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In a deep mess and not quite sure what to do

2

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  • SaverRate
    SaverRate Posts: 980 Forumite
    Sixth Anniversary 500 Posts Name Dropper
    What size house are you? If 3 bed or below gas and electric is seems high

    Mobile Phones @ £62 a month. Can you reduce this? if not in contract go sim only Use https://www.moneysavingexpert.com/cheap-mobile-finder/

    Can you reduce presents, holiday & entertainment?
  • It doesn't matter whether your wife knows you are posting on here or not. The most important thing is that she realizes that she has to cut back on spending in order for the family to be in a better place.

    I do hope neither of you are still spending on the credit cards and that you have been able to have the conversation with her regarding the mess you are in.

    If you are both careful with the income you have it should be solvable but you both need to be on the same page.
    If you go down to the woods today you better not go alone.
  • Martico
    Martico Posts: 1,198 Forumite
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    edited 21 August 2023 at 9:42AM
    Hi - so it looks like you have plenty to put towards the debt, but that your SOA might still need tweaking.

    How about this for a month 1 strategy while you refine the SOA:

    Pay minimum amounts on all CCs, pay contracted monthly amount on all loans, pay an additional £1,500 towards MBNA. This should leave you with just over £500. Put this into an easy access savings account for now, and see if you can get through the month without dipping into the £500. But you know that buffer is there for month 1, so that you don't need to reach for credit.

    Meanwhile, keep a daily spending diary and monitor where your spends are going. This will help inform your SOA and give you full knowledge of your true budget.

    And by the look of it, you might be paying your house and contents insurances monthly, as they appear quite high - save up so that you can pay both for the full year once it's renewal time. Monthly payments always incur a high credit cost, which you don't have with an upfront annual payment.

    Good luck!
  • Martico
    Martico Posts: 1,198 Forumite
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    While you do that, it's worth syphoning off any spends that may not come every month (so those that you allocate towards eg car maintenance, holidays, presents, christmas, etc) into separate savings pots, so that the money is there when needed
  • EssexHebridean
    EssexHebridean Posts: 24,672 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    edited 21 August 2023 at 10:04AM
    Teflon80 said:
    Hi Everyone 

    I am absolutely terrified at the position we are in. I have been reading through other threads and have done a SOA. (see below)

    Our debts are due to a multitide of reasons. General overspending, mental health issues ( wife), house repairs, disorganisation, maternity leave etc etc etc. There hasn;t been one BIG event that has led to this and we have both buried our heads for far too long. it's time to sort this now

    We are both now back working full time and my wife receives £515 PIP due to medical issues that she has. 

    we also owe my parents 15K but they are happy to wait for this for a while and therefore I have not included it

    I am trying to think positively and focus on the fact that our income is good and that we should be able to tackle this. Neither of us are looking for a quick fix and if possible. I would like to avoid debt management

    Please can you take a look at my SOA. It's very difficult sharing this and I feel sick with shame 

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 2
    Number of cars owned.................... 2[b]

    Monthly Income Details[/b]
    Monthly income after tax................ 4090
    Partners monthly income after tax....... 1550
    Benefits................................ 515
    Other income............................ 300[b]
    Total monthly income.................... 6455[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 576
    Secured/HP loan repayments.............. 0
    Rent.................................... 0
    Management charge (leasehold property).. 0
    Council tax............................. 135
    Electricity............................. 130
    Gas..................................... 159 These (gas and electric) seem quite high, and I suspect there is savings to be made there - have you embarked on any efforts to ensure that people are turning things off when not in use, and do you have a plan in place for how the heating gets used once the weather changes? (ie making sure that people put a jumper on before turning the heating on, that sort of thing)
    Oil..................................... 0
    Water rates............................. 57
    Telephone (land line)................... 0
    Mobile phone............................ 62 Yes - agree with others that this is fairly high, even if it is for 4 phones you can make savings there. Diarise when contracts are due to end, and look for SIM only deals - and make sure that the kids are aware that their phones will NOT be being replaced at that stage! 
    TV Licence.............................. 13
    Satellite/Cable TV...................... 57
    Internet Services....................... 0
    Groceries etc. ......................... 400
    Clothing................................ 30 Are you sure this covers everything? School uniforms, sports kit, shoes...? 
    Petrol/diesel........................... 350 Ok - so you are pretty high mileage, yes?
    Road tax................................ 6 Hopefully you don't pay this monthly as that carries a premium?
    Car Insurance........................... 80 This is high - have you established why that is? Do you use comparison sites at renewal?
    Car maintenance (including MOT)......... 50 This sounds low allowing for the mileage - you've already said that you are intending to look at this but remember to include all the consumables and depreciative items.
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 9
    Pet insurance/vet bills................. 38
    Buildings insurance..................... 21
    Contents insurance...................... 12
    Life assurance ......................... 41
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 100 Probably really a little high allowing for your position at the moment. 
    Haircuts................................ 15
    Entertainment........................... 200 Again, it could be said that this is a little high, but you certainly do need to ensure that there is something showing here. Just remember that whatever you budget, you don't HAVE to spend it every month, you can always elect to "roll forward" any excess for another month, or even to bolster your christmas/presents spending budget. 
    Holiday................................. 100 Where are you saving this, allowing there are no cash assets showing? 
    Emergency fund.......................... 0 This needs to change - even allowing that you have the ability to build the initial £1000 for the EF, still look to budget £50 a month at the moment to continue to build that pot and make it more robust.[b]
    Total monthly expenses.................. 2641[/b]
    [b]

