Some advice please!

Geworgie

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. 

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]

Geworgie

I should add that all the CC's are on 0% interest at the moment but they expire over the next year and we are currently in no position to move them around. 

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?

sharpe106

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.

enthusiasticsaver

You have a lot of debt for someone who supposedly has almost £800 spare each month so I doubt that soa is accurate. You are certainly vulnerable should your DH lose his job so I think it is urgent you address this.  
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? 

ohdearhowdidthathappen

Definitely clear Next first and then tackle credit cards as per when the 0% rate ends.  If you get £4K, that would clear the loan which is the other debt charging interest

monetxchange

Just to say you don't need another contracted phone when your contact is up. Just buy a cheap £100 max Android on eBay or Amazon and then go on an £8 a month SIM only deal. Getting a contract on some top of the range phone paying £45 a month is completely unnecessary and is the kind of lifestyle choice not necessity that needs to go. 

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!

Geworgie

sharpe106 said:

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.

Agreed. So I spent 2 days this week getting ALL my transactions for the last 12 months (current account and credit card) onto a spreadsheet and organising them into various headings. 
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. 

Geworgie

enthusiasticsaver said:

You have a lot of debt for someone who supposedly has almost £800 spare each month so I doubt that soa is accurate. You are certainly vulnerable should your DH lose his job so I think it is urgent you address this.  
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? 

Agreed! We ought to have plenty left over to throw at the debt but it just wasn't happening. 
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. 

Geworgie

monetxchange said:

Just to say you don't need another contracted phone when your contact is up. Just buy a cheap £100 max Android on eBay or Amazon and then go on an £8 a month SIM only deal. Getting a contract on some top of the range phone paying £45 a month is completely unnecessary and is the kind of lifestyle choice not necessity that needs to go. 

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!

I was looking at a £12 a month contract including the phone. Nothing too extravagant! Agreed though - I hate spending so much on my phone each month. I've literally been ticking off the days until I can get that cheaper. 
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?

enthusiasticsaver

Geworgie said:

enthusiasticsaver said:

You have a lot of debt for someone who supposedly has almost £800 spare each month so I doubt that soa is accurate. You are certainly vulnerable should your DH lose his job so I think it is urgent you address this.  
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? 

Agreed! We ought to have plenty left over to throw at the debt but it just wasn't happening. 
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. 

We have all been there.  I did some forensic accounting (love that term) myself yesterday and was horrified too as to how much we spent on January to March.  Since lockdown we have been better and we do not have debt but still having compared our outgoings to another early retired couple I can see we have been more than a bit loose with the purse strings. Just think if you can cut that £7k by at least half if not more how much you would have to overpay the debt.  I think I would try and aim for £1k a month off the debt for the next 6 months or so and really get that debt down especially with the £4k too. Your soa shows that could be possible.  Well done on not using a credit card.  

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. 

enthusiasticsaver

You could start a diary on here too to keep motivated?  I can move this to the diaries section for you if you wish?