32k in credit card debt where do I start??

monetxchange · 6 June 2020 at 8:33PM

I think my first reaction would be this is not a true SOA. if it was, you wouldn't have built up debt in the first place. Not a criticism, but it's important to be honest with yourself at the start and then you can move on it. You need to look through a years worth of statements and do an average for what you actually spend on food, going out, entertainment, clothes, buying shiny things etc. Then you can start making changes and everyone here can advise you properly. Do you have anything to sell as a stopgap?

You say you could afford all the stuff you bought, but you obviously couldn't or you wouldn't have put it on credit. I'm not getting at you, just trying to help you come to the realism that it's your spending that's led you here, not just circumstances out of your control. I was the same as you this time last year. Now I've cleared my debt and learnt that I simply cannot trust myself to use credit and if I want something, it has to be budgeted and saved up for.

Well done on taking the first step!

leroy1980 · 6 June 2020 at 9:24PM

How did you clear your debt in such short a time?

flashg67 · 6 June 2020 at 9:30PM

Is it me or is the mortgage payment amount not right?

leroy1980 · 6 June 2020 at 10:30PM

£473 not £4.73

ryanm8655 · 6 June 2020 at 11:29PM

A few typos in the SOA, also looks like it’s aspirational but if you can stick with it...

Are you paying minimums on credit cards at the moment? First thing I did was set all of the direct debits on cards to £1 above the current minimum. Then, based on what I could afford, I targeted the highest interest cards first.

I started from a similar position to you and have similarIsh income, albeit my current outgoings are a lot less. When I first started 2/3 of my debt (£20k) was charging 20%+ interest. My minimum payments came to £800ish. Once I started to make a dent a few months in, I began to get 0% offers and by using those I got the vast majority of my debt onto 0% pretty quickly. Then I noticed the debt decrease far more quickly, later helped by lockdown.

Now that all of my debt is on 0% it’s a game of staying ahead of the expiry dates. I now prioritise the cards that end the soonest and clear those down.

I’m using zero based budgeting, essentially. I work out all of my outgoings for the month ahead. Based on that I work out what I can afford to put towards debt and then clear it when I get paid so that I can’t be tempted to spend anything more than I can afford.

Lockdown is a great opportunity to put yourself in a far better position.

leroy1980 · 7 June 2020 at 12:00AM

Sounds really helpful, would love to do that but not getting any 0% offers . So not sure to go down the DMP route?
Im looking at selling my laptop and decks which could raise £2000, if if trade down my car I could possible get another £1500-2000. Which would give me a start at it. Little bit unsure of what to do at the moment.
Should I pay off my 1k very and Next or get stuck into the credit cards first?

ryanm8655 · 7 June 2020 at 8:34AM

leroy1980 said:

Sounds really helpful, would love to do that but not getting any 0% offers . So not sure to go down the DMP route?
Im looking at selling my laptop and decks which could raise £2000, if if trade down my car I could possible get another £1500-2000. Which would give me a start at it. Little bit unsure of what to do at the moment.
Should I pay off my 1k very and Next or get stuck into the credit cards first?

You’ve got plenty of spare income to pay debt going by your SOA (though if you could fix the errors and repost that would make that clearer). On that basis you don’t need a DMP.

Selling what you can and clearing down the debt will help a lot and potentially free up some 0% offers in a few months time. I had none available either at first.

Are Next and Very the highest interest? If so then clear those first. Once they’re gone you’ve got at least the minimum payments on those to put towards the next debt.

Have you set all your direct debits to £1 above minimum? That’s a good initial step. Then order the debts by interest rate next and plough everything you can afford into the highest interest before moving onto the next item. You can also look at things you could sell that you don’t need/use, every little helps.

enthusiasticsaver · 7 June 2020 at 9:01AM

leroy1980 said:

Here you go
[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]
Number of adults in household........... 1
Number of children in household......... 0
Number of cars owned.................... 1[b]

