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In over my head

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  • SillySillyGoose
    SillySillyGoose Posts: 34 Forumite
    10 Posts Name Dropper Photogenic
    Just to chime in around the car and them coming with 12 month's MOT - my last car was excellent mileage for it's age and came with 12 months MOT, was only 7 years old, and it cost me £1700 in repairs in the first 12 months. I'm not saying it will happen, but it can happen. Just something to bear in mind to consider everything :)
    Starting Total - £8586.09
    Current Total - £7999.85
    Paid to Date - £586.24 / 6.8%
    Overpayments to Date - £46
  • kimwp
    kimwp Posts: 2,983 Forumite
    Fifth Anniversary 1,000 Posts Photogenic Name Dropper
    Hi all,

    I have been over my head for a while and have been burying my head further and further into the sand. The reason for my debts are years of consolidation, on top of a house move where we had to pay for 2 homes for 3 months (long story) and then essentially getting carried away and living a lifestyle we cannot afford. I suspect a degree of this is also down to undiagnosed ADHD for both of us as well as a few spells of depression for me.
     I filled out my information on Step Change and they advised either an IVA or Bankruptcy. They said I am not eligible for a DMP or DRO although I'm not sure I understand why this is, especially as I don't have any assets....Anyway, this has lead to days and days of me scouring this forum and I'm pretty sure I now understand the process for a self managed DMP.........
    I have completed my SOA which I will include below. Please note, this has been completed more as a going forward budget than how things have been.
    I'd be really grateful for any support or advice that could be offered by anyone please.

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

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 2
    Number of cars owned................(this is what the £200 in "other travel" is for as I am currently doing driving lessons and savings for a car so that I can look at working more hours therefore increasing my income).... [b]

    Monthly Income Details[/b]
    Monthly income after tax................ 925
    Partners monthly income after tax....... 1907
    Benefits................................ 1032.36 (this is a monthly average)
    Other income............................ 0[b]
    Total monthly income.................... 3864.36[/b][b]

    Monthly Expense Details[/b]
    Mortgage................................ 0
    Secured/HP loan repayments.............. 0
    Rent.................................... 1200
    Management charge (leasehold property).. 0
    Council tax............................. 197.22
    Electricity............................. 40.3 (dual fuel total 80.60 so just split between both categories)
    Gas..................................... 40.3 (dual fuel total 80.60 so just split between both categories)
    Oil..................................... 0
    Water rates............................. 60 (on a meter but have only received one bill since we have been here so this may well reduce at some point)
    Telephone (land line)................... 0
    Mobile phone............................ 36.99 (this is for both of us)
    TV Licence.............................. 15
    Satellite/Cable TV...................... 61.87 (confident we can reduce this a bit)
    Internet Services....................... 24
    Groceries etc. ......................... 650 (both children have allergies hence higher budget, also includes pet food for x2 pets, toiletries etc)
    Clothing................................ 100 (includes school uniforms)
    Petrol/diesel........................... 0
    Road tax................................ 0
    Car Insurance........................... 0
    Car maintenance (including MOT)......... 0
    Car parking............................. 0
    Other travel............................ 200 (currently have driving lessons/saving for car)
    Childcare/nursery....................... 460
    Other child related expenses............ 36 (piano/swimming)
    Medical (prescriptions, dentist etc).... 161.34 (prepayment certs plus private prescriptions which I'm hoping to end in a few months)
    Pet insurance/vet bills................. 42
    Buildings insurance..................... 0
    Contents insurance...................... 8.98
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 100
    Haircuts................................ 30
    Entertainment........................... 75
    Holiday................................. 60
    Emergency fund.......................... 100
    Partner debts............................... 80 (DMP with step change, CC and utilities)
    (Unnamed monthly expense)............... 0[b]
    Total monthly expenses.................. 3779[/b]
    [b]

    Assets[/b]
    Cash.................................... 0
    House value (Gross)..................... 0
    Shares and bonds........................ 0
    Car(s).................................. 0
    Other assets............................ 0[b]
    Total Assets............................ 0[/b]
    [b]
    No Secured nor Hire Purchase Debts[/b]

    [b]Unsecured Debts[/b]
    Description....................Debt......Monthly...APR
    Natwest Loan...................9299.21...198.2.....6.4
    Natwest CC.....................367.22....12.67.....0
    Natwest CC.....................7607.31...75.69.....0
    Monzo OD.......................1114.84...0.........39
    Barclaycard....................7369.39...73.96.....0
    Natwest OD.....................277.......0.........39.49[b]

