Debt about to spiral - advice needed

summerlilly

Hi everyone, 

I was once an avid user of the debt-free forum some 11 years ago, I found it to be a really great place to gain support and understanding on how to get out of debt. At the time I had lots of pockets of silly debts from being in my 20s and not really appreciating the importance of money management. I was also engaged to someone who was worse with money. Well 11 years later, a divorce a child, getting financially savvy and getting a mortgage from staircasing on my own - I've taken all the lessons I learned and have stayed strong to them. The reason I post now is that while I have been very financially clued up, life has taken ahold and I need some steer before I get myself in position that I can't get out of. I am currently a single mother to a 7 year old with a child on the way (my mat leave started today) - the father of unborn child has scarpered and I'm left holding the baby. Figuratively and literally.

I really feel like I need another pair of eyes to  help me see how I can manage my circumstances as they currently are. I have done a new SOA which was very basic in all honesty - I've already pulled the plug on all my "luxuries" reducing phone bills, internet and cancelling netflix, amazon etc. So I know what I need to do but it's still not feeling like I'm catching up. I have some assets in my mortgage, a medium pot of unsecured debt, a car and a small amount of savings that's about to get swallowed up in payment to a lease extension and legal fees on my flat, which I keep trying to remind myself is a necessary and will add value down the line (hopefully). I've attached my SOA below as it stands. I know that as mat leave commences - this will be a moving post but I could do with a steer from where I stand now - please!

My biggest issue I have is that I have a decent income and all my bills are paid. I have no overdue payments and my credit rating is excellent. 

My biggest outgoing by far is my mortgage + ground rent and service charge but there is very little I can do about either. 

I have 2 loans, one which is due to be paid off (rate settler) by Jan 2023 and M&S which still has 4 years 2 months to run. Currently I repay £410 a month which is the part that's breaking me every month.

The loan was to pay for a number of items that I needed to sort out combined, in the space of 6 weeks I had to pay for a new boiler, new car and fix a bad leak in my property. 

The car is worth approx £8800 and I'm considering this the avenue to go down in order to regain some cash flow.

At the end of a month when I've paid for various outgoings that crop up unexpectedly - I find myself with touching my overdraft. I haven't had this happen to me in 6 years so it's a worry to me that this is happening now even though I don't feel my expense pattern has changed. I don't know where I'm losing money even though I comb over my bank accounts to see where!?

I have £8800 which in a couple of weeks will be entirely wiped out from my bank account to pay for a pesky lease extension. I did ask the bank (nationwide) if I could borrow the sum I needed and they said no -this was in a soft search. I wanted to keep the £8800 as a cash flow for mat leave - a safety net that's now gone. my mortgage is in 2 parts (from staircasing) and the bigger part is due to renew in October, I don't want to risk needing to apply for a whole new mortgage at this point as I'll be on maternity leave and I know this can be a bad time to try and get a better deal. I was planning to just switch over to a new deal if possible as I did 2 years ago.

God this got long! Sorry! 

So as you can see, I'm kind of treading water at the moment and I want to prevent a sticky situation becoming dire. Can anyone advise what they would do in my circumstances? 

Should I sell the car (I need a car - so I'd get something for around £3500) to give me some cash flow to keep me from going into the red? 

Should I ask the bank again about borrowing more - allowing me to keep the car and get a small cash flow for the next 12 months to top up my salary.

Should I combine my current loans into one to extend again to allow a lower repayment freeing up more money at the end of the month? 

I have a wedding ring and engagement ring I wondered if there was any value in that, I doubt it would be much and I wouldn't bother for a few £xxx - how could I find out its worth? I'm not sentimental about it so if it got me some cash flow that would be better or is that a silly idea and worth keeping as assets?

I have no other assets cars, houses, stocks or savings. Everything else has been plunged into making sure I got homeownership of my flat which took me 5 years and only owned 100% of it last year so I don't feel ashamed of being less buoyant financially but I certainly want to steady myself and without a partner to confide in or work out a plan with I've got all this in my head which is making me feel very stressed and alone - so if you got this far and have any brainwaves on what I should - or indeed, shouldn't do I'm all ears! 

