A different pace of life

Stand_up_8

Hi everyone

I'm not new here, but I've just recently signed up so I could start this diary. I've read so many helpful things here. Thank you to everyone who takes the time to post - you reach more people than you know. 

My situation is not an emergency. I have 2 credit cards and a car loan and I pay just above the minimums each month. However, my health is not great and I need to get these things paid off so I can reduce my working hours and have a different kind of life. I always assumed I'd be working hard full-time until my retirement but that's not how things are. I've come to terms with this and now just need a plan, somewhere to record my progress and a bit of support along the way.

I have 2 part-time jobs, one self-employed, one not, both working from home. My monthly income averages around £2k, including quieter months when I take annual leave. My basic outgoings (rent, all bills, food, petrol and debt repayments) is roughly £1700, depending on how well I do with food challenges and keeping 'fun' spends low. The remaining £300 covers other expenses such as road tax, MOT, car repairs, car insurance, haircuts, clothing, gifts, travel, and lately some items for my home to make it more comfortable, such as paint for the living room (that now looks lovely).

I record everything that comes in and everything that is spent in a folder with colour coding so I know where my cash is going. I love doing this. I have £5,100 in savings that I will not touch to pay debt with, my landlord holds £750 deposit of mine that I include in my net worth, and I usually keep an emergency fund of £1,000. And this is where I've noticed a difficulty. 

My EF is fluctuating from month to month and I cannot seem to keep it topped up. It is currently very low after I had some new tyres put on my car last month and some extra expenses the month before. More repairs are due to my car, and my professional association fee is due soon (£180), and it seems like these extra things are beginning to mount up. I am scared of dipping in to my long term savings to pay for regular expenses as it may only be £5k but it is a godsend in terms of reducing my anxiety about money. I was hoping I'd be able to add to it, not reduce it. My EF is my buffer, and I see a red light so I need to take action now. 

It'd probably help to have some debt numbers so here goes.

Barclaycard £1,384.86   0% July 2025    (I pay £50 per month)
MBNA 1 £1,647.63         0% Nov 2024    
MBNA 2 £513.45            0% Dec 2024    (I pay £60 per month)
Total credit card debt = £3,545.94

Car payment £241.39     33 payments to go.

I love my car - it is reliable and perfect for me, and I don't want to change it. It's a massive drain on my monthly outgoings, though. If I offered a settlement amount it would be less than £241.39 x 33 but I'm just not sure I want to use all of my savings to pay it off. I may now need to consider a change of car. 

My debt repayments every month are £351.39. This amount in my pocket would mean I could live comfortably. Instead, I'm scared I'm sliding into insolvency and that my small savings pot will be used up paying monthly bills. I need this debt gone and to stop pretending that it's ok. It's not. 

Thank you to anyone who reads this.    





 

 

elsien

Hello and welcome to the forum.

I’m certainly not an expert, but it seems to me that your emergency fund has been used for things that potentially you could be planning for? Car maintenance for example, and your professional fee. 

You know these are coming round so the ideal would be that they are preplanned for rather than having to come out of the emergency fund. Obviously, the ideal can go a bit pear-shaped with a change in circumstances but now seems like a good time to maybe review your budget and see what else you need to tweak to try and address those fluctuations in your emergency fund.

I know very little about self-employment, but would your professional fees not come from the business side of things - how well are the two separated?

stu12345_2

do you need your car, how long is the higher purchase for, how many years, don't change it , especially if you are less than half way repaying the HP.

I got rid of my newish car, got some equity back as it was desirable and during lockdown when used cars were through the roof
 bought old car on eBay with my equity

used cars are still overpriced except electric cars, cod nobody wants one, and dealers are virtually giving them away lol.

you will be in negative equity with car.
your debts are zero % only for a short while, can you get a 0% interest balance transfer

when are you retiring, are you going to fund rent via a housing benefit claim for the length of your retirement.

are you on the housing register for housing association or council home, it may take a while, but it's worth it.you don't want to be renting private when retired

Stand_up_8

Hi elsien

Thanks for your helpful comments. You are exactly right - I have had a change in circumstances that unsettled everything. I am now wondering if the move was a good idea. Time will tell. 

