Starting my mission to become debt free - Snowballing advice

in Debt-free wannabe
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KeysMcKKeysMcK Forumite
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Hi all,

Sorry in advance if this is long winded! 

I’m looking to take the first sincere steps towards becoming debt free. My total debt (as calculated on my credit report inclusive of interest I’m due to pay) is around £19,000. Total monthly payments to all creditors come up to around £900 which really has me treading water financially, but before I look at nuclear options (bankruptcy/IVA) I want to have a push at paying this off.

I’ve been entering my debts into the “what’s the cost” snowballing calculator which has worked out that if I keep up spending £900 per month l I could be debt free within 2 years. I really don’t see this as being achievable though, so I will likely be employing a watered down version where my payments will increase slightly as old debts are paid off. 

Previously I’ve tried to outsmart my debts, re-financing to pay off loans only not to do it completely, take out credit cards with the plan not to use them much only to max them out, trying to move debts around cards like some credit busting Ponzi scheme thinking I could some how pay it all off maximising my credit rating, but all I’ve ended up doing is maxing out all avenues.

I’m looking for some help/guidance as to how I can make sure I stick to this and actually achieve what I’m looking for. 

1) When entering my debt into a  Snowball calculator, do I put total debt as calculated on the credit score, or the current settlement amount? 

2) Does anyone known of a snowballing calculator that would allow for more detailed projections, lowering monthly total spend as debts are paid off etc?

3) Could I keep one of my credit cards (Barclaycard) active for daily use (only 800 limit) and use it as a pre-payment card, for daily use (groceries, petrol, amazon etc). Balance transfer is instant from my Barclays Bank and if I keep a flow of money moving through it it could reduce the interest I’m paying. It’s already maxed out and is my highest interest card so I can’t see it doing me any damage. I always feel like I’m doing myself a disservice when I use my Barclays debit card!

P.s. I know that a debt management plan might seem like the most obvious option, but I’m at the time in my life where I really have to start thinking if getting my credit file ready for a mortgage in the mid-term. From my understanding the DMP could be on my credit score for up to a decade before I can rebuild and that’s really not something that I can consider. Even a 6 year IVA/Bankruptcy would be easier to stomach, but I don’t want to go there either. 
«134567

Replies

  • IrishSeanIrishSean Forumite
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    Hey, welcome

    Best advice is to given the forum a look at your SOA. (Links on 1st page of most of the DFW diaries @lemonfool)

    Make sure you're as thorough as possible. Once you've posted list when all of your 0%s end and the most wise here (not me, 😂) will be able to throw up some ideas not only re: snowballing but other techniques: as a rule you round up your minimums and tackle the highest aprs 1st. 

    Also you'll get a lot of advice on driving down your monthly spend to free up as much as pos. for debt repayments.

    Without an SOA ppl are giving you advice in the dark, not knowing outgoings, salary etc. So whereas it's likely you don't need an DMP or IVA,  best to start there :wink:

    GL!

    Oh, and start a diary too, then you'll get ppl looking in weekly & offering advice.
    💪💪
    You're on the road now ➡ this way to debt freedom👍


    Admin for Tilly Tidy to £1825 DFW challenge: 2021
    Rolling Total for 2021: £970
  • IrishSeanIrishSean Forumite
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    Admin for Tilly Tidy to £1825 DFW challenge: 2021
    Rolling Total for 2021: £970
  • IrishSeanIrishSean Forumite
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    Avalanching (i always forget the term) is paying off highest (or soon to be highest) aprs 1st and just over minimums to the others. If you pay just over the minimum you can sometimes avoid the 'm' on your credit file which lets other lenders know you paid the minimum. 
    If you can build an emergency fund (£500 - £1000, in easy access savings) as you go along that's prob better than keeping a credit card open for paying for stuff. I wouldn't be keen on idea of trying to keep cashback credit cards etc open. Pay for stuff by debit, keep dds as low as you pos can, hammer your debts to stay ahead of promotional offers.

    👍☺
    Admin for Tilly Tidy to £1825 DFW challenge: 2021
    Rolling Total for 2021: £970
  • MidsHollieMidsHollie Forumite
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    Hi, 
    It sounds like you are at what I think is the hardest bit of your debt journey (or at least that I have noticed so far in mine!). You know what the problem is, and you know it needs fixing. But somehow you need to get enough leverage to actually make a start. 
    Do your SOA. Hopefully make some easy wins there, eg, stop Netflix, cut the grocery budget etc. Start an emergency fund.
    The two most helpful things I have done so far is to set up an emergency fund, and to start budgeting for annual expenses. These two things will stop you needing to use the credit card. 
    Personally, I think the debt snowball is the most achievable (pay off the smallest debts first). You can always change to the debt avalanche (paying off the debts with the highest interest rate) once you fee the empowerment of some easy wins. 
    Focus on getting control of this 100%. Every tiny bit of cash that goes towards debt brings your debt free date closer. 
    Good luck!

