Debt... incoming

LBincoming

powerspowers said:

Congratulations on baby number 2 and well done for recognising early that your heading into debt. 

To be honest, although there’s well meaning advice on shaving bits off haircuts, grocery, tv licence etc which will all add up, your biggest expenses are the 2 cars. Focusing on those will make the biggest impact on your availabile cash, allowing you to save for maternity leave and pay nursery fees. I’d be seriously looking at options to trade them in for something cheaper as it’s unaffordable on your current wage. Ideally you need to be building up a buffer, otherwise when washer blows up or whatever you end up taking on more debt. 

Good luck! 

Thank you! Yes, the cars are definitely our biggest expense. I got a bit of a shock when I worked it out. 

My husband really really doesn’t want to get rid of one, but considering he only uses his to commute to and from work I’m not entirely sure why he doesn’t just get a cheap banger and allow us to save the monthly payment. 

Thats what’s worrying me the most - we had a pretty substantial buffer from when I worked full time before having a baby, but then spent it on a wedding as we weren’t expecting a second child (pleased we didn’t get into debt for our wedding day and also not sure we’d have saved quite so much if it wasn’t for a purpose). It’s hard being without that safety net now though.

Grumpelstiltskin

Buying coffee out is usually a huge waste of money.

If you think the cost of making a cup of coffee is just pence and coffee shops will willing charge you up to £3. so try and find alternatives.

At least you are cooking as much as you can just make sure you use the cheapest ingredients you can. 

LBincoming

EssexHebridean said:

LBincoming said:

ratrace said:

this is the link to the soa

Giving a full breakdown of your situation.

Format for MSE and put it on here.

Think I’ve managed! Thank you! I did a similar one earlier for my figures, just the MSR budget planner excel sheet, but here’s the lemon fool one.

[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......... 1

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

Monthly Income Details[/b]

Monthly income after tax................ 1633

Partners monthly income after tax....... 1830

Benefits................................ 82

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

Total monthly income.................... 3545[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 675

Secured/HP loan repayments.............. 762.74

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

Management charge (leasehold property).. 0

Council tax............................. 215 Assume you have checked this is correct? There's a section on the main MSE site about this - that feels like a high figure for the property value though

Electricity............................. 223 This isn't as stand-out high as it once was but it it still a fair bit up on where I'd think it could be. Have a think about where you can trim use, and make sure you're giving regular meter readings (or checking smart meter readings if you have one of those) to be sure your estimated annual use figure is accurate. 

Gas..................................... 0

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

Water rates............................. 29 Metered I take it? Again - have a think where use can be trimmed a little.

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

Mobile phone............................ 47 Even for two, this is high. Have a look on the main MSE site for the current "best buy" deals for SIM only plans - and if it helps, I currently have unlimited calls/texts plus 10gb data with EE for under £10 a month - I could get cheaper than that, too! 

TV Licence.............................. 12.5 Check this - I think it's more like £13.37 a month now?

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

Internet Services....................... 29 You might be able to get better than this too - again - the main MSE site is your friend here. 

Groceries etc. ......................... 250 Definitely room for some tweaking here!

Clothing................................ 50 

Petrol/diesel........................... 300 Make sure you're driving as economically as possible, and combine journeys or walk/cycle where possible.

Road tax................................ 5

Car Insurance........................... 70 diarise to get renewal quotes at the right time to see if any savings can be made here.

Car maintenance (including MOT)......... 10 for TWO cars? Does your finance deal include all servicing, other maintenance, tyre replacement etc? If not, then what happens when you  need a service as this will barely cover an annual service on one, never mind anything else that needs doing! We budget £165 a month to cover our two - that's a little above where we need to be now we both have slightly newer (but still of MOT needed age) cars - that includes insurance too, without that if I was redoing my figures now I'd be looking at budgeting around £70 a month to cover the two for maintenance and depreciation I think.  

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

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

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

Other child related expenses............ 40

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

Pet insurance/vet bills................. 14

Buildings insurance..................... 22 Hopefully this includes contents as well?

Contents insurance...................... 0

Life assurance ......................... 62

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

Presents (birthday, christmas etc)...... 80 OK - but is this actually being saved? I ask because we're half way through the year and you only show £200 in cash assets - some of which is presumably from other things you budget for monthly as well? It  may be that all your family birthdays happen in the first half of the year though.

Haircuts................................ 70 HOW much?! This is seriously a lot ! As a guideline most folk on here seem to be able to find a gents barber visit for £15 and a Womens cut for £30-ish - looks like your OH is about on that level but going far more often than he ought to need - perhaps time for a less high-maintenance style? You could try dropping a stylist level maybe - that sounds like "Senior Style Director" or similar level. 

Entertainment........................... 80 Does this cover all your entertainment?

Holiday................................. 0 You never go away at all - not even for a weekend visiting family?

Emergency fund.......................... 0[b] You definitely need to get something in here! 