[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......... 1

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2483.14

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

Benefits................................ 80

Other income............................ 500[b]

Total monthly income.................... 3063.14[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 928.6

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

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

Management charge (leasehold property).. 183.5

Council tax............................. 100

Electricity............................. 45

Gas..................................... 45

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

Water rates............................. 28

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

Mobile phone............................ 21

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

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

Internet Services....................... 23

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

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

Petrol/diesel........................... 40

Road tax................................ 13.56

Car Insurance........................... 29

Car maintenance (including MOT)......... 250

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

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

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

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

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

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

Buildings insurance..................... 0

Contents insurance...................... 13.72

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

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

Presents (birthday, christmas etc)...... 50

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

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

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

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

Total monthly expenses.................. 1933.38[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 310000

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

Car(s).................................. 8900

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

Total Assets............................ 318900[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 210000...(928.6)....2.3[b]

Total secured & HP debts...... 210000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

halifax credit card............400.......14........17.8

Rate settler...................1280......171.......2.3

M&S............................12700.....232.......2.3[b]

Total unsecured debts..........14380.....417.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,063.14

Expenses (including HP & secured debts). 1,933.38

Available for debt repayments........... 1,129.76

Monthly UNsecured debt repayments....... 417[b]

Amount left after debt repayments....... 712.76[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 318,900

Total HP & Secured debt................. -210,000

Total Unsecured debt.................... -14,380[b]

Net Assets.............................. 94,520[/b]

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

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

mumtoomany

Didn't want to read and run. Looks like when your maternity leave kicks in you could be struggling. Electric and gas are both going to increase i think, as will your grocery shop, even without adding in things for baby. How long will you be off work for? How much will you be getting for mat pay? What will your childcare costs be when you return to work? Do you pay for any childcare now for the seven year old? Your car expenses look high, £250 per month, for someone who only uses £40 in fuel a month, we use more than that and, as farmers, work at home all the time. Maybe a cheaper car would be good, freeing up some cash for emergencies. Can you make some money anywhere else? Rent out a room? Surveys? Seedling stuff you don't need? 
I'm sure others will be along soon with suggestions for you. Hugs, mumtoomany.xx

EssexHebridean

summerlilly said:

[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......... 1

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2483.14

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

Benefits................................ 80 Is this child benefit, of so it should be £84.xx shouldn't it? 

Other income............................ 500[b]

Total monthly income.................... 3063.14[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 928.6 

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

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

Management charge (leasehold property).. 183.5 Eek I thought ours was high but this is double ours - ouch! have you checked your staircasing agreement (I'm assuming you were originally shared ownership) to ensure that this shouldn't have fallen on reaching 100%?

Council tax............................. 100Single person discount applied, I assume? Is this over 12 months, or 10? If 10 then consider getting it switched to 12 months to help with budgeting.

Electricity............................. 45 I agree with the previous response - these are both likely to increase. 

Gas..................................... 45

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

Water rates............................. 28 Metered? 

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

Mobile phone............................ 21 I contract? if so check when that's due to end - if not in contract, ditch and switch now to a SIM only deal. You should be able to half what you're paying.

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

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

Internet Services....................... 23

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

Clothing................................ 0 Unless you're a full-time naturist something needs to go in here... ;-) 

Petrol/diesel........................... 40

Road tax................................ 13.56 Are you paying this on monthly D? If so investigate viability for stashing money against paying it annually next time as there is a charge for monthly DD payment.

Car Insurance........................... 29 

Car maintenance (including MOT)......... 250 This is really high - why so much? To give you a clue, I budget £170 per month to cover the insurance, MoT tests, breakdown cover, servicing and depreciative costs on our TWO cars - and at 6 years old I assume they are a similar age to yours? Also - make sure where you budget money for the big annual spends that you do genuinely save it - it's easy to budget but never get round to transferring it to savings, then it's not there when needed! 

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

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

Childcare/nursery....................... 0 Should there be anything here?

Other child related expenses............ 0 Should there be anything here?

