Starting to budget after years of wishful thinking

TheAble

You can pay that lot off in 18 months then, even allowing for a bit of fun money. You just need to stop buying stuff

kimwp

LegoHead said:

curlytop12 said:

Hi , would you feel comfortable posting up your SOA? 
use this tool and format for mse
 https://www.lemonfool.co.uk/financecalculators/soa.php
Have a read of some of the diaries too
good luck

So I came back. Been trying hard to clear debts. I did start saving, but I like shiny new tools so every time I saw new tools I wanted for my workshop I would dip into savings. Not a bad idea to save up for stuff some would say, but I wanted the savings to pay off the debt. I made a drastic decision one month to clear over £3000 of credit card and completely skint myself out for a couple of months. I have now got down to only one credit card and two loans remaining

 [font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 0

Number of cars owned.................... 2[b]

Monthly Income Details[/b]

Monthly income after tax................ 2855

Partners monthly income after tax....... 0

Benefits................................ 0

Other income............................ 0[b]

Total monthly income.................... 2855[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 576

Secured/HP loan repayments.............. 0

Rent.................................... 0

Management charge (leasehold property).. 0

Council tax............................. 111

Electricity............................. 50

Gas..................................... 46.39

Oil..................................... 0

Water rates............................. 20

Telephone (land line)................... 0

Mobile phone............................ 8

TV Licence.............................. 0

Satellite/Cable TV...................... 0

Internet Services....................... 37

Groceries etc. ......................... 150

Clothing................................ 0

Petrol/diesel........................... 100

Road tax................................ 15

Car Insurance........................... 20

Car maintenance (including MOT)......... 0

Car parking............................. 0

Other travel............................ 0

Childcare/nursery....................... 0

Other child related expenses............ 0

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 43.6

Buildings insurance..................... 15

Contents insurance...................... 0

Life assurance ......................... 0

Other insurance......................... 0

Presents (birthday, christmas etc)...... 0

Haircuts................................ 0

Entertainment........................... 0

Holiday................................. 0

Emergency fund.......................... 0[b]

Total monthly expenses.................. 1191.99[/b]

[b]

Assets[/b]

Cash.................................... 0

House value (Gross)..................... 225000

Shares and bonds........................ 0

Car(s).................................. 10000

Other assets............................ 5000[b]

Total Assets............................ 240000[/b]

[b]

Secured & HP Debts[/b]

Description....................Debt......Monthly...APR

Mortgage...................... 136831...(576)......2.49[b]

Total secured & HP debts...... 136831....-.........-   [/b]

[b]Unsecured Debts[/b]

Description....................Debt......Monthly...APR

hsbc loan......................12845.....262.......3.2

sains CC.......................2976......75........0

sains loan.....................6360......155.......9.2[b]

Total unsecured debts..........22181.....492.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 2,855

Expenses (including HP & secured debts). 1,191.99

Available for debt repayments........... 1,663.01

Monthly UNsecured debt repayments....... 492[b]

Amount left after debt repayments....... 1,171.01[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 240,000

Total HP & Secured debt................. -136,831

Total Unsecured debt.................... -22,181[b]

Net Assets.............................. 80,988[/b]

[i]Created using the SOA calculator at www.stoozing.com. 

Reproduced on Moneysavingexpert with permission, using other browser.[/i][/font]

When you say you're wanting to use the savings to pay off debt, are you saving up the money first instead of using it immediately to pay down the debt?

LegoHead

kimwp said:

When you say you're wanting to use the savings to pay off debt, are you saving up the money first instead of using it immediately to pay down the debt?

I was saving the money with intention of clearing a credit card first when I had a decent savings pot. Also wanted the cash at hand just in case of emergencies, but I just kept dipping into it for other things. Basically had no self control and spent the money I saved. The only option I could see was to just pay all my spare straight into the debts and leave myself with no spare cash. All my bills go out on the 1st of the month so effectively have had no money from 1st to 28th when i get paid. It has worked for me, not been easy, but it is working. 

I did some sums and if I sold my car for about £9k I could clear my debts in 6 months. That is one end of the scale. The other is I can overpay £1000/month, keep car, clear credit card by selling spare stuff and be debt free in 12 months. So this is now my plan. 

I am giving myself until January to clear the credit card by ebaying stuff as that is when interest free period ends. After that I will overpay the loans by £1000/month. If I ever lose my job I I have cash tied up in the car I can release by selling in an emergency.

Feels pretty good knowing I have a sensible plan now, will be debt free by christmas next year and will still have my car. :-) 

kimwp

Sounds like a good plan, there are some that advocate paying off debt over even an emergency fund if credit is available for an emergency.

