Changing financial situation - can you help me make good decisions?

Daphne16

Hi there. I'd really appreciate your thoughts on moving forward situation. Over the last few months, a lot has changed!

A very brief background, I'm 27 and early last year decided to get control of my spiraling debt situation. Long story short, I have consolidated my debts into more manageable payments which I stick to every month, and I haven't used my overdraft since before Christmas. My long-term goals are to eliminate my debt and save for a house deposit.

However, my partner was unexpectedly made redundant just before COVID-19 kicked off. He was offered a new job, but the start date wasn't until late March, and by the time that came around lockdown had struck. He fell through the gaps of any support, and although he received an ok redundancy package, we have been largely relying on my salary alone. 

In better news, I've been really lucky to be able to continue working throughout all this, and I have just been given a pay rise and promotion (from 25k to 29k) which will be backdated to April of this year in my next paycheque.

My partner is, of course, looking for more work, but he works in an industry hit hard by COVID, and with everything being so uncertain right now, I'd really like to get your thoughts on how to manage my money in this situation - working under the assumption it will be like this for a while longer.

CURRENT SITUATION
(Note: when life was 'normal' bills were shared and I was paying bigger payments on credit cards, plus had some additional costs: bus pass, swimming pass, cinema card, larger fun budget)

Accounts
Current account 1: Finishing each pay cycle, approx. £30 in credit
Current account 2: £840 (emergency fund)
Help to Buy savings: £350

Debt
Credit card: £4,405 (0% interest)
Loan: £8,318 (fixed, includes interest)

Income
Salary: £25k (£1,643 pcm take home), but as of next payday £29k (approx. £1,830 pcm take home)
One-off: next payday, backdated pay will be approx. £600

Outgoings, pcm:
Credit card: £75
Loan: £181
H2B: £50
Pet insurance: £16
Contents insurance: £9
Rent: £675
Water: £24
TV license: £112
Energy: £99
Mobile: £37
Phone insurance: £8
Entertainment subscriptions: £36
Groceries: £215
Other fun/household spending: £80
TOTAL: £1,617 
Monthly closing balance: £26 (next payday: £213)

As you can see, although there have been hiccups this year, I'm doing OK and able to avoid debt - just slowing down my payments. I wouldn't usually stash money and rather use it for debt payments (2nd current account), but I wanted to keep a small emergency fund that would not = debt given the circumstances.
I know the £50 to H2B is maybe less important now, but psychologically it makes a difference to be building something, not just paying stuff off.

My questions to you are, assuming everything is going to stay like this for the next few months at least, how should I a) manage my additional £200pcm and b) manage my £600 back payment? I'm torn between putting ALL towards debt / adding it to my emergency fund (which will be used for debt payments once my OH has a job) / half and half it.

Plus please feel free to share any other advice you have. 
Thanks so much all. Keep safe!

sharpe106

Your current situation is a good start but try filling in the statement of affairs, as includes a few other things. 

https://www.lemonfool.co.uk/financecalculators/soa.php

Daphne16

Hi there, here's my SOA as of my current situation. I've done it based on my new pay. To address some questions that it might raise:
- Free internet was one of OHs workplace benefits, and we are lucky in that despite his redundancy, that will last until year-end
- I am literally not buying any gifts, haircuts or clothes for the foreseeable, and haven't since February. Any necessities will be few and far between, taken out of the entertainment budget.
- We don't own a car and are walking everywhere (now working from home so no daily bus needed)

[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......... 

Number of cars owned.................... [b]

Monthly Income Details[/b]

Monthly income after tax................ 1830

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 1830[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 0

Secured/HP loan repayments.............. 0

Rent.................................... 675

Management charge (leasehold property).. 0

Council tax............................. 112

Electricity............................. 99

Gas..................................... 0

Oil..................................... 0

Water rates............................. 24

Telephone (land line)................... 0

Mobile phone............................ 37

TV Licence.............................. 13

Satellite/Cable TV...................... 0

Internet Services....................... 0

Groceries etc. ......................... 215

Clothing................................ 0

Petrol/diesel........................... 0

Road tax................................ 0

Car Insurance........................... 0

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................. 16

Buildings insurance..................... 0

Contents insurance...................... 9

Life assurance ......................... 0

Other insurance......................... 9

Presents (birthday, christmas etc)...... 0

Haircuts................................ 0

Entertainment........................... 116

Holiday................................. 0

Emergency fund.......................... 0

Help to Buy............................. 50[b]

Total monthly expenses.................. 1375[/b]

[b]

Assets[/b]

Cash.................................... 840

House value (Gross)..................... 0

Shares and bonds........................ 0

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 840[/b]

[b]

No Secured nor Hire Purchase Debts[/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

Loan...........................8138......181.......0

Credit card....................4405......45........0[b]

Total unsecured debts..........12543.....226.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 1,830

Expenses (including HP & secured debts). 1,375

Available for debt repayments........... 455

Monthly UNsecured debt repayments....... 226[b]

Amount left after debt repayments....... 229[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 840

Total HP & Secured debt................. -0

Total Unsecured debt.................... -12,543[b]

Net Assets.............................. -11,703[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

sharpe106

You are not in to bad a place to pay back your debts on your current wage, even without your partner working. So the question becomes is how come you have so much debt when you were both working? What were you doing wrong previously and what are you going to address that in the future?

 

How long will you be working for home for? How much did the bus cost?

 

When does your interest free period of the loans end?

 

With your saying the loan is fixed interest included, does that mean you can't overpay without it costing you?

Fireflyaway

Congrats on your pay rise! There are a couple of things I'd suggest. Firstly that your partner get a job immediately. Doesn't have to be his 'proper' job, just anything that will bring extra money in until he finds the job he requires. Supermarkets are hiring, cleaning, delivery driving etc. 
Secondly I would up my emergency funds. Just in case the unexpected happens and you lose your job or become ill or the landlord wants his place back etc ( just examples as these things have all happened to me). 
Lastly I would probably negotiate lower debt repayments until things become more stable. Most creditors are pretty understanding at the moment. 

enthusiasticsaver

I think you can continue to pay your debts down and I would up your emergency fund to £1000 out of your backpay and put the rest towards your debt or in savings to pay off the card when the 0% finishes.  When is that?  What interest rate are you paying on the loan and when will it be paid off?  Are there early penalty fees for that? 

I second the  suggestion your partner gets a job (any job) especially if he is in an industry which is affected by Covid and likely to be so for some time.  It is not fair to expect you to cover all his bills as well as your own. Apart from that you have done well to not fall into the trap that many fall into when consolidating debt unless of course that credit card was built up again after you took the loan out to pay off old credit card debt.  For many consolidation does not work and leads to higher debt.  You have got out of overdraft which is brilliant  and built up some savings so I would focus on getting that card and loan paid off now.  Having emergency savings is important as it stops you turning to credit and increasing that in the event of an unexpected bill.