I have a business bank account and all invoices are paid into that. The professional fee will come out of there, but will reduce my wage by that amount that month. It will be tax free so come April I'll have a slightly lower tax bill but other than that, it's all just my money, organised in a particular way. You have given me an idea about building a separate savings pot linked to my business account. That would be a good goal.   

The excess £300 monthly has been used to cover things like MOT, etc, as I mentioned before. When a bill is bigger than expected, I have used my EF then paid myself back. Recently, I haven't been able to pay myself back. It does seem like it's time to start building those separate pots again to cover car expenses, clothing, etc. You've reminded me that I used to have those in place but they got emptied when I made the move. 

Some of what I struggle with is the actual practicality of it all. In the past, I used envelope stuffing. I had a cute little file with plastic wallets and put cash in there every month. However, it got quite annoying when I wanted to buy a gift online, or if I wanted to buy something but had forgotten to bring the wallet. I know this sounds petty but it is an area I struggle with. Recording things as I do helps keep me roughly on track but it has never been easy. Maybe I need to open a couple of savings accounts for sinking funds. I don't know.  

stu12345_2

can you keep your savings in an interest paying account with quick withdrawal.

how much of your credit cards are you utilising, try 30% , if it's higher consider putting some of your savings to bring it down.
as you stand a better chance of a 0% balance transfer card

you do not want to be paying interest under no circumstances when the 0% offer ends

thus the interest will bound to be higher than your car interest rate

Stand_up_8

stu12345_2 said:

do you need your car, how long is the higher purchase for, how many years, don't change it , especially if you are less than half way repaying the HP.

I got rid of my newish car, got some equity back as it was desirable and during lockdown when used cars were through the roof
 bought old car on eBay with my equity

used cars are still overpriced except electric cars, cod nobody wants one, and dealers are virtually giving them away lol.

you will be in negative equity with car.
your debts are zero % only for a short while, can you get a 0% interest balance transfer

when are you retiring, are you going to fund rent via a housing benefit claim for the length of your retirement.

are you on the housing register for housing association or council home, it may take a while, but it's worth it.you don't want to be renting private when retired

Hi Stu

Thanks for your comments - really helpful.

I have always driven old cars and paid for them outright, but my health condition meant I needed something better and more reliable. I'm not experienced with car loans but I thought it would be manageable. I'm slightly less than half way through, and I really want to keep the car, so thank you for your advice. It sounds like you did well with yours during lockdown. I don't want an electric car either - not enough mileage without charging. Maybe in the future.

You make a very good point about renting and housing benefit in the future. I have considered applying for council or housing association homes but always thought it would be in the future. The time is possibly now. I will look into it.   



  

elsien

Stand_up_8 said:

Hi elsien

Thanks for your helpful comments. You are exactly right - I have had a change in circumstances that unsettled everything. I am now wondering if the move was a good idea. Time will tell. 

I have a business bank account and all invoices are paid into that. The professional fee will come out of there, but will reduce my wage by that amount that month. It will be tax free so come April I'll have a slightly lower tax bill but other than that, it's all just my money, organised in a particular way. You have given me an idea about building a separate savings pot linked to my business account. That would be a good goal.   

The excess £300 monthly has been used to cover things like MOT, etc, as I mentioned before. When a bill is bigger than expected, I have used my EF then paid myself back. Recently, I haven't been able to pay myself back. It does seem like it's time to start building those separate pots again to cover car expenses, clothing, etc. You've reminded me that I used to have those in place but they got emptied when I made the move. 

Some of what I struggle with is the actual practicality of it all. In the past, I used envelope stuffing. I had a cute little file with plastic wallets and put cash in there every month. However, it got quite annoying when I wanted to buy a gift online, or if I wanted to buy something but had forgotten to bring the wallet. I know this sounds petty but it is an area I struggle with. Recording things as I do helps keep me roughly on track but it has never been easy. Maybe I need to open a couple of savings accounts for sinking funds. I don't know.  

