Small Business, Big Debts

Hello all Debt free wannabes!  :)

I posted on these Forums over 10 years ago, and it made such a huge impact on my (successful!) attempt to get debt free, but a LOT has changed in the last 10 years, so I’m back again!

The accountability and kindness I received back then was invaluable to me, so I hope to bring some of that positive energy back in 2023  o:)

Now, I have to be honest before starting, my financial situation is ‘ok’.

I’m a single guy with no dependents, and I’ve got a (paid-up) roof over my head for the next couple of years.

I also own a small business which (only just!) survived the Pandemic and is now doing pretty well, but it’s not in a place where it can pay a Dividend, as we want to re-invest the earnings to grow the Company (and I only own half of the Company).

So I’m in a place where my long-term Finances are looking pretty good… but my short-term Finances are an absolute mess.

Getting the business started saddled me with a LOT of l debt, and getting it through the pandemic added even more to the pile. Thankfully most of this debt is ‘Asset-backed’ (I’m not one for splurging) but 'debt is debt', and I’m in place where nearly 50%(!) of my post-tax Income is going towards repayments - and that does not sit well with me. I wouldn’t say it’s keeping me awake at night, but it’s getting close…

So, what do I need to do?!

I need to get these debts cleared by the end of 2025, so that I can free-up my Salary to spend on the things that bring me joy with the people who matter the most to me. Luckily I’m a pretty simple guy, with pretty simple needs, so I’m hoping it won’t be too hard.

2025 is also an important date because it is when my paid-up Lease will expire. So, ideally, by that stage I’ll be in a financial position where I can start to consider getting back on the Property Ladder - but one step at a time for now :-)

A bit about me and my personality.  I can get a bit obsessive sometimes, and I have a tendency to let the world around me get pretty small (and a bit lonely). As I proceed on this journey, I need to be mindful of making space to still enjoy myself, otherwise it could be a miserable couple of years - and the last few years have shown me that none of us can take our time, our families and our freedom(s) for granted.

So, in summary, I’ll be looking for some flexibility to meet my milestones whilst also ‘enjoying the journey’ as much as possible. It’s very unlikely that I’ll be splurging on luxury goods or partying, but travel is pretty important to me (I live far away from family and friends), as is my health (gym) and my learning/curiosity (books, movies etc).

Ok, enough blabbering, let’s get down to the Statement…

… but before we do...

For personal reasons, I’m not going to disclose the Asset-side of my Statement - because I feel that it’s not really relevant to my goals here.  I know that my long-term Finances are looking pretty healthy, but I am here for help and support with my short-term Finances, which is therefore what I am going to focus on.

Also, because my Income is dependent on my business, I need to focus on building up a bit of an Emergency Fund, which I’m sure some people will say could be better used to pay-down debts (comments/challenge very welcome!), but I cannot 100% rely on getting 100% of my Salary every month, so I’d rather be prudent and build-up a bit of a safety net at the same time, if possible.

Ok, here goes…

Debts

(Balance / Interest, Duration / # Priority)

Bank Loan - £12,263.16 / 10.9%, 5 years / #5

Bank CC - £971.95 / 0% ends May24 / #6

CC1 (Bcard) - £0.00 / 24.9% / #n/a

CC2.1 (MBNA) - £7,375.50 / 0% ends Dec23 / #1

CC2.2 (MBNA) - £1,470.00 / 0% ends Aug 24 / #3

CC3.1 (Halifax) - £8,691.48 / 3.9% ends Jul24 / #2

CC3.2 (Halifax) - £3,697.40 / 5.9% ends Jul25 / #4

Bounceback Loan - £48,315.97 / 2.5%, 10 years / #n/a

TOTAL = £83,785.46

Challenge Total = £34,469.49 (excl. BBL)

Repayments

Bank Loan - £235.85

Bank CC - £75.00

CC1 (Bcard) - £0.00 (every day spend card, DD paid in-full each month)

CC2 (MBNA) - £250.00

CC3 Halifax) - £175.00

Bounceback Loan - £656.34

TOTAL = £1,428.18

Balance

Income (post-tax) - £3,000.00

Debt Repayments - £1,428.18

Balance = £1,571.82

House Costs - £50.00

Gym - £45.00

Music/Books - £35.00

General - £600.00

BALANCE = £841.82

Emergency Fund

Target - £5,000

Oct23 - £0.00


So, there we have it!  Nearly £85k of debt (wow!), but I’m not including the Bounceback Loan in my 2025 Goal, so it’s really 'just' £35k that I’m focused on clearing by the end of 2025.