 I think you might want to think about life after debt, are you going to continually spend what you have? If you want to move away from this, I'd recommend considering a regular saver or even overpaying your mortgage or putting more in your pension or a LISA as these will lock away the money (albeit temporarily with the regular saver) so you can't spend it.

Booksandplants

Good suggestion from kimwp.  Whatever works for you is mostly likely to get results you want.  A couple of things I picked up from your SOA is that you have no money put aside each month for contents insurance (unless its included in your building insurance). You have no money put aside each month for haircuts, presents or going out, so if you are spending on those sorts of things, it can be demoralising if you think you’ve got, say, £800 a month for paying off debt but you keep using this money for other incidentals.  

You are going down the right path, definitely.  I find that if I ring fence money, as you are doing by all your bills going out at the beginning of the month, that certainly helps.  But, be kind to yourself as well.  If you deprive yourself of all spending treats, that’s when you could become disillusioned and blow a load of money destined for debt…. Perhaps you could set up a separate account for your personal spending, make a realistic budget and if you don’t spend it all that month, let it roll over to the next month and you could soon find yourself with a bit of money you didn’t expect to have.

it sounds silly, but its all about planning, assessing those plans to do better if things go awry and not beating yourself up.  One bonus to this is that if you can not spend money to pay off your debts, when they’re gone, you’re already in the habit of saving!!!!  

jimjames

LegoHead said:

kimwp said:

When you say you're wanting to use the savings to pay off debt, are you saving up the money first instead of using it immediately to pay down the debt?

I was saving the money with intention of clearing a credit card first when I had a decent savings pot. A

Bear in mind that no savings account pays anywhere near the interest charged on a credit card (unless it's a 0% card) so from a financial perspective it's far better to pay more off the card than keeping money in a savings account to pay off as a lump sum.

enthusiasticsaver

You cannot  continually go through life spending every spare penny you have so you need to put some obstacles in place to make you think before you spend.  You could try putting it into a regular saver as suggested or a different bank to your normal bank.  Well done though on clearing one card but clearing the other loans and cards would give you  more than £500 a month back if you  had no debt to clear.  When does the Sainsburys card deal expire? 

MalMonroe

What I learned from my very long affair with debt was that you can sell everything you own but you can STILL be in debt. Until you can learn how to budget properly, you will just keep going around in circles. It was a very hard lesson indeed for me to learn. 

I ended up having a DRO - it was just like a slap in the face but it taught me how to budget and how important it is to never bury your head in the sand. I thought that because I had a good, well paying job that I was immune. But I also had so many store cards and credit cards on the go at one time, I was never going to be able to pay any of them off. All of that stemmed from having a divorce and being left as a single parent years before. I never caught up with myself and spending. 

Now, two years after the DRO has dropped off my credit report, I'm finally debt free and a bit more finance-savvy. I feel a bit like I'm an alcoholic, only with money spending. I have to be careful and think about what I'm spending. I do still manage to run a decent car and pay all my bills, with not a lot left at the end of each month but now I have peace of mind. I know I had a really cavalier attitude towards money but didn't realise it. Now I feel older and wiser - in that I know I have to watch what I'm doing or I could end up in dire straits again.

You could have a word with someone at one of the free debt help agencies, I know you're not in a desperate situation right now but they do offer advice for those who struggle. First you have to see the real problem before you can solve it, though. 

tealady

Hi
Well done on facing up to your debt.
Re tools, could you look at hiring (or borrowing) kit. If you only use something once and it cost £100 then the cost per use is £100. If you use it 10 times then the cost per use is £10.
Is there a "man in sheds" type of group you can join? Dont know your circumstances but meeting with like minded people might encourage you to borrow/hire rather than buy.

LegoHead

kimwp said:

Sounds like a good plan, there are some that advocate paying off debt over even an emergency fund if credit is available for an emergency.

 I think you might want to think about life after debt, are you going to continually spend what you have? If you want to move away from this, I'd recommend considering a regular saver or even overpaying your mortgage or putting more in your pension or a LISA as these will lock away the money (albeit temporarily with the regular saver) so you can't spend it.

this could be a good idea for me. I am thinking even if eventually I only put £100/month into an account that is locked for short term it would be good for me. When I saved to buy my house I used the Help to Buy ISA. The bonus of the 25% at the end forced me to not dip into the funds. Unfortunately there dont seem to be any deals like that anymore, but will look at long term savings accounts where the money is locked away for a few years.