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Help with debt next steps…
Sarahbridget
Posts: 3 Newbie
Hi everyone, Apols in advance for the long post. My husband and I have got ourselves into debt after years of over spending and unreliable freelance work. For the first time in decades, we are now both full time employed. I’ve completed the SOA below and just wondered if I could use the forums expertise to work out what to do on the journey to becoming debt free. Am starting to worry that the only way out is a DMP but concerned that this will prevent future house moves. Thankyou so much all… in case relevant, I’m 52 and my partner is 47; he has a separate credit card in his name which he pays and isn’t included here. All debts below are in my name except the loan, which is joint; but the payments are made from the joint current account.
We have just applied for the six month mortgage cost of living relief, which means our repayments drop from 1900 to 365 per month; I’m hoping we can use this to kickstart our debt-free plan.
Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 1
Monthly Income Details
Monthly income after tax: 3100
Partners monthly income after tax: 2000
Benefits................................ 0
Other income............................ 0
Total monthly income..................5100
Monthly Expense Details[/b]
Mortgage................................ 1900
Secured/HP loan repayments.............465
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 186
Electricity............................. 340
Gas..................................... 0
Oil..................................... 0
Water rates............................. 66.7
Telephone (land line)................... 0
Mobile phone............................ 170
TV Licence.............................. 13.25
Satellite/Cable TV...................... 59.27
Internet Services....................... 0
Groceries etc. ......................... 600
Clothing................................ 100
Petrol/diesel........................... 250
Road tax................................ 13
Car Insurance........................... 68.18
Car maintenance (including MOT)......50
Car parking............................. 0
Other travel............................ 300
Childcare/nursery....................... 0
Other child related expenses............400
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 50
Buildings insurance..................... 44.15
Contents insurance...................... 0
Life assurance ......................... 0
Other insurance......................... 0
Presents (birthday, christmas etc).....100
Haircuts................................ 50
Entertainment........................... 200
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses...............5425.55
Assets
Cash.................................... 0
House value (Gross)....................750000
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 0
Total Assets...........................753000
Secured & HP Debts
Description........Debt......Monthly...APR
Mortgage..........350000...(1900).....2.2
Secured Debt.... 65000....(465)......9
Total secured & HP debts: 415000....
Unsecured Debt
Loan..................17000.....345....... 9%
Credit
card....................10000.....243.......22%
card....................10000.....243.......22%
Credit card....................500.......25........22%
Credit card....................3000......50........22%
Credit card....................6000......112.......0%
Total unsecured debts........……..,,,36500.. 775.......
Monthly Budget Summary
Total monthly income.................... 5,100
Expenses (including HP & secured debts). 5,425.55
Available for debt repayments........... -325.45
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Comments
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A number of things jump out, the children how old are they? I guess from your age they are not toddlers.
Presents, haircuts and entertainment seem high, any way of reding those?If you go down to the woods today you better not go alone.0 -
Welcome. Firstly if you are including your partners income etc in your SOA then it’s a good idea to include his credit card debt too.Others here will forensically go through your info but what strikes out to begin with is food costs - does that include takeaways? And of course mobile phone costs. If you’re not tied into a contract there are some great sim only deals out there for less than £10. You don’t need unlimited gigs of data. I use mine a lot but still rarely use more than 10gb a month,
Good luck0 -
Thankyou both. Yes, we can reduce on presents definitely. Entertainment I used as a catch all place to put misc spending and unexpected outgoings, ie school trip payments, parking costs etc. but it could come down. I think we could get food down a bit but both kids are early teens so eat a lot and that includes pet food too. I’m going to see if I can get a work mobile so that will bring those costs down I hope! Thanks again.0
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OK So your children are old enough to be told money doesn't grow on trees and they are going to accept that they can't just get everything they want when they want it.
Does the mobile phone costs include phones for them?
I hope you are not paying expensive contracts for their phones when they should be Sim only.
Are they old enough to get a little part time job?
Another thought what is the £400 other child expenses?If you go down to the woods today you better not go alone.0 -
If you can extract these figures from the "catch-all" of entertainment it will help to clarify exactly where your money is going. You are already in a shortfall situation so need to look at bringing your outgoings within your income by cutting costs, as well as paying off some of the debt.
