Savings or Debt Repayment - Advice Please!

Skintdognotmillionaire

I have been bad at managing my money. I am sure this is a typical story here.

Me and my wife are crippled by monthly debt repayments as follows (not including mortgage).. This is coming at a very bad time with the rising bills etc. 

• Barclaycard - £2531.72 at 0% APR - (£121.55 calculated per month to clear the debt before the end of the 0% period ~ Dec 2023)
• Personal Loan (Prior consolidation) --- £10,887.45 (£222.20 per month, 49 payments remaining) 4.7% APR.
• Novuna Finance (Was Hitachi) -- £673.70 (£0 per month currently).... Interest-free period ends and payments begin 22/10/2022 (16.9% APR)
• Virgin Money Credit Card -- £450 at £50 per month (0%)
• Loan from Family -- £15,025 (Agreed 2.75% APR), Repayments flexible, Current monthly repayment £50

Total debt ~ £27,157 .. Current fixed monthly repayments ~ £443.75
Mortgage ~ £713 Pcm (Fixed until August 2025) ~ Roughly £133,000 remaining over 21 years.

Take-home household income (roughly) ~ £40,500 p/a
2 Adults, 2 Children, 1 Car

~

Heres the thing....

We also have £9,700 sitting in a savings account. We could use this to clear some of the debt and reduce our monthly repayments... but I have the folllowing issues

1. Unfortunately, the upstairs of our house is very dilapidated and we could really do with using this money to renovate the upstairs WC, fit new doors and have the place replastered. 
2. We also have a 14-year-old gas boiler which I have been told on good authority is on its last legs
3. Our family car is aging and giving us more and more problems. We could really do with replacing it ASAP but just don't have the money (note: A car is absolutely essential as we have to travel 500 miles per weekend for step-children plus commute to work.... we put around 28,000 miles on the car per year so they don't last long!
   

We also have a 12 old boiler that could need to be replaced

What is the sensible solution?

Sewn

you need to put up your SOA, it's too difficult to give you any advice when we don't know what your outgoings are, for instance on a joint income of £40k monthly fixed debt repayments of £443 doesn't mean anything when we don't know what the rest of your monthly outgoings are, do an SOA first then we can advise

Skintdognotmillionaire

Sewn said:

you need to put up your SOA, it's too difficult to give you any advice when we don't know what your outgoings are, for instance on a joint income of £40k monthly fixed debt repayments of £443 doesn't mean anything when we don't know what the rest of your monthly outgoings are, do an SOA first then we can advise

Is there a template I can use for an SOA? I did look but couldn't find one.

powerspowers

Less than £10k is unlikely to cover all the things on your list and if you spend that money on debt repayments you are going to have to take out more debt when either boiler or car packs in. I’d try to keep hold of the savings but this depends if you are in a position where you are paying debt down or is it still going up? 

A statement of affairs would be useful and help make a plan of how to start paying down the debts whilst keeping hold of the boiler/car money until it’s needed. 

Skintdognotmillionaire

Statement of Affairs and Personal Balance Sheet

Household Information

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

Number of children in household......... 1.5

Number of cars owned.................... 1

Monthly Income Details

Monthly income after tax................ 2357.17

Partners monthly income after tax....... 834

Benefits................................ 86.55

Other income............................ 0

Total monthly income.................... 3277.72

Monthly Expense Details

Mortgage................................ 716.8

Secured/HP loan repayments.............. 61

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

Management charge (leasehold property).. 0

Council tax............................. 120.98

Electricity............................. 82

Gas..................................... 82

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

Water rates............................. 58.18

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

Mobile phone............................ 59.57

TV Licence.............................. 13.18

Satellite/Cable TV...................... 33.99

Internet Services....................... 0

Groceries etc. ......................... 260

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

Petrol/diesel........................... 291.5

Road tax................................ 0

Car Insurance........................... 58.33

Car maintenance (including MOT)......... 49.16

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

Other travel............................ 8.5

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

Other child related expenses............ 103

Medical (prescriptions, dentist etc).... 18.28

Pet insurance/vet bills................. 6.2

Buildings insurance..................... 16.8

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

Life assurance ......................... 35.97

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

Presents (birthday, christmas etc)...... 60

Haircuts................................ 15

Entertainment........................... 400

Holiday................................. 70

Emergency fund.......................... 100

Total monthly expenses.................. 2770.44

Assets

Cash.................................... 9700

House value (Gross)..................... 165000

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

Car(s).................................. 1800

Other assets............................ 1500

Total Assets............................ 178000

Secured & HP Debts

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

Mortgage...................... 131467...(716.8)....3.49

Hire Purchase (HP) debt ...... 673......(61).......16.9

Total secured & HP debts...... 132140....-.........-   

Unsecured Debts

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

Monzo Personal Loan............10887.....222.2.....4.7

Virgin Money Credit ...........450.......60........0

Barclaycard....................2531.72...121.5.....0

Loan from Family...............15025.....0.........2.75

Total unsecured debts..........28893.72..403.7.....-  

Monthly Budget Summary

Total monthly income.................... 3,277.72

Expenses (including HP & secured debts). 2,770.44

Available for debt repayments........... 507.28

Monthly UNsecured debt repayments....... 403.7

Amount left after debt repayments....... 103.58

Personal Balance Sheet Summary

Total assets (things you own)........... 178,000

Total HP & Secured debt................. -132,140

Total Unsecured debt.................... -28,893.72

Net Assets.............................. 16,966.28

Created using the SOA calculator at www.stoozing.com. 

