£67,031.92 is a frightening number indeed....

Treadingonplaymobil · 12 February 2017 at 10:56AM

£67,031.92. Seriously. £67,031.92. That is a SCARY number. I can't believe our debt has peaked (and it is the peak, I am determined) at this level.

Our light bulb moment actually happened a few months back, but it's taken since then of wrangling utilities and carefully watching out income/outgoings (using You Need a Budget) to really figure out where we were overspending and how the monthly shortfall of anything from £200-£1,000+ was happening.

We have literally nothing to show for this debt, it's just crept up over the past 8 years or so, and has always been at manageable levels, but back in October we realised we were spending more on credit cards each month than we were paying off.

We committed that cardinal sin of taking out a consolidation loan, but alongside it we looked really carefully at our spending over the next couple of months, budgeted realistically for what we spend and have (I think) picked off all the easy 'low hanging fruit' of budget cuts and really identified why we were overspending.

The main reason for the debt is, erm, me. Not that I'm the biggest spender (neither of us are amazing), but because I am self employed with a hugely variable income and basically worked out our budgets on the basis I would always earn my 'best' month's income. Which was, with hindsight, maybe a TINY bit deluded.

The aim of this diary is to keep us on track with actually reducing our debt every single month, not doing it in a three steps forward, two (or four) steps back sort of way. Having sat down and put our numbers into the whatsthecost site, it appears that we are looking at 7 years and 1 month of repayments to clear the debt (and that's assuming we can get rid of the shortfall showing below). I REALLY want to reduce this term as that just seems bonkers.

SOA below, with a couple of explanatory notes.

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 3
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 250 (variable, but this is the minimum I have earned in any month in the last 5 years)
Partners monthly income after tax....... 2711.86
Benefits................................ 192
Other income............................ 0
Total monthly income.................... 3153.86

Monthly Expense Details
Mortgage................................ 698
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 174 (including overpayment for a period when we messed up during a house move 18 months ago and didn't restart the direct debit for the new property. Will drop by a little under £50 after either March or April, can't remember which)
Electricity............................. 52 (gas and electricity are one combined DD, I haven't checked the exact split but the total is £104)
Gas..................................... 52
Oil..................................... 0
Water rates............................. 104 (also including a debt from previous property, but I think this will be included for another 6 months or so. I'm not sure what our actual usage is)
Telephone (land line)................... 18.5 (includes internet)
Mobile phone............................ 85 (£45 for my contract, which I use for work as well, £40 for DH)
TV Licence.............................. 12.12
Satellite/Cable TV...................... 0
Internet Services....................... 0 (included in landline cost)
Groceries etc. ......................... 520 (Includes £40 for one lot of school lunches. I am REALLY struggling to reduce this, but feel I could and should be able to!)
Clothing................................ 100 (growing children, plus see notes below re clothes)
Petrol/diesel........................... 225 (90% DH commuting costs)
Road tax................................ 16.27
Car Insurance........................... 25.22
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 50
Childcare/nursery....................... 70 (this will disappear in April as child 3 gets free 15 hours)
Other child related expenses............ 81.85 (music/swimming lessons x2, cubs and beavers, National Trust membership as they love visiting them)
Medical (prescriptions, dentist etc).... 5
Pet insurance/vet bills................. 0
Buildings insurance..................... 27.07
Contents insurance...................... 0
Life assurance ......................... 16.26
Other insurance......................... 0
Presents (birthday, christmas etc)...... 90
Haircuts................................ 20
Entertainment........................... 135
Holiday................................. 75
Emergency fund.......................... 25
Total monthly expenses.................. 2707.29

Assets
Cash.................................... 0
House value (Gross)..................... 210000
Shares and bonds........................ 0
Car(s).................................. 800
Other assets............................ 0
Total Assets............................ 210800

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 173733...(698)......3.14
Total secured & HP debts...... 173733....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Barclaycard....................6880.21...156.......0
MBNA...........................9614.71...98........0
Parental loan..................20000.....0.........0 (see notes below)
Tesco loan.....................21000.....377.......10
Total unsecured debts..........57494.92..631.......-

Monthly Budget Summary
Total monthly income.................... 3,153.86
Expenses (including HP & secured debts). 2,707.29
Available for debt repayments........... 446.57
Monthly UNsecured debt repayments....... 631
Amount short for making debt repayments. -184.43

Personal Balance Sheet Summary
Total assets (things you own)........... 210,800
Total HP & Secured debt................. -173,733
Total Unsecured debt.................... -57,494.92
Net Assets.............................. -20,427.92

Created using the SOA calculator at stoozing.
Reproduced on Moneysavingexpert with permission, using other browser.

