Everything else is good....expect for the finances

mrsjanner · 20 November 2017 at 3:04PM

Hi everyone, this is my first MSE post!

I have just done a SOA after finally reaching the point of tackling our finances. A bit of history... met husband 5 years ago and since then we have married, had 2 kids and purchased a dilapidated house! We have spent the last 3 years coping with maternity, serious house renovations and debts that existed prior to us meeting ( we both owed around £15k when we met).

I am now back at work full time and the house is FINALLY completed. I am incredibly happy with my life and how things have turned out for me. 5 years ago I was single, childless and sad.... today I have everything I want, except for the debts!!! We are now at the stage where we just need to tackle the debts. We no longer have to fund maternity or building work to the house, so we are in a position to really hammer this debt

We have a lot of debt, as you will see from our SOA, however we also have a decent income so I am more determined than worried, if that makes sense. I am aware that a change in circumstances could change things drastically, which is why we want to tackle the debt now!

The debts have built up as a result of funding the renovation works to our house, plugging the gap for maternity pay, plus some existing debts that we had when we first met. We haven't lavish holidays, or lived the high life, in fact we have decided to not go abroad until the kids are much older, as it is too much like hard work!

Please can you have a look at our SOA below. Any comments are most welcome. I must admit it was a daunting experience seeing it all in black and white... but here it is...

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

Monthly Income Details
Monthly income after tax................ 1200
Partners monthly income after tax....... 3650
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 4850

Monthly Expense Details
Mortgage................................ 643
Secured/HP loan repayments.............. 185
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 130
Electricity............................. 50
Gas..................................... 60
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 15
Mobile phone............................ 40
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 20
Groceries etc. ......................... 300
Clothing................................ 75
Petrol/diesel........................... 150
Road tax................................ 5
Car Insurance........................... 50
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 200
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 20
Pet insurance/vet bills................. 0
Buildings insurance..................... 20
Contents insurance...................... 10
Life assurance ......................... 30
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 15
Entertainment........................... 150
Holiday................................. 100
Emergency fund.......................... 100
Total monthly expenses.................. 2460

Assets
Cash.................................... 2500
House value (Gross)..................... 275000
Shares and bonds........................ 0
Car(s).................................. 15000
Other assets............................ 0
Total Assets............................ 292500

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 180000...(643)......2.4
Hire Purchase (HP) debt ...... 11500....(185)......4.9
Total secured & HP debts...... 191500....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
barlaycard platinum............15000.....300.......0
mbna...........................1000......40........19.9
creation.......................5000......52........0
Tesco loan.....................9000......180.......7.5
HSBC loan......................25000.....380.......3.9
Total unsecured debts..........55000.....952.......-

Monthly Budget Summary
Total monthly income.................... 4,850
Expenses (including HP & secured debts). 2,460
Available for debt repayments........... 2,390
Monthly UNsecured debt repayments....... 952
Amount left after debt repayments....... 1,438

Personal Balance Sheet Summary
Total assets (things you own)........... 292,500
Total HP & Secured debt................. -191,500
Total Unsecured debt.................... -55,000
Net Assets.............................. 46,000

Scilly · 20 November 2017 at 3:18PM

I'd call the debt helplineto talk it through with someone impartial, look at a taking a debt management plan and reduce your bills. Can you reduce your groceries, clothing, entertainment & holidays - the latter are £250 combined.
Good luck

mrsjanner · 20 November 2017 at 3:21PM

Thanks for posting Scilly,

Not sure I we need the debt management route as we can afford our payments. I agree that we could cut back on certain areas of out SOA, however I do want to make it sustainable. We would like to clear it all within 5 years.

Scilly · 20 November 2017 at 3:54PM

Just an idea but if you go onto the Stepchange website, bear with me here, type in your SOA it'll tell you how much you'd be paying back each month over the 5yrs. You could then use that as your own management plan?!?!

tori.k · 20 November 2017 at 4:27PM

Plug your figures into the stoozing.com snowball calculator that will give you the best order to pay off your debts the cheapest way. Five years is more than achievable

nkkingston · 20 November 2017 at 4:36PM

Like you say, if you can afford it to pay it down, then you're not really in a DMP place. I was going to comment on your SOA, but actually, the first thing that leaps out at me is this is almost certainly an aspirational SOA, unless you really have £1500 left at the end of every month (in which case, clear the MBNA card before christmas, roll that £40pm into the £1500, and work down the debts form highest APR to lowest, taking into account any 0% deals). If you really are spending £900 a year on clothes and £600 a year on presents, you can see immediately where you can make cuts.

