 a year!) Eating out/coffees/snacks/shopping for fun (another £2400 a year) and that caravan (£2740 a year).  That's a lot of luxuries you really need to choose between rather than have them all.  But I think you may also have a problem of thinking you earn more than you do from your self employment.  Only think of the sum after tax as your earnings (as with your take home pay for employment). You don't earn £1959.91 from self employment - you earn £1010.47 and of that need to pay back £732 tax for the next 6 months or so.

monetxchange

Excellent point above on the employment front. Are you truly making the most of it, hustling for business etc? I spent years middling in my work, just about scraping by, but have boosted my income hugely the last two years by putting myself out there and working hard to establish myself more. Every time you have a good month, remember to put away for another month you predict will be quiet. Don’t just blow it all and hope you’ll be okay in the future. Plan!

jmb1

Thanks for the replies so far. For some reason this new forum isn't any longer notifying when I have new replies. Will reply further tomorrow. 

EssexHebridean

Self-employment can be great if either a) you just want something to let you tick over and you have a business model that allows that or b) if you need a decent income, your business model supports the possibility of that AND you're willing to REALLY put your back into it - long hours, careful accounting and a lot of self-promotion. There are however very few roles that will allow you to do the coating from a) with the income from b). 

A couple of observations from me
Firstly - you are dead right about needing to separate out your tax & NI payments before considering what is left over as your income. I always worked on the basis that the "HMRC portion" of my money simply belonged to someone else - I separated it straight out of each invoice payment and put it into an account labelled "HMRC" - and from there it wasn't to be touched other than to pay across. 
Second - make sure that if your income fluctuates a lot over the year you're working to (ideally) the lowest income for budgeting purposes - this ensures that you can balance the books in even the tightest of months - and as a worst-case scenario, the average across the 12 months. That way in the better months you can pay more to debts, or put more into savings, or even potentially allow a few extra treats once you have no debts to worry about. 

DCFC79

Apologies if I have replicated some previous advice.

Eating Out -100 Why

Coffees/Sandwiches/Snacks -50 Why
Drinks for Home -50 I think considering the circumstances you could get rid of this whether you reduce or get rid completely
Drinking Out -200 Why

Cigarettes -300 (I know, we're idiots, a no-brainer) You said it, its gone, if you want to quit then now is the time

Amazon Prime/Music Unlimited -7 You have Sky so do you need both ? Obvioulsy its cheaper if you get rid of both sky and Prime, if you wanted too keep prime.

Amazon Kindle/Audiobooks -10 Id ditch

Magazines -3 Do you really need this ?

If you were to get rid of these it would free up at least £720, could be more with other cutbacks.

Just my thoughts.

jmb1

DCFC79 said:

Apologies if I have replicated some previous advice.

Eating Out -100 Why

Coffees/Sandwiches/Snacks -50 Why
Drinks for Home -50 I think considering the circumstances you could get rid of this whether you reduce or get rid completely
Drinking Out -200 Why

Cigarettes -300 (I know, we're idiots, a no-brainer) You said it, its gone, if you want to quit then now is the time

Amazon Prime/Music Unlimited -7 You have Sky so do you need both ? Obvioulsy its cheaper if you get rid of both sky and Prime, if you wanted too keep prime.

Amazon Kindle/Audiobooks -10 Id ditch

Magazines -3 Do you really need this ?

If you were to get rid of these it would free up at least £720, could be more with other cutbacks.

Just my thoughts.

That's all useful as everyoneeveryone else's replies, I really need this. Just to clarify, my budget I posted is an honest-as-possible estimate of our (over) spending, not what we are going to spend having realised we have a serious problem.

As above advice, everything is being cut back to either a minimum or completely.
I then need to see what the budget reveals as available cash to pay to the debts starting with the cards 0% ending soonest. 

My concern still remains that I won't have the time and funds to clear them before they turn into 20% or more interest incurring debts. That's what is keeping me up at night.

But so many thanks again for all comments so far, it really helps and encourages where to focus. 

monetxchange

That's all useful as everyone else's replies, I really need this. Just to clarify, my budget I posted is an honest-as-possible estimate of our (over) spending, not what we are going to spend having realised we have a serious problem.
As above advice, everything is being cut back to either a minimum or completely.
I then need to see what the budget reveals as available cash to pay to the debts starting with the cards 0% ending soonest. 
My concern still remains that I won't have the time and funds to clear them before they turn into 20% or more interest incurring debts. That's what is keeping me up at night.

It’s okay, it’s refreshing to have an honest SOA on here. You can see where we’ve said huge cuts and savings can be made. It’s your choice now to start putting it into action. The reality is, you may not have cleared the debt before it start accruing interest, but that will at least serve as a hard financial lesson.  What is for certain is it definitely won’t get cleared if you don’t get going with cutting back, so get moving and give yourself a fighting chance!

foxgloves

There is so much unessential stuff here that can be cut. It's not as though it will be forever, just until debts are paid, then a new realistic, but more generous budget can be devised. But now it is payback time. They key areas where you are haemorrhaging money have already been mentioned, so I'd start by turning off those particular taps first. Then at least £100 a month can be knocked off your grocery shopping. When we were debt busting, our budget for food, cleaning products & cat food was £200 a month, occasionally £250. There was no separate budget for 'eating out', 'drinking out' or buying drinks for home. Sure we like a bottle of wine, but that would be purchased as part of our grocery budget. As previous 'Spenders', this was a new way of living for us, but we cleared a lot of debt without feeling our lifestyle had been compromised. The way I came to look at it was (& still is) that if I'm putting it on a credit card, a loan or overdraft to buy it, that is somebody else's money, not mine, so I obviously can't afford whatever it is.
You are on a much bigger monthly income than us - double, in fact - so there's no reason you can't alter your spending habits to get yourself in a debt-free position.
Best wishes, 
F