    Some thoughts on your SOA-
    -how will your benefits be affected if your wages increase?
    - Energy bill seems low for a family of four - I live in a three bed semi, only heat the downstairs and the bathroom and my bill is £103 - what is this figure based on?
    - water bill might reduce, but only if you reduce your water usage.
    - put the dates when your phones are out of contract to switch to SIM only contracts - £5-10 will give you unlimited calls/texts and a decent chunk of data
    - have looked through your bank accounts and included any top up shops, school lunches etc for your grocery total? 
    - if you have kids, then you should get life assurance, unless it's covered by death in service cover by your employer
    - £1200 on presents is too high for people in debt, though I appreciate it's difficult with kid's birthday parties etc. For your own kids, £100 per child, to cover birthday and Christmas should be enough. 
    - what is the entertainment for? I think you might need to choose between sky package, entertainment or holiday if things are tight.
    - I think it's worth splitting out your partner's debts to what is going to dmp/unsecured debts and the higher priority debts.

    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • kimwp
    kimwp Posts: 2,983 Forumite
    Fifth Anniversary 1,000 Posts Photogenic Name Dropper
    edited 18 April at 10:15PM
    I just saw your note about presents for Easter, fathers day etc. There's no need for presents full stop, but there's definitely no need to be buying things for these occasions. A bit of a rethink on what is a need and what is a want will be helpful. 

    Also, what are your sums for your full time job income and the car? (Will the increase in income cover the cost of the car? Is there any increase in childcare as a result?). I'm normally against weighing up the benefit of a job just in terms of finances, but your family as a whole doesn't have much financial flexibility.

    And I know it might seem a bit of a walk, but we have to cut our clothes to match our cloth (and it'll help keep the weight off!), so if you can fit the walk in from a time point of view, it would be financially more sound than buying a car. What about push scooters or a push bike to reduce the time?
    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • jelly_legs_88
    jelly_legs_88 Posts: 11 Forumite
    10 Posts Name Dropper
    - benefits will reduce with wage increase however the overall amount of money will be higher. For every £ earned UC is reduced by 55p. It pays to work when on UC

    - my energy bill is based on smart meter readings which I manually check each month too

    - water bill is still based on what they estimated we would use for our size home/family. When we received our last bill we were refunded some money so am therefore expecting it to go down this time. More than likely to £50. 

    - I am sim only - £10. He is in contact for another year. 

    - yes - this grocery budget includes everything like that 

    - we both have death in service cover

    - yes the present budget can be lowered.  That is only budgeting for a £100 each for their birthdays and Xmas though. I guess they’ll have to not have Easter eggs or be able to get me or their dad something small for mothers/fathers days. I’m sure they won’t feel too alienated from their peers and will understand. And we’ll stop getting his neices and nephews birthday and Xmas gifts too. That will help. 

    - as previously mentioned the satellite category is a mixture of subscriptions as we don’t have sky or anything and this we can get down to about £23

    - holiday am happy to reduce to £0

    - partners debts as previously mentioned are £50 for DMP, £12 CC and £16.63 electricity debt. 

    - I find your comment re “a bit of a walk” slightly patronising. I walk 3-5 miles a day between school run/nursery run and work, which I have been doing since my daughter was 9 months old and she will soon be 10. If walking was the answer to my weight issues believe me, I would be a size 6 by now haha. 

    - An increase in hours, when taking into consideration a reduction in UC would equate to an approximate £400 increase in real terms. Due to distance and time I cannot get a full time job until I drive (I have looked at this numerous times) and I don’t imagine this will be until after my youngest starts school
    in September. Therefore there will be a huge reduction in childcare, at least by half. UC will also reduce to reflect this but we also get an increase in Jan as our bedroom rate increases with our daughter turning 10. 

    - I don’t envisage getting a car before this time so I believe the costs will be covered but am happy to be corrected. 

    @sourcrates - due to the above changes and the changes due to happen in the next 12 months I feel this will mean a DRO is not a suitable option. Would you agree? Also you said although I could do a DMP, the length of time it would take to repay the debts would be long, if ever paid off, but are there further repercussions to this other than it being in my budget for many years to come. Does it matter how long a DMP runs for? 




  • kimwp
    kimwp Posts: 2,983 Forumite
    Fifth Anniversary 1,000 Posts Photogenic Name Dropper
    edited 19 April at 7:44AM
    - benefits will reduce with wage increase however the overall amount of money will be higher. For every £ earned UC is reduced by 55p. It pays to work when on UC
    Good to know

    - my energy bill is based on smart meter readings which I manually check each month too
    Just to check - that number in your SOA is the average for the year?

