Best tactic to reduce debt and climb property ladder

littlegreenparrot

I would suggest you start a savings account and put something aside every month, even if its just a small amount in the short term while you are paying off debts. It will take a while to build up, but at least you've got into the habit. 

As you have found, stuff is going to come up. I have been in a similar position to yourself in the past, most of my credit card debt came about in the first instance because of emergency dental treatment and car repairs. I had no choice over that at the time, but life is much easier now there is an amount set aside to cushion it. 

EssexHebridean

Hypothetical question time...assuming you do, as planned complete your house move in the next year or so. "Congratulations, and welcome to your new home" says your employer - great stuff! However -  "I'm so sorry, we are going to have to make you redundant" says your OH's employer at the same time. So - What's the plan now?

You also need to give consideration to how - with no savings - you are covering stamp duty, legal costs, agents fees on the sale of your current house, land reg fees, removal costs, and new items needed for the new house etc, etc.... Again - what's the plan there?  

A few comments on your SOA - that cost for mobiles is horrific - why so much, particularly allowing you must have been debt busting when you took your current deals? Groceries - also high. And you are saving £234 a month towards holidays but nothing for an emergency fund?  You are saving money for annual costs - car related, holidays, presents etc, yet you have no cash assets showing, is also a concern and something we often see on SOAs - are these savings just "on paper" and actually when the bills come round something has to give to pay for them? 

Kim's done some great number-crunching relating to the debt and the time you took the salary cut - hopefully that's made you think a bit on that side of things. The key thing from your posts here is that your impression of that time is that you were living paycheck to paycheck - ie scraping through but covering costs - but the debt picture paints a different story. Out of interest, are you comfortable with saying what the debt was at its worst? 23k of debt now when you've been clearing it for 5 years+ suggests that you were in a much worse state originally, and it does seem a little unlikely that it was all down to loss of income and the unexpected situation with your pet. 

Personally my feeling is that you've not quite had your lightbulb moment yet, and the worry is that because you've still not even completed step one of the debt busting path (create an emergency fund) even the smallest glitch in everyday life will still be in a position to throw you off track. I'm going to suggest you take things back to the beginning.
- Check actual spending against the SOA (Ie do you really have nearly £500 a month "spare" and is that all going to debt payments at the moment? use a spending diary if needed to track down real spending.
- Look to make savings where you can - mobile contracts,  at least £100 less on groceries, creating savings "pots" either real or virtual for annual expenses and making sure money is there, ready and waiting when those expenses arise
- Create an emergency fund. Initially throw big chunks of money at it (yes, sacrificing some of the debt overpayments for this one) to build to the basic £1000, then drop to £100 a month with a view to building to £5k. 
- get the rest of the debts cleared - move stuff to 0% cc's where you can to save interest costs - ALD & CFD are obvious candidates here
- Put off the house move until you have cleared the debt, and saved the associated costs. By this time your LTV on your current property will also have increased. 

Matt8888

There are some damaging rates of interest there... Put everything into settling those debts, and plan so you don't repeat that: build up an emergency fund. Only once you have focused on and achieved that goal, start thinking about property ladders.

EssexHebridean

Unfortunately the OP has not been back to the thread since 10/1 - it may well be that the next time we see them will be the point at which they are asking for advice as to how not to lose their dream home in the country, I'm afraid. Some good solid advice here for anyone in a similar position who has a similar question in mind though. 

enthusiasticsaver

I am not sure if the OP is still reading but on the off chance I would recommend a three step plan. 

First identify if that SOA is correct and if you really have almost £500 spare and if not where is it going? 

Second build up some emergency savings and overpay the most expensive debt. 

Third When the first two steps are done start a house savings fund and research how much a bigger mortgage would cost you and the extra expenses you would need to pay on a bigger/more expensive house. 

The harsh reality is that you have been living beyond your means. You have expensive pets and taking holidays you can’t really afford and prioritising these over repaying debt or saving for a better house. You are both on average salaries and have no safety net should either of you lose your job. 

datlex

Hi OP one small piece of advise.  If you have not already set a direct debit for a fixed amount on your cards which is a least last month's minimum payment.  If you can round it up to the nearest £5 over the payment.  The reason for doing this is a fixed payment is taken whereas a minimum payment might not be taken if you make extra payments.  Rounding up to the nearest £5 or even £10 just makes life easier when budgeting.  

dylmoney

Hi everyone, thanks for the advice - I'd been busy for a while hence no return to the forum for a fair amount of time, but I'd read most comments up to a certain date and gone away with a lot of advice.

I took a lot of what was said to heart regarding savings and debt and it fuelled a decision to look into a new role as I'd spent so much time and effort retraining for my previous employer to renege on their promise to give me a pay rise in April.

So, this has completely changed our outlook as my annual salary has increased 20k from finding a new job. My partner also took a promotion at work which will bring her income up to 29k or so (inclusive of PIP) starting from next pay date.

We're taking steps to overpay on loans as much as possible and have started a savings pot to account for any unexpected bills, vets or otherwise.

Things have changed a lot, so I plan on doing another SOA next month when our incomes are at their fullest and will give the best picture of our situation for the foreseeable.

runningrafan

Sounds like you're heading in the right direction, congrats to you both on the pay rises.