Regarding the (relatively) high clothes expense, it is a combination of 3 growing children (8, 6 and 3), plus the fact that my job is in the fashion industry, and as a self employed person I need to have the right sort of 'look' in order to get work (think along the lines of a self employed personal shopper - people need to see you looking good in order to book with you).

The parental loan was for a house deposit. The parent in question has no idea about our debts. She is not desperate for the money back and isn't charging us interest, but has asked us to save £150-200 every month into a savings account and then once we've saved a decent sum to either repay them or 'reborrow' it for work on the house (basically they want us to be able to make repayments if they suddenly need the extra income, but meanwhile are happy for us to benefit from it. I am not saving the money while our debt payments are so high - we are hoping to have paid enough off that if the parent ever needs it that we can reborrow it and pay them back). This isn't great, but realistically I think the best solutions is to treat it as the lowest priority for snowballing - once we have paid back the other debts we will throw the entire £630+ at this debt.

So, there is a freaking enormous shortfall every month, which is somewhat depressing. Most months it is covered by the fact that I earn more than my 'bare minimum', but it is those months where it isn't covered that the debt creeps up again, and I am a total disaster for going 'oh well, we've spent on the credit card, we might as well keep going' and buying more clothes or something for the house - this is probably a significant proportion of our debt problem.

We have managed to get rid of the balance on the one credit card we were spending on, so the remaining ones are both on 0% deals (although one expires in September). I have not cut up the remaining credit card, because we don't have an emergency fund in case of eg boiler repairs, but it has not been used for all of a month, and I hope to keep it that way.

A DMP or similar isn't really on my horizon right now - I feel like we should be able to make the cuts to make our budgets balance, and I am optimistic that as my income goes up (when I can work more as child 3 starts school) that we will be able to make overpayments.

My plan for now is:
1) Try to wiggle those budget numbers around enough that we don't have a shortfall any more.
2) Make a plan for any months where I make extra - do I use it for an emergency fund, as a fund to cover future months' shortfalls, to throw money at the debt to try to reduce minimum payments in case of future 'shortfall' months?
3) Try to make more money. Not quite sure how this will work as I am largely limited to working around DH's working hours (I work evenings and weekends and the 5hrs childcare per week we are paying for for child 3).

Now that's all down in black and white I am feeling a combination of relieved (to be clear on the numbers) and immensely stressed (by the semi-regular £180+ shortfall).

Onwards and downwards (for the debt, not me)!

edited to add: the original £67,031.92 figure was based on the total figure for the Tesco loan, which included all interest payable over the entire term of the loan. I have updated the debt figure in my signature and in all posts going forward as at 4th June 2017 to reflect that actual current debt balance rather than the balance plus interest over the lifetime of the loan. This has knocked £7,911.62 off the debt figure, but means that each monthly payment will have the interest for that month deducted from it, so it won't affect the DFD if I don't make overpayments.

Mr.Generous · 12 February 2017 at 12:00PM

Time to tighten the belts and start living within your means I'm afraid.

You don't have to spend he way you are, what on earth was the Tesco loan for?

My work mobile contract is £5.10 per month with Virgin, wife's is similar. You could free up £50 per month straight away.

Food and groceries is going to have to be cut, you need a family meeting where you agree what is going to be cut out and what is going to be traded down to save money.

Gas and electricity needs a small saving, turn the heating down - its a mindset as much as anything else, "We are serious about this and are all going to have to muck in and face some slight hardship." You need to free up at least £300 per month to make an impression on debt.

