SOA poor family finances

EssexHebridean · 11 December 2019 at 11:33AM

Definitely in the right place James - comments in red as usual

Jamesp31 wrote: »

Not sure if I have done this in the right place or even correctly, but I need some help/advice with our family finances. Looking at the below we should have plenty of disposable income each month, but we dont, we are literally living month to month. Im right up to my overdraft limit by the time I get paid. It should all be there below if anyone can see anyway that we can free up some cash each month just to be able to live comfortably. We dont drink/smoke rarely go out. I would love to be able to save £50-100 per month into a savings account as a 'rainy day' fund but cant afford it

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned....................

Monthly Income Details
Monthly income after tax................ 1895
Partners monthly income after tax....... 197 can this be increased at all? Even things like online surveys can add a bit to the pot each month.
Benefits................................ 147 Take it you have done the check to be sure this is your full entitlement?
Other income............................ 0
Total monthly income.................... 2239

Monthly Expense Details
Mortgage................................ 752 This is rather high as a percentage of income which is always going to cause some issues.
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 168 This is also quite high - have you checked that your band looks correct? Also if that is split across the standard 10 months then look to change to 12 monthly from the new financial year - and remember to siphon the February & March amount straight into savings on payday for this year!
Electricity............................. 40 Pretty good I'd say - but remember to keep a check on tariffs and also cut back on usage where you can.
Gas..................................... 38 As above although this is pretty good for a home with central heating.
Oil..................................... 0
Water rates............................. 57.16 Is this metered? If not then check whether you might be able to make a saving that way.
Telephone (land line)................... 32 This is high - does this include Broadband? (If it does there are still deals to be had which will beat this)
Mobile phone............................ 28.74 Is this for 2 phones? If so, decent. If for just one then look to ditch the contract at its end and switch to SIM only.
TV Licence.............................. 13.2 I think you'll find that is a short term thing for a couple of months after they randomly took £11.xx a few months ago? If so it will revert to £12.87 (I think) shortly.
Satellite/Cable TV...................... 40 Obviously a luxury but if you spend little else on entertainment then it's a reasonable one.
Internet Services....................... 0
Groceries etc. ......................... 300 You'd be able to reduce this a bit if you wanted to. Easy wins here are to look at what is currently not being cooked from scratch, address brand-reducing for any brands you buy and also to make sure you meal plan and shop from a list - and don't buy particular items from impulse or habit.
Clothing................................ 15
Petrol/diesel........................... 0 Do you not have to contribute at all for personal mileage, especially if it's a longer journey, to visit family perhaps?
Road tax................................ 0
Car Insurance........................... 0
Car maintenance (including MOT)......... 0
Car parking............................. 10 Park a little further away for free and walk?
Other travel............................ 0
Childcare/nursery....................... 100
Other child related expenses............ 15
Medical (prescriptions, dentist etc).... 4
Pet insurance/vet bills................. 0
Buildings insurance..................... 19.32
Contents insurance...................... 0 I hope this is included within the buildings cover?
Life assurance ......................... 63.96 This seems high - have you made sure that the price is right for the cover you need?
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0 Really? You have two kids but spend nothing on them for birthdays and christmas? I suspect there is a spend here!
Haircuts................................ 10
Entertainment........................... 0 Probably not realistic - I know you say you rarely go out but you must take the kids out sometimes surely, and that inevitably comes with the odd stop for an ice cream for them, coffee for you, or that sort of thing.
Holiday................................. 0 You never go away at all? Not even a weekend visiting family?
Emergency fund.......................... 10 You're showing no cash assets so where is this going?
childrens savings....................... 20
Total monthly expenses.................. 1736.38

Assets
Cash.................................... 0
House value (Gross)..................... 225000
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 225000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 158000...(752)......2.34
Total secured & HP debts...... 158000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Natwest credit card............1070......50........17.44
HSBC credit card...............3032......100.......0 Make sure you know when this 0% finishes.
HSBC overdraft.................750.......0.........17.9 This and the co-op one are you targets to tackle first
Co-op bank overdraft...........186.......0.........17.9
Family loan....................15000.....200.......0
Total unsecured debts..........20038.....350.......-

Monthly Budget Summary
Total monthly income.................... 2,239
Expenses (including HP & secured debts). 1,736.38
Available for debt repayments........... 502.62
Monthly UNsecured debt repayments....... 350
Amount left after debt repayments....... 152.62 This is good - or would be if you had it - which, looking at the OD's, I'm guessing you don't.

Personal Balance Sheet Summary
Total assets (things you own)........... 225,000
Total HP & Secured debt................. -158,000
Total Unsecured debt.................... -20,038
Net Assets.............................. 46,962

OK - first stop is to find that surplus - while £152 a month might not seem like much, that is nearly £2k per year, so not to be sniffed at. As already said - a spending diary. Some of it will be accounted for with things like presents that are not on the SOA, but that will still leave you a decent lump surplus each month to find.