EssexHebridean

datlex said:

Hi OP one small piece of advise.  If you have not already set a direct debit for a fixed amount on your cards which is a least last month's minimum payment.  If you can round it up to the nearest £5 over the payment.  The reason for doing this is a fixed payment is taken whereas a minimum payment might not be taken if you make extra payments.  Rounding up to the nearest £5 or even £10 just makes life easier when budgeting.  

there's another factor to this as well - the minimum payment will fall over time as money is paid off, so long as nothing more is spent on the card. This means that more money each month gets left behind in the bank account, because it happens in tiny increments people rarely notice so it gets frittered, and it reduces the overall impact to the payments. Rounding up and paying a set amount actually means you make more impact over time - it is ONLY for use with cards that are not being used though and pay attention to any correspondence from the provider telling you the minimum payment percentage is changing, too! 

dylmoney

Hi all, just wanted to come back to this (reviving old thread for context more than anything!) to give an update, and to once again thank all for advice all that time ago.

It really did give perspective and helped a lot in what was to come.

My circumstances have significantly changed in the last 3 years - my (now) wife and I have worked our backsides off to accomplish so much - my move to take a pay cut and retrain has paid off, and I'm currently earning 60k a year. My other half has now also tipped the 30k a year mark, so our joint income has pretty much doubled.

I spent an awful lot of time and effort on fixing up our old property on a budget, and we were savvy (and lucky!) enough to sell at peak for 120k back in 2023, which gave us a huge leap forward to clear our debts entirely and start fresh.

We have been living in our dream home for 2 years now, and had a good savings balance of around 25k.

Both fortunately and unfortunately, we wound up paying a significant amount out for two private surgeries, and tied the knot, which meant our savings have now dwindled to 2,200... but we were so fortunate to be able to do that without any debt.

Hence the revived post, and another look at our life financially.

Our new goal is to pay off the remaining balance on our new car (purchased last year) and then overpay the mortgage. I've used the calculator on MSE and I think we can pay off our mortgage 10 years early.

I'm also not that great with understanding how to make my money work for me (I have recently set up monthly saver accounts for both my wife and I, note the 800 outgoing a month to that - 400 each) so that is something I want to work on, to maximise the good position we find ourselves in now.

Updated SOA:

Statement of Affairs & Personal Balance Sheet

Summary

Monthly Budget Summary	Amount(£)
Total monthly income	6,114.61
Monthly expenses (incl. HP & secured loans)	3,688.98
Available for debt repayments	2,425.63
UNsecured debt repayments	29.99
Amount left after debt repayments	2,395.64

Personal Balance Sheet Summary	Amount(£)
Total Assets (things you own)	227,200
Total Secured & HP Debt	-189,331.1
Total Unsecured Debt	-599.8
Net Assets	37,269.1

Household Information

Number of adults in household	2
Number of children in household	0
Number of cars owned	2

Income, Expense, Debt & Asset Details

Income	Amount(£)
Monthly income after tax	3544.54
Partners monthly income	2570.07
Benefits	0
Other income	0
Total monthly income	6114.61

Expenses	Amount(£)
Mortgage	1296
Secured/HP loan payments	290
Rent	0
Management charge (leasehold property)	0
Council tax	188
Electricity	61.35
Gas	61.35
Oil	0
Water Rates	40.39
Telephone (land line)	33.1
Mobile phone	47.45
TV Licence	14.95
Satellite/Cable TV	34
Internet services	41
Groceries etc.	400
Clothing	50
Petrol/diesel	60
Road tax	21
Car Insurance	42
Car maintenance (including MOT)	4
Car Parking	0
Other travel	0
Childcare/nursery	0
Other child related expenses	0
Medical (prescriptions, dentists, opticians etc.)	0
Pet Insurance/Vet bills	0
Buildings Insurance	3.3
Contents Insurance	2.3
Life Assurance	23.79
Other Insurance	0
Presents (birthday, christmas etc.)	75
Haircuts	0
Entertainment	0
Holiday	100
Emergency Fund	0
Monthly Saver (x2)	800
Total monthly expenses	3688.98

Secured & HP Debt Description	Debt(£)	Monthly(£)	APR(%)
Mortgage	179213	(1296)	5.83
Hire Purchase (HP) Debt	10118.1	(290)	6.9
Secured & HP Debt totals	189331.1	-	-

Unsecured Debt Description	Debt(£)	Monthly(£)	APR(%)
Table	599.8	29.99	0
Unsecured Debt totals	599.8	29.99	-

Asset Description	Value (£)
Cash	2200
House Value (Gross)	210000
Shares and bonds	0
Car(s)	15000
Other assets (e.g. endowments, jewellery etc)	0
Total Assets	227200

Comments on the results

You have sufficient monthly income to meet your expenses and your minimum monthly debt repayments with £2395.64 left over.
You can use this to pay off your debts more quickly or to build/top-up an emergency fund.
Whatever your results show, it always pays to seek advice or comments from others.

Why not post your SOA details on our Debt Management discussion board or on your preferred discussion forum elsewhere.

Thankyou for using the SOA Calculator at www.LemonFool.co.uk