£170 seems very high for mobiles - I guess this is for 4? When are they out of contract?
Building insurance is high - does this include contents?
You have put £100 for presents Christmas etc but have nothing saved - and have no emergency find so I guess that any breakdown / gifts etc have previously gone on credit cards.
I would suggest that you immediately pay off the £500, and pay an extra £500 off both the £3k and the £10k Then next month pay £1,000 off the £10k and £500 off the £3k, and so on until your 6 months relief is up. You will have had over £9k in 6 months, so can clear 2 cards & make a good dent in the balance on the higher interest rate card.
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Even without any debt repayments you are spending £325 more than you have coming in - you need to deal with this or you will get nowhere with the debt issue. It might be helpful to start not from what you want to spend, but from the money you have - you have £5100 coming in a month, how are you going to use it on life and debt?You need to cut everything that has crept up through habit, or nice to have. Travel and fuel are high - is every journey necessary, could any be combined? Food - fill up on carrots and bread and peanut butter and other cheap stuff, drink tap water. Electricity - make sure your heating and water heating are optimised for efficiency. Other child - what is that?But a banker, engaged at enormous expense,Had the whole of their cash in his care.
Lewis Carroll1 -
Sarahbridget said:Hi everyone, Apols in advance for the long post. My husband and I have got ourselves into debt after years of over spending and unreliable freelance work. For the first time in decades, we are now both full time employed. I’ve completed the SOA below and just wondered if I could use the forums expertise to work out what to do on the journey to becoming debt free. Am starting to worry that the only way out is a DMP but concerned that this will prevent future house moves. Thankyou so much all… in case relevant, I’m 52 and my partner is 47; he has a separate credit card in his name which he pays and isn’t included here. All debts below are in my name except the loan, which is joint; but the payments are made from the joint current account.We have just applied for the six month mortgage cost of living relief, which means our repayments drop from 1900 to 365 per month; I’m hoping we can use this to kickstart our debt-free plan.Statement of Affairs and Personal Balance SheetHousehold InformationNumber of adults in household........... 2Number of children in household......... 2Number of cars owned.................... 1Monthly Income DetailsMonthly income after tax: 3100Partners monthly income after tax: 2000Benefits................................ 0Other income............................ 0Total monthly income..................5100Monthly Expense Details[/b]Mortgage................................ 1900Secured/HP loan repayments.............465 what is this for?Rent.................................... 0Management charge (leasehold property).. 0Council tax............................. 186Electricity............................. 340 this is very high. You need to work together on reducing it a lot this winter. Keep the rooms at 16 degrees, layer clothes and hit primark for thermals.Gas..................................... 0Oil..................................... 0Water rates............................. 66.7Telephone (land line)................... 0Mobile phone............................ 170 this is huge. Are you paying for the latest upgrades in Iphone etc?TV Licence.............................. 13.25Satellite/Cable TV...................... 59.27 reduce for now, and kill this or the TV licence altogether when you renewInternet Services....................... 0Groceries etc. ......................... 600 aim for £100 of this for a start. Cut snacks, teach the kids to microwave a potato, and meal plan.Clothing................................ 100 good but is this actually what you spend?Petrol/diesel........................... 250 does this include a commute?Road tax................................ 13Car Insurance........................... 68.18Car maintenance (including MOT)......50Car parking............................. 0Other travel............................ 300 what is this?Childcare/nursery....................... 0Other child related expenses............400 what is this?Medical (prescriptions, dentist etc).... you need something here if only the cost of prescriptions and check-ups.Pet insurance/vet bills................. 50Buildings insurance..................... 44.15 hopefully this includes contents?Contents insurance...................... 0Life assurance ......................... 0 Would your pension schemes pay out big enough lump sums to pay off the mortgage? Even so, you need this.Other insurance......................... 0Presents (birthday, christmas etc).....100 you need to cut back.Haircuts................................ 50Entertainment........................... 200 based on your response, you need to separate out these costsHoliday................................. 0 never, ever, not even a trip to friends and relatives?Emergency fund.......................... 0 you need this.Total monthly expenses...............5425.55AssetsCash.................................... 0House value (Gross)....................750000Shares and bonds........................ 0Car(s).................................. 3000Other assets............................ 0Total Assets...........................753000Secured & HP DebtsDescription........Debt......Monthly...APRMortgage..........350000...(1900).....2.2 - when is the renewal?Secured Debt.... 65000....(465)......9Total secured & HP debts: 415000....Unsecured DebtLoan..................17000.....345....... 9% - is this a previous consolidation? How long ago?Credit
card....................10000.....243.......22%Credit card....................500.......25........22%Credit card....................3000......50........22%Credit card....................6000......112.......0% when does this end and what rate does it revert to?Total unsecured debts........……..,,,36500.. 775.......Monthly Budget SummaryTotal monthly income.................... 5,100Expenses (including HP & secured debts). 5,425.55Available for debt repayments........... -325.45
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This looks a bit aspirational, with lots of round figures?
