For a Simpler Life!

Frodobaggins

Hello to everyone! I have been reading through the diares for some months and gaining lots of helpful tips and ideas.  I thought it is probably about time I commit to my own diary.  I dont expect it to be the most interesting of reads, but I am hoping it will help to keep me more focused and accountable. 
A bit of background about me.  I had a substantial amount of debt some years ago and managed over many years to clear most of it and actually built up some savings.  Then 3 years ago we moved to downsize to our forever home.  The house we bought needed a lot of repair work when we bought it.  We knew this beforehand but we hadnt realised just how extensive this would be as more and more extra work needed doing.  We paid a 20% deposit and had a lump sum for building work but it ended up costing much more than we had accounted for. I absolutely love this house though, and maintainance wise the inside is now like a brand new house so we hope any needed work for the next few years should be minimal.
I have a decent paying job but my OH has had to medically retire early.  I have to be honest and confess that for the last 3 years I buried my head in the sand regarding the debt we have accummulated since living here, most of which has been for work on the house and furnishings.  I have managed to meet all payments with no problem and often overpay the highest interest credit card. I think being able to meet all payments is part of the reason I was unaware of how bad our situation is.
The reality of my situation has been a bit of a shock and a wake up call.  My car is on its last legs.  When I tried to get a loan for a newer car I was turned down by my bank.  This caused me to realise that just because I make all payments each month I am not in a very good situation.  If I was to go off sick for any length of time I would lose my enhancments and I would really struggle to meet my minimum payments.  I also do regular extra shifts to make extra payments on the cards.  I have also realised that the £300 a month I pay in interest each month would actually pay for a newer car!
At its highest 2 years ago my total outstanding debt was £52687.38 and I was paying up to £400 a month in credit card interest.  I have paid over £12000 off the total debt in the last 2 years through over payments and card transfers.
However I now realise I could have managed this better and not continued to still justify to myself continued credit card spending.
Moving forward and after much reading of the debt free forums I am determined to stop using my credit cards and take control of my finances.  I want to be in a position were 
i live within the budget of my basic pay.  I have started to build up an emergency fund but my priority is the credit card debt initially.
I hope that as I reduce the credit card balances I may be offered some lower interest transfer rates.  I am going to continue to pay a minimum of £800 a month across my credit cards but this will only reduce the balances by about £500 as around £300 will be taken in interest.
My total credit and loan balance at the end of October was £40259.24 and my Mortgage balance was £84820.99.  I have been overpaying my mortgage since it began 3 years ago.  I pay my loans and credit cards at different dates throughout the month so my plan is to update them all together at the end of each month.

End of October Balances.

£6707.61                Loan 1
£6906.60                Loan 2
£7398.00                HSBC CC
£3259.58                MBNA CC
      £8.23                CREATION CC
£4512.38                SAINSBURYS CC
£3254.69                B/C CC
£3953.33                B/C CC
£4258.82                M/S CC
Total £40259.24.

My 2 loans finish early 2023.  My plan is to clear all credit cards and debt by May 2024.   Any comments or ideas much appreciated. 

enthusiasticsaver

Welcome.  I would start off with an easy win and pay off that Creation CC and close it to begin with.  
Have you looked at cutting back on outgoings and made sure you are budgeting correctly with putting money aside for car maintenance, presents, clothes etc? Paying insurances annually instead of monthly will save you  a fair bit.  

The biggest issue you have though is the £300  interest charge each month so checking to see if you are eligible for any 0% deals is a good start.  There is an eligibility checker on this site which only does a soft search so nothing will show on your credit file. What interest rates are you paying on the cards and which one are you targeting at the moment?

On the plus side you have brought the debt down by £12k and have a decent paying job.  If you are still spending on the cards I would stop that immediately especially if you are paying interest.  An emergency fund will be needed too but as you are paying so much in interest I would prioritise the credit cards for now especially if you have done all emergency work to your house.  Keeping a few hundred aside for the car would be a good idea though especially if it is old.  Being refused for the loan has probably done you a favour as having that much unsecured debt if you have lost a salary is not good so adding to it at this moment is not sensible anyway.  Can the car limp on for a few more years? 

