Want to be debt free...where to start?

Kiittykatz

greensalad said:

I'm here to be the YNAB Evangelist. You have a healthy salary which suggests that you just don't know where your money is going if you're still struggling in debt. I am similar salary and was in a similar situation to you for a long time.

Anyway, I think You Need A Budget. Whether you use the software I'm suggesting or find something else, you need to start completely focusing on your budget for each thing you're spending on. Clearly you are overspending and you need to identify on what.

I recommend categorising and logging every single transaction you make for a month. 3 months if you can. You'll soon see where money is disappearing without you realising once you see a full monthly spend figure.

From there, you can make a plan of a) how to reduce and b) snowball to use up that £600 odd surplus (plus any you manage to reduce simply by not overspending). Depending on how anal you are you can go really granular. Personally I have categories even down to our £15 car tax per year. Yes, I set aside £1.25 every month just to pay our car tax bill (and a lot of other things in a similar fashion).

I think if you can get a firm grip on your money and where it is going you can start crunching the numbers and see just how far away you are from being debt free and the financial freedom that comes with it.

Hi, thanks for your input. I definitely need a budget. I have been looking at YNAB but it bugs me that it’s in $. Any other suggestions? I have categorised my spending using MSE budget planner. I changed electricity, mobile phone providers etc. Most of my debt is historical. Buying things with debit or credit without thinking it through. Never saying no. I have stopped that type of expense, especially holidays (Covid helped). I also have been the main breadwinner for years with my ex husband, step children and now my children and my now husband has only just started work. I have been on maternity for a year only returning to work last month. With all that we are now in the best position to tackle this. My spending on the SOA will not highlight the madness of how the debt has run up so high as we have already reigned it in a lot. Should say the 19k loan was to extend the lease on my house ( not ideal but not just spent on clothes and holidays!) 

Really appreciate your input. 😀

TheAble

You have a good income and there are no obvious areas of waste there. It really is just a case of knuckle down and pay back the money. It'll be a tough old grind in view of the amount involved, but you should pick up some good new habits along the way.

MidsHollie

It really bugs me too that YNAB (you need a budget) is a subscription service. I got 12 months free because of being a part time student. I didn’t actually use it in the end though as the functionality was annoying and I could do much more, much more easily with a simple excel document. I do several things with my fairly simple excel doc which I’ve developed over time: 
- track all spending per month and categorise in to categories (eg groceries, food at work, eating out, gifts, entertainment spends etc) to work our total spend per month in each category
- predict annual expenses eg car tax, home insurance, holidays etc, Keep track of how much I put in to my combined sinking fund, and how much I take out of combined sinking fund
- prepare a monthly budget / spending plan to allocate all £s to direct debits, debts, sinking funds or spending categories
- keep track of debt pay off: 28% so far! 

I actually hate monthly subscriptions. They seem small, and can so easily add up to £100s. Whilst I’m paying off debt, I am completely avoiding them! 

monetxchange

I'm another one that couldn't get on with YNAB. Found it unnecessarily fussy and not intuitive. It only seemed to be per month too. I use a very retro app called simply Accounts as you can scroll through and see months ahead which helps me as self employed when my income is variable. I agree on the subscriptions thing - they really do mount up and sometimes are very much paying a premium for basic things, for example all these £10 a month sock and gin subscriptions type rubbish 😂

EliseoPadrinov

What about somethig that can generate passive incomes? it doesn't seems like an over nigth money maker, but it's an idea that can be helpfull.

greensalad

Kiittykatz said:

Hi, thanks for your input. I definitely need a budget. I have been looking at YNAB but it bugs me that it’s in $. Any other suggestions? I have categorised my spending using MSE budget planner. I changed electricity, mobile phone providers etc. Most of my debt is historical. Buying things with debit or credit without thinking it through. Never saying no. I have stopped that type of expense, especially holidays (Covid helped). I also have been the main breadwinner for years with my ex husband, step children and now my children and my now husband has only just started work. I have been on maternity for a year only returning to work last month. With all that we are now in the best position to tackle this. My spending on the SOA will not highlight the madness of how the debt has run up so high as we have already reigned it in a lot. Should say the 19k loan was to extend the lease on my house ( not ideal but not just spent on clothes and holidays!) 

Really appreciate your input. 😀

It's not in $? You choose the currency when you create the budget. There are a few Americanisms (e.g "checking account" instead of current account) but nothing that gets in the way of budgeting. 

I don't think anyone here will judge you for what the debt was spent on. I once bought a £350 scarf because I fancied it. Actually I bought 2 £350 scarves. We're all in debt for some reason or another.

I guess my question is, can you say off the top of your head how much you have this month to spend on, say, takeaways? Groceries? Clothes? A day out? How much does your car cost you per year, when is the next annual subscription (Disney Plus, Amazon Prime, that sort of thing) coming out? Have you planned for it or will it catch you by surprise?