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

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

Buildings insurance..................... 0

Contents insurance...................... 13.72

Life assurance ......................... 0 Should there be anything here?

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

Presents (birthday, christmas etc)...... 50

Haircuts................................ 0 Never? Not for you or the small person? 

Entertainment........................... 0 Nope - and with a child too, double nope. There will be something, whether it's an impulse bought comic for small person and magazine for you, or a sneaky McD's after the school pickup, or a coffee when feeding the birds at the park....

Holiday................................. 0 You never go anywhere at all? Not even a weekend visiting family? 

Emergency fund.......................... 0 And you need to get something here... [b]

Total monthly expenses.................. 1933.38[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 310000

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

Car(s).................................. 8900

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

Total Assets............................ 318900[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 210000...(928.6)....2.3[b]

Total secured & HP debts...... 210000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

halifax credit card............400.......14........17.8

Rate settler...................1280......171.......2.3

M&S............................12700.....232.......2.3[b]

Total unsecured debts..........14380.....417.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,063.14

Expenses (including HP & secured debts). 1,933.38

Available for debt repayments........... 1,129.76

Monthly UNsecured debt repayments....... 417[b]

Amount left after debt repayments....... 712.76 OK - this is the biggie isn't it - that is £8,400 a year - where is it? That would have cleared both your two smaller debts AND halved the M&S loan.[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 318,900

Total HP & Secured debt................. -210,000

Total Unsecured debt.................... -14,380[b]

Net Assets.............................. 94,520[/b]

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

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

OK - I know you have lots of questions, but right now I'll focus on the SOA because that is always the second step - after having the LBM of course - and clearly, you've ticked that one already! See above in bold for thoughts...

The Lease extension seems to be quite pricey - I assume it's been left to fewer than 80 years left, has it? 

If the rings are of no sentimental value then sell - having "assets" is all well and good but right now you also have debts - and those debts are costing you money. 

Priority is to track down that surplus - so have a think about the items you've not got on the SOA at the moment for a start, and also where you might be overspending on the things that are written. Groceries is a good start - do you KNOW you spend £150 a month? or are you estimating that? If it's an estimate, it's probably wrong, I'm sorry to say. I'd be tempted to start a spending diary noting EVERYTHING you spend for the next month - as that will let you start to see where things go. You could also consider opening a separate current account for only grocery spending so it's easy to keep track - just make sure you keep an eye so if it turns out you do spend more than you think you can add funds before going overdrawn! 

Personally, and as a priority, I'd also look to shift that credit card to 0% - then your £14 a month will start making a real impact on the balance. 

fatbelly

On the car issue, I would downgrade. A 9k car is going to cost 3x a 3k car in depreciation, and you can still get a reliable car for 3k, plus have 6k to reduce interest paid on debt and/or put to an emergency fund.

summerlilly

mumtoomany said:

Didn't want to read and run. Looks like when your maternity leave kicks in you could be struggling. Electric and gas are both going to increase i think, as will your grocery shop, even without adding in things for baby. How long will you be off work for? How much will you be getting for mat pay? What will your childcare costs be when you return to work? Do you pay for any childcare now for the seven year old? Your car expenses look high, £250 per month, for someone who only uses £40 in fuel a month, we use more than that and, as farmers, work at home all the time. Maybe a cheaper car would be good, freeing up some cash for emergencies. Can you make some money anywhere else? Rent out a room? Surveys? Seedling stuff you don't need? 
I'm sure others will be along soon with suggestions for you. Hugs, mumtoomany.xx

My mat pay isn’t bad, it’s basically 6 months full pay before I drop down to stat, I have done some figures on UC and it looks like there will be a bridge of help there, but still a short fall. I’m opened minded about having to go back to work before the mat leave year ends although I would like to untap every option before I do that. Once I return to work I have some childcare plans in place and good flex at work. 

