Some advice please!
Geworgie
Forumite 25 Posts
So, we're in a stupid amount of debt. Again. The difference is that this time I've had my LBM and I desperately want to be debt-free. While we are extraordinarily lucky to both still be employed with little risk of redundancy I know how vulnerable the debt makes us. If my husband (who is the bigger earner by a long short) lost his job now we'd be in serious trouble.
This month I've budgeted slightly differently, in that I've put aside an extra £250 to cover things like the children's activities, Christmas, home maintenance, and £10 a month savings. These are things that I know will cost us money over the next 12 months and if I have nothing set aside then they'll be put on the credit card which is entirely what I'm trying to avoid.
Would you bother keeping some back or would you just throw it all at the debt? I'm in two minds as to the best way to approach it.
This month I've budgeted slightly differently, in that I've put aside an extra £250 to cover things like the children's activities, Christmas, home maintenance, and £10 a month savings. These are things that I know will cost us money over the next 12 months and if I have nothing set aside then they'll be put on the credit card which is entirely what I'm trying to avoid.
Would you bother keeping some back or would you just throw it all at the debt? I'm in two minds as to the best way to approach it.
Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2 (both preschoolers)
Number of cars owned.................... 2
Monthly Income Details[/b]
Monthly income after tax................ 680.50
Partners monthly income after tax....... 2762
Benefits................................ 140
Other income............................ 74 (I get a WFH allowance of £1000 a year paid quarterly but I pay tax on it so it works out around £888 a year or £222 a qtr)
Total monthly income.................... 3656.5
Monthly Expense Details[/b]
Mortgage................................ 920.3
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 185
Electricity............................. 39
Gas..................................... 32.5 (we have LPG)
Oil..................................... 0
Water rates............................. 46.5
Telephone (land line)................... 0
Mobile phone............................ 90 - £45 each my contract is up in August when I will switch to a much cheaper deal. Can't do sim only unfortunately as my phone is on it's very last legs.
TV Licence.............................. 13.2
Satellite/Cable TV...................... 11.99
Internet Services....................... 42
Groceries etc. ......................... 600 ( I know this is high but I have a health condition and prioritise eating organic wherever we can)
Clothing................................ 0
Petrol/diesel........................... 50 (At the moment we are both WFH and not really going anywhere but this would usually be around £250/£300)
Road tax................................ 13.12
Car Insurance........................... 44.54
Car maintenance (including MOT)......... 28.5 for both cars
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0 We pay childcare fees but through childcare vouchers so the money is gone before it hits out account
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 25 (pet food)
Buildings insurance..................... 14.43
Contents insurance...................... 0
Life assurance ......................... 22.4
Other insurance......................... 0
Presents (birthday, christmas etc)...... 49 Again, this is high but we have a lot of extended family to buy for.
Haircuts................................ 0
Entertainment........................... 202 this includes weekly counselling sessions at £45 a week
Holiday................................. 0
Emergency fund.......................... 0[b]
Total monthly expenses.................. 2444.48[/b]
[b]
Assets[/b]
Cash.................................... 0
House value (Gross)..................... 310000
Shares and bonds........................ 0
Car(s).................................. 3500
Other assets............................ 0[b]
Total Assets............................ 313500[/b]
[b]
Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 240000...(920.3)....0[b]
Total secured & HP debts...... 240000....-.........- [/b]
[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
Next...........................274.25....18........23.9
DFS............................2395.92...82.62.....0
Tesco..........................8955.34...90........0
Virgin 2.......................2120.63...25........0
Virgin 1.......................8262.87...83.53.....0
MBNA...........................4412.79...44.13.....0
Barclaycard....................563.12....13.01.....0
Sainsburys loan................4151.24...99.38.....6.9
Barclaycard....................1105.41...17.92.....17[b]
Total unsecured debts..........32241.57..473.59....- [/b]
[b]
Monthly Budget Summary[/b]
Total monthly income.................... 3,656.5
Expenses (including HP & secured debts). 2,444.48
Available for debt repayments........... 1,212.02
Monthly UNsecured debt repayments....... 473.59[b]
Amount left after debt repayments....... 738.43[/b]
[b]Personal Balance Sheet Summary[/b]
Total assets (things you own)........... 313,500
Total HP & Secured debt................. -240,000
Total Unsecured debt.................... -32,241.57[b]
Net Assets.............................. 41,258.43[/b]
[i]Created using the SOA calculator at www.stoozing.com.
Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]
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I am also expecting a lump sum of around £4000 although I'm not sure when that will be so for now I'm not including it in my forecasting but it might be worth noting?