    <a rel="nofollow" href="https://forums.moneysavingexpert.com/discussion/6086606/debt-free-by-23/p1">https://forums.moneysavingexpert.com/discussion/6086606/debt-free-by-23/p1</a>

    True LBM, December 2019 = £32934. Current Debt = £12762. 1% Challenge = 61.1%. #51 3-6 Month EF Challenge = £1200/£6000



  • Blue_sky101Blue_sky101 Forumite
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    I’m in the same boat as you OP.  This is what I found useful for me:
    I downloaded a debt app called ‘Debt Payoff Planner’ where you put in all your debts, interest rates, minimum payments and how much extra you can put towards debt monthly. You can then choose the order in which you want to pay them off such as snowball, avalanche or the order they appear on the list and the app works out how much you should pay monthly towards each debt and also tells you when each debt will be cleared. It can even tell how you much interest you pay overall, depending on payment strategy. You can record payments into or out of accounts so your balance remains accurate.

    If you want extra features such as an amortisation table, then you pay for the ‘premium, version. I paid $24 (£18) for a 2 year subscription.

    I use this, along with YNAB budgeting app, and it has helped me to really get a hold on my debt issue. 
    Good luck!
  • KeysMcKKeysMcK Forumite
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    Thank you for your advice and feedback! I’ll get looking at these tools and putting a list together this weekend and post it asap!
  • KeysMcKKeysMcK Forumite
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    Hi,

    Please see my SOA below. An explanation, I pay the rent, my girlfriend pays the other household bills (hence some sections being empty). 

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

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 0
    Number of cars owned.................... 1[b]

    Monthly Income Details[/b]
    Monthly income after tax................ 2550
    Partners monthly income after tax....... 0
    Benefits................................ 0
    Other income............................ 0[b]
    Total monthly income.................... 2550[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 0
    Secured/HP loan repayments.............. 211
    Rent.................................... 750
    Management charge (leasehold property).. 0
    Council tax............................. 0
    Electricity............................. 0
    Gas..................................... 0
    Oil..................................... 0
    Water rates............................. 0
    Telephone (land line)................... 0
    Mobile phone............................ 5
    TV Licence.............................. 0
    Satellite/Cable TV...................... 35
    Internet Services....................... 26
    Groceries etc. ......................... 150
    Clothing................................ 30
    Petrol/diesel........................... 100
    Road tax................................ 17
    Car Insurance........................... 80
    Car maintenance (including MOT)......... 30
    Car parking............................. 30
    Other travel............................ 50
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 9
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 0
    Contents insurance...................... 0
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 30
    Haircuts................................ 8
    Entertainment........................... 50
    Holiday................................. 0
    Emergency fund.......................... 0[b]
    Total monthly expenses.................. 1611[/b]
    [b]

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

    Secured & HP Debts[/b]
    Description....................Debt......Monthly...APR
    Mortgage...................... 0........(0)........0
    Hire Purchase (HP) debt ...... 2623.....(211)......16[b]
    Total secured & HP debts...... 2623......-.........-   [/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    Barclays overdraft ............1500......50........35
    Monzo overdraft ...............1000......50........39
    Barclaycard ...................800.......50........32
    Active securities .............290.......10........0
    Sll (default)..................1200......10........0
    Manchester credit uni..........700.......80........36
    Bamboo loans...................3019......52........60
    Likely loans ..................6210......295.......40
    Aqua card......................2950......80........24
    Capital one ...................900.......50........26[b]
    Total unsecured debts..........18569.....727.......-  [/b]

    [b]
    Monthly Budget Summary[/b]
    Total monthly income.................... 2,550
    Expenses (including HP & secured debts). 1,611
    Available for debt repayments........... 939
    Monthly UNsecured debt repayments....... 727[b]
    Amount left after debt repayments....... 212[/b]

    [b]Personal Balance Sheet Summary[/b]
    Total assets (things you own)........... 0
    Total HP & Secured debt................. -2,623
    Total Unsecured debt.................... -18,569[b]
    Net Assets.............................. -21,192[/b]

    [i]Created using the SOA calculator at www.LemonFool.co.uk.
    Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
  • edited 13 June 2020 at 9:45PM
    KeysMcKKeysMcK Forumite
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    edited 13 June 2020 at 9:45PM
    I wasn’t sure if I should do the SOA figures based on the full amount payable on the loans, or based on the current settlement figures. Here’s another one with Bamboo and Likely adjusted to show current settlement figures.