 I only have a 2 bed and will be swapping rooms so the children can share… I’m sure there are places I can come up with money which may help £30 here and there - not to be sniffed at of course but nothing that’s going to help cover mortgage payments every month.
the Car really does seem like my best bet atm. 

summerlilly

EssexHebridean said:

summerlilly said:

[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......... 1

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2483.14

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

Benefits................................ 80 Is this child benefit, of so it should be £84.xx shouldn't it? 

Other income............................ 500[b]

Total monthly income.................... 3063.14[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 928.6 

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

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

Management charge (leasehold property).. 183.5 Eek I thought ours was high but this is double ours - ouch! have you checked your staircasing agreement (I'm assuming you were originally shared ownership) to ensure that this shouldn't have fallen on reaching 100%?

Council tax............................. 100Single person discount applied, I assume? Is this over 12 months, or 10? If 10 then consider getting it switched to 12 months to help with budgeting.

Electricity............................. 45 I agree with the previous response - these are both likely to increase. 

Gas..................................... 45

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

Water rates............................. 28 Metered? 

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

Mobile phone............................ 21 I contract? if so check when that's due to end - if not in contract, ditch and switch now to a SIM only deal. You should be able to half what you're paying.

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

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

Internet Services....................... 23

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

Clothing................................ 0 Unless you're a full-time naturist something needs to go in here... ;-) 

Petrol/diesel........................... 40

Road tax................................ 13.56 Are you paying this on monthly D? If so investigate viability for stashing money against paying it annually next time as there is a charge for monthly DD payment.

Car Insurance........................... 29 

Car maintenance (including MOT)......... 250 This is really high - why so much? To give you a clue, I budget £170 per month to cover the insurance, MoT tests, breakdown cover, servicing and depreciative costs on our TWO cars - and at 6 years old I assume they are a similar age to yours? Also - make sure where you budget money for the big annual spends that you do genuinely save it - it's easy to budget but never get round to transferring it to savings, then it's not there when needed! 

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

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

Childcare/nursery....................... 0 Should there be anything here?

Other child related expenses............ 0 Should there be anything here?

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

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

Buildings insurance..................... 0

Contents insurance...................... 13.72

Life assurance ......................... 0 Should there be anything here?

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

Presents (birthday, christmas etc)...... 50

Haircuts................................ 0 Never? Not for you or the small person? 

Entertainment........................... 0 Nope - and with a child too, double nope. There will be something, whether it's an impulse bought comic for small person and magazine for you, or a sneaky McD's after the school pickup, or a coffee when feeding the birds at the park....

Holiday................................. 0 You never go anywhere at all? Not even a weekend visiting family? 

Emergency fund.......................... 0 And you need to get something here... [b]

Total monthly expenses.................. 1933.38[/b]

[b]

Assets[/b]

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

House value (Gross)..................... 310000

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

Car(s).................................. 8900

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

Total Assets............................ 318900[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 210000...(928.6)....2.3[b]

Total secured & HP debts...... 210000....-.........-   [/b]

[b]Unsecured Debts[/b]

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

halifax credit card............400.......14........17.8

Rate settler...................1280......171.......2.3

M&S............................12700.....232.......2.3[b]

Total unsecured debts..........14380.....417.......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,063.14

Expenses (including HP & secured debts). 1,933.38

Available for debt repayments........... 1,129.76

Monthly UNsecured debt repayments....... 417[b]

Amount left after debt repayments....... 712.76 OK - this is the biggie isn't it - that is £8,400 a year - where is it? That would have cleared both your two smaller debts AND halved the M&S loan.[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 318,900

Total HP & Secured debt................. -210,000

Total Unsecured debt.................... -14,380[b]

Net Assets.............................. 94,520[/b]

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

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

OK - I know you have lots of questions, but right now I'll focus on the SOA because that is always the second step - after having the LBM of course - and clearly, you've ticked that one already! See above in bold for thoughts...

The Lease extension seems to be quite pricey - I assume it's been left to fewer than 80 years left, has it? 

If the rings are of no sentimental value then sell - having "assets" is all well and good but right now you also have debts - and those debts are costing you money. 

