In a mess - need to take action before it becomes unfixable.

Birminghamboy

Hi Everyone, 

Long time lurker here. 

In a nutshell, my wife and I are in a terrible mess. We are a couple that earn a 'decent 'joint income of about 120K per year. We should be living a good life and yet we are deeply in debt due to total disorganization and stupidity. We have both buried our head in the sand and have allowed our income to cover up the mess we are in. We are in a shocking amount of unsecured debt. Issues over the last few years - health issues/bereavements have led to us missing payments etc so our credit scores are not good at the moment. This means that we can't obtain 0% deals right now, so we are paying a fortune in interest payments. 

We need to decide if we should knukle down, do the debt snowball and reduce the interests over time OR do we to into a debt management plan and take the hit on our credit scores?  I am not sure if we would be approved for a debt management plan as we CAN afford the payments - we just need to budget and get organised 

Here is our SOA. It's not a nice read and I have major anxiety just looking at it. We should have loads of money left but our stupid spending eats away at this. I am certain that with some proper budgeting and mindful spending we can make a real dent in this. 

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................ 4284

Partners monthly income after tax....... 1650

Benefits................................ 549

Other income............................ 800[b]

Total monthly income.................... 7283[/b][b]

Monthly Expense Details[/b]

Mortgage................................ 624

Secured/HP loan repayments.............. 289

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

Management charge (leasehold property).. 0

Council tax............................. 158

Electricity............................. 280

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

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

Water rates............................. 30

Telephone (land line)................... 30

Mobile phone............................ 62

TV Licence.............................. 12

Satellite/Cable TV...................... 41

Internet Services....................... 29

Groceries etc. ......................... 600

Clothing................................ 50

Petrol/diesel........................... 120

Road tax................................ 0

Car Insurance........................... 92

Car maintenance (including MOT)......... 30

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

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

Childcare/nursery....................... 100

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

Medical (prescriptions, dentist etc).... 18

Pet insurance/vet bills................. 54

Buildings insurance..................... 38

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

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

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

Presents (birthday, christmas etc)...... 100

Haircuts................................ 30

Entertainment........................... 200

Holiday................................. 0

Emergency fund.......................... 100[b]

Total monthly expenses.................. 3087[/b]

[b]

Assets[/b]

Cash.................................... 1200

House value (Gross)..................... 290000

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

Car(s).................................. 14000

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

Total Assets............................ 305200[/b]

[b]

Secured & HP Debts[/b]

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

Mortgage...................... 39000....(624)......4.11

Hire Purchase (HP) debt ...... 21000....(289)......7.8[b]

Total secured & HP debts...... 60000.....-.........-   [/b]

[b]Unsecured Debts[/b]

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

Barclay 1......................4800......110.......6.9

Barclay 2 platinum.............12500.....257.......6.9

Barclay 3......................9300......270.......24.2

mum............................5000......200.......0

Betterborrow...................900.......120.......38

creation CC....................4100......98........24.9

LLoyds loan....................1800......132.......8

HSBC...........................3000......76........18.9

MBNA...........................8900......334.......25.9

Natwest........................10000.....0.........100

Updraft consolidation..........18900.....611.......16.9[b]  This is actually 3 smaller loans - I added them together

Total unsecured debts..........79200.....2208......-  [/b]

[b]

Monthly Budget Summary[/b]

Total monthly income.................... 7,283

Expenses (including HP & secured debts). 3,087

Available for debt repayments........... 4,196

Monthly UNsecured debt repayments....... 2,208[b]

Amount left after debt repayments....... 1,988[/b]

[b]Personal Balance Sheet Summary[/b]

Total assets (things you own)........... 305,200

Total HP & Secured debt................. -60,000

Total Unsecured debt.................... -79,200[b]

Net Assets.............................. 166,000[/b]

we don't have £1988 left however this is because we are always spending money on stuff that is non essential - top up shops. breaks, holidays, catching up with things that we have missed etc. It's embarrassing that we are so financially inept!!!!