You don't HAVE to have these things you are choosing to, and in reality at the expense of others including your parents who perhaps would like a nice car or great holiday but are CHOOSING to help you instead.

I look at things like cars but decide to make do, I weigh up my needs V's my wants. I don't have all the answers or think my way is always the best way, I'm just trying to show you a different view point.

I have a lower income than you but we are comfortably off and intend spending £120k / £130k on two more investment properties (probably 2 cheap houses) from savings over the next 4 years to give us an income to retire in comfort at 55. Was it easy? No. Do I regret the small sacrifices? No. We still had nice holidays, live in a nice house and drive decent cars, we just saved on the other stuff, clothes, food, utilities. We still ate out but we chose pub grub, that kind of thing. You can make choices now that will give you a bright future or you can live for today and worry about the consequences for ever.

The biggest change you can make is in spending habits and attitude towards the future!!

armchairexpert · 12 February 2017 at 12:53PM

Well done on a very thorough budget!

I'm also self employed and I understand the feeling of having to spend a bit to get a bit, although on a bad month your wage doesn't actually cover your phone, clothing and childcare costs, realistically, it's laying the groundwork for more money later.

The thing that jumps out immediately is entertainment plus holiday. Those two give you 210, and covers your shortfall. CAncel holiday savings for now, you can't afford a holiday in this kind of debt, and turn the entertainment budget down to 25 for now.

Once you've got the nursery fee out of the way, that's 70 you can throw onto the debt, and maybe any extra you earn over that minimum can go 50:50 on the debts and the entertainment budget if you really can't give it up altogether. But honestly, that budget is the budget of a couple who aren't nearly as much in debt, and there's no magic answer without giving something up.

Also agree on mobile phone and groceries. Best of luck.

Treadingonplaymobil · 12 February 2017 at 1:08PM

The Tesco loan is the dreaded consolidation loan - we spent a long time living outside our means! I'd say we were in happy denial for the best part of a decade. My real earnings used to be virtually zero, but because some months I was earning £500, we basically acted as though I was earning £500 every month. Denial doesn't begin to describe it. :0

Phone contracts: our phones are both well inside the contract term (I think we took out either 18 or 24 month contracts?), so would cost to get rid of I think, and I do a lot of emails etc on mine when out and about and use the camera for work, so need a half decent one. I might be able to reduce contract price a bit if I phone and ask though.

Food and groceries I'm really not quite sure how to cut, which is ridiculous as I'm sure I used to do it miles more cheaply. We could obviously get rid of school dinners for Child 1, but currently we feel able to have a lot of beans on toast/scrambled eggs type dinners because we know the older two children have had a decent hot lunch, so I think what we'd save on packed lunches we'd lose on hot dinners. I think actually a small amount of that £500 is going on little extras when I go food shopping - a toy for child 3 (who is often with me), a magazine etc etc, which can easily be cut. I used to do MySupermarket and absolutely religiously stick to the list, so I think I need to get back into that. We eat 95% vegetarian (because I will only eat higher welfare meat, which we can't afford), but do that partly to offset buying organic dairy, eggs and a couple of other bits, which i think for the short term we'll need to abandon (the parent who loaned us the money is very pro-organic and is horrified when they visit and we haven't bought organic, and they feel we should be able to afford so, but maybe I can keep some in the freezer for their visits!).

Gas an electricity - heating is set fairly low, but could perhaps go lower. I am waiting for DH to call them to see whether we are in credit, as the DD feels very high (we live in a small 2 bed terraced house).

Parental loan: the loan was offered, not asked for - the parent wanted to see us buying a house rather than staying in rented, and we were honest in saying we had no deposit, so they loaned it to us. Both of us have wealthy parents and I think a lot of our older debt (neither of us have been debt free since going to uni at 18) is from just mindlessly carrying on the life we had had as children/teens (when we had significantly more free cash than we do now!). We stopped doing that a few years ago, but clearly not quickly or efficiently enough.