Most of my debts are on 0% and/or low interest cards, but a couple of these deals are expiring in the next few months, so whether I can transfer these again or not will have a BIG impact on the interest paid, and therefore the priority for repayment.  My Credit Rating has taken a bit of a hit over the last few years (no missed payments or anything, just a lot of large balances and high credit utilisation), so I’d like to get that back up towards ‘Excellent’ in 2025 too.

My Bank Loan is the highest cost debt I have ever taken on, at 10.9%(!) so, as my Credit Rating improves, I’d like to re-finance this Loan and get it back down to a more ‘reasonable’ figure, which could save me ~£25 a month OR give me an earlier repayment date.

Based on my projections, it should be just-about possible to get these Debts cleared by the end of 2025 but ‘best laid plans’ and all that. Let’s see what happens in reality…

The ‘Big Plan’ is to leave all of my debts on the current payment plans and divert any surplus cash to my Emergency Fund. Once this Emergency Fund hits a certain level, I will then transfer surplus amounts towards debts - especially at key points, such as when interest rate deals are ending.

I know this strategy doesn’t strictly make sense but, due to the unexpected nature of my Income, doing it this way should give me enough of a ‘buffer’ to deal with the inevitable laptop breakdown or unexpected bill - and it should mean that I can fund my Travel Plans without using debt.

Ok that’s me done!  Thank you to everyone who has made it this far!!!

It has actually been quite cathartic to write it all down, and I feel so much more in control of the situation than I did when I first started writing this a few days ago.

I am committing myself to update at least monthly, probably around payday.

So, yep, debt free by the end of 2025, let’s go!!!

Wishing everyone all the best on their journeys,

Old Timer

Comments

  • What level of emergency fund are you thinking of? As long as the money is going into a saver and being kept for emergency fund or debt repayments that's what matters. As my debts are all 0% I am putting it away in a saver and will use to pay off when get to end of promotion. 
    *Dad loan - £5300 - £3100
    *Virgin Credit Card - £3552.50 - £0
    *Barclaycard - £0

    *Total debt - £3100*

    *Sinking Fund - £1500/£3000*
    *Emergency Fund -£0/£3000

    *Debt Repayments Pot - £0/0*

    New diary- https://forums.moneysavingexpert.com/discussion/6474943/the-three-cs-coffee-clothes-credit-cards/
  • Thanks Sarah!  Good to hear that it's not just me who would rather build a bit of a buffer before repaying.  Sadly not all of my debt is 0%, and I don't think I'll be able to match/beat the interest rate for my savings, but it will give me a lot of 'peace of mind' knowing that the buffer is there. I'm going to aim for £5,000 to get started, and see how things go from there.  As you say, then I can maybe drawdown some of this when I have promotion periods coming to an end, or unexpected bills etc.

    Other than that, it has only been a few days since I first posted, but it has already been such a boost to my mood and wellbeing :) I feel a lot more in control than I did a few days ago, and I'm remembering that 'fun' side of working towards a goal.  It's really inspiring reading others' stories too, so I will aim to comment a bit more (rather than just lurking).

    Hope everyone is having a great weekend.  I decided to do a bit of DIY that I would otherwise have paid someone to do, so I'm already benefiting from being back in the MSE mindset
  • Ok, time for a little pre-payday post  :)

    There's sadly not much left to 'sweep' over from this month, so I've decided to leave everything in the Bank and review before next Payday (November).  There should hopefully be some leftover funds next month, but I'm meeting some old friends for a long weekend away, so will have to see how that one goes.  This trip is in the Budget already, and I definitely don't want to go crazy with my spending... BUT... I also don't get to see these guys very often, so I don't want to hold myself back for money reasons.  I guess these things are all about 'balance', as so often seems to be the way...

    I've been reading a lot about the snowball method.  Part of me definitely prefers the more 'rational' approach of tackling the highest interest debt first, but I think I am going to 'trust the science' on this one, and start using the snowball method.

    Before doing so, however, I'm a little nervous that I have a 0% balance to transfer in mid-December - so I'm going to focus on building my savings buffer first.  I will then start the snowball method straight away IF I can transfer the balance in-full, but if I can't transfer all of it then I will have to use savings to offset the difference, and throw everything I can at it to avoid those high interest charges.

    So, in summary, it looks like I might only be able to make the 'regular payments' to my debts this month - which felt a little disappointing at first - but it still means my total debts will be around £1.4k lower this time next month, so I need to see this as 'progress' too.  Alas my Savings balance is still sat at £0.00, but hopefully next month I can get this started too, even if it's just a few hundred quid.

    Ok, that will do for now.  I'll post my updated totals once all the Payments have cleared after payday (and I can't wait to start using those strikethroughs hahaha).