The best step to take now is get the last three month's of bank statements and reconcile them against the SOA. Are you really spending £300 pm on food, or have you overlooked those sneaky lunch break sandwiches? What is your £150 pm on entertainment actually covering? Your car is insured, but has no maintenance costs whatsoever? You have no child related costs apart from childcare?

Once you know what you actually spend your money on, you'll be able to compare that with what you want to spend your money on, and come up with a realistic plan to shift it into clearing debts.

In the mean time, I'd see if I could get the gas and electric more cheaply (and get into good habits turning lights off and putting jumpers on!), and when the insurances are up for renewal shop around. Always use a cashback site to get a little something extra as well. If your council tax is over ten months, you've got two months coming up soon where you can throw that at the debts, then ask the council to split it over twelve for easier budgeting going forwards.

EssexHebridean · 20 November 2017 at 4:44PM

Welcome aboard and well done for looking to tackle things! You sound determined to get things sorted too which is always a bonus - especially when combined with a nice healthy surplus on an SOA!

As usual, comments are in red...

mrsjanner wrote: »

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

Monthly Income Details
Monthly income after tax................ 1200
Partners monthly income after tax....... 3650
Benefits................................ 0 Above the income threshold for Child Benefit I assume?
Other income............................ 0
Total monthly income.................... 4850

Monthly Expense Details
Mortgage................................ 643
Secured/HP loan repayments.............. 185
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 130
Electricity............................. 50
Gas..................................... 60 Your combined utilities bills are quite high -
have you checked you're on the best tariff? If so then it's time to start reducing use (which you can do anyway) - first thing is to turn your thermostat down a couple of degrees. Then have a wander round your house - top to bottom, and turn off everything that's not in use and doesn't need to be on. So TV;'s on standby, chargers plugged in, lights...whatever you can find!
You can make a surprising difference just with the small stuff. One real energy guzzler is an
electric shower so if you have one of these think about reducing the time you spend under it,
too.
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 15
Mobile phone............................ 40 2 phones? You might be able to save a bit once contracts expire by switching to SIM only.
TV Licence.............................. 12 12.37 or thereabouts, I think? Sorry -
aware this sounds picky but it's never a great idea to ignore the pennies, they all mount up!
Satellite/Cable TV...................... 0
Internet Services....................... 20
Groceries etc. ......................... 300 This is quite a bit for a family of 2 +
2 tots. You can knock £50 off this easily, and more with a little effort.
Clothing................................ 75 Ouchy - now that IS high!
Petrol/diesel........................... 150 Read Martin's guide about driving economically
Road tax................................ 5 Is this actually being paid monthly? For that amount that's a false economy if so as you pay extra for that - just pay it for the year then set the money aside to pay the following year when due.
Car Insurance........................... 50 This is good for two cars - again though with that surplus pay the full year's policy then put money aside each month...
Car maintenance (including MOT)......... 0 Nothing at all?
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 200 Assume you do all the right things to get the best deal here - childcare vouchers or whatever the current thing is?
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 20 If this is for prescriptions then think about prepaid.
Pet insurance/vet bills................. 0
Buildings insurance..................... 20
Contents insurance...................... 10
Life assurance ......................... 30
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 15
Entertainment........................... 150
Holiday................................. 100
Emergency fund.......................... 100
Total monthly expenses.................. 2460

Assets
Cash.................................... 2500 Think about separating this out into different pots so you can see what is where - so EF, Holiday etc.
House value (Gross)..................... 275000
Shares and bonds........................ 0
Car(s).................................. 15000
Other assets............................ 0
Total Assets............................ 292500

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 180000...(643)......2.4
Hire Purchase (HP) debt ...... 11500....(185)......4.9
Total secured & HP debts...... 191500....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
barlaycard platinum............15000.....300.......0
mbna...........................1000......40........19.9
creation.......................5000......52........0
Tesco loan.....................9000......180.......7.5
HSBC loan......................25000.....380.......3.9
Total unsecured debts..........55000.....952.......-

Monthly Budget Summary
Total monthly income.................... 4,850
Expenses (including HP & secured debts). 2,460
Available for debt repayments........... 2,390
Monthly UNsecured debt repayments....... 952
Amount left after debt repayments....... 1,438 This is an excellent surplus to work with - where is it going currently?

Personal Balance Sheet Summary
Total assets (things you own)........... 292,500
Total HP & Secured debt................. -191,500
Total Unsecured debt.................... -55,000
Net Assets.............................. 46,000

OK your situation is really not so bad.