    - water bill is still based on what they estimated we would use for our size home/family. When we received our last bill we were refunded some money so am therefore expecting it to go down this time. More than likely to £50. 
    Ace

    - I am sim only - £10. He is in contact for another year. 
    Great.

    - yes - this grocery budget includes everything like that 
    Perfect

    - we both have death in service cover
    Sufficient in the sad event?

    - yes the present budget can be lowered.  That is only budgeting for a £100 each for their birthdays and Xmas though. I guess they’ll have to not have Easter eggs or be able to get me or their dad something small for mothers/fathers days. I’m sure they won’t feel too alienated from their peers and will understand. And we’ll stop getting his neices and nephews birthday and Xmas gifts too. That will help. 
    This might be hard because of expectations, but certainly within the family, it's possible to cut this without feeling deprived. For example, the children could make an easter present (decorate a cut out paper basket and put mini eggs in it) - you just turn family activities time into making time. They could decorate a birthday crown for the birthday (or father/mothers day) person and that person has special powers (to choose what's for the birthday tea/activities for the day (from a selection). It's about celebrating the person and physical gifts aren't required for this. You could even do this with the kids' friends - a voucher to be Queen for the day.

    - as previously mentioned the satellite category is a mixture of subscriptions as we don’t have sky or anything and this we can get down to about £23
    Sounds good

    - holiday am happy to reduce to £0
    Something for the future

    - partners debts as previously mentioned are £50 for DMP, £12 CC and £16.63 electricity debt. 
    Check with fatbelly/sourcrates, but I would think that the DMP and CC would go in the debt section rather than monthly expenses.

    - I find your comment re “a bit of a walk” slightly patronising. I walk 3-5 miles a day between school run/nursery run and work, which I have been doing since my daughter was 9 months old and she will soon be 10. If walking was the answer to my weight issues believe me, I would be a size 6 by now haha. 
    It was simply meant as an extra pro of not getting a car and sticking with the current arrangement. If it helps, I'm carrying 30kg excess fat. Two things were instrumental to putting weight on for me - changing from walking everywhere at uni to sitting at a desk all day and an element of stress eating. Then increasing my hours (compressed week), which meant I was ravenous by the time I was able to eat in the evening. (I put on 20kg in 3 months at that point, before I'd realised it was happening). It's a lot harder to lose than gain :(

    - An increase in hours, when taking into consideration a reduction in UC would equate to an approximate £400 increase in real terms. Due to distance and time I cannot get a full time job until I drive (I have looked at this numerous times) and I don’t imagine this will be until after my youngest starts school
    in September. Therefore there will be a huge reduction in childcare, at least by half. UC will also reduce to reflect this but we also get an increase in Jan as our bedroom rate increases with our daughter turning 10. 

    - I don’t envisage getting a car before this time so I believe the costs will be covered but am happy to be corrected. 
    It's difficult to judge without the numbers, particularly without knowing what your commuting/school run costs will be in fuel. I wouldn't expect to spend any less than £500 a year in tax and mot/service/tyres etc (though maybe your mechanic friend can help reduce this). I do appreciate that it's a difficult situation - you'll just have to look at the numbers of what the cost of a cheap reliable car/insurance/fuel costs are likely to be. 
    - see above
    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • jelly_legs_88
    jelly_legs_88 Posts: 11 Forumite
    10 Posts Name Dropper
    And to add, what’s the idea with making savings on my budget, that I have more to give creditors now? That I have more to
    give creditors after defaulting? Or that I have more to build a fighting fund with? 
  • kimwp
    kimwp Posts: 2,983 Forumite
    Fifth Anniversary 1,000 Posts Photogenic Name Dropper
    And to add, what’s the idea with making savings on my budget, that I have more to give creditors now? That I have more to
    give creditors after defaulting? Or that I have more to build a fighting fund with? 
    It's a good question. I think everyone will have a different take in it, but my approach for an SOA is:
    1. Achieve accurate understanding of current income/spend
    2. Cut back on excessive spending (which you don't really have apart from in presents)...which establishes a sensible budget for household of your size. But also make sure there is sufficient allowance in the different categories (hence my question about your energy bill seeming low)
    3. Determine the best debt option. (If fatbelly/sourcrates recommend a dro, it's worth looking at and accounting for anything in your outgoings that could cause you to be eligible.)
    4. Once on the debt solution path, cut back where you can (and doesn't make life miserable) to save for full and finals if on dmp (or the car). You don't want to commit this to your creditors in case you need it. (Although you can always take a break from paying them to rebuild an emergency fund)