Honestly, I think a huge amount of our problems are down to feeling that we needed to give ourselves and our children a certain sort of life as well - not in terms of having LOTS of things (we are pretty minimalist, capsule wardrobes all round and no consumer stuff in the house, only one shared computer, no tablets etc) but in terms of having the best of what we do have (phones are iPhones, clothes are John Lewis type price range, nice wooden toys, etc etc) and having lots of life experiences (days out on the weekend, both children do music lessons) etc etc. Obviously the material things can be cut back, but I am not sure how to resolve the children's side of things without 'punishing' them for our mistakes, if that makes sense.

Treadingonplaymobil · 12 February 2017 at 1:23PM

I am embarrassed to admit that we are already committed to £300 plus some equipment (perhaps £100 worth) for an activity holiday in the summer (booked by another set of oblivious parents), so I need to save that holiday money. Once that's paid for (which will take until the holiday in July) we will get rid of that almost entirely - we might keep a tenner per month as that will cover a couple of cheap weekends camping (we have all the equipment, usually camp half a dozen weekends/long weekends a year, but we could still do two or three for £120 a year).

Entertainment budget definitely up for negotiation though - that is 95% DH's spend as it's on weekend activities (I usually work on the weekend) like swimming, national trust membership, cafes, cinema etc. I will get him onside with cutting £50 off it as a starting point and take it from there.

so immediate current savings:
£50 from entertainment budget
£50 from groceries budget
total £100

longer term savings:
£40 from council tax in May (might be more like £50, but would rather estimate under than over)
£70 from childcare in May
total £110

So from May I will have covered that £184 shortfall, we just need a couple of really mean months with groceries, entertainment, clothes (DH and I ok for clothes until May, I'm sure, so only need to replace any of the children's clothes that get trashed/outgrown) to get through until then. That's a good challenge to start off with.

I have some pasta/lentils/rice in the cupboards and frozen chips/veg, maybe I'll see if I can have a couple of weeks of only buying fruit and veg, (non-organic) dairy, eggs and baking ingredients and just use up what we've got.

enthusiasticsaver · 12 February 2017 at 1:25PM

The biggest punishment you can inflict on your children is giving them the message that you can spend regardless of income. Spending a fortune on high end goods because you don't want to deprive them and consequently going into debt by such a large amount is madness. teaching them how to live within a budget is one of the best life lessons you can give them.

If the kids are growing and you are buying good quality clothes they are probably growing out of them before they wear out. You can sell them on eBay maybe or down brand to supermarket clothing which would wear less well but is a lot cheaper. Same goes for groceries. Downbrand and get the monthly bill down.

annandale · 12 February 2017 at 2:52PM

I think you should be looking at cutting more than 50 pounds from your groceries budget. It's where the biggest savings could be made without too much of a headache.

Ys shopping, approved food, meal planning, the old style board might help you cut costs

Treadingonplaymobil · 12 February 2017 at 4:50PM

enthusiasticsaver wrote: »

If the kids are growing and you are buying good quality clothes they are probably growing out of them before they wear out. You can sell them on eBay maybe or down brand to supermarket clothing which would wear less well but is a lot cheaper. Same goes for groceries. Downbrand and get the monthly bill down.

Good point on the clothes. I find some stuff gets passed down from first to second, but virtually nothing makes it to the third one, yet we still buy her good quality clothes that are still in perfectly good condition when she's grown out of them. Will keep buying some good bits for eldest, but make sure that anything that hasn't got a sibling to hand down to is supermarket prices.

annandale wrote: »

I think you should be looking at cutting more than 50 pounds from your groceries budget. It's where the biggest savings could be made without too much of a headache.

Ys shopping, approved food, meal planning, the old style board might help you cut costs

That sounds like a good challenge. As a starting point, we still have £242.47 in the food budget for February. £15 earmarked for school lunches so £227.47 to play with. I'm about to go away with the kids for 3 days, so only DH at home, then we only have 13 days to limp through after that. I did an enormous stock up shop last week which we still have tons left of, so a good start would be if I can get to the end of the month with £100 still left in the food budget, which can go straight off one of the debts.