Monthly Income Details[/b]
Monthly income after tax................ 2470.11
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 0[b]
Total monthly income.................... 2470.11[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 4.73
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 108
Electricity............................. 34
Gas..................................... 34
Oil..................................... 0
Water rates............................. 32.63
Telephone (land line)................... 0
Mobile phone............................ 16
TV Licence.............................. 13.2
Satellite/Cable TV...................... 42
Internet Services....................... 41.24
Groceries etc. ......................... 240
Clothing................................ 50
Petrol/diesel........................... 240
Road tax................................ 18
Car Insurance........................... 60.23
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 15.98
Buildings insurance..................... 8
Contents insurance...................... 8
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0
Haircuts................................ 0
Entertainment........................... 12
Holiday................................. 0
Emergency fund.......................... 0
union fees.............................. 20.9[b]
Total monthly expenses.................. 998.91[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 155000
Shares and bonds........................ 0
Car(s).................................. 6000
Other assets............................ 0[b]
Total Assets............................ 161000[/b]
[b]

Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 107680...(4.73).....2.3[b]
Total secured & HP debts...... 107680....-.........- [/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
HSBC Loan......................9690.35...236.3.....6
MBNA 1.........................8368.7....189.9.....18.93
MBNA 2.........................4118.83...41........0
Amazon newday..................674248....191.......21.9
Halifax........................608136....60.81.....0
Lloyds.........................631821....63.5......0[b]

Assuming your mortgage is £473 and not £4.73 I make your surplus £215.69. I would hazard you are actually spending more than this or you would not have this much debt. Assuming you have missed decimal points on the amazon, Halifax and Lloyds debts that makes a total of £41319.93 in unsecured debt so this is going to be a long haul. Do you have an overdraft?

For one person the groceries is high. Go to a cheaper supermarket, downbrand and meal plan so there is no waste. Cut out the cable tv and go without buying new clothes for a while and just use what you have. You have no emergency savings so you must start budgeting for that so you don't use the cards. You need to cut the cards up. You also have no car maintenance money, nothing in presents or haircuts and very low entertainment.

I recommend you throw all spare money at the Amazon card and make sure you stop using it completely. As you can meet minimums I don't think a DMP will help and as two thirds of your debt is on 6% for the loan and 0% on Halifax, lloyds and MBNA 2 there is no advantage to you to go into a debt solution. My recommendation is you reduce the groceries figure to £150 to £200 which is completely doable for 1 person and get rid of the clothing figure. Put £100 in emergency savings every month and then put any debt overpayments you can into Amazon New day. You also need something in car maintenance. You must stop using credit though or you will never get out of this. Sell anything you can to get the debt down further. When do the 0% deals finish? The minimums will go up when that starts happening to get to grips with this before that happens. If not then that is when a DMP will help. I think you could address this now with some financial discipline.

It will be tough but when the debt is gone you will have an extra £782 in your wages each month.

enthusiasticsaver · 7 June 2020 at 9:04AM

leroy1980 said:

Sounds really helpful, would love to do that but not getting any 0% offers . So not sure to go down the DMP route?
Im looking at selling my laptop and decks which could raise £2000, if if trade down my car I could possible get another £1500-2000. Which would give me a start at it. Little bit unsure of what to do at the moment.
Should I pay off my 1k very and Next or get stuck into the credit cards first?

You don't show the very and next on the soa. Why not? They are normally really high interest so yes you should start with those plus any overdrafts as they are usually 40% interest now.

mrsmoneypenny90 · 7 June 2020 at 9:27AM

Hi Leroy,

well done on joining here and admitting you have a problem. That’s the hardest bit. Without calculating myself how much disposable income do you have ?

£240 a month for one person groceries is high. I feed 2 adults (inc one v hungry gym going man) for around £200 a month but we have only recently been doing that after our LBM and making strict meal plans and lists when shopping at Aldi. Yes it sounds boring and hard work but you are in a large amount of debt, so something has to change.

Also, I would use the credit card snowball repayment calculator on the same website that you did the SOA on. It does take some time as you need to input all your debts and the APR / minimum repayments. But you might just be shocked at how quickly you can be debt free if you stick to that plan?

also, have you still been driving as much during in lockdown? Any chance you could work from home more to save fuel costs ?

32k in credit card debt where do I start??

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