Credit cards and Loan Debts - bad situation

Carfiest

Hi all,  I hope you can help me, but please, don't judge me. I am struggling enough with my current situation.

My life changed a year ago when I got separated but decided not to sell our house until when the 5 years mortgage term ends, which it's this next summer. During this time I have been poorly managing my money as you can see below.

However, we are going to sell our house this summer and I expect to get around £40.000 which would help me clear some of the debts. But what can I do in the meantime? because my savings are reducing quickly. I have decided to pay the minimum to credit cards until I get the money from selling the house. And I need the car at the moment but I am planing to sell it in summer as well.

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 1

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

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2251.36

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

Benefits................................ 159.6

Other income............................ 400[b] - My ex helps me with part of the mortgage minus expenses for 2 kids that we have together.

Total monthly income.................... 2810.96[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 1092

Secured/HP loan repayments.............. 141.79

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

Management charge (leasehold property).. 0

Council tax............................. 99

Electricity............................. 97.2 - Electricity and Gas

Gas..................................... 0 

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

Water rates............................. 32.5

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

Mobile phone............................ 8

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

Satellite/Cable TV...................... 0

Internet Services....................... 35.28

Groceries etc. ......................... 200

Clothing................................ 75

Petrol/diesel........................... 40

Road tax................................ 1.66

Car Insurance........................... 35.06

Car maintenance (including MOT)......... 21

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

Other travel............................ 0

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

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

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 0

Buildings insurance..................... 34.02

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

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

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

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

Haircuts................................ 14

Entertainment........................... 250

Holiday................................. 50 

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2289.77[/b]

[b]

Assets[/b]

Cash.................................... 6400

House value (Gross)..................... 410000

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

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

Other assets............................ 0[b]

Total Assets............................ 424400[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 221000...(1092).....2.05

Hire Purchase (HP) debt ...... 2800.....(141.8)....0[b]

Total secured & HP debts...... 223800....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Credit Card MBNA...............3700......40........0

Loan MBNA......................9376.4....218.......0

Credit Card Barclays...........1632.71...27........0

Metro Loan.....................5638......282.......0

First Direct Loan..............14283.7...235.8.....0

M&S Loan.......................19529.....331.1.....0

Barclays Loan..................11745.2...365.2.....0[b]

CliveOfIndia

On the face of it your living expenses look fairly reasonable, with the exception of one thing that stands out for me - £250 a month on entertainment?  That's a huge amount if you're on a tight budget.  Especially given that you've said you should be in a position to pay off a big chunk of your debts in a few months, I would say this could be reduced massively in the short term.

The clothing budget is also pretty high.  As an adult, there's no reason to be buying new clothes regularly - and when you do, there are some great bargains to be had in charity shops or one of the many online second-hand market places.

Carfiest said:

I have decided to pay the minimum to credit cards until I get the money from selling the house.

It's worth paying a fiver more than minimum if you can, just for the sake of your credit record - this may make a slight difference in the future if/when you're wanting a mortgage.  Obviously, you ideally want to be paying the full balance, but I fully appreciate that's probably not possible at the moment!

When you do get the money to throw at the debts, you want to be prioritising those with the highest APR (you've not stated what the APRs are on your SOA).  Just watch that there are no early settlement penalties on the loans - although even if there are, you're usually still better to pay them off early if you can.

I'm sure others will be along with more suggestions, but hopefully this will give you a start.

Carfiest said:

Hi all,  I hope you can help me, but please, don't judge me.

This is one board where you can be assured of zero judgement.  It takes courage to come here in the first place and ask for help, so well done for taking the first step.  No-one is going to tell you it'll be easy, but it's almost always do-able with a decent dollop of discipline and determination

sourcrates

Non essential credit debts can be left unpaid for a good 8/12 months without fear of further action, you can write and tell your creditors you are struggling, if you want to, they will likely put everything on hold for a 3 month period, which will usually be extended if circumstances don`t change.

Your budget figures are not that far out, and some categories are not budgeted for at all, if your going to have a lump sum at some point, employ delaying tactics until it lands.

Roger-D

Wow!
Thank you for posting this. I'm really sorry for you and your situation.
It's made very interesting reading though. Very useful to anyone / everyone to help focus the mind.
I agree with above comments, £250 / mth for entertainment is massive. As is the £75 clothing. I'd also add,  the £14 / mth haircut as not necessary. Perhaps buy a set of trimmers for £20 and do it yourself in future?
I'd personally also get rid of the £8k car at £140 / mth and instead buy a 10-15yr old something outright.
I recognise that (I assume) you're young and used to an image but,  life changes and one has to adapt.
I wish you the very best of luck and perseverance for the future.

peb

Just for clarity, your SOA states one adult, you then refer to 'we" and to our children.  How many are there in the house/you catering for?   That will put into perspective for example the clothes budget.

I would also suggest you look at the budget post house sale - are you downsizing, renting?  

enthusiasticsaver

Given you have savings and presumably want to keep a solid credit record I would focus on squeezing the budget and prioritising the money you have towards highest charging debts. You need to put the interest rates on the soa. Pay slightly over minimum on credit cards. I assume at least one of those loans are debt consolidation loans so don’t do that again as it doesn’t help. Don’t use the cards until you are straight again. 

I would reduce entertainment and not do holidays until you have moved into your new place and got your budget straight.

EssexHebridean

One discrepancy I'll pick up on first off - you give the house value as £410,000, and state the outstanding mortgage at £221,000 - yet you say you're only expecting £40,000 out of the sale - how does that work? Has the financial settlement between you and your ex including things like child maintenance been worked out formally? If not I'd urge you to get it formalised - it will be cheap at the price even though there will be legal bills involved if it means you get all that you are entitled to. The concern is that the amount you are saying you will have from the equity won't clear the debt you currently have in full. 

