Time to make a change - Debt-free wannabee!

Lamech_43

Hi Everyone,

I have been in 2 minds about whether to sign up to this forum & submit a post but after seeing the level of support and genuinely useful positive comments / information I have decided to give it a go.

I have managed to accumulate a large amount of unsecured debt over the years. This has been due to several reasons but a fair proportion of it has just been down to bad money management & a lot of waste.

I am looking for judgement – I know I could be in a much better position right now and I very much wish I had done things differently. Here I am looking to make a positive change, start managing money correctly & ultimately start chipping away at this unsecured debt.

I have filled out a SOA as accurately as I can. I do have a partner, but I have not included income details as we keep our money separate. The entry for groceries is low as my partner contributes towards this.

Any advice or suggestions anyone has would be great – I will use this forum to document & share progress on my debt-free wanabee journey.

Household Information

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

Number of children in household......... 0

Number of cars owned.................... 2

Monthly Income Details

Monthly income after tax................ 4320

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

Benefits................................ 0

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

Total monthly income.................... 4320

Monthly Expense Details

Mortgage................................ 1250

Secured/HP loan repayments.............. 158

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

Management charge (leasehold property).. 0

Council tax............................. 160

Electricity............................. 100

Gas..................................... 100

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

Water rates............................. 58.7

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

Mobile phone............................ 78.48

TV Licence.............................. 13.25

Satellite/Cable TV...................... 35

Internet Services....................... 35

Groceries etc. ......................... 100

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

Petrol/diesel........................... 100

Road tax................................ 25

Car Insurance........................... 50

Car maintenance (including MOT)......... 100

Car parking............................. 15

Other travel............................ 75

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

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

Medical (prescriptions, dentist etc).... 25

Pet insurance/vet bills................. 25

Buildings insurance..................... 16.75

Contents insurance...................... 16.75

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

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

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

Haircuts................................ 40

Entertainment........................... 200

Holiday................................. 150

Emergency fund.......................... 150

LISA Contribution....................... 100

Spotify................................. 9.99

Netflix................................. 10.99

Online Gaming Subscription.............. 6.99

Amazon Prime............................ 8.99

Bank Account Fee (Ins & AA)............. 21

Total monthly expenses.................. 3334.89

Assets

Cash.................................... 50

House value (Gross)..................... 520000

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

Car(s).................................. 8000

Other assets............................ 0

Total Assets............................ 528050

Secured & HP Debts

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

Mortgage...................... 236000...(1250).....1.19<

Secured Debt#2.................870......(73).......0<

Secured Debt#1.................1023.....(85).......0

Total secured & HP debts...... 237893....-.........-

Unsecured Debts

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

Loan#1.........................30850.....400.......0

Loan#2.........................15153.....490.......6.7

Overdraft......................2000......0.........38

Total unsecured debts..........48003.....890.......-

Monthly Budget Summary

Total monthly income.................... 4,320

Expenses (including HP & secured debts). 3,334.89

Available for debt repayments........... 985.11

Monthly UNsecured debt repayments....... 890

Amount left after debt repayments....... 95.11

Personal Balance Sheet Summary

Total assets (things you own)........... 528,050

Total HP & Secured debt................. -237,893

Total Unsecured debt.................... -48,003

Net Assets.............................. 242,154

JayRitchie

Hi

I'm sure you'll get loads of great advice here!

Perhaps you could clarify a couple of things:

- your mortgage rate is 1.19%. When is this fixed until?

- I couldn't quite follow how income, expenditure and taxes are split with your partner? Is the mortgage entirely yours? Are the bills split?

JayRitchie

Oh, and you have secured and unsecured loans showing at 0% interest. Is this correct?

Floss

At first glance:

£150 savings in emergency fund but no savings? So you are spending that money somewhere...
LISA contribution - is this in your partners name? You should show it as an asset.

enthusiasticsaver

What were those unsecured loans taken out for? Previous debt consolidation loans?  

You have a good income but you obviously do spend it.  Although you state £150 for emergency savings each month and a LISA those are not showing as assets. I am assuming you do not pay £16.75 each for buildings and contents insurance.  If so that is expensive. The mobile cost is also high and a bank fee of £21 per month is very high.  An AA subscription will cost you way less than £250 a year. What insurance is that for if you are already paying over £30 for buildings and contents insurance? 

The overdraft is your most urgent debt as it is probably the most expensive and can be withdrawn at any time.  Do you use it or has it just been agreed and you do not go into it?  

Are you sure you have a fair split of bills if you are paying the mortgage and utilities plus some of the groceries.  What does your partner pay? 

Can you reduce holiday, entertainment and get rid of some of those other subs like spotify/amazon prime or the online gaming one? Are there other costs to the gaming you have not included?

I think you do need to really go through your spending with a fine toothcomb and cut back wherever possible.  When does your mortgage come up for renewal? 

Lamech_43

Thank you for all the replied, I have tried to clarify some of the points below...