    Take care everybody,
    Old Timer
  • Very quick update! I've been watching a lot of the Dave Ramsey stuff online (7 baby steps), and I think I'm going to drop my Emergency Fund target from £5,000 to £1,000.  Most of the "oh sh*t" moments that could knock me out savings-wise are around the £1k mark (new laptop, new phone, emergency travel etc), so I'm going to focus on getting that £1k tucked away for now, then I can throw everything else at the Debt Snowball - just as soon as I get some clarity on this upcoming Balance Transfer next month.  Feels like I'm in a bit of limbo until I know how much I'm going to be able to transfer, but I'm trying to do what I can before then to get my ducks in a row. Slowly, slowly I guess!
  • Ok I'm super-late posting my updated totals from November...

    LBM Oct23Nov 23RepaidRepaid %
    Bank Loan£12,263.16£12,027.31£235.852%
    Bank CC£971.95£896.95£75.008%
    CC1 (Bcard)£0.00£0.00£0.00
    CC2.1 (MBNA)£7,375.50£7,125.50£250.003%
    CC2.2 (MBNA)£1,470.00£1,470.00£0.000%
    CC3.1 (Halifax)£8,691.48£8,718.83-£27.350%
    CC3.2 (Halifax)£3,697.40£3,539.68£157.724%
    Bounceback Loan£48,315.97£47,203.93£1,112.042%
    TOTAL£82,785.46£80,982.20£1,803.262%
    Challenge Total£34,469.49£33,778.27£691.222%
    Emergency Fund£1,000.00£0.00£0.000%

    Unfortunately I wasn't able to make any additional repayments this month, and I also got hit by Sod's Law, in that my laptop finally bit the dust last week (after 6 years of faithful service, so no hard feelings), but "it is what it is".

    On the positive side, I was able to get a new Balance Transfer for my MBNA balance, which I was reallyyyyy worried about, so once that all goes through I'll be able to revise all my totals and get started on the Debt Snowball.

    Still no movement on the Emergency Fund, but if I have a good month in December then I might be able to squirrel a couple of hundred quid away...

    Ok that's it for now.  Feels like I haven't made all that much progress, but hopefully with the new Balance Transfer approved I can start to develop some momentum into the New Year :-) 

  • Hi, at least you haven't had to go into more debt for the laptop, that is great news! 

    There is also the avalanche approach, which is, pay off highest interest first, and work down. Both methods are good, I would prefer snowball, as I would feel I am making a difference more quickly. Though the other method could work really well for other people! 

    I recently joined the Payment A Day challenge, (PAD), I have really enjoyed this as I pop on my accounts and round it down, some days it may be £1, other times it can be more, I have been using any interest for my accounts as PAD as well. Worst case, I have two accounts and would get £14 a week from both if its a pound, though most weeks it is more. It also doesn't feel like its money I am necessarily missing, whilst also keeping me focused and giving me a daily goal for a very long term goal!

    Best of luck, will subscribe!
  • Ahh thanks Aiming :-)

    I was actually beating myself up a bit about the laptop, but I hadn't thought of it like that (i.e. that I didn't have to take on extra debt to buy it), so thank you for giving me that new perspective.

    I have the teeniest little balance remaining on my MBNA card after the Balance Transfer, so my big focus now is to get that cleared ASAP and then hopefully keep the positive momentum up into the New Year!

    Checking PAD Challenge now...

    Thanks again, Old Timer
  • OldTimer2023
    OldTimer2023 Posts: 10
    First Post
    Forumite
    Hello all, and Happy New Year!!!

    I've been a bit quiet lately, as I had a bit of sickness in December, but I'm feeling good now and ready to start the new year ahead :-)

    Posting my December totals to keep track of where I'm at with the debts...

    LBM Oct23Dec 23RepaidRepaid %
    Bank Loan£12,263.16£11,791.48£471.684%
    Bank CC£971.95£821.95£150.0015%
    CC1 (Bcard)£0.00£0.00£0.00
    CC2.1 (Virgin)£7,375.50£8,240.00-£864.50-12%
    CC2.2 (MBNA)£1,470.00£345.50£1,124.5076%
    CC3.1 (Halifax)£8,691.48£8,746.26-£54.78-1%
    CC3.2 (Halifax)£3,697.40£3,381.27£316.139%
    Bounceback Loan£48,315.97£46,644.58£1,671.393%
    TOTAL£82,785.46£79,971.04£2,814.423%
    Challenge Total£34,469.49£33,326.46£1,143.033%
    Emergency Fund£1,000.00£0.00£0.000%

    So, there we go, still no additional payments, but I'm feeling pleased that I got through Christmas without adding any new debt, and I've got my eyes on that small MBNA balance to get cleared ASAP this year!  Then, after that, I will tackle the ~£800 balance, and hopefully keep the momentum going into the rest of the year.

