Starting my mission to become debt free - Snowballing advice
KeysMcK
Forumite 87 Posts
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.
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!
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.
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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
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👍
Rolling Total for 2021: £970
Format it for MSE
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Rolling Total for 2021: £970
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.
👍☺
Rolling Total for 2021: £970
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.
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.
<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
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.
Please see my SOA below. An explanation, I pay the rent, my girlfriend pays the other household bills (hence some sections being empty).
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?
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?