I also suspect your clothing spend is higher than you think, but I can see you've already acknowledged that possibility. definitely something to be aware of. Similarly groceries - if you have underestimated in other areas i strongly suspect that you may have done here too. Remember to include the occasional takeaway etc in this category too, as well as any food you buy during the daytime at work.

You're in a great position in that your current income does actually cover your living expenses AND leave you with some money left over - now the thing to do it to actually start living to that budget you have set out for yourself.

If I were you I would start off by redoing the SOA ensuring that the figures are accurate, and then when you know your REAL surplus split that 50/50 currently between building an emergency fund and clearing the overdrafts.

getmore4less · 11 December 2019 at 11:45AM

and what I would really like is to have more disposable income.

To achieve that you need to know where it is all going so you can set priorities.

Trying to cut back blind doesn't catch the low value/priority stuff that you won't miss.

Jamesp31 wrote: »

Thanks for the advise, I will go back to the drawing board......

IT's not really back to the drawing board it is fine tuning what you have done which is a great start

Everyone starts with guesses as they really don't know where the money goes.

The SOA is a snapshot of an average month but we don't have those and money dribbles out on other stuff.

Really you need to look at a full 12months of what will be going out as some of the little things eat up money and there is none left for the big bill.
there are 2 ways to have an initial stab at trying to find the money missing in action.

The spending diary will get you more accurate going forward you will find things you forgot about so put them in, some will be up or down a bit but remember you are looking at a full year so things like clothes tend to be £0 some months and more others.

Review the last year, the idea here is to do a SOA that looks at a full 12months, you tot up your income and then the difference in debt and try to allocate it to where it went.

The goal is to get the following line down to zero
Amount left after debt repayments

Some stuff will be easy like the mortgage and fixed outgoing others will be OH yes we bought something which category does that go in.....

it will be hard to get down to the last penny but you should get close with estimates based on last 12 months, the spending diary gets them a bit closer.

One thing I would say if not sure make it a little more than you think,once balanced if more things a re a little higher than needed it is easier to move forward than trying to be very tight and find you are overspending.

getmore4less · 11 December 2019 at 1:02PM

HSBC overdraft.................750.......0.........17.9
Co-op bank overdraft...........186.......0.........17.9

If you are hitting that every month there will be charges going on that are not accounted for anywhere else

That will account for a bit of the surplus.

Mortgage...................... 158000...(752)......2.34

£158k 2.34% 23y £741pm (yours is 22y7m

at 70% LTV a better rate may be possible that won't same much but everything helps.

as money is tight extending the term may be an option
£158k 2.34% 30y £611pm

when is the mortgage up for renewal?

Jami74 · 12 December 2019 at 5:36AM

You could save money on water (if you are metered). Check your toilet cistern isn't overflowing, we didn't think ours was but after adjusting the ballcock our water usage reduced. Check the meter and update the reading online in case they are using estimates. When our children were younger they often bathed together and mostly went in after us. We also use our bath water for flushing the toilet, it's not for everyone but we've got in the habit and now it seems wrong to waste perfectly usable water whilst using clean drinking water to flush our waste.

Can you sell any of the kids stuff as they outgrow it? Loads of free selling sites on facebook and those £1s for outgrown clothes and toys come in useful. Additionally, lots of bargains to be had for free/cheap.

While your kids are young you can get away with Christmas/Birthday presents not being brand new and in retail packaging. Kids like unwrapping presents so mine always got/get useful things at Christmas (as well as toys). If you have relatives buying presents for them then annual passes to local kids places make excellent gift requests, or vouchers for local eating places and provide treats/save money through the year.

Could you consider switching your satellite/cable to something cheaper? Eg Netflix or NowTV?

Are you entitled to any tax credits/universal credits? I'm not sure what the cut-off is but looks like you are only getting child benefit.

It's miserable feeling poor when it feels like you are not being extravagant, but it's good to get it sorted while your kids are young because they won't notice.

Frugull · 12 December 2019 at 7:07AM

Hi Jamesp31,

Good luck with your debt free journey!

To offer another point of view on extending the mortgage term, I don't think it would be a great move long term.

Here's why, wiith some approximate figures on a £158k mortgage.

23 years @ 2.34% (£767 per month) is £44,389 in interest.
30 years @ 2.34% (£612 per month) is £62,178 in interest.

Again, these are approximate. I personally wouldn't rob Peter to pay Paul, and accrue an extra £17,789 in interest.

Best of luck!
Frugull

EssexHebridean · 12 December 2019 at 11:16AM

Another vote here for not extending your mortgage term - firstly I genuinely don't think you need to, by managing budgets a bit more tightly and being very structured about putting money aside for future spending, you can meet your expenditure AND be able to start to tackle the debt. secondly even if you are not adding the debt on to the mortgage directly, you would be doing that in effect, by increasing the length of time you would be tied to the mortgage AND as pointed out above, increasing the interest payable massively.

First step here is to get your day to day finances in order and start budgeting properly and effectively - and see how you go with that for a few months. That means no using credit cards, as well!

SOA poor family finances

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