• The SOA is purely based on my income & expenditure.
• My current mortgage interest rate is fixed for another 3 years & is entirely mine.
• My partner contributes towards groceries & holiday fund, but I have only included my contributions in the SOA.
• I have only just opened the LISA following a post I read on this forum. It is in my name only - I will move it into the asset section for the next SOA update I post.
• The secured & unsecured loans showing 0% interest are accurate.
• My buildings & contents insurance are a combined policy - £33.50/Month
• The bank fee of £21/Month covers mobile phone insurance, worldwide travel insurance & AA breakdown cover, I have only kept this going as its quite an extensive package (Travel ins. includes winter sports & AA covers other cars if you are a passenger etc.).
• The emergency savings is something I have done each month but spent due to poor money management / impulsive spending so there is nothing to show for this currently.
• The unsecured loans have been taken out for previous debt consolidation.

TheAble

The big unsecured loan - is the 0% an introductory rate or will it be for the life of the loan? If it's going to become interest-bearing at some point then factor in any increased repayment.

Bear in mind when the mortgage comes up for renewal it could be at around the 5% mark so consider what your new payment will be then. Obviously at the moment you're only just meeting overall debt repayments so you need to build in some slack to accomodate this.

The overdraft is costing you around £65/month. As ES has pointed out, note that the bank has the right to recall this at any time (and as credit conditions tighten a number of customers are already experiencing this so don't be too surprised if it happens).

enthusiasticsaver

I think clearing your debts is more of a priority than the LISA so I would direct it towards debt repayment. 0% loans are rarely if ever seen. Is it a family debt? 

The overdraft should be tackled first then the interest bearing loan but ideally you need shot of a lot of that debt to give you spare income to repay the increased mortgage payment when it increases as it will. I don’t think I would be doing holidays either until you have the debt sorted as you clearly don’t have savings to pay for them unless you already have one booked and paid for. When the secured loans finish also put those payments towards debt.

on the plus side you have no credit card debt and I strongly recommend you don’t get any cards until you have your spending habits sorted and got rid of the £48k of old debt. Debt consolidation almost always leads to the point where you are forced to consolidate again so well done for trying to address this before you go down this route again. 

enthusiasticsaver

House insurance is always loads cheaper if you pay annually. Check out the cost for that and divide by 12 so you can see the difference. Also check you don’t have extras on the policy you can do without as that is an expensive policy unless you live in a high crime area. Our house is 4 bed detached and I paid £130 annually for buildings and contents combined this year. 

enthusiasticsaver

One more comment.

I assume you have the Lloyds platinum account. I checked out whether they offer 0% overdrafts as that is the only reason it is worth keeping but it appears not.  Unless you travel a lot or have a large family the cost of that packaged account is not worth the benefits you get from it. The AA cost could probably be got cheaper direct and unless you are fairly old or have health conditions travel insurance is not that expensive. Your contents insurance is high so may already cover your mobile phone. 

EssexHebridean

Lamech_43 said:

Hi Everyone,

I have been in 2 minds about whether to sign up to this forum & submit a post but after seeing the level of support and genuinely useful positive comments / information I have decided to give it a go.

I have managed to accumulate a large amount of unsecured debt over the years. This has been due to several reasons but a fair proportion of it has just been down to bad money management & a lot of waste.

I am looking for judgement – I know I could be in a much better position right now and I very much wish I had done things differently. Here I am looking to make a positive change, start managing money correctly & ultimately start chipping away at this unsecured debt.

I have filled out a SOA as accurately as I can. I do have a partner, but I have not included income details as we keep our money separate. The entry for groceries is low as my partner contributes towards this.

Any advice or suggestions anyone has would be great – I will use this forum to document & share progress on my debt-free wanabee journey.

Household Information

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

Number of children in household......... 0

Number of cars owned.................... 2

Monthly Income Details

Monthly income after tax................ 4320

Partners monthly income after tax....... 0 This does make it pretty hard to see what exactly the household spending is - assuming that you are confident that your choice of username doesn't identify you could you do an SOA with this detail and full expenditure in it? 

Benefits................................ 0

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

Total monthly income.................... 4320

Monthly Expense Details

Mortgage................................ 1250 

Secured/HP loan repayments.............. 158

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

Management charge (leasehold property).. 0

Council tax............................. 160

Electricity............................. 100

Gas..................................... 100

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

Water rates............................. 58.7

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

Mobile phone............................ 78.48 This is just for your own phone I assume? If so then it is very high. If it covers your partners as well then it is still very high, mind you! Diarise when your contact ends and a month ahead of that point start looking at SIM only deals - you should get something manageable for around £10 a month, these days, and very probably cheaper. 

TV Licence.............................. 13.25

Satellite/Cable TV...................... 35 Lose this, keep the Netflix subscription and buy yourself a Chromecast if you don't already have a smart TV. 

Internet Services....................... 35

Groceries etc. ......................... 100

Clothing................................ 50 Not every month, while you've got that level of debt. For the time being spending needs to be "socks and pants" only, and those only when needed. If you know you need new work clothes in 6 months time, start stashing aside money now to cover those. 

Petrol/diesel........................... 100

Road tax................................ 25 Don't pay this monthly - it carries a premium to do it that way. Pay for a year up front and save monthly to enable that to happen.