The money you are getting from the house - it's all well and good planning to use it to pay off debt but will you not need that money as a deposit to buy somewhere else to live? 

AS for the rest of the SOA - comments in bold below...

Carfiest said:

[font=courier new][b]Statement of Affairs and Personal Balance Sheet[/b][b]

Household Information[/b]

Number of adults in household........... 1

Number of children in household......... 0 The children don't live with you? 

Number of cars owned.................... 1[b]

Monthly Income Details[/b]

Monthly income after tax................ 2251.36

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

Benefits................................ 159.6

Other income............................ 400[b] - My ex helps me with part of the mortgage minus expenses for 2 kids that we have together.

Total monthly income.................... 2810.96[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 1092

Secured/HP loan repayments.............. 141.79 Is this for the car?

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

Management charge (leasehold property).. 0

Council tax............................. 99 

Electricity............................. 97.2 - Electricity and Gas Keep an eye on things here to be sure it's right - it is on the low side so make sure you check readings being used for billing are accurate. 

Gas..................................... 0 

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

Water rates............................. 32.5 If it is just you in the house and you are metered then this is high - you might be worth checking your water companies website for tips on cutting back on use.

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

Mobile phone............................ 8

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

Satellite/Cable TV...................... 0

Internet Services....................... 35.28

Groceries etc. ......................... 200 Make sure that you are including ALL shopping here - it's easy to miss the little top-up shops where we go in for a pint of milk and come out having spent £10! 

Clothing................................ 75 This is very high - even for someone not clearing debt this would be a high monthly spend. Time to go through your wardrobe, wear the clothes you have, note anything you will actually need (not want) to replace, and start keeping an eye for that item at a good price, and other than that, this should be reduced to a nominal "socks and pants" budget for now. 

Petrol/diesel........................... 40

Road tax................................ 1.66

Car Insurance........................... 35.06

Car maintenance (including MOT)......... 21 

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

Other travel............................ 0

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

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

Medical (prescriptions, dentist etc).... 0

Pet insurance/vet bills................. 0

Buildings insurance..................... 34.02

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

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

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

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

Haircuts................................ 14

Entertainment........................... 250 This is very high - knocking it down even by £100 would allow you to have a better impact on the debt.

Holiday................................. 50 

Emergency fund.......................... 0[b]

Total monthly expenses.................. 2289.77[/b]

[b]

Assets[/b]

Cash.................................... 6400

House value (Gross)..................... 410000

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

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

Other assets............................ 0[b]

Total Assets............................ 424400[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 221000...(1092).....2.05

Hire Purchase (HP) debt ...... 2800.....(141.8)....0[b]

Total secured & HP debts...... 223800....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Credit Card MBNA...............3700......40........0 Are these debts really at on zero interest?

Loan MBNA......................9376.4....218.......0

Credit Card Barclays...........1632.71...27........0

Metro Loan.....................5638......282.......0

First Direct Loan..............14283.7...235.8.....0

M&S Loan.......................19529.....331.1.....0

Barclays Loan..................11745.2...365.2.....0[b]

Do any of these debts pre-date the separation? And if so, are they essentially joint debts between you and your ex? If so then this is another reason why formalisation of the finances needs to be put in place as you should be sharing these debts between you rather than you being expected to take responsibility for them all. If they have all arisen post-split, then do you know exactly how they have been accrued? Without the payments to the debts your books not only balance, but you show a surplus, so as Sourcrates says, stopping paying all the unsecured debts for now not only means that you can live within your income but also means you will be able to save a further emergency fund/fighting fund amount which might enable full & final settlements along the line. Stopping the payments also means that the debts should default - so the interest will stop. The issue you may have so far as I can see here is that when the house is sold, you are either going to want to buy somewhere new (with a mortgage, presumably) or rent somewhere, in which case the defaults might make things harder. Having said that, I'm going to hazard a guess that your credit file probably already doesn't look the healthiest, so it may not make that much difference in the grand scheme of things. In theory defaulting also means that there is a better chance that the £40k you're talking about having from the sale of the house might be able to be used to make F&F offers and clear the debt in full. 

Superhoopza

This probably reflects more on me but £250 doesn't sound very high. Without trying to make this about me but I've tried to cut down on social events but when you have friends, family, partner, there are only some things you can say no to without dampening relationships and can't get it below £500 a month which is double the OPs budget. £250 is obviously less than £10 a day. Maybe its another topic of how to say no and how to reduce social spend.

Floss

I manage solo social expenditure of £150 pm, predominantly by saying "I'm sorry but I can't afford that". My family & friends all understand that I'm a single household with all the usual bills to pay; those that persist in suggesting costly events are told I can't do it.

However, this does depend upon friends & family understanding your financial position, and how they perceive your financial position - if the household seems to have costly stuff such as a shiny newish car, newish phones, lots of clothes & holidays, then it's likely that there will be an assumption that you are well placed to do whatever is being suggested, however costly.

Superhoopza

Floss said:

I manage solo social expenditure of £150 pm, predominantly by saying "I'm sorry but I can't afford that". My family & friends all understand that I'm a single household with all the usual bills to pay; those that persist in suggesting costly events are told I can't do it.

However, this does depend upon friends & family understanding your financial position, and how they perceive your financial position - if the household seems to have costly stuff such as a shiny newish car, newish phones, lots of clothes & holidays, then it's likely that there will be an assumption that you are well placed to do whatever is being suggested, however costly.

Yeah its hard to change perception.