    Assets[/b]
    Cash.................................... 0
    House value (Gross)..................... 260000
    Shares and bonds........................ 0
    Car(s).................................. 7000
    Other assets............................ 0[b]
    Total Assets............................ 267000[/b]
    [b]

    Secured & HP Debts[/b]
    Description....................Debt......Monthly...APR
    Mortgage...................... 46520....(576)......4.11[b]
    Total secured & HP debts...... 46520.....-.........-   [/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    barclaycard 1..................12741.....287.......6.9
    barclaycard 2..................4000......105.......6.9
    barclaycard 3 ( Wife)..........9000......271.......19
    creation.......................4100......121.......21
    Tesco..........................3600......36........0
    mbna...........................8900......276.......33 I assume this is a relatively recent debt, looking at that interest rate?
    Fairscore loan (wife)..........8000......210.......16
    Fairscore loan.................14000.....360.......19
    halifax loan...................3800......132.......8[b]
    Total unsecured debts..........68141.....1798......-  [/b]

    [b]
    Monthly Budget Summary[/b]
    Total monthly income.................... 6,455
    Expenses (including HP & secured debts). 2,641
    Available for debt repayments........... 3,814
    Monthly UNsecured debt repayments....... 1,798[b]
    Amount left after debt repayments....... 2,016 This is great,  but you definitely need to be sure that you do have this, and that it doesn't get frittered. [/b]

    [b]Personal Balance Sheet Summary[/b]
    Total assets (things you own)........... 267,000
    Total HP & Secured debt................. -46,520
    Total Unsecured debt.................... -68,141[b]
    Net Assets.............................. 152,339[/b]

    Comments on the SOA in bold above - but I will also open by saying how great it is that you have arrived here with eyes already open and lightbulb moment definitely well and truly happened. I sense a little ambiguity around your wife's position in that - although I definitely understand the position with the challenges around her mental health, it really is important that she is fully aware of the position and that the spending habits have to change. otherwise, you can work as hard as you like on this but if your wife seems money in the account and at certain times, when she is in a low place, she feels that she can spend as needed to "make herself feel better" then you will be swimming against the tide. I'd agree with the earlier post that stepping fully away from the credit cards is your first step forwards here. The good news on that is that with that surplus showing, you can instantly put in place your basic emergency fund - just take £1000 of the next month's surplus (hopefully that will be able to happen at the end of this month?) and stick that aside in an account that is easy access, but not necessarily instant access. 

    I think the overwhelming feeling you have that you have a good enough income to be able to sort this out is correct - and yes, you  may well be able to do it without any form of debt  management although this may also prove to be a more expensive route. You mention not having any access to further 0% transfer deals - have you checked on the MSE Credit Club whether there is ANY chance of you getting anything in the way of 0% offers from any providers? 