So - DMP or to not DMP?? That is the question

Grumpelstiltskin

I think you realize the first thing you need to do is  stop wasting money.


Looks like you could easily cut back on food, presents and entertainment. Then you should be able to clear Betterborrow in one fell swoop.

You will get nowhere until you do have a serious discussion with your other half and you need to both be on the same page.

You are correct that a DMP is a none starter it will be just budgeting and sticking to it.

Andyjflet

There are a number of different methods you can use to tackle this, the good news is you have a big shovel to clear the mountain of debt.

I personally followed the Dave Ramsey baby steps, I cleared a similar level of debt in under 5 years with a single income.

The baby steps are a proven method to follow and personally helped me stick to the path, You have the £1000 saved emergency fund so you are off to a good start.

List your debts smallest to largest regardless of APR etc and then start by throwing everything at the smallest, ensure the other debts you make the min payment only at this stage.

Sell things on Vinted and Facebook, any toys, clothes you don't wear etc. All that also goes towards the Betterborrow debt. Once this is cleared you take the £120 you were paying the Betterborrow loan off with and add that to the Lloyds debt, etc etc. 

By making headway and paying off cards and loans it gives you the momentum and enthusiasm to keep that feeling going.

Any dont use any more debt, no cards etc, you have no need to at all. 

2021rdsunshine

You know that you are overspending, that’s a good starting point. Don’t despair, most of us have done that. It would be useful to gather at least 6 months of bank statements, you will be able to see exactly where you’ve gone wrong. You presented an “aspirational “ SOA where you clearly have a lot of money left to tackle your debts. Yes you could make savings within your SOA but even if you don’t you still have a lot of money left to pay your debts without the need for a DMP. I would put another £100 monthly to the emergency fund and then you just have to stick with your SOA. You have to be disciplined but you would be debt free really quick. 

fatbelly

Looks like a dmp to me - and time to take control

Birminghamboy

fatbelly said:

Looks like a dmp to me - and time to take control

Thank you - would it be accepted considering that we have surplus income after contractual debt payments?

Grumpelstiltskin

If you do a self managed DMP you are in charge, no need to tell creditors details of your income etc.

To do this you have to stop paying all unsecured debts and let them default first.

Birminghamboy

Grumpelstiltskin said:

If you do a self managed DMP you are in charge, no need to tell creditors details of your income etc.

To do this you have to stop paying all unsecured debts and let them default first.

Ok thank you. Looking at my figures, is this what you would be in the same circumstances?

RAS

Ignore credit scores and get all three credit records. Read the recent MSE email for details. Do you have Arrangement to Pay markers already against your names? 

And do get out the last six month's statements and work out whether that missing money is a bottle of wine a night, carry outs, eating out for 4, expensive holidays because you've earned it, stuff for the kids added to the supermarket shop? 

You both need to agree to cut your coat according to your cloth and work out a budget that you can live with. Not sack cloth and ashes but something that gives you £1500 towards cutting you debt as well as the minimum payments. As the minimum payments reduce, you can take some of the gain to save for treats if you wish.

Birminghamboy

RAS said:

Ignore credit scores and get all three credit records. Read the recent MSE email for details. Do you have Arrangement to Pay markers already against your names? 

And do get out the last six month's statements and work out whether that missing money is a bottle of wine a night, carry outs, eating out for 4, expensive holidays because you've earned it, stuff for the kids added to the supermarket shop? 

You both need to agree to cut your coat according to your cloth and work out a budget that you can live with. Not sack cloth and ashes but something that gives you £1500 towards cutting you debt as well as the minimum payments. As the minimum payments reduce, you can take some of the gain to save for treats if you wish.

Hi, yes I had a short arrangement to pay agreement. I now know it was a mistake but we are where we are. I agree that we need to massively cut our cloth 

Grumpelstiltskin

Do you know the difference between arrangement to pay markers and default markers?
Arrangement to pay stay on your credit report for 6 years after the final payment, so if it takes 4 years  to pay off it's on for 10 years (assuming England or Wales )
Defaults disappear 6 years from the date made whether they are cleared or not.