The 4 horsemen (debts) of the apocalypse (2018)

fatrab · 6 December 2017 at 4:49PM

Hi,

Long time lurker/user of the main site and debt free wannabe/mortgage free wannabe!

I've decided (light bulb moment) that enough is enough with my current debt situation. I want to stress from the offset that I am not in any financial difficulty, I've not missed any payments in the past 10 years and our income is more than our outgoings. No overdraft. And I want to make sure it stays that way.

But, I'm sitting here in a situation where we should have expendable income wondering where it all goes every month.

I've had a quick look at where some of it is going wrong I've found 4 culprits that I want to get my head down and clear within the next 12 months.

1. Credit card with a balance of £6300 - 0% deal expires this month - £90/month min payment
2. Bank Loan with a balance of £6200 (£166/month) @ 3.1% - car purchase
3. Home insurance monthly £12.94, renewal July
4. Car insurance monthly £34.21, renewal October

The total monthly saving from these 4 alone is over £300 which would make a huge dent in the mortgage overpayment plan, which I've mentioned below.

I know it would be a quick fix to transfer the £6300 (again) from the credit card to a 0% deal but I've been doing this for years and just want to get it cleared.

Between us we have 3 mobile contracts (2 phones and 1 tablet) totalling £70. I haven't considered them as debts and as each contract expires at differing times in 2018 they won't be renewed.

Most of our bad spending was on take-away food and eating out which we have cut down on considerably.

I also have this overwhelming desire to clear my mortgage and have been making irregular overpayments - totalling £1800 so far this year. I will be at the end of a 5 year deal @ 3.24% and will have 7 years 4 months remaining come September.

I want to clear all of these but just can't seem to find any focus or direction to make the best impact on my situation and hope someone reading this has been in a similar situation and can point me in the right direction.

I feel like I should know what to do, but my brain is frazzled. I'm always really good at making sure I'm on the best deal for energy/insurance/credit card etc but I've lost the plot this year.

Thanks for any advice in advance,

Robert

National_Debtline · 6 December 2017 at 7:03PM

Hi fatrab

I must confess I'm a little confused by your reference to items #3 and #4 in that list above.

In what sense are you aiming to eliminate/clear your spending on home/car insurance? Are you referring to simply seeking better deals upon renewal? Or organising your finances in such a way that you can pay next year's premiums in one go, as opposed to monthly and thus saving a few £?

The figures you're currently paying for those insurances don't look outlandishly high, though of course I don't know enough about your circumstances to comment on what better quotes might be out there.

Dennis
@natdebtline

fatrab · 6 December 2017 at 7:45PM

Hi Dennis,

I think once I actually wrote out the above post I realised my own failing.

I wasn't in a position to pay the insurance in full so paid monthly thus costing more in the long run. But only a few months earlier I'd made an overpayment to my mortgage.

I follow MSE's advice at renewal and never auto renew so I'm confident that I'm on the best deal for both home & car insurance.

I seem to be making irrational decisions when it comes to paying off my debt. If I'd kept the money in the bank instead of being hell bent on reducing my mortgage I'd have been able to pay both insurances up front.

Like I said, I'm usually good at this kind of thing.

[Deleted User] · 6 December 2017 at 10:03PM

Its not a bad idea to want to pay more off your mortgage but assuming you have a decent mortgage deal it would make more sense to pay off debt first.
One of my tricks when I think i'm over-spending is for a full month write down day by day EVERYTHING I spend, it can make interesting reading at the end of a month, just one example a newspaper every day 7 days a week can add unto to £7 or if you like £364 a year or in your case a years car insurance.

fatrab · 7 December 2017 at 9:20AM

venison wrote: »

a newspaper every day 7 days a week can add unto to £7 or if you like £364 a year or in your case a years car insurance.

We applied the same logic to our eating habits as we were eating out or having take-aways far too often. £20-30 per week on fast food and at least £30 every time we were eating out stacks up to a stupid amount of money over the year, not to mention the health implications.

Then sitting at the end of the month wondering why there's no money left!

I think need to address the credit card first. If I do transfer it to another 0% deal then need to be far more disciplined with the payments. I have enough expendable income on paper to clear it in less than a year.

I just need to do it.

National_Debtline · 7 December 2017 at 1:42PM

Hi again

It's always easy to think more clearly with 20/20 hindsight so please don't be too hard on yourself. I dare say that you've saved a good deal more than you've wasted over time by following the MSE guidance.

Out of interest, were these mortgage overpayments out and out "capital reductions" (which are irreversible), as opposed to regular overpayments which can often be claimed back depending on the terms of your agreement?

Dennis
@natdebtline

System · 7 December 2017 at 2:17PM

Can you post a SOA and we can see where your money is going

fatrab · 9 December 2017 at 10:51AM

National_Debtline wrote: »

Out of interest, were these mortgage overpayments out and out "capital reductions" (which are irreversible), as opposed to regular overpayments which can often be claimed back depending on the terms of your agreement?