    Personally if I were in your position I'd be using the next couple of months for a few things:
    - Learning to live with that budget - and finding out what needs tweaking
    - setting up a "pot" for your emergency fund, and others for the other things you save for monthly. I would also make one of those for car expenses, and that should include working towards paying your next car insurance renewals upfront, for the year. 
    - Stopping the use of credit cards completely - neither you nor your wife should carry your CCs around routinely any more - by all means continue to have one stashed in a safe place at home that could be used in a dire emergency.
    - Introducing the family to the concept that Christmas this year will perhaps look a little different to previous, that presents will not be the latest big-ticket item, and that the general spending will be more restrained. 

    Assuming that you are still of a view that you want to go forward with no specific debt-management plan in place I would also be going through the monthly payments for each debt, setting it to slightly above the current minimum as a standard monthly amount payable *. This has the effect of meaning that you knock a little more off each debt as time runs on than the minimum payment would allow, and also makes it far easier to budget, too. You then direct all the remaining surplus each month to a single debt - usually the one with the highest interest rate. once that debt is cleared, you take ALL the money you were throwing at the one you have just cleared, and throw that at the one with the NEXT highest interest rate. That is the "snowballing" method that has been mentioned. 

    I think you are in a very good position to be able to sort this out, but the whole family needs to be on the same page on it, otherwise you are going to find the whole process even more difficult than it otherwise would be. 

    * This method is ONLY for use on any cards that are not in use - if you are still using the cards at all, then better by far to leave the direct debt set to take the minimum due as set by the card company.
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  • fatbelly said:
    Teflon80 said:
    Hi, 

    Thanks for posting. I have seen some of your other advice on other threads so I was hoping you would post :)

    Do you think that we can get away without debt management given the scale of our debt? I imaging that we are a pretty extreme case 
    Yes I do - unless you have something happen that knocks your income.

    If you are serious about clearing this you may want to scale back on the presents and entertainment and holiday fund for a bit. There are plenty of cheap options that the other boards will help you with.

    If you took 'professional' advice they may suggest an IVA but I think that you can do this in a shorter (than 6 year) timescale with less problems and avoiding insolvency. 

    Please prove me right!
    Thanks for posting again 

    I did look into options such as a DMP or an IVA but my understanding was that these methods are for people who are not able to make their minimum payments. Despite our shocking debt, we are able to pay the minimums, plus some more given our new income. 

    Would an IVA every be suitable for us? I am not totally against these methods if it's the best route, but would prefer to avoid it if not

    Thank you
  • sourcrates
    sourcrates Posts: 31,950 Ambassador
    Part of the Furniture 10,000 Posts I've been Money Tipped! Name Dropper
    edited 21 August 2023 at 10:42AM
    I would want to avoid debt management or insolvency as things stand.

    Try not to beat yourself up too much over this, you have a monthly income most can only aspire to, but it is kind of typical for earners in your income bracket, to also have larger amounts of unsecured credit, swayed by the notion that you can always afford the monthly payments.

    Well currently that is the case, so I agree snowballing is your best approach to this.

    Unless the situation changes drastically, go with the advice given.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • TheAble
    TheAble Posts: 1,676 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    I would just add, don't neglect the debt to your parents. It's easy to let these things slide "because it's family/interest free" but in some ways these types of debts are the most important of all because they have the potential to damage your personal relationships. Also while it's interest- free to you it's costing them at least £750/year in interest foregone. 

    So, once you've got some of the more painful debts out of the way, maybe start to pay them back on this one.
  • RAS
    RAS Posts: 36,107 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 21 August 2023 at 12:29PM

    Just to reiterate, there are savings, which will be better spent clearing debt, and there is proper budgeting. 

    There are loads of annual costs for which you need to budget monthly. Christmas, birthdays, holidays, insurance renewals, MOTs, boiler service all come round once a year and if you haven't budgeted for them, it's likely they will end up on a credit card. If you are paying them monthly, there's often a premium. 

    How much did you spend on all those items last year? Divide by 12 and put that into a budgeting account. That way you can cover the annual costs without paying a premium or putting it on a card. If you are paying an insurance monthly, you can now pay it as a lump sum and save quite a bit. You may not get them all onto annual payment the first year, but should aim for it.

    And since you own a house, you also need to make an allowance for basic maintenance unless you re a DIY fiend. It could go in the same pot as the emergency find, Or it may go into it's own account.

    You need some money in an instant access account, and another lot in a notice account, or perhaps in an ISA that allows a small number of debits each year, which you can use for the bigger ticket annual spends.

    If you've have not made a mistake, you've made nothing
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