Facing up to the limitations of my life

Cowparsley16

I took out a loan as part of buying a house that had lots of category three repairs that needed urgent attention but the repayments meant things were tight and I let that notion slip every now and again so now two years later I am maxed out on my credit card. Nothing major but just no 'cushion' and the occasional 'sod it' takeaway or clothing purchase as led to a debt that is costing me a fortune each month (£600).

I hope to increase my earnings as well as increase my debt repayments through spending (even) more frugally and also renegotiate some of my debt.

Personal loan £15,000
Credit Card £1500
Overdraft £2800

Total £19,200

DFD target September 2022

Cowparsley16

I went to a financial advisor who applied for my debt to be consolidated into my mortgage but that was declined due to my credit utilisation. I think this was a mistake as I knew I was living in my credit card for much of the month and I feel the application was optimistic. I have enjoyed trusting a financial advisor though.

I budgeted very tightly this month and last month which has meant eating very frugally and doing no activities requiring cash.

Looking at my initial post I realise that it is a very inaccurate analysis of how I got to this point. I have realised that the issue I have is that one third of my income is on a zero-hours basis so is highly unpredictable and not entirely clear until payday arrives. This month I earned £600 less than last month due to that income dropping.

I have realised that it is the volatility of zero-hours that makes budgeting harder in modern times. This is really important; as a child, the types of food and holidays we had were fixed. I am in a situation where some months I can eat very nice food and other months I don't have enough food. I can put some away in the better months of course but this is more about the psychology of understanding who you are economically - and my economic identity is less reliable. 

It is much harder for someone employed using modern methods like zero-hours or subcontracting to use the piggy bank savings model for example, unless they are so well paid that there is always enough even in meagre months.

This month my credit score has plummeted, dropping 100 points, which I assume is as a result of the credit application.

I have worked many more hours this month on the zero hours element so next month will be more comfortable.

Crucially, I spoke to my family about what was happening. That is because the financial advisor told me that research has shown that most people who take out a mortgage to consolidate their loan do not then go on to do that, but just get mired in even more debt. I asked a family member to buddy with me to ensure the money was paid across. In fact, I was unsuccessful but this alerted them to the issue. As a result, my family have given me some money which has decreased my smaller debts by quite a margin and through that, decreased my repayments.

I am now going to work on improving my credit score and decreasing my debt so that I can change my mortgage to a better rate in the future.

I also feel that increasing income is a sensible thing to focus on - not just decreasing expenditure - especially when the margins are so tight that that means eating less food. I have a meeting next month to review my contract and increase my pay.

Cowparsley16

I should have added a DFD update:

Personal loan  £14500
Credit Card         £650
Overdraft             £246

Total                   £15396 (was £19200)

DFD target September 2022

doingitanyway

Increasing income was crucial to me becoming debt free so yes do that if you can.
Well done for approaching a family member. Not easy to do...

Cowparsley16

Thankyou 'doingitanyway' - I am so independent and have been since the day I left home at 18 so it was super hard but worked because in the first instance I wasn't asking for money - just for support to keep on the right track if I did get the Kerchingg moment and £20k was it my hot little hand. I am certainly thinking that I want to pay it back but don't want to include that in my debt column as it was a gift and it's only my stubbornness that would put it in the debt column. 

I'm trying for four approaches:

1. budget with what I have and analyse my expenditure each month to reduce my debt
2. speak to my employer and negotiate a fairer wage and increased fraction to increase my ability to repay
3. attend to my wellbeing and sense of gratitude so that I can improve my psychological relationship with consumption / status / anything £££ to reduce the impact and expand non £ happiness
4. work with my financial advisor and family to reorganise my debts to reduce interest

All four have their good bits.

Cowparsley16

1. I've been in the black all month in my current accounts by using an excel spreadsheet to monitor all my spending (woohoo!). I paid all my spare money into my credit card and then have been using that for food over the month so I filled as much of that hole as I could when the money was there rather than having it sitting in my current account. It hasn't been easy as I have a slightly variable income, and this month was a particularly low yield. Next month will be almost double so should repair some damage done this month as I have dipped slightly lower there. Not being able to buy what I need has been annoying, wasted time and at times been depressing. I keep going to look at my balances to remind me of the payoff. I've also consciously looked at what I can do for free using existing resources but it doesn't fool me all of the time.
2. I have my appraisal tomorrow (!) so now is the time to prepare for that and do my Oliver Twist impersonation. I think women, and especially women who do a lot of unpaid cleaning and caring work at home, can find it difficult to be confident about asking for fair pay or an increase in pay. 
3. I've set up an art studio in the spare room so I can go and do that when I feel like spending money as an 'enrichment activity' as they say (is that just for zoo animals?)
4. I'm leaving off doing any more to refinance debt etc until my credit score is all green smiley faces rather than having one yellow one.

Personal loan    £14300
Credit Card         £1200
Overdraft             £0

DFD target September 2022

foxgloves

Good luck with everything, @Cowparsley16 - I have to say that we consolidated our debts 3 times - not onto the mortgage, but into a big loan rather than lots of little ones/cards, etc. I can confirm that this didn't re-set our spending & encourage us to pay down our debts. What it did was free up our credit cards so we could use them for buying more stuff. Not too long into our 3rd consolidation, the LBM struck re our endebtedness & we changed our ways. I think consolidation is often regarded as a solution, but it mostly isn't, unless circumstances, attitude or both have changed. Zero hours contracts are an utter scourge in my opinion. Security of income, even if it is quite modest, is so important when trying to live sensibly within a budget.
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Cowparsley16

Yes @foxgloves , it is a bit of a scary time as I need to redo my mortgage soon so I need to keep the big overdraft capacity available to keep up my credit score so it's like walking over a chasm! I dabbled in the idea of consolidation but it took me to a firm who were asking £2k to arrange a loan so I backed out. The banks being forced to be more honest about how they tell you what you have in your account has helped. 
Yes too about not having fixed hours. It's hard when people who earn more say 'why don't you just save the extra when you get it to tide you over the lean times' as they are all fairly lean times and once you slip off the straight and narrow you are 'fighting a rear guard action' as my old allotment neighbour used to say! I'm not as bad as some as I do have a core income but it pretty much pays the bills so food and life are a month by month lottery. Next month should be a good one though so maybe a chance for a treat.
I am starting to get a better understanding of where my finances actually sit and that does give me a feeling of security.

foxgloves

Yes. As in all things, knowledge is power.
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