Car Insurance........................... 50

Car maintenance (including MOT)......... 100 I'm concerned that you state this as a car maintenance figure but there is only £50 showing in cash assets - is this amount actually being set aside? Also is this for one car or two? You appear to do reasonable mileage so do be cautious about whether the amount you are allowing here will cover everything - servicing, MoT Test, tyres etc. 

Car parking............................. 15

Other travel............................ 75

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

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

Medical (prescriptions, dentist etc).... 25

Pet insurance/vet bills................. 25

Buildings insurance..................... 16.75

Contents insurance...................... 16.75

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

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

Presents (birthday, christmas etc)...... 50 Same question as before - allowing that we are half way through the year I'd expect to see some savings towards christmas presents and your cash assets don't reflect that. 

Haircuts................................ 40 Every month? that's a lot of haircuts - spending here needs to be reduced allowing for your debt - you're simply not high maintenance people right now, I'm afraid! 

Entertainment........................... 200 Sorry but this is too high allowing for the level of debt you have. Halve it as a starting point. 

Holiday................................. 150 As before - where is this being saved? IS it actually being saved?

Emergency fund.......................... 150 Again, no sign of this?

LISA Contribution....................... 100

Spotify................................. 9.99 Choose either this or the gaming subscription to keep, lose the other one and put the money to debt payments. 

Netflix................................. 10.99

Online Gaming Subscription.............. 6.99

Amazon Prime............................ 8.99

Bank Account Fee (Ins & AA)............. 21 What insurance do you get for this money? I have just paid AXA for our breakdown insurance for the year - and we have paid under £40 per car. There are also cheaper packaged bank accounts available out there that offer benefits of this type - have a look and see if you can do a switch and get paid to do it as well. 

Total monthly expenses.................. 3334.89

Assets

Cash.................................... 50

House value (Gross)..................... 520000

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

Car(s).................................. 8000

Other assets............................ 0

Total Assets............................ 528050

Secured & HP Debts

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

Mortgage...................... 236000...(1250).....1.19<

Secured Debt#2.................870......(73).......0<

Secured Debt#1.................1023.....(85).......0

Total secured & HP debts...... 237893....-.........-

Unsecured Debts

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

Loan#1.........................30850.....400.......0

Loan#2.........................15153.....490.......6.7

Overdraft......................2000......0.........38

Total unsecured debts..........48003.....890.......-

Monthly Budget Summary

Total monthly income.................... 4,320

Expenses (including HP & secured debts). 3,334.89

Available for debt repayments........... 985.11

Monthly UNsecured debt repayments....... 890

Amount left after debt repayments....... 95.11 But do you actually have this amount left each month? I'm guessing not...

Personal Balance Sheet Summary

Total assets (things you own)........... 528,050

Total HP & Secured debt................. -237,893

Total Unsecured debt.................... -48,003

Net Assets.............................. 242,154

First up, congratulations on your honesty about where you are at and how you've arrived there. Also, you are far from the first person on here to have learned the hard way that consolidation doesn't clear debt, it just makes it a problem for a point in the future, probably on a bigger scale. 

Comments in the SOA in Bold above. 

I'm afraid this SOA doesn't ring true as accurate for me - although it's difficult to see the full picture because we only have a proportion of the household income showing, there is a total of £450 being budgeted for as savings for either big one offs (holiday, car maintenance, presents) or your emergency fund, and no sign of where this month is actually going - usually when we see that in an SOA it points to the SOA having been put together with a "this is what I should be doing" head on - and that's not helpful. it also means that your entire budget is based on the false impression that you actually spend less in various categories than you do - for example you might be documenting £300 a month spent on groceries because that's what the Tesco receipts say, but ignoring the additional £150 being spent on takeaways or eating out. 

Open a savings account for the EF money - and make it a "limited access" one - so one that allows you to take money out of it maybe 6 times in a year (Coventry Building Society do something that might suit). That then forms a deterrent to withdrawing, because the interest rate will plummet if you do. As a starting point, pay £100 into that each month - and remind yourself it is there for genuine emergencies - NOT "Ooh - shiny thing, must have...". This is the pot that means if the fridge breaks, you can replace it. If you need a new kettle, then the money is there.  You can also do something similar for other "budgeted for" spending - I have savings pots for car expenses, presents, holiday, clothing and various other things. 

Do you have a holiday booked that you are currently saving for? If not, time to reflect and revisit future "ideal world" plans - sure it would be lovely to go off to somewhere hot and sunny for a fortnight, but right now you can't afford to be that person. Have a think of some cities you'd like to visit. Choose one and price up a long weekend break to it - remember to include spending money. Making it a city where the public transport is good - and use that rather than hiring a car. Book an Airbnb not a posh hotel. Budget airline not a posh one. Make a further list of things you could do in your local area - days out a couple of hours drive at most away. Local museums and other attractions - preferably free or at least super cheap. Plan a week off staying at home and visiting those places. Budget for a small amount of spending money, but assume that if you have a  meal out one day, you need to make and take a picnic for the next. Add up the cost of these things (clue - it should be substantially cheaper than your current holiday budget figure) and set aside that amount monthly. Put the balance of the amount you are currently budgeting to overpaying the most expensive debt.