I'm still not sure which debt to tackle first. The cards are both on 0%, but one 0% expires in 6 months. We'll probably be able to get another 0% at that stage, but it isn't absolutely definite (we have never skipped a payment or anything, but we have had a few 0% offers over the years, so not sure if banks keep letting you have them if you've had one in the past?). So should I pay off the CC, I wonder, or throw anything extra at the Tesco loan, which is permanently at a whopping 10.29%?

JoJoC · 12 February 2017 at 5:02PM

Hi ToP, just thought I'd return the visit!

Thinking about your grocery bill, I do think you could easily shave loads of cash off that. Do you meal plan? Do you write a list before you go shopping? Where do you shop?

We are a house with two adults and two kids (age 4 and 18m) who both have massive appetites but I've spent the last year getting my shopping budget down. We shop almost exclusively at Aldi but I go to the nearest Sainsbury's/ Morrisons/ Home Bargains (depending on what we need) to get a couple of branded things that we need/ particularly like, such as Lurpak, deoderant and soap powder.

My monthly grocery budget is £220, so approx £55 per week and that's to include nappies and pull ups (my eldest still wears them at night and my youngest still in nappies). We eat well and loosely follow slimming world so lots of fruit, veg and lean meat. I meal plan, shop on a Sunday afternoon and spend Sunday evening prepping food mostly.

Here's an example of ours for the week:
- Bacon, mushroom and pea risotto
- Skinny burgers, poached eggs, sweet potato fries and veg
- Campfire stew on bakes potatoes
- Diet coke chicken and noodles
- Spag bol
- Chicken curry and rice

Then for lunches, I'll make potato and leek soup tonight and taco bowls and that'll do my husband and I for lunches all week. Snacks will be fruit, crisps and yoghurts.

The last two weeks have come under £50 per week at Aldi and I had a £20 spend at Home Bargains last weekend for toiletries and cleaning things that we were running out of.

All that waffling was just a bit of an example of what we do as some food for thought (excuse the pun!).

Bobarella · 12 February 2017 at 6:08PM

Just popping in to say good luck TreadingonPlaymobil

enthusiasticsaver · 12 February 2017 at 6:33PM

Treadingonplaymobil wrote: »

Good point on the clothes. I find some stuff gets passed down from first to second, but virtually nothing makes it to the third one, yet we still buy her good quality clothes that are still in perfectly good condition when she's grown out of them. Will keep buying some good bits for eldest, but make sure that anything that hasn't got a sibling to hand down to is supermarket prices.

That sounds like a good challenge. As a starting point, we still have £242.47 in the food budget for February. £15 earmarked for school lunches so £227.47 to play with. I'm about to go away with the kids for 3 days, so only DH at home, then we only have 13 days to limp through after that. I did an enormous stock up shop last week which we still have tons left of, so a good start would be if I can get to the end of the month with £100 still left in the food budget, which can go straight off one of the debts.

I'm still not sure which debt to tackle first. The cards are both on 0%, but one 0% expires in 6 months. We'll probably be able to get another 0% at that stage, but it isn't absolutely definite (we have never skipped a payment or anything, but we have had a few 0% offers over the years, so not sure if banks keep letting you have them if you've had one in the past?). So should I pay off the CC, I wonder, or throw anything extra at the Tesco loan, which is permanently at a whopping 10.29%?

I would tackle the credit card with the 0% finishing in 6 months. I hear what you say about the loan but that is being reduced by £377 per month which is a decent repayment. My feeling would be you get on top of the credit cards first. You only have 2 but they both have high balances. Neither is going to be paid off in 6 months with the lack of disposable income you have so you are thoroughly dependent on getting another deal in 6 months time.

It is good that your parents are willing to wait for repayment at least and the credit cards are at 0% but maybe this has made you a little bit blas! about the debt going up as the majority is not costing you anything as such at the moment. I wonder with your self employment bringing in so little and costing you in terms of quality clothes, top end mobile if you would not be better looking for alternative employment?

I think as a matter of urgency you should not be accepting shortfalls any more. Whether it is holidays, entertainment, groceries or clothing something in your discretionary spend has to go or you will need to bring in a higher income.

£67,031.92 is a frightening number indeed....

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