This is my personal approach to going debt free and it 100% has revolutionised my life and how I spend money. It's not all about going without either. I'm going on a pretty expensive holiday next year. Silly idea? Maybe, but I feel at least my debt is low enough now and I know how much the holiday will cost and have already set aside money for it so I feel content going and it feels worthwhile to me. Budgeting properly gives you that sort of freedom.

I strongly suggest even if you don't use any software in particular you try the envelope method of budgeting. Not with physical envelopes but through software that does it for you or even your own spreadsheet. Start breaking down how much money you have per month and where it needs to go, what jobs it needs to do.

With a healthy salary like yours you should see how much you have to service debt each month, and using a snowball calculator you can quickly see how soon your DFD is which is really motivating. Once you know your DFD you might even decide that a holiday would only push that back a month or two and therefore might be a possibility for you. 

Having knowledge of your spending is the ultimate key to financial freedom imo.

greensalad

monetxchange said:

I'm another one that couldn't get on with YNAB. Found it unnecessarily fussy and not intuitive. It only seemed to be per month too. I use a very retro app called simply Accounts as you can scroll through and see months ahead which helps me as self employed when my income is variable. I agree on the subscriptions thing - they really do mount up and sometimes are very much paying a premium for basic things, for example all these £10 a month sock and gin subscriptions type rubbish 😂

You can go forward 6 months in YNAB. But the key is it isn't a forecasting app, and for the majority of people planning how much they might spend on, say, a night at the cinema in 6 months time probably isn't reasonable.

I will agree it's quite fussy. I found it very intuitive, probably because I had already used the envelope budgeting technique before (with physical envelopes! when I was a teenager). But I like the fact that the software doesn't "do it for me" or "make it automatic" because it keeps me regularly making money decisions. 

There's another app called Every Dollar I hear mentioned a lot. All in all, I think my overall advice is that you've just got to have a budget in some form. I can never understand when I ask people "how much do you budget on X?" and they say "dunno". 

mamamu

greensalad said:

monetxchange said:

I'm another one that couldn't get on with YNAB. Found it unnecessarily fussy and not intuitive. It only seemed to be per month too. I use a very retro app called simply Accounts as you can scroll through and see months ahead which helps me as self employed when my income is variable. I agree on the subscriptions thing - they really do mount up and sometimes are very much paying a premium for basic things, for example all these £10 a month sock and gin subscriptions type rubbish 😂

You can go forward 6 months in YNAB. But the key is it isn't a forecasting app, and for the majority of people planning how much they might spend on, say, a night at the cinema in 6 months time probably isn't reasonable.

I will agree it's quite fussy. I found it very intuitive, probably because I had already used the envelope budgeting technique before (with physical envelopes! when I was a teenager). But I like the fact that the software doesn't "do it for me" or "make it automatic" because it keeps me regularly making money decisions. 

There's another app called Every Dollar I hear mentioned a lot. All in all, I think my overall advice is that you've just got to have a budget in some form. I can never understand when I ask people "how much do you budget on X?" and they say "dunno". 

I use few bank accounts to budget it has changed my life.

Monzo account for food and dog food.
Starling account for spending money ( fuel, parking, swimming pool, ice cream, days out, cinema trip etc)
Starling pots for sinking funds for everything ( Car maintanace, insurance, xmas, holidays, dental/medical, suscriptions, road tax, clothes, EF) 

High street bank main account for DD 

ISA for savings.

I use zero pound budgetting. On pay day I transfer money to all above accounts and my main account is left with DD amount +50£ just in case, this 50£ goes to savings day before payday. 

This way i know exactly how much I can spend on what. I am going to insure my car tomorrow and fird ttime in my life I am going to pay upfront for a year and I have got money sitting there ready. I am so happy about it, I feel so in control.

greensalad

mamamu said:

Monzo account for food and dog food.
Starling account for spending money ( fuel, parking, swimming pool, ice cream, days out, cinema trip etc)
Starling pots for sinking funds for everything ( Car maintanace, insurance, xmas, holidays, dental/medical, suscriptions, road tax, clothes, EF) 

High street bank main account for DD 

ISA for savings.

I use zero pound budgetting. On pay day I transfer money to all above accounts and my main account is left with DD amount +50£ just in case, this 50£ goes to savings day before payday. 

This way i know exactly how much I can spend on what. I am going to insure my car tomorrow and fird ttime in my life I am going to pay upfront for a year and I have got money sitting there ready. I am so happy about it, I feel so in control.

Yep I have the same! I use YNAB in conjunction with Monzo pots to segment my cash. Though I just like using YNAB because it helps me go more granular (a single category for car tax, insurance, MOT, service, petrol etc where the pot on Monzo is just "car pot" with the total of those balances). 

tlc678910

Hi OP,
I assume the “other” amount in your income is rent from the rental property?
Have you accounted for the tax you will need to pay on this income.  As a higher rate tax payer you will be paying higher rate (40%?) on “profit” and effectively 20% (pay 40% but get a 20% credit) tax on your mortgage interest.  Have you budgeted for landlord insurance, gas and electric checks, repairs etc?

In you initial post you say you take home 2.5k but in your statement of affairs 3.5k. Was the 2.5k a typo?