Things to think about.
- You're putting £100 a month aside for a holiday - is this something that is already booked? If not then how about sacrificing the idea of a holiday away and instead spent a week/fortnight enjoying your lovely family and home together? Perhaps re-start the clock again with regard to planning something for 2019 - so maybe start saving again in the middle of next year. This has two advantages - firstly it lets you use whatever savings you've already amassed to throw at the debt, and secondly it gives you 6 - 8 months where that £100 a month can go to debt, too.
- Car expenses - with your level of surplus you really shouldn't be paying things like insurances etc in monthly instalments as this generally does cost a bit more. Think about saving an amount from your surplus each month to build up to the amount of your next year's premium, then pay that in one go when due - after that put aside 1/12th of the annual premium each month, along with 10% extra on top to cover increases.
- Groceries - think about making sure you cook everything from scratch and also shop about a bit for bargains. Start to learn what your optimum prices are for the things you buy regularly, and remember to compare the costs of the various different pack sizes.

In terms of tackling the debts - get that MBNA card gone and the account closed as that rate of interest is nasty. That's one month - this one if you still have your surplus in the bank.
Then you can be canny about how you tackle the rest - it might be worth looking to see what the settlement figures on the loans are should you pay them off early - if the interest is front loaded you might make a saving there. If the interest IS front loaded then it can be as well to stick money aside into savings until you have enough to pay loans off in a lump sum rather than trickling money back to them.
Look also at when the 0% rates on the cards expire - you'll want to have them cleared by that stage. Might be worth considering upping the monthly payments on those to just make sure they'll be clear ahead of the 9% ending anyway - that's certainly one way of tackling it.

You have to scope to be able to pay in the region of £1600 a month off - that's nearly 20k of debt you can shift in a year if you can keep the focus and momentum. You can be debt free in under 3 years - had you realised that?

One thing - and nkkingston has alluded to it as well - all the above comments are taking your SOA at face value as the open, honest document it needs to be for your own sake. If it's not, then use the next month to get everything under control so that by christmas, that IS the real picture.

mrsjanner · 20 November 2017 at 8:53PM

Thanks for all of the posts folks!

I will try and answer everyone's questions here...

In terms of our surplus £1400 - this relatively new to us as I have only recently returned to work. Up until last month, every penny of spare cash was accounted for to either plug the maternity pay gap, or to go towards the house. We finished the last 'big' house job last month ( the kitchen). The house will be fine now for years to come, apart from the odd bit of decorating etc.

I was a little unsure of what to enter for clothes and haircuts etc so I improvised! Some months I will spend nothing on these things, whereas other months I will spend more.

We don't have a holiday planned but we would like to get away to Devon or Cornwall for a week. I really want to budget for this as I think that it will be great family time. I have waited a long time for my famiily life and I intend to enjoy it!

In terms of how much we can pay back, we are currently paying £950 per month as minimum payments. We have an additional £1400 spare. Let's say that I have grossly undestimated our spending and we only have £1000 spare... that is still nearly £2k per month that we could throw at the debts, meaning that we could get rid of all of the unsecured debt within 2.5 years. This fills me with hope.

I did do the online Step change debt remedy calculator, just out of interest. It told me what I already know... That we can afford the payments and that we should just get on with it! I actually wouldn't want to go into a DMP. I don't want/need any more credit, however I don't want to trash our credit rating as we may need to move mortgage deals in the future etc.

I actually feel quite relaxed about things, perhaps more so that I should. I actually feel quite excited that we are going to do this and get rid of the one bit of stress that we have.

Does 2k per month seem realistic or am I kidding myself????

EssexHebridean · 20 November 2017 at 10:33PM

Looking at that SOA I'd say that's definitely realistic - easily so.

One thing you might think about is using £1000 of your savings to clear off MBNA. At the moment I bet with that interest rate that £40 a month isn't making much of a dent, and there's no way on earth that your savings are earning you anywhere CLOSE to that rate of interest. that still leaves you with a decent emergency fund there too - and a while before you'll be planning that holiday too I'm guessing.

Absolutely agree with your remark about not wanting to use credit but not wanting your credit history trashed either - good thinking, that. On the subject of mortgages I take it you're on a fixed rate deal, currently?

mrsjanner · 20 November 2017 at 11:36PM

EssexHebridean wrote: »

Looking at that SOA I'd say that's definitely realistic - easily so.

One thing you might think about is using £1000 of your savings to clear off MBNA. At the moment I bet with that interest rate that £40 a month isn't making much of a dent, and there's no way on earth that your savings are earning you anywhere CLOSE to that rate of interest. that still leaves you with a decent emergency fund there too - and a while before you'll be planning that holiday too I'm guessing.

Absolutely agree with your remark about not wanting to use credit but not wanting your credit history trashed either - good thinking, that. On the subject of mortgages I take it you're on a fixed rate deal, currently?