Your expenses currently exceed your income, when the mortgage increases you are going to be in trouble.
Taking a break on the mortgage is not the best way to tackle this, as your should be paying priority debts, and not paying the unsecured debts, if necessary. But you have so much expenditure where it's unclear what you are actually doing that it looks like you could balance things if you all work at it.
Is hubbie fully on page re sorting out the debt? If not, you are going to really struggle.
It's a bank holiday weekend, hopefully the kids are occupied. But it wouldn't be bad for them to see you and hubbie working on this as the kitchen table.
The pair of you need to get out the last 6 months' statements, and ruthlessly work through them and allocate every single payment to a category. For annual costs, just divide by 12, and add hubbie's card. Then come back with the real expenditure
It wouldn't surprise me if there are a lot of lattes and lunchtime purchases on top of your grocery bill? Takeaways, the odd McDonald's or Pizza Express? A few bits of the kids alongside the supermarket shop?
You own a home, so you need an budget line for repairs and maintenance. In the short term, set up a new bank account and put £50 a month in there.
Your priority over the next month is to stabilise your situation. That means massively reducing your non-priority costs so your expenditure is less than your income. And that budget needs to assume you are paying the full mortgage, not the reduced rate. You have to cut your coat according to your cloth.
Get the kids involved. Explain you have to cut costs because of the cost of living crisis and the (soon to be) mortgage increases.
No takeaways, so you need a menu plan. Probably three that you rotate to begin with. Bulk cook and freeze, or cook two and freeze one for next month. Only use the oven when you can make full use it's power and go over to the Old Style Money Saving forum for ideas on reducing costs. For example, pasta is better for you cold or reheated. So make an extra portion of pasta, divide in two, add mayo and fridge bits plus a tomato and you have a couple of pasta salads for lunch, or an after school fillers for the kids.
Read the electricity meters every couple of weeks. Monitor showers, as they are expensive, make everyone wear appropriate clothes for the season, and lower the heating. Sort out the hideous phone costs.
Can't give much advice on other things as you don't know where a lot of the money is going.
Meantime
Pay off your smallest 22% card in full this month, and then reduce the £3k one. Next month add £200 to the emergency fund and pay £100 onto the third 22% card and the rest towards the same card. Clear that card on month 3.
Without knowing when you 0% deal ends and what it reverts to, it's impossible to advise whether you then hit the other 22% card or whether you need to concentrate the money released on clearing the 0% card before it reverts to full cost. So the length of the deal and reversion rate are vital.
By the time your relief ends, you need to have cleared £9k worth of debt, and will have saved some interest as well.
But you can't do this until you massively reduce your monthly spends. Then you need to start planning for the higher mortgage costs at the end of your deal, preferably with no CC debt.The person who has not made a mistake, has made nothing2 -
I'd recommend updating the numbers with your husband's CC. It would also be useful to know when the 2.2% expires on your mortgage, and the 0% on the £6000 CC.0
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You mention future house moves - what are you thinking about? If you might move to somewhere with a smaller mortgage using your 300k equity (and ideally lower transport costs) it might be worth looking at bringing this forward to balance your budget. If you would absolutely resist this, thinking about it might be a useful motivation for the significant changes you will need to make to keep the property you have.
But a banker, engaged at enormous expense,Had the whole of their cash in his care.
Lewis Carroll0 -
Hi. You say you haven't included oh's credit card repayments but it looks like you have entered a figure for his income? So is that figure before or after card repayments?
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