Total monthly expenses.................. 3046.24[/b]

[b]

Assets[/b]

Cash.................................... 200

House value (Gross)..................... 217000

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

Car(s).................................. -4500

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

Total Assets............................ 212700[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 165600...(675)......3.02

Hire Purchase (HP) debt ...... 20124....(385)......7<

Hire Purchase (sofa)...........998.14...(90.74)....0<

Hire Purchase 2nd car..........16000....(287)......7[b]

Total secured & HP debts...... 202722.1.-.........-   [/b]

[b]Unsecured Debts[/b]

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

Owed to parents................1100......0.........0[b]

Total unsecured debts..........1100......0.........-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 3,545

Expenses (including HP & secured debts). 3,046.24

Available for debt repayments........... 498.76

Monthly UNsecured debt repayments....... 0[b]

Amount left after debt repayments....... 498.76[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 212,700

Total HP & Secured debt................. -202,722.14

Total Unsecured debt.................... -1,100[b]

Net Assets.............................. 8,877.86[/b]

Please bear in mind however, that our income will drop by £890(ish) when I have to go on maternity leave later in the year.

Comments on the SOA in bold as usual...

Right then - the first thing to track down is that £500 a month you are showing as unallocated - that's nearly £6k a year you're just "losing" at the moment - in other words, enough to clear what is owed to your parents inside three months and then be able to start building a proper emergency fund too. Might be worth getting together a spending diary - literally a notebook and pen each where you write down EVERYTHING you spend over a month as that will see where money is being spent that's not currently being budgeted. 

Others have said about checking what benefits you may be due - this will definitely come into play later in the year I would think. 

The absolute blessing here is that you have asked for help BEFORE getting into serious debt - it's so much easier to deal with at this stage when you can really drill down into what you're spending, and also work to track down "leaking" money like your £500. 

If you're happy with your existing mobile providers then a good starting point is to ring them and tell them that, and then continue with "however I've seen this great deal from X offering this, that, and the other, and it's only £8 a month so I think I need to leave you - could I have a PAC code please?" and see what they say - most will match. If the offer you quote happens to be with another supplier using the same network they are even more likely to in my experience! 

On the TV license you need it if you are watching ANY TV "as live" I believe. If you only watch things like Netflix etc then you  may be able to get away without though. 

Thank you so much, that’s really helpful. 

At the moment, the £500 showing as ‘unallocated’ mostly goes into savings; £100 a month into an investment ISA, £200 into premium bonds and the remainder into our regular savings account (although the money in the regular savings account is never left untouched by the end of the month, so definitely need to look where that’s being spent). My husband has just gone to the local butcher for a pie for instance…

With regard to the haircuts, I spend £65 every 6/7 weeks (hair dyed) and my husband spend about £15 every 2/3 weeks. I could stop dying my hair to save £30, but I really really would prefer not to, as I have natural white chunks through it like Frankenstein’s bride haha! I’d much rather lose one of the cars.

For the car maintenance, I’d just thought about what two MOTs had oils cost and not everything else. Luckily a family member services the cars for us and all we do is buy the oil (still £60 a time mind!).

I’ve checked council tax, we’re correct at band D so that’s the right figure unfortunately (cheap area of the country in terms of property value). I’m definitely going to look at our mobile phone bills too.

Our gas and electric (I combined the figure) was £140 a month until recently, and I’m not sure how we could trim it any further than what we already have to be honest. We’re smart metered.

The £80 does cover all our entertainment generally (except for the odd meal out which I included in the groceries bit), except for the odd rare occasion which is hard to put a figure on per month.

My side hustle business seems to be the only way we’re actually getting by at the moment, and that’s really worrying to me as it’s not a regular or dependable income like a wage is.

Really appreciate your help, I’ve got some good things to work on.

EssexHebridean

Is the side hustle income included in the figures you've given for your income? 

Being able to manage with only one car - or indeed as you say an older one plus the existing second one is one thing - but when you've bought using finance actually having that choice is a tricky one because as you've found the depreciation takes its hit at the start leaving you potentially in a situation where the amount you'd get from the sale wouldn't cover the amount outstanding on the finance. Definitely start making sure you set aside money to cover ALL the expenses though - you're right, you are lucky to have  family member to do the routine servicing, but you still need to account for the stuff that could happen which isn't something they could - or would want to - fix, as well as the standard depreciative bits as well. Modern "nicer" cars tend to come with a higher price tag for things like tyres as well - My OH's old car (55 plate small hatchback) we could get a full set fitted for around £200 - his current vehicle (66 plate small SUV) would cost a full £100 more than that, as a rough guide. 

Grievingpanda

You've had some sound advise regarding your SOA. With regards to the pram, I had twins and absolutely swore by the baby jogger city, easy to fold, super quick to set up (literally throw it open -very important with 2 children to contend with!), lies almost flat for newborns and even better is great value for money. You can get connectors to fit a car seat onto if required. I loved it so much that when I had my singleton, I bought the single version! Congratulations btw.

alan_d

Just read this thread... and surprised at some of the figures, especially car ones.
You have spent £36k on 2 cars (that are now worth £10k less) - about £5k less than you earn in a year. Digest that for a moment, if you had nothing else to pay for, it would take you both nearly a year of work to pay off the cars alone. This is crazy. You DO NOT NEED 'new' (or nearly new') cars to run about or for reliability.

