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!