Priority is to track down that surplus - so have a think about the items you've not got on the SOA at the moment for a start, and also where you might be overspending on the things that are written. Groceries is a good start - do you KNOW you spend £150 a month? or are you estimating that? If it's an estimate, it's probably wrong, I'm sorry to say. I'd be tempted to start a spending diary noting EVERYTHING you spend for the next month - as that will let you start to see where things go. You could also consider opening a separate current account for only grocery spending so it's easy to keep track - just make sure you keep an eye so if it turns out you do spend more than you think you can add funds before going overdrawn! 

Personally, and as a priority, I'd also look to shift that credit card to 0% - then your £14 a month will start making a real impact on the balance. 

Unfortunately no, the lease was at 83 years but the price is pretty standard through a housing association - they left no room for negotiation and my property is in a London borough. From what I read £8000 was about right for the price. 

I’ve been having to spend money on baby related items which are not usually factored in. Cot buggy car seats etc. ive shopped around heavily for all of them and used marketplace to but things ive needed, I haven’t paid full
price or gone for a thing top of the line at all - I’ve had a few glitches at the flat I’ve had to pay for too. My service charge ramped up this year - with the sinking fund - a bug bear of mine. I take it as it is, I don’t have a chance to negotiate it or challenge it.

any idea where I’d go to get the best price for the rings? Tracking my food expenses is defo a good idea but I’m actually on a special diet in my pregnancy atm so I don’t get any takeaways or treaty food and my son goes to his father 50% of the week so I’m able to be very smart with my food, nothing goes to waste at all. 

I had been paying off more on the credit card but I think shifting it to 0% is a no brainer now I need to stop overpaying to get back on track. 

As I said I think the car needs to go….

theoretica

Is the £500 child maintenance for the older child?  Do you anticipate problems getting maintenance for the younger, and how much do you expect?

Once the rate setter debt is gone that will help your cash flow.

summerlilly

fatbelly said:

On the car issue, I would downgrade. A 9k car is going to cost 3x a 3k car in depreciation, and you can still get a reliable car for 3k, plus have 6k to reduce interest paid on debt and/or put to an emergency fund.

Yes to be honest I know the car needs to go. It’s a shame it was my first nice car I’ve ever had but this debt and covering my mat leave is more important! 

summerlilly

theoretica said:

Is the £500 child maintenance for the older child?  Do you anticipate problems getting maintenance for the younger, and how much do you expect?

Once the rate setter debt is gone that will help your cash flow.

Yes this comes from my ex husband: very amicably and without delay. 

I don’t expect to get anywhere with the younger ones father - he quite literally walked out the moment I told him I was pregnant and haven’t heard or been able to reach him since (he’s blocked me on everything ) - your forgiven for thinking this is the act of a 19 year old but in fact it’s a 40 year old man. He’s a professional actor/singer who’s work is largely dependent on how well he’s doing with auditions he lost a lot to covid, and is considered self employed so I know even if I did try and get some support from him he would make it impossible and I’m not sure it’s worth the stress. 

stymied

Could there be grandparents on that side who might be interested in helping out? Is it worth working out how much you could save while you’re on almost full pay and tracking all spends to see if this could be enough to tide you over? Also, have you explored the option of a mortgage payment holiday for when you’re on statuary for 3 months & 0 for 3 months although I understand this would impact your credit record?

summerlilly

stymied said:

Could there be grandparents on that side who might be interested in helping out? Is it worth working out how much you could save while you’re on almost full pay and tracking all spends to see if this could be enough to tide you over? Also, have you explored the option of a mortgage payment holiday for when you’re on statuary for 3 months & 0 for 3 months although I understand this would impact your credit record?

The grandparents don’t even know I’m pregnant! (It’s a whole mess I’ve only just stopped realing from) 

Yes, that was my plan to save per month and roll it into months with stat pay but what I’m now seeing is that there is nothing to roll. I don’t think I’m out of time to fix this but I need to act fast, hence coming back to the boards. 

Payment holidays I admit I haven’t looked into, I’m not clued up enough to make an informed decision atm, it’s not so much underpayments that concern me but the affect it may have on trying to renew my mortgage which I want to do without going full credit checking while on mat leave!