At the moment you earn for more than your outgoings. Yes you could cut back on food, sky, internet, phone services and be debt free quicker. You could probably easily save another £200 a month without trying too hard.
But I don't think that is your main issue. Your main issue is what have you been spending on to get to that level of debt and how are you going to stop it.
Without knowing why you have that level of debt and on your SOA, all you really need to do is priorities the credit card repayments. The next and the Barclaycard debt can go in the next month or two. The Sainsbury loan is quite low anyway so if one of the other loans are nearly finishing soon and the APR is going to be about 20% you might be best throwing money at that to get it down before you start paying interest on it. Obviously if they do not finish for a 2 or months you best addressing the Sainsbury loan.
There is no point keeping money aside for something that breaks to avoid having to get credit, if you already have loans at 20% plus APR. But if the interest free period is still a few months there is no harm keeping money.
If you get your lump sum, I would be throwing it at the credit card debt.
I agree with saving for annual costs and emergencies as this should get you out of the habit of spending on credit. You have no emergency savings so you should be putting something aside each month for this.
The groceries figure is way too high even if you have a health condition. It is perfectly possible to eat healthily for less than £600 for two adults and two pre schoolers. Can the counselling sessions be moved to fortnightly if they cannot be cut out?
I would target the Next card and the Barclaycard first as they are both charging interest. Close them down as you pay them off to stop you being tempted into spending on them again. A lot of those cards have high balances and moving them to new 0% deals will cost a lot in BT fees even if you were able to do that. As soon as interest starts being charged on these the minimum payments will increase significantly so I would certainly prioritise paying these off over the next couple of years. Even on 0% interest it will take you almost 4 years or more to repay the debt paying around £800 a month. You could clear that Next with one months surplus so it begs the question why you are paying almost 24% interest on a relatively small debt instead of clearing it? Do you normally clear it in full?
If you receive a lump sum of £4000 that will help in bringing the debt down but you really have to stop using cards altogether and find out where all your spare money is going. Do you keep a spending diary?
Save £12k in 2023 Challenge #8 £12,000/£3700
The 365 day 1p Challenge 2023 #1 £670.00/£57.00
The 365 £1 a day Challenge for Christmas 2023 #43 £1000/£200
I'd also really encourage you to put aside for yearly expenses month to month as you've decided to. It's a false economy to not do it now and then blow loads on credit cards come the time. It's also a great exercise in learning to budget.
You can definitely trim a lot from your budget and get the debts cleared and increase your savings - to be used as an emergency fund so urgent stuff doesn't go on credit. To be honest, £10 a month savings is paltry on your income and could definitely be increased to at least £100 without much hardship. There's no point scrimping now and paying in the future.
You can do this!
Results were awful, obviously but it definitely made it easier to see where we were/are overspending and also helped to prioritise our spending going forward.
I don't keep a spending diary but we've been using YNAB for a few months which has definitely helped us stop spending. We only used the credit card last month 3 times which is a massive improvement on previous months.
Having done some forensic accounting I can see that we're overspending by about £7k a year which is horrifying and it's not on emergencies or big ticket items. It's literally just days out/take out/gifts/clothes etc. Yuk.
Also agree £10 is almost not worth doing considering our income as I've said up thread, I've done some thorough investigations into our spending and I can see that we're spending when we're feeling lazy and when we want nice things (don't we all!) so it's not just a case of setting budgets this time, it's almost a complete lifestyle overhaul.
If I look at things from a yearly point of view we get in £40k and £34k of that is immediately accounted for on debt repayments, Cars (maint, ins, parking, fuel), childcare, TV, phone, internet, mortgage and utilities, life insurance, and food. So we have £6k a year with which to pay off debt and live life. So that helped put things into perspective a bit.
I'm going to try and trim that £34k down to pay off the debt a bit quicker.
Easy on paper though, isn't it?
Maybe before spending or booking a meal or day out just think how that impacts on you building up your savings and paying down your debt. Perhaps build in a limited number of treats each month like a takeaway on payday and/or one day out a month. You will look forward to it more when it is not so often and you are saving money to get your finances in order.
Save £12k in 2023 Challenge #8 £12,000/£3700
The 365 day 1p Challenge 2023 #1 £670.00/£57.00
The 365 £1 a day Challenge for Christmas 2023 #43 £1000/£200
Save £12k in 2023 Challenge #8 £12,000/£3700
The 365 day 1p Challenge 2023 #1 £670.00/£57.00
The 365 £1 a day Challenge for Christmas 2023 #43 £1000/£200