Reproduced on Moneysavingexpert with permission, using other browser.

TheAble

Entertainment seems a bit toppy? Can you trim that while you're paying your debts off?

Also maybe look again at the travel - it's a lot of money you're burning on petrol.

Skintdognotmillionaire

TheAble said:

Entertainment seems a bit toppy? Can you trim that while you're paying your debts off?

Also maybe look again at the travel - it's a lot of money you're burning on petrol.

Fuel is really unavoidable. I'm travelling over 450 miles a weekend to keep in contact with my Son. The alternative would be not being a part of his life and also ending up paying the same or more in child support for the privilege. 

SusieT

i would use enough savings to pay the Virgin card and Novuna (that will be higher interest when it kicks in), and leave the remainder as an emergency fund for the boiler (is that a 14 year old one or a 12 year old one, or do you have 2?), get a reliable but inexpensive car, and forget the upstairs of your house for now.
Then since the Barclaycard will be repaid within the 0% time (well done for sorting that out), family will probably understand if you do not pay more to them, and Monzo will pay itself off for now at a sensible interest rate I would put as much as possible into the savings sinnce you expect to have expensive essentials to pay for in the near future. You may also find that even with a more efficient boiler your gas and electric bills will go ou soon, so you will need some of the spaer to pay those. 
Then, when you have saved enough, either upgrade the car, or start to do the upstairs of your house from money that you have rather than with a loan. It may mean doing a bit at a time, but that is better than getting in more debt right now.

Skintdognotmillionaire

SusieT said:

i would use enough savings to pay the Virgin card and Novuna (that will be higher interest when it kicks in), and leave the remainder as an emergency fund for the boiler (is that a 14 year old one or a 12 year old one, or do you have 2?), get a reliable but inexpensive car, and forget the upstairs of your house for now.
Then since the Barclaycard will be repaid within the 0% time (well done for sorting that out), family will probably understand if you do not pay more to them, and Monzo will pay itself off for now at a sensible interest rate I would put as much as possible into the savings sinnce you expect to have expensive essentials to pay for in the near future. You may also find that even with a more efficient boiler your gas and electric bills will go ou soon, so you will need some of the spaer to pay those. 
Then, when you have saved enough, either upgrade the car, or start to do the upstairs of your house from money that you have rather than with a loan. It may mean doing a bit at a time, but that is better than getting in more debt right now.

Thanks SusieT for your comments. What you are saying makes a lot of sense to me.

I have always tried to borrow at low rates or 0% where possible but it has run away with itself a little.

To confirm, the boiler was installed 08/2008 so it's 14 years old this year - We just have the 1.

My biggest concern is the car because it has been getting very ropey over the last 2 years and I'm terrified of a large repair bill!

kimwp

Welcome! I don't think you can really say debt is crippling you when you are spending £530 on fun, holiday and presents and still have £100+ left each month after paying out for everything to be honest, but it's great that you've put together your SOA so you can get tackling this debt.

NB, I think you might have left a debt off your SOA (novuna finance?)

I believe Martin's view (which I subscribe to) is to pay off debt that costs more than savings - you can borrow money if you need it before you have built up another pot. In your case, I'd adjust this thinking a little to say if your car is costing you, then first get a new (second hand) reliable car.

Then pay all the minimums, while setting the 0% APR debts to pay off before interest starts being charged (which I think you've done). 

Then split the remainder into three - a boiler replacement pot*, overpaying the personal loan** and paying your family loan**.
* Unless you will be able to get credit at the time or you have enough after buying the car

** Check for any overpayment penalties

*** I'd normally say prioritise overpaying the highest Apr, but your family are losing out to loan you this money, so it seems fair to give them equal priority.

If the upstairs works, even if it doesn't look nice, then it's not a priority.

You'll need to make sure you understand why you are in this debt to avoid getting back into debt (but you don't need to share it here)

Skintdognotmillionaire

kimwp said:

Welcome! I don't think you can really say debt is crippling you when you are spending £530 on fun, holiday and presents and still have £100+ left each month after paying out for everything to be honest, but it's great that you've put together your SOA so you can get tackling this debt.

NB, I think you might have left a debt off your SOA (novuna finance?)

I believe Martin's view (which I subscribe to) is to pay off debt that costs more than savings - you can borrow money if you need it before you have built up another pot. In your case, I'd adjust this thinking a little to say if your car is costing you, then first get a new (second hand) reliable car.

Then pay all the minimums, while setting the 0% APR debts to pay off before interest starts being charged (which I think you've done). 

Then split the remainder into three - a boiler replacement pot*, overpaying the personal loan** and paying your family loan**.
* Unless you will be able to get credit at the time or you have enough after buying the car

** Check for any overpayment penalties

*** I'd normally say prioritise overpaying the highest Apr, but your family are losing out to loan you this money, so it seems fair to give them equal priority.

If the upstairs works, even if it doesn't look nice, then it's not a priority.

You'll need to make sure you understand why you are in this debt to avoid getting back into debt (but you don't need to share it here)

Hi Kimwp,

It’s guess it feels crippling to
me because 100% of my wages on on bills and debt. Maybe my wife feels differently as it is her that has the spending money.

I didn’t mean for this to seem insulting to others who are in reality struggling a lot more than we are so I apologise if it has come across that way.

The Novuna is the hire purchase on the SOA.

Thanks for the advice, I just really, desperately want to be debt free and the thought of extra borrowing is sickening.