Feeling positive about banishing a decade of debt

pippa_pelada

Electricity still not fixed, dishwasher still not fixed or replaced and a quiet Christmas all round in the end as it just didn't seem worth taking any risks but we popped round to see my folks on Christmas day which was short and very sweet! I didn't have the covid test in the end as it didn't seem worth it if we weren't having people to stay here. We had my step kids over yesterday so it was lovely to see them and step daughter is here for the weekend.
I'm waiting for all the big payments to come out at the beginning of the month so I can see the debt go down. I did a bit of working out and if everything continues as it is, the goal in 2020 is to pay off at least £20,000 by next December.
Also, I really need to stop wishing my life away in monthly payments, life goes by too quickly as it is!

enthusiasticsaver

Well done on addressing the debt and getting £20k paid off in a year. If you can get another £20k paid off in 2021 that will really help. Building up emergency savings too is critical. 

pippa_pelada

enthusiasticsaver said:

Well done on addressing the debt and getting £20k paid off in a year. If you can get another £20k paid off in 2021 that will really help. Building up emergency savings too is critical. 

Thank you and oops, I meant to say 2021 but the £20,000 is the plan for the coming year. It will mean living to a fairly strict budget but it’s doable! I’m also hoping to save for an emergency fund too - that’s saved us using the credit card numerous times this year, it’s been a revelation!

enthusiasticsaver

pippa_pelada said:

enthusiasticsaver said:

Well done on addressing the debt and getting £20k paid off in a year. If you can get another £20k paid off in 2021 that will really help. Building up emergency savings too is critical. 

Thank you and oops, I meant to say 2021 but the £20,000 is the plan for the coming year. It will mean living to a fairly strict budget but it’s doable! I’m also hoping to save for an emergency fund too - that’s saved us using the credit card numerous times this year, it’s been a revelation!

Definitely it is key to not relying on credit. I thought I read you started this journey a year ago and had £56k of debt which is now down to less than £35k. That is impressive. 

pippa_pelada

enthusiasticsaver said:

pippa_pelada said:

enthusiasticsaver said:

Well done on addressing the debt and getting £20k paid off in a year. If you can get another £20k paid off in 2021 that will really help. Building up emergency savings too is critical. 

Thank you and oops, I meant to say 2021 but the £20,000 is the plan for the coming year. It will mean living to a fairly strict budget but it’s doable! I’m also hoping to save for an emergency fund too - that’s saved us using the credit card numerous times this year, it’s been a revelation!

Definitely it is key to not relying on credit. I thought I read you started this journey a year ago and had £56k of debt which is now down to less than £35k. That is impressive. 

Thank you! Yes, we’ve paid off around £20k this year too so it should be possible for next year as long as nothing changes with the job situation. The car and the credit card should be paid off this time next year. I’m desperate to save 6 months household income but that will take some time yet - it’s a goal to work towards in the meantime and not something I’d have imagined even being possible this time just over a year ago when we were really struggling to keep our heads above water. 

It’s definitely rewarding to look back and see progress which is one of the reasons I want to keep this diary going over the next year at least.

NeverendingDMP

Wow sounds like a very successful year with the debt reduction! Well done.

pippa_pelada

@NeverendingDMP Thank you! It is a huge amount of money in a year when you factor in the car, the loan and the credit card together! But it makes me think we can do something sensible with any available earnings once we’ve finally got rid of all the debt instead of getting into this mess again! 

pippa_pelada

oh heck! We've both had notifications through the NHS app that we have to isolate for 6 days as we've been in close contact with someone who's tested positive but I have absolutely no idea who that could be as we haven't seen anyone other than step kids and parents (wearing a mask with parents) and none of them have tested positive. We went to the supermarket but again, we wore masks and didn't hang around for long - the app says you have to have been within 2 metres of the infected person and for 15 mins. Has anyone else had this notification and couldn't work out how or why?

pippa_pelada

Here are my final numbers for this month. I've decided that I'm updating at the end of the month going forward as then I'll know where I stand with the savings.

December 2020

Savings end of December

Savings Pots = £400 

Emergency Fund = £300

Premium Bonds = £850

=£1550

Emergency cash = £650 – dishwasher & plumber install + electrician

 

Overpaid the mortgage by £125

 

Debt

Car loan - £8088 at 10.4%

NW loan - £17085 at 12.10% APR

Credit card - £9500 at 6.684%

Total = £34,673

Hubby and I have been talking about the mortgage which is due for renewal in April. We've got a fair bit of equity in the house now (LTV @ 51%) and I've been using the mortgage calculators/info on this site to work out what kind of percentage etc we could possible qualify for. 

If the info is to be believed, we could possibly get the mortgage down to 1.4% from 2.6% for a fixed 5 year mortgage and borrow an additional £20,000 for doing essential work on the house and paying off the car (£6355 by March - without settlement figure) The mortgage costs should still work out at what we're paying now. 

That would free up £577 a month which I would then put towards paying off the credit card. From the middle of next year when I've hopefully paid off all the debts, I plan to overpay the mortgage by at least £800 a month. This all makes perfect sense to me but I'm not known for my financial acumen in my family. Does it make financial sense?

enthusiasticsaver

I would not absorb your car loan into your mortgage. While the rate is lower the length of time you will be paying it over will counter any savings on the rate. You would be better overpaying the car loan and other debts than the mortgage. I am never a fan of consolidating existing debt especially onto a mortgage. I also would not take out any more borrowing until you have dealt with the existing debt. It is a slippery slope and you never know when your circumstances may change.