Hi Dennis,

I agreed with the lender that any overpayments would come off the end term so basically every time I pay £600 it takes a month off the end date. I took out a 25 year mortgage in 2006 (re-mortgaged in 2013 - 5 year deal) and I've got 8 years left so I have made a considerable dent in it over the years. I am 43 and it's my goal to be mortgage free before my 50th birthday.

I have now transferred £4000 of the £6300 credit card debt to another 0% card. That was the most I could transfer with the credit limit offered, but I was offered the full 36 months so at £100/month it'll be pretty much cleared by the end of the term. Just need to pay the £2300 asap. I will post a SOA shortly. I had done one last week but didn't save it. I'll re-do it.

Thanks again for responding. Things just seem so much clearer simply by writing them down and getting other peoples input.

fatrab · 9 December 2017 at 11:47AM

Few things to explain about the below SOA - wife and I keep finances separate. I pay big bills, cars etc, she runs the house. I've marked the bills she pays with **.
She's currently on Maternity leave and will be returning to work afterwards.
We were spending £100+/week on takeaway/eating out. This is now £40-60 and we're still cutting down. I work away from home mon-fri so I have a mortgage & rent to pay for temp. accommodation. I receive subsistence allowance for this and have included that in my monthly earnings.

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 2
Monthly Income Details
Monthly income after tax................ 3500
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 213
Total monthly income.................... 3713
Monthly Expense Details
Mortgage................................ 800
Secured/HP loan repayments.............. 400
Rent.................................... 300
Management charge (leasehold property).. 0
Council tax............................. 136
Electricity............................. 0**
Gas..................................... 0**
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 0
Mobile phone............................ 70
TV Licence.............................. 12
Satellite/Cable TV...................... 33
Internet Services....................... 0
Groceries etc. ......................... 0**
Clothing................................ 0**
Petrol/diesel........................... 400
Road tax................................ 43
Car Insurance........................... 34
Car maintenance (including MOT)......... 90
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0**
Other child related expenses............ 0**
Medical (prescriptions, dentist etc).... 0
Pet costs................. 0**
Buildings insurance..................... 13
Contents insurance...................... 0 - combined with buildings
Life assurance ......................... 7
Other insurance......................... 0
Presents (birthday, christmas etc)...... 0**
Haircuts................................ 0
Entertainment........................... 0
Holiday................................. 0
Emergency fund.......................... 0
Netflix................................. 5.99
Gym..................................... 32
Total monthly expenses.................. 2375.99

Assets
Cash.................................... 0
House value (Gross)..................... 128000
Shares and bonds........................ 0
Car(s).................................. 27000
Other assets............................ 0
Total Assets............................ 155000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 66000....(800)......3.24
Hire Purchase (HP) debt ...... 20000....(400)......6.9
Total secured & HP debts...... 86000.....-.........-
Unsecured Debts
Description....................Debt......Monthly...APR
Credit card....................4050......100.......0
Credit card....................2300......0.........19.9 - to pay off in full by end of January
Loan...........................6200......166.......3.1
Total unsecured debts..........12550.....266.......-

Monthly Budget Summary
Total monthly income.................... 3,713
Expenses (including HP & secured debts). 2,375.99
Available for debt repayments........... 1,337.01
Monthly UNsecured debt repayments....... 266
Amount left after debt repayments....... 1,071.01
Personal Balance Sheet Summary
Total assets (things you own)........... 155,000
Total HP & Secured debt................. -86,000
Total Unsecured debt.................... -12,550
Net Assets.............................. 56,450

starting_again_in_the_sun · 9 December 2017 at 8:48PM

Hi Fatrab,

It's quite tricky to comment on your SOA with so much missing, could you do a joint one with what your wife pays?

Do you really spend nothing on food or entertainment even though you live away from home during the week?

Good luck!

fatrab · 10 December 2017 at 12:05PM

Hi,

Wife's situation is complicated so we keep our finances separate.

She pays certain bills and I pay the rest.

We do a big shop on a Sunday which includes my food for the week that I take with me. My wife pays this. I don't normally go out during the week, apart from to the gym 2 or 3 evenings.

If I'd filled out the SOA a few months ago it would be a very different picture but basically since Oct I've cut down on takeaways and eating/drinking out and joined the gym.

We still have a take away on a Friday night when I get home (£20) and we go to a local cafe for Sunday breakfast (£10) so we're not spending anywhere near what we used to.

On paper it looks like I should have loads of money left but I don't.

This week I'm going to write down every penny that I spend. I feel like i must be missing something somewhere.

Thanks

Robert

The 4 horsemen (debts) of the apocalypse (2018)

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