    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • kimwp
    kimwp Posts: 2,983 Forumite
    Fifth Anniversary 1,000 Posts Photogenic Name Dropper
    edited 19 April at 8:46AM
    And to add, what’s the idea with making savings on my budget, that I have more to give creditors now? That I have more to
    give creditors after defaulting? Or that I have more to build a fighting fund with? 
    Sorry, my head is all over the place at the moment -answer continued... it's yes to all three depending on the situation 
    1. To creditors now if someone can afford their debts if they are just excessively spending or really don't want to default because it effects their job etc
    2. To creditors after defaulting - if, for example in a situation of excessive spending for income but where the debts have become too big to handle so a restart is required
    3. For making full and final offers a couple of years into the dmp

    NB, I'm not sure exactly what you mean by fighting fund. If doing a dmp, then you would build an emergency fund for if you have unexpected spends - delaying any significant payments until you have built this up (and pausing significant payments if you need to rebuild it). This is separate to the full and finals fund.

    HTH
    Statement of Affairs (SOA) link: https://www.lemonfool.co.uk/financecalculators/soa.php

    For free, non-judgemental debt advice, try: Stepchange or National Debtline. Beware fee charging companies with similar names.
  • RAS
    RAS Posts: 35,676 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 19 April at 9:24AM
    I'd suggest you need short and longer term debt strategies, given the number of variables that are going to affect your income and expenditure over the next year.

    Would it make sense to stop paying, default (save what you would have paid towards debt into an emergency fund) and then set low payments with those that default until your finances settled, then do a DRO if eligible.

    Or would you be better to stop paying now, do a DRO (assuming your income and expenditure meet the criteria) and then once that's clear, set about saving for a car etc?

    You had a household surplus of over £75 with some fairly large discretionary allowances. You personally have the lower income and the higher debt? 

    DROs are individual arrangements, and fatbelly might be able to advise how the income and expenditure would be apportioned? Would the expenditure be apportioned in line with income, assuming that the benefits are shared 50:50? Are your current discretionary spends acceptable, and other items likely to be within allowances?

    Then you need to work out budgets for the different scenarios that will occur over the next year, and those that might occur. And both you and your partner need to keep spending diaries for a few weeks, so you can spot any spends that are not accounted for.

    If you've have not made a mistake, you've made nothing
  • ManyWays
    ManyWays Posts: 1,372 Forumite
    1,000 Posts Fifth Anniversary Name Dropper
    Sat in tears as this all now seems so impossible and hopeless 
    No it isnt impossible or hopeless!
    Its just that because so much is going to be changing in the next 6 months (paasing test, possibly buying a car, hopefully mounjaro working and you being able to waen yourself off it, childcare dropping, UC dropping a bit less, etc) that it's really hard for us to be able to see the full picture now (because that budget is not what you have actually been spending) or guess what it will be like in 6 months time (who knows?).

    The reason why I suggested separate SoAs is not to suggest that you actually separate your finances, but to be able to look at what a debt adviser would look at if they consider you for a debt relief order. At the moment we simply can't guess what joint surplus the two of you will have in 6 months or what your surpus on your own would look like.

    We can see you are in a bit of difficulty on that budget and that is going to get worse immediately the natwest 0% offer ends. You could default on all the debts, it's not a silly idea and it has the advantage of treating all your creditors equally. Or you could just ask Natwest for a payment arrangement at the moment for the loans and the card and then review your full situation in 6 months time.

    Other things you can do in the next 6 months to improve your situation and let you make a better decision later:
    - try to get that satellite/cable bill down a lot
    - start buying fewer presents (seriously!)
    - start tracking what you actually spend on everything, groceries, clothes, etc
    - look at a social tariff for the broadband as you are on UC (see 
    https://www.ofcom.org.uk/phones-and-broadband/saving-money/social-tariffs/ you can usually switch to one of these mid contract)
    - find out the situation with your partners DMP, if the debts in it are old he may be able to ask for the CCA 
    agreement(see https://nationaldebtline.org/get-information/guides/credit-agreements-getting-information-ew/)  for them and if that cant be produced get them removed from his DMP so it ends sooner
    - look into making affordability complaints to Natwest about all the borrowing, win any, and the interest will be removed
    - get yourself a new bank account and move over to that from NatWest. Upping the NatWest overdraft to clear the Monzo one is not a good idea. 


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