Frodobaggins

Thanks for the welcome enthusiasticsaver and for taking the time to read and offer some good advice, much appreciated.
I have today paid off the Creation credit card and closed the account, its such a good feeling to see the back of one of them!  I have saved £300 so far as an emergency fund.  I have arranged for my mechanic to take a look at my car at the end of the month to see if I can keep it on the road for another year.  It is due MOT next month so depending what he says and costs involved I'm hoping I can cover costs with extra shifts payment which I usually use to overpay my cards.  I am paid for any additional shifts as a seperate payment and wage slip so I dont include this in my budget, as it can not be relied on as regular income but is a bonus which can be used to make extra payments or cover extra expenses which pop up.
So if my car can be salvaged for another year I wont be able to make much headway on overpayments but it will solve my transport needs.  I need my car for work as it would be very difficult to commute on public transport and would involve a fair amount of walking too.  
I pay for my car insurance yearly always on a credit card.  It is due the begining of January and I am planning on using my emergency fund and my additional shift payments for December to cover this.  I am determined to no longer use my credit cards.  This may mean a second month of limited overpayments on my credit cards.  My house insurance is not due until August next year and I hope I will have a good emergency fund in place by then to cover it.  I do currently pay my dog insurance monthly so will have to look at those policies. 
I am not currently eligable for any credit cards with balance transfer offers.  I overpay more on one of my lower interest CC's as it allows me to balance transfer to a 0% interest every couple of months.  I am hoping as I reduce my cards more offers to balance transfer will become available to me.
I have been paying a big chunk of my highest interest CC each month then using it for shopping.  This means the balance is lower for some of the month and I try to spend less than I paid off to help the total balance to reduce.  Going forward next month I have budgeted £300 for food shopping so I do not use any cards.
My DS is getting married in March so I need to budget for this too. 

Frodobaggins

       

Credit card	Balance	Interest	Minimum Payment	Set Monthly Payment
Sainsburys	£4512.38	26.48%	£145.76	£150
B/C 1	£3254.69	25.78%	£100.00	£100
M&S	£4258.82	21.9%	£106.47	£110
MBNA	£3259.58	20.93%	£49.62	£155
B/C 2	£3953.33	20.14%	£100.00	£100
HSBC	£7398.00	18.9%	£184.95	£185
Total	£26636.80

Sarahwithlove

Have you done an SOA might help us be able to make suggestions as to where to cut back and have an idea of what your current budget is like. Just start with highest paying interest card and snowball down from there. What credit check companies do you use? I'm with mse club and clearscore as both offer different cards at different rates so always worth using more than one to check eligibility. 

enthusiasticsaver

Good that the first credit card is gone.  
A few things about your post.  Paying your insurance annually on a credit card kind of defeats the object in saving money unless the credit card is at 0%.  You are still paying interest on it otherwise and given none of your cards are at 0% then you lose the advantage of paying it annually.  Saving up for it and paying from a car or house maintenance pot is the way to go or at a pinch emergency savings. 

Paying a chunk off the credit cards then spending on them again does not make sense.  If you cannot afford to live after making the debt repayments then you either need to reduce the debt repayments if you are paying above minimums or look at some sort of debt solution like a DMP. All of your cards are charging fairly high interest so tackling this is a priority. Ideally you should be tackling Sainsburys and BC1 as they have the highest rates but you seem to be overpaying MBNA? You said that one of your cards offers 0% balance transfers every few months but you don't have any of the debt on 0%?  I would also stop overpaying your mortgage as undoubtedly you are paying less interest on that than you are those credit cards. 

Last thing is that to deal with debt you have to do a realistic budget and stop spending on the cards from now on.  That means saving for things you would normally use cards for like car or house costs, insurances, living expenses and Christmas, holidays  etc and your DS wedding. 

natsplatnat

Hi Frodo,

Just to echo ES really, I would divert the overpayment from MBNA to Sainsburys to reduce that balance the quickest and reduce the interest.

The good old 'statement of affairs' is a must as it highlights all sorts of bits n bobs we tend to forget about. Have you checked your utility costs recently?