    Other than that, things are going pretty well. We are in the process of expanding the business to a new, second location at the moment - which is exciting - but also means that I need to manage my energy levels RE burnout etc, as it will be a long process (18-24 months).

    I'm also thinking of booking some summer flights now before they get crazy expensive, which is technically money that I could put towards the debts, but it makes more sense to get the flights as cheap as I can.

    Not much else to report, really.

    Wishing everyone all the best for 2024, and hoping we can all end the year in significantly less debt than we started.

    Take care everyone,
    Old Timer
  • OldTimer2023
    OldTimer2023 Posts: 10
    First Post
    Forumite
    Ok it's that time of the month again... can't believe we're already 1/12th of the way through 2024!!!

    Posting my Jan totals, to keep me on-track:

    LBM Oct23Jan-24RepaidRepaid %
    Bank Loan£12,263.16£11,555.67£707.496%
    Bank CC£971.95£746.95£225.0023%
    CC1 (Bcard)£0.00£0.00£0.00
    CC2.1 (Virgin)£7,375.50£8,157.60-£782.10-11%
    CC2.2 (MBNA)£1,470.00£320.50£1,149.5078%
    CC3.1 (Halifax)£8,691.48£8,774.69-£83.21-1%
    CC3.2 (Halifax)£3,697.40£3,222.59£474.8113%
    Bounceback Loan£48,315.97£46,087.28£2,228.695%
    TOTAL£82,785.46£78,865.28£3,920.185%
    Challenge Total£34,469.49£32,778.00£1,691.495%
    Emergency Fund£1,000.00£0.00£0.000%

    So, yet again, another month with no overpayments BUT another month with no new debt, so at least everything is moving in the right direction (albeit slowly).

    I did end up booking my summer flights in January - which turned out to be a great move, as they went up by 20% a few days later.  I felt a bit bad that I didn't use that money for debts, but it was the right decision overall (rational vs emotional thoughts).  If I can 'lockdown' most of my major (planned) costs for the year, and get them out of the way sooner, then that should mean that I can be more confident making overpayments later in the year.

    I was feeling a little down the other day, because life would just be so much easier if all of my money was mine to keep every month (rather than ~50% going towards debts) - but I need to use those feelings as motivation to make the changes and get the debts cleared FASTER, rather than feeling down about something that I can't really change.

    I'm not sure whether I'll get all of the challenge debts cleared by the end of 2025, but I still want to hold on to that as the goal for now, and if I end up falling a bit short then that will no doubt be much better than if I hadn't made an intervention back in October.

    Ok, I think that's everything.  Time to go watch those early February Direct Debits trickling out...

    Take care all,
    Old Timer
  • Hello all,

    Happy Valentines Day!  You can see how romantic I am by the fact that I'm checking my finances haha.

    At least I'm actually on-time with posting my Totals this month :-)

    LBM Oct23Feb-24RepaidRepaid %
    Bank Loan£12,263.16£11,319.84£943.328%
    Bank CC£971.95£671.95£300.0031%
    CC1 (Bcard)£0.00£0.00£0.00
    CC2.1 (Virgin)£7,375.50£8,157.60-£782.10-11%
    CC2.2 (MBNA)£1,470.00£295.50£1,174.5080%
    CC3.1 (Halifax)£8,691.48£8,803.22-£111.74-1%
    CC3.2 (Halifax)£3,697.40£3,063.11£634.2917%
    Bounceback Loan£48,315.97£45,528.80£2,787.176%
    TOTAL£82,785.46£77,840.02£4,945.446%
    Challenge Total£34,469.49£32,311.22£2,158.276%
    Emergency Fund£1,000.00£0.00£0.000%

    So, I'm doing ok I guess...

    I keep beating myself up that I haven't made any additional overpayments, or added to my Emergency Fund, but I have still managed to clear just under £5k of debt since October 2023, and haven't added any new debt either (despite a few pretty major unexpected costs) - so I think I need to be a bit kinder to myself...

    It's going to be a REALLY tight month this month, so my job is just to get through it.  Might even need to dip into my overdraft, but I don't mind doing that when it's an absolute emergency.

    In theory though, once I get through to March Payday, things should really start to open up a bit, and I can start to chip away at those two tantalisingly-small balances...

    Right, that's it from me.  Wish me luck for a tight, boring, lonely month, and already I'm looking forward to getting out the other side.

    Take care all,
    Old Timer
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