Where to Start

Polar_Express

Hi, I hope this is the right section to post in. I'm really hoping for some advice on where to start/how to tackle the ridiculous financial situation we are in. I mean we've been spiralling into it for a long time but it's come to the point where we know we need to address this and sort ourselves out but to honest we have no idea where/how to start. 

Basically we have a joint income of just over 7k, however we are currently spending just over 3.5k a month on debt repayments to a large number of credit cards and loans. The total unsecured debt between us is approx £114k. We are not in arrears on any of these accounts but we are struggling to make any real dent in the debt as we are mainly paying minimum payments. We don't have any balance transfer options available. Once we have paid this as well as our general monthly bills and outgoings we are finding we are having to put more and more onto these credit cards just to finish the month which is just perpetuating the problem.

We do have about 60-70k equity in our house but I'm reluctant to move unsecured debt to our mortgage as all advice seems to warn against this. is there anything we can do to best approach this mess and start reducing these debts down. 

I've attached a summary below. Any adivce would be appreciated on how to start

Many thanks

Polar_Express



 

mcpitman

Hi, happy to offer support, but that's painful to try and read.

Could you fill out an SOA (Statement of affairs)? It is the common format used here and easily displayed/understood. (links I believe in the stickies).

Until then, do you know the root cause of your overspends historically, until you understand the drivers for the debt and address them, you can work as hard as you like, but are at risk of getting nowhere with it.

mcpitman

https://www.lemonfool.co.uk/financecalculators/soa.php

Polar_Express

Hi, sorry about that I've only just joined up. could you tell me how to access the SOA that I need to fill out? And where do I load it? thanks for replying. 

Polar_Express

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

Household Information[/b]

Number of adults in household........... 2

Number of children in household......... 2

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

Monthly Income Details[/b]

Monthly income after tax................ 4750

Partners monthly income after tax....... 2425

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

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

Total monthly income.................... 7175[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 666.7

Secured/HP loan repayments.............. 338.79

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

Management charge (leasehold property).. 0

Council tax............................. 159

Electricity............................. 66

Gas..................................... 50

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

Water rates............................. 40.64

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

Mobile phone............................ 185

TV Licence.............................. 13

Satellite/Cable TV...................... 47

Internet Services....................... 42.08

Groceries etc. ......................... 450

Clothing................................ 200

Petrol/diesel........................... 150

Road tax................................ 26

Car Insurance........................... 117

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

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

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

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

Other child related expenses............ 300

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

Pet insurance/vet bills................. 0

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

Contents insurance...................... 29

Life assurance ......................... 28.31

Other insurance......................... 34

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

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

Entertainment........................... 200

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

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

Total monthly expenses.................. 3157.53[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 230000

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

Car(s).................................. 0

Other assets............................ 0[b]

Total Assets............................ 230000[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 135543...(666.7)....1.74

Hire Purchase (HP) debt ...... 0........(338.8)....0[b]

Total secured & HP debts...... 135543....-.........-   [/b]

[b]Unsecured Debts[/b]

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

barclaycard1...................17655.....400.......0

halifax card...................8642......301.4.....0

mbna card......................1771......48.88.....0

halifax card 2.................4196......200.......0

mbna card 2....................5299......300.......0

barclaycard2...................4608......300.......0

loan 3.........................2243......83.07.....0

loan 2.........................31898.....674.......0

Loan 1.........................21201.....642.9.....0

natwest card...................6135......226.......0

virgin card....................11350.....335.2.....0[b]

Total unsecured debts..........114998....3511.45...-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 7,175

Expenses (including HP & secured debts). 3,157.53

Available for debt repayments........... 4,017.47

Monthly UNsecured debt repayments....... 3,511.45[b]

Amount left after debt repayments....... 506.02[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 230,000

Total HP & Secured debt................. -135,543

Total Unsecured debt.................... -114,998[b]

Net Assets.............................. -20,541[/b]

[i]Created using the SOA calculator at www.LemonFool.co.uk.

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

Brie

so you're saying there's no interest charged on any of the cards or loans?

Brie

you also say

Mortgage................................ 666.7

Secured/HP loan repayments.............. 338.79

But then below say that there is nothing owed on loan repayments.   ?????

Brie

Obviously this is a first draft of your SOA so there will be some amendments to be made.  Well done for getting started on this.

Additional observations....

2 cars but monthly amount for road tax of £26 which implies they are not monster cars but then you're paying about £1400 a year for insurance.  Is it time to look at changing providers?  And why is there no maintenance MOT for these cars??

Nearly £300 a month on phone/broadband/TV/internet?  Can anything be cancelled?  Go to cheaper tariffs?

£34 for what insurance?  

£200 a month for clothing (a bit high maybe?) but nothing for haircuts, birthdays?

£200 a month for entertainment (again maybe this needs to be cut?) but nothing for holidays (fair enough given covid)

Will be interested in the updates!

EssexHebridean

Well done for facing up to the fact that you need to do something about this. £115k is a lot of debt, but equally your income is a lot of income, so that will help!

First thing I’d suggest is you need to track down the £500 surplus that the SOA shows you should have. It might be an idea to start a spending diary - although I suspect, as mentioned above, you’re going to find that it actually goes on things like presents, haircuts …! (I’d also guess if you have a grocery and clothing spend as high as stated, that you’re likely underestimating there, too. 

Your general household bills are reasonable, nothing outlandish there, but your mobile bill is extortionate! Are either of you nearing the end of contracts so you can roll onto SIM only deals? Groceries are high - you could easily knock that down probably simply by doing the downshift challenge (cut from buying branded to buying own brand). Clothing, already mentioned - high and particularly for a household in debt, that needs cutting a lot while you get yourself back on track. Is there a reason for the car insurance being so high, too?

There’s some good savings to be made, and you can make a good impact on the debt but it IS going to be a long haul, you need to be prepared for that. 

Brie

And thinking in general about the unsecured debts.....

I suspect the loans may be fairly structured in their payments for a set period.  And likley lower interest than cards if as you say no 0% offers are available.  So let's set those to one side for the moment.

Normally it's suggested that the card(s) with the highest interest rate should be tackled first.  Obviously the quicker you pay them off the quicker you get rid of the high interest.   Then again there's something to be said about an early success which might be achieved by getting rid of the one with the lowest balance.  If you really did have a spare £500 a month available (which I kinda doubt) you could get rid of the MBNA card in about 3 months.  At that point you cut it up, close the account or put the card in the freezer - whatever keeps you from using it again.  In my experience MBNA are really eager to offer 0% BTs so clearing it might open up some wiggle room to reduce interest on one or two of the others.

How old are the kids?  Is that part of the cost with the mobiles??  Teens with fancy tech??  Just a thought.  Not sure there's an easy solution to that short of telling them to get jobs and pay for their own.

MalMonroe

Hi, you really could do worse than contact Stepchange, link here - https://www.stepchange.org/

It's a free phone call and they not only give advice but they can also talk you through some options. They helped me so much when I was in great financial difficulty. 

You will need your SOA when you call, and you have nothing to lose. 

Citizens Advice and National Debtline can also help but Stepchange is the one that helped me, that's why I (highly) recommend them. 

https://www.nationaldebtline.org/

https://www.citizensadvice.org.uk/resources-and-tools/search-navigation-tools/Search/?c=HOME&q=debt