My only last thought is that B/Card (assuming that is your B/C 1 & 2 above) used to be quite good at switching existing balances to lower rate of interest. Worth an ask?

Wishing you all the best... you've cleared a decent amount of debt in the past so you know what's ahead of you. x

joedenise

I agree with the above couple of posts.  You really need to be paying more to the Sainsbury CC as that is your highest interest card; just pay minimum + £1 on all the other cards.  Certainly don't overpay your mortgage at the moment - the interest rate on that will be far lower than any of your credit cards.

Doing an SOA would definitely be helpful as it would help to make suggestions as to where you could cut back - the main things to look at would be your utilities:  gas; electric; phone; mobiles.  Are you on a water meter?  If not it might be worth looking into to see if it would save you money.

Just a few things for you to consider.

Have bookmarked this thread.

MidsHollie

Hi there, 
I also have a really boring diary, so welcome to the club 
I would echo what enthuasticsaver said above. You already know that your house insurance is due, so you need to save for this, not pull from your emergency fund. I set aside about £250 per month for irregular expenses. These include car insurance and maintainence, home insurance, clothing, medical and dental, random travel requirements etc. The emergency fund should be for things you truly can’t predict: a hotel to visit a sick relative, a train ticket to visit your kids when they really need you quickly for some reason. The stuff you can’t plan for. These sinking funds have been so useful for me over the past year. It has taken away some of the panic, stress or guilt to do with spending. I wanted to buy some new gym clothes in the summer because I was cycling to work each day. I thought about it so hard because my budget was so tight, but the I realised I’m putting £20 a month away for clothes and I hadn’t spend a single thing, so back in January I essentially have my self permission to spend that £55 as I still had more than that left over. 

My other recommendation / piece of advice..... I truly believe that almost everyone has the capability to work in some capacity and to some degree. Three huge barriers to employment are unflexible employers in terms of environment and hours, perceptions and the benefits system. I don’t know the cause of your partners medical retirement, but is there any way at all that they could earn some money? Small independent businesses are great options for people who need to work flexibly. Could they have a look at what is available, or take initiative and suggest opportunities. Also take a look at the boost your income guides here. There is some good info on there. I think this is going to be a long slog without increasing your income. 

Good luck!

Frodobaggins

Thanks to all of you for taking the time to read and reply, some really good ideas and pointers to consider.
Sarahwithlove I am with MSE club but I will have a look at Clearscore.
Enthusiasticsaver my MBNA card offers regular 0% or low rate interest for 12 month periods.  There are many little transfers I have done on this card many of which are now gaining full interest.  I thought this was good to get a few hundred card chunk od the Sainsburys card, but maybe taking into account the transfer fee this extra £100 a month would be better to go directly to the Sainsburys card.  
I havent used any cards for over a month and I plan to stop using them ever again.  I have cruised along blissfully ignorant thinking I am managing and reducing my debts while at the same time I have been putting insurances and shopping onto my cards.  I will now look at doing an SOA and try to budget for all expenses.
Natsplatnat I will look at my utilities.  My gas and electric deals are due to end so I will have a look at those. 
Joedenise I dont have a water meter but I think in my case thats a good thing but that was a good suggestion.
MidsHollie my OH truly is not capable of work.  He has more quality of life than he did do but he cant leave the house unless its in a car or wheelchair.  I liked your idea of a separate EF and savings for insurance and other yearly expenses.  I am determined to pay my car insurance in January with my extra shifts payments and possibly might have to dip in to EF until I have other pots set up.  I will definetly not be paying anything else with a credit card.
Thanks for all your input I'm truly grateful.

enthusiasticsaver

Good that you haven't used the cards for a month and you don't plan to use them again. 

If you have been offered 0% balance transfers in the past on the MBNA these again only work if you use the opportunity to actually pay the card off. What many people do is to take advantage of the lower minimum and drop the monthly repayment to either target another debt or spend the money on something else. Otherwise the constant BT fees outweigh the advantage of the 0% deal especially if it is a short deal. 

You are doing well though so keep going and going and I will subscribe to follow your journey. I would also suggest you put up an soa to see if we can suggest other savings you could make.