I do that as well. I like my little envelopes although in this electronic age people tend to look at me as if I am mad!
A couple of ways round it - an account where you have have separate virtual "pots" and move things around that way. Doesn't work for me but it does for a lot of people.
I have separate easy access savings accounts for the bigger things which I put a set amount into each month - mine are currently holidays, car (includes road tax, servicing etc) and house maintenance because my house is a bit of a money pit.
With the envelope thing eg my birthday or social funds I still buy things online etc but then pay myself back out of the envelopes. I have a tin for money that needs to go back into the main account so it's my "don't touch this, it has to go back" tin. I know that would be too much of a faff for a lot of people but it's about knowing what you have, not overspending and then making sure the money goes back where it needs to go. If that makes sense. 
If there isn't enough in my envelope then lunch out (or whatever) has to wait. 

Sometimes it's about playing around with the different systems and balancing the time it takes with how your brain works. 

stu12345_2

as you are adequately housed right now you will only have a few housing points, you need technically fir your landlord to be selling up to get more points and landlord makes you homeless.

there is a good chance your rent may be too high for full housing benefit and you have to make up the difference via your OAP pension which will be horrible.

plus your landlord may not accept housing benefit 

the whole idea of this auto enrolment pension at work is so folk fund their private rent themselves, not claim housing  benefit when retired 

it's all a big con by labour and Tory govs as they won't build enough social homes, but that's a different matter.

old cars even these days are reliable, it's not the 1970s where they won't start if it rains lol.

imo new  or newish cars are for disabled folk via disability allowance or taxi drivers or folk that can pay them cash.

if your not one of them don't take on hp.
a tip I got from Dave Ramsey, watch his YouTube videos.

when you took on your hp loan the dealer would have done an affordability check and ask you about any debts, eg credit cards and your income, if they didn't or it proved you could not afford the hp , then you can put in an affordability complaint where you can get money bsck

Stand_up_8

stu12345_2 said:

can you keep your savings in an interest paying account with quick withdrawal.

how much of your credit cards are you utilising, try 30% , if it's higher consider putting some of your savings to bring it down.
as you stand a better chance of a 0% balance transfer card

you do not want to be paying interest under no circumstances when the 0% offer ends

thus the interest will bound to be higher than your car interest rate

My savings are in a high interest account with instant access. So that's good. My EF is in a savings account with a much smaller rate of interest. 

My credit cards have a £5k limit on each, and both offer me deals for transfers all the time. I was planning to move the MBNA to Barclaycard towards the end of the year. Then move what's left of Barclaycard back to MBNA in the middle of next year. It's such a ridiculous money-shuffling game. But those transfers will also cost me money. 

I agree that keeping interest to zero is a priority. I was hoping I'd be able to claim something back on my HP after all the fuss about people having extra fees added on to their HPs for cars, but I bought mine in 2022 so it doesn't include me. Shame that.  

If I had enough savings to pay all of this off, I would be tempted. Part of what confuses me is that I'm trying to cover myself not for the long-term best interest, but for the short-term if I become unable to work, I need that cash, it makes me feel safe. I don't care about the credit cards - in an emergency I could just stop paying them. My credit rating would take a hit but who cares. I don't use new credit any more anyway. I'm just trying to create a layer of protection in case my health deteriorates further.   

2021rdsunshine

Hi! I know you mentioned you don’t want to dip into your savings but I would pay the 2 MBNA cards from savings before Nov, then use the monthly money that you are paying on them to top up payments on the Barclaycard and hopefully get it full paid by the time the 0% finishes. This way you would get rid of credit cards debts pretty quick 
xx

stu12345_2

£6000  savings will be your limit if you lose job and claim universal credit which contains housing benefit to pay your landlord.

 I know it's a kerfuffle to move cards about, but the fee of 3% is with it if your credit card goes up to 19% when the current offer ends., cos future  deals can end at anytime by the lender

I don't agree with repaying a O% card in full.in one go, it don't make sense, just pay it off at 0% monthly ,

 but if your fearful you will go above £6000 limit if you ever lose your job.

then consider using the excess into making extra lump sum payments into your car , if it's allowed , cos it's bound to be at 8% approximately