EG, we bought a 8 year old Volvo hatchback for my wife 4 years ago for £4k. It's needed nothing other than fuel, servicing and tyres in that time, is on 120k miles and has been 100% reliable.
My car (a Volvo estate) is 19 years old and on 130k miles, also been 100% reliable. Yes, it's more thirsty than a 'new' car, but when it costs me about £400/year in maintenance etc (and no other ongoing costs), it's irrelevant.
I do most maintenance myself which saves £loads. Yes I know that's 'too difficult' for many but it's easy to learn thanks to YouTube & forums etc with a handful of cheap tools.
I have no issues with the 'image' of running around in an older car, the cost savings outweigh everything.

Also phones.... We have 4 in the household on PAYG sims from GiffGaff, each around £10/month including all the data my kids can chew through. Remember, when at home, the phones should connect to your WiFi automatically and use no sim data.

LBincoming

Grievingpanda said:

You've had some sound advise regarding your SOA. With regards to the pram, I had twins and absolutely swore by the baby jogger city, easy to fold, super quick to set up (literally throw it open -very important with 2 children to contend with!), lies almost flat for newborns and even better is great value for money. You can get connectors to fit a car seat onto if required. I loved it so much that when I had my singleton, I bought the single version! Congratulations btw.

Thank you for the good advice! There’ll only be a year between my two, so we’ll need a double for a while I’d imagine. Thankfully already got a single pram we’ll keep for when the older is walking enough (or as a back-up)

LBincoming

alan_d said:

Just read this thread... and surprised at some of the figures, especially car ones.
You have spent £36k on 2 cars (that are now worth £10k less) - about £5k less than you earn in a year. Digest that for a moment, if you had nothing else to pay for, it would take you both nearly a year of work to pay off the cars alone. This is crazy. You DO NOT NEED 'new' (or nearly new') cars to run about or for reliability.

EG, we bought a 8 year old Volvo hatchback for my wife 4 years ago for £4k. It's needed nothing other than fuel, servicing and tyres in that time, is on 120k miles and has been 100% reliable.
My car (a Volvo estate) is 19 years old and on 130k miles, also been 100% reliable. Yes, it's more thirsty than a 'new' car, but when it costs me about £400/year in maintenance etc (and no other ongoing costs), it's irrelevant.
I do most maintenance myself which saves £loads. Yes I know that's 'too difficult' for many but it's easy to learn thanks to YouTube & forums etc with a handful of cheap tools.
I have no issues with the 'image' of running around in an older car, the cost savings outweigh everything.

Also phones.... We have 4 in the household on PAYG sims from GiffGaff, each around £10/month including all the data my kids can chew through. Remember, when at home, the phones should connect to your WiFi automatically and use no sim data.

The cars aren’t even new - 5 years old and 6 years old, respectively. It seemed fine before we had a child, especially when I was working full-time, but life changes. I’ve never had issues with image in an older car either (my old one had to go in for scrap because it was old, broken and couldn’t be fixed). It somehow seemed worthwhile at the time getting a used one that would last us a decent amount of time after the HP is paid off, but in the short term with a child and another on the way it’s become an expense that we clearly can’t afford any more. Most of the maintenance is done by a family member too.

We’ll definitely look at phones, but feels like pennies in comparison to the cars (but every little helps I suppose!)

LBincoming

EssexHebridean said:

Is the side hustle income included in the figures you've given for your income? 

Being able to manage with only one car - or indeed as you say an older one plus the existing second one is one thing - but when you've bought using finance actually having that choice is a tricky one because as you've found the depreciation takes its hit at the start leaving you potentially in a situation where the amount you'd get from the sale wouldn't cover the amount outstanding on the finance. Definitely start making sure you set aside money to cover ALL the expenses though - you're right, you are lucky to have  family member to do the routine servicing, but you still need to account for the stuff that could happen which isn't something they could - or would want to - fix, as well as the standard depreciative bits as well. Modern "nicer" cars tend to come with a higher price tag for things like tyres as well - My OH's old car (55 plate small hatchback) we could get a full set fitted for around £200 - his current vehicle (66 plate small SUV) would cost a full £100 more than that, as a rough guide. 

Side hustle isn’t included in our income figures - I don’t yet have a full year of trading to be able to average it out and it’s really variable month to month, especially towards Christmas. I’ve also just taken on a big wholesale customer but I don’t know how often they’ll order yet.

I’d need to double check the depreciation on my husband’s car, but for mine it was just over £4000. 

pinkteapot

Loads of good advice here. Just a comment re the peer pressure to go out for coffee etc - you've got a perfect excuse to use with friends and family now (not that you should need one, but I do understand!) - you can say you're cutting back as between the cost of living going up and a second baby on the way that means you'll lose loads of income due to your employer not doing maternity pay, you need to save up some money to see you through those months. See if people want to come to yours, or you go to theirs, or you meet in the park with your own food and drink - things like that. It's only a few quid a time but it really adds up.

As one of the issues is also the little extras like this, I'd suggest you and OH both keep a spending diary - literally a note in your phone/pocket of EVERYTHING you spend each day, no matter how small. You'll be able to see where little bits of money are leaking out.