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

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 0
    Number of cars owned.................... 1[b]

    Monthly Income Details[/b]
    Monthly income after tax................ 2550
    Partners monthly income after tax....... 0
    Benefits................................ 0
    Other income............................ 0[b]
    Total monthly income.................... 2550[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 0
    Secured/HP loan repayments.............. 211
    Rent.................................... 750
    Management charge (leasehold property).. 0
    Council tax............................. 0
    Electricity............................. 0
    Gas..................................... 0
    Oil..................................... 0
    Water rates............................. 0
    Telephone (land line)................... 0
    Mobile phone............................ 5
    TV Licence.............................. 0
    Satellite/Cable TV...................... 35
    Internet Services....................... 26
    Groceries etc. ......................... 150
    Clothing................................ 30
    Petrol/diesel........................... 100
    Road tax................................ 17
    Car Insurance........................... 80
    Car maintenance (including MOT)......... 30
    Car parking............................. 30
    Other travel............................ 50
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 9
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 0
    Contents insurance...................... 0
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 30
    Haircuts................................ 8
    Entertainment........................... 50
    Holiday................................. 0
    Emergency fund.......................... 0[b]
    Total monthly expenses.................. 1611[/b]
    [b]

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

    Secured & HP Debts[/b]
    Description....................Debt......Monthly...APR
    Mortgage...................... 0........(0)........0
    Hire Purchase (HP) debt ...... 2623.....(211)......16[b]
    Total secured & HP debts...... 2623......-.........-   [/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    Barclays overdraft ............1500......50........35
    Monzo overdraft ...............1000......50........39
    Barclaycard ...................800.......50........32
    Active securities .............290.......10........0
    Sll (default)..................1200......10........0
    Manchester credit uni..........700.......80........36
    Bamboo loans...................1000......52........60
    Likely loans ..................4434......295.......40
    Aqua card......................2950......80........24
    Capital one ...................900.......50........26[b]
    Total unsecured debts..........14774.....727.......-  [/b]

    [b]
    Monthly Budget Summary[/b]
    Total monthly income.................... 2,550
    Expenses (including HP & secured debts). 1,611
    Available for debt repayments........... 939
    Monthly UNsecured debt repayments....... 727[b]
    Amount left after debt repayments....... 212[/b]

    [b]Personal Balance Sheet Summary[/b]
    Total assets (things you own)........... 0
    Total HP & Secured debt................. -2,623
    Total Unsecured debt.................... -14,774[b]
    Net Assets.............................. -17,397[/b]

    [i]Created using the SOA calculator at www.LemonFool.co.uk.
    Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
  • fatbellyfatbelly Forumite
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    It looks like you have enough money to make your contractual payments and have some left over for snowballing.
    There's a lot of high-apr stuff there so it'll make a real difference as you overpay.

    I'd be a bit concerned whether the soa is realistic. Is the rent all-inclusive?

     £150 for groceries for a couple is not very much. Are you sure that's what you are spending?

    Well done on  not needing a tv licence but could you cut back on the entertainment?

    Could you avoid the car parking charges?
  • KeysMcKKeysMcK Forumite
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    fatbelly said:
    It looks like you have enough money to make your contractual payments and have some left over for snowballing.
    There's a lot of high-apr stuff there so it'll make a real difference as you overpay.

    I'd be a bit concerned whether the soa is realistic. Is the rent all-inclusive?

     £150 for groceries for a couple is not very much. Are you sure that's what you are spending?

    Well done on  not needing a tv licence but could you cut back on the entertainment?

    Could you avoid the car parking charges?
    Hi,

    Thanks for your feedback. The frustrating thing is I could have a very comfortable life looking at this SOA. I just have a great deal of high interest debt with huge monthly payments and really nothing to show for it.

    Sorry for any confusion, I pay the rent in full, my partner pays the bills (inclusive of tv licence etc), apart from tv and internet, and then pays a small share of the rent to break even. For the same of simplicity I’ve just added that to my income. My phone contract is also £55 but when not furloughed my employer pays £50 of it (expensed) so I’ve just put down £5. Is that ok or does it mess up the SOA? 

    £150 is my share of the groceries, so over the month I’ve estimated £300 between us. Does that sound right? Tracking my true spend is something I’ve found difficult. Especially over lockdown as I’ve been doing the shopping for me, my partner, and both sets of grandparents so I have hundreds of pounds per month is transactions from supermarkets and an struggling to identify how many are truly mine. 

    On review though I have missed something. Cat food/litter, probably about £50 per month is my share (we have three). 

    As you can probably see from my high APR I’ve got a real problem with impulse control that really leads me astray. This translates into trips to the shop to pick up little bits and bobs too, I always find myself accidentally spending money here and there, and seem am addicted to amazon/eBay. A steady stream of junk through the letterbox, especially since I was furloughed. I’m my own worst enemy. 
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