We are currently on SVR paying just 1.5% BUT I am tempted to look at a fixed rate asap

enthusiasticsaver · 21 November 2017 at 2:40PM

mrsjanner wrote: »

Hi everyone, this is my first MSE post!

I have just done a SOA after finally reaching the point of tackling our finances. A bit of history... met husband 5 years ago and since then we have married, had 2 kids and purchased a dilapidated house! We have spent the last 3 years coping with maternity, serious house renovations and debts that existed prior to us meeting ( we both owed around £15k when we met).

I am now back at work full time and the house is FINALLY completed. I am incredibly happy with my life and how things have turned out for me. 5 years ago I was single, childless and sad.... today I have everything I want, except for the debts!!! We are now at the stage where we just need to tackle the debts. We no longer have to fund maternity or building work to the house, so we are in a position to really hammer this debt

We have a lot of debt, as you will see from our SOA, however we also have a decent income so I am more determined than worried, if that makes sense. I am aware that a change in circumstances could change things drastically, which is why we want to tackle the debt now!

The debts have built up as a result of funding the renovation works to our house, plugging the gap for maternity pay, plus some existing debts that we had when we first met. We haven't lavish holidays, or lived the high life, in fact we have decided to not go abroad until the kids are much older, as it is too much like hard work!

Please can you have a look at our SOA below. Any comments are most welcome. I must admit it was a daunting experience seeing it all in black and white... but here it is...

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

Monthly Income Details
Monthly income after tax................ 1200
Partners monthly income after tax....... 3650
Benefits................................ 0
Other income............................ 0
Total monthly income.................... 4850

Monthly Expense Details
Mortgage................................ 643
Secured/HP loan repayments.............. 185
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 130
Electricity............................. 50
Gas..................................... 60
Oil..................................... 0
Water rates............................. 30
Telephone (land line)................... 15
Mobile phone............................ 40
TV Licence.............................. 12
Satellite/Cable TV...................... 0
Internet Services....................... 20
Groceries etc. ......................... 300
Clothing................................ 75
Petrol/diesel........................... 150
Road tax................................ 5
Car Insurance........................... 50
Car maintenance (including MOT)......... 0
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 200
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 20
Pet insurance/vet bills................. 0
Buildings insurance..................... 20
Contents insurance...................... 10
Life assurance ......................... 30
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 15
Entertainment........................... 150
Holiday................................. 100
Emergency fund.......................... 100
Total monthly expenses.................. 2460

Assets
Cash.................................... 2500
House value (Gross)..................... 275000
Shares and bonds........................ 0
Car(s).................................. 15000
Other assets............................ 0
Total Assets............................ 292500

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 180000...(643)......2.4
Hire Purchase (HP) debt ...... 11500....(185)......4.9
Total secured & HP debts...... 191500....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
barlaycard platinum............15000.....300.......0
mbna...........................1000......40........19.9
creation.......................5000......52........0
Tesco loan.....................9000......180.......7.5
HSBC loan......................25000.....380.......3.9
Total unsecured debts..........55000.....952.......-

Monthly Budget Summary
Total monthly income.................... 4,850
Expenses (including HP & secured debts). 2,460
Available for debt repayments........... 2,390
Monthly UNsecured debt repayments....... 952
Amount left after debt repayments....... 1,438

Personal Balance Sheet Summary
Total assets (things you own)........... 292,500
Total HP & Secured debt................. -191,500
Total Unsecured debt.................... -55,000
Net Assets.............................. 46,000

I will not go over the individual figures on the soa as I too suspect they are moveable given you have recently returned to work and have done a lot of house renovation. If you are confident that you can repay £2k per month then that is an excellent repayment and would see you debt free in less than three years.

Firstly I would tackle the MBNA card which is an easy win and could be paid off in one month. When do the 0% deals run out on the Barclaycard and Creation card? I would find out what the situation would be with the loans should you repay particularly the Tesco one early. Would there be a discount or is the interest already front loaded? If the 0% credit cards have a long time left before the deals expire I would tackle the Tesco loan first. Otherwise try and get the Barclaycard lower or Creation Card cleared within the interest free periods. It is good that you have a decent emergency fund and I agree with EH it is a good idea to split it into a not to be touched pot for emergencies, home and car repair and holidays.

You have the advantage of a high income but you have a significant amount of unsecured debt which leaves you extremely vulnerable particularly if your DH got sick or made redundant. I definitely don't think you are in DMP area but I would not be relaxed about that amount of debt either and focus on clearing it asap.

Everything else is good....expect for the finances

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