Sorting out this massive mess

mandi80 · 9 April 2018 at 12:26AM

Evening all,

I have been planning this post in my head all day! I am posting here for support, advice and generally somewhere to vent about our current circumstances.

DH and I, both 37 with one kid, are in debt to the tune of around 60k.. The debt is made of up a combination of credit cards, and a loan. we have been in debt ever since we became a couple. We lived our twenties during the noughties and we took advantage of the 0% balance transfers that seemed to be everywhere back then. We funded holidays, weekend and away and general lifestyle stuff with credit cards, before balance transferring to another 0% card and so on, so on etc. Totally foolish in hindsight but we were totally taken in by the debt culture.

our debts up until around 5 years ago were around 25K, Whilst this was lot, it was easily manageable on our income and we didn't really think much about it. Fast forward to 2018 and we are around 60K in debt... how did this happen.... I'll digress!

we were supposed to receive a large sum of money last year (50Kish) that was due to us. Sadly, due to the actions of others this money will not be coming our way ( well not all of it). I can't really go into much more detail. DH is happy for me to post on here, on the condition that I don't reveal anything too specific, so I need to respect this. We have done everything we can to get the money that we are due, however we have had to accept that it isn't going to happen.

We racked up a lot of debt using a loan, and 0% credit cards with the full intention of clearing it when we received out 50K. This money was used to fund our house renovations, maternity pay gap, as well as funding a 9 month gap when I was not able to work. I need to be jonest and admit that a good 10K was used to totally non-essential things such as holidays, expensive furniture, and being too generous to people who, in hindsight, didn;t appreciate of deserve it.

We hqve both made peace with the fact that the 50k isn't going to appear. We have had to, in order to maintain our sanity. I am a practical person and not really a worrier, therefore I am taking on the role of 'money manager' in our house - DH is on board and fully aware, but tend to fret and worry and IMO this gets in the way of progress!!. I like to look at things logically, so I have spent sometime today thinking about the reasons why I am/am not worried

I am worried because –

It’s a massive amount of debt, regardless of income
A sudden loss of income would be catastrophic for us
It makes my DH anxious and stressed, which I hate.
The

0% deals are running out soonish

I am not worried because –

It’s only money – I have witnessed family and friends deal with all sorts of horrendous things during the last few years and our money woes are minor in comparison
We have a reasonably small mortgage of just over £500 per month, which enables us to throw more at our unsecured debts
We have a good joint income, taking home around £4800 per month. Minimum debt payments are around £1200 so this still leaves an income of £3600 after minimum debts are paid, which isn’t too bad. We managed on far less at the start of our relationship
We have paid off 10K since oct/nov 2017
We will definitely receive around £17k mid 2019, so this can be knocked straight off the debt, with perhaps a couple of grand retained as an emergency fund
Stepchange said that we don’t need to consider a DMP as we can easily afford minimum payments.
I have put the figures though the snowball calculator with the interest set at 20% and we can still manage it
I pay everything on time, and have been overpaying so I am reasonable confident that I will be able to obtain more 0% transfers when the time comes

I will do a full SOA tomorrow when I am not so tired, but as a general idea, our finances are arranged in the following way –

Income £4800
Mortgage and all house related bills and direct debits £1250
Food, fuel and kids clubs £600
Minimum debt payments - £1200
TOTAL outgoing- £3050

Do this look doable? I think that we can do it without resorting to a formal debt solution, based on the fact that we do have a good surplus at the moment. Our jobs are secure so we should be able to make a decent dent in the debts this year.

System · 9 April 2018 at 3:50AM

our debts up until around 5 years ago were around 25K, Whilst this was lot, it was easily manageable on our income and we didn't really think much about it. Fast forward to 2018 and we are around 60K in debt... how did this happen.... I'll digress!

That's easy, lifestyle inflation. As your income goes up so does the money you spend on things. A Ford Mondeo becomes a BMW or Audi and when you put fuel in it you no longer care the nearest petrol station is 10p/litre more than another one you pass on the way to work, £30 pairs of shoes replaced by £100 pairs of shoes, a meal and drink out at a local chain pub becomes one at a much more expensive restaurant, a package holiday becomes a cruise...

Absolutely doable and it already looks like you're starting down the right path shifting everything you can to lower rates, getting a SOA together. I reckon there's a fair bit of fat to trim as well as you'll find out when you post a SOA BUT YOU HAVE TO BE TOTALLY HONEST WITH IT and include everything you spend, even those odd few quids here and there on a Costa Coffee etc.

You have as it stands at least £1700 a month to throw at this. 3 years or so and it would be done with.

DO NOT RELY ON THE £17K. If you do get it keep it for an emergency fund. £2k is not enough of an emergency fund for you, you need at least 3 to 6 months of outgoings.

a_silver_lining · 9 April 2018 at 7:53AM

I agree with the previous poster. I would treat the 17k as your emergency fund, and repay the debt with your income. Try using a spending tracker on your mobile and record every little spend, you'll be surprised where it all goes and where you can cut down.

mandi80 · 9 April 2018 at 8:43AM

Thanks for the replies guys.

I agree that 2k Isn't enough - I was just thinking about having some money in case the washing machine broke, etc. Normally, that sort of thing would have gone straight onto the credit card.

I am going to so the SOA as soon as I have had breakfast

mandi80 · 9 April 2018 at 10:34AM

So here is the SOA. I have tried to be as accurate as possible and reflect how we have been spending since the end of last year. It's actually a bit worse than I thought - I thought that we had a bigger surplus. Just shows the importance of writing it all down and looking at it in black and white.

I should add that we are not currently paying for TV licence as DH's 75 year old mother is staying with us for around a year. She pays for her own food etc so doesn't really cost us anything.

Household Information[/b]
Number of adults in household........... 3
Number of children in household......... 1
Number of cars owned.................... 2

Monthly Income Details
Monthly income after tax................ 2450
Partners monthly income after tax....... 2365
Benefits................................ 82.8
Other income............................ 0
Total monthly income.................... 4897.8

Monthly Expense Details
Mortgage................................ 518.2
Secured/HP loan repayments.............. 179
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 120
Electricity............................. 30
Gas..................................... 60
Oil..................................... 0
Water rates............................. 0
Telephone (land line)................... 35
Mobile phone............................ 40
TV Licence.............................. 0
Satellite/Cable TV...................... 0
Internet Services....................... 25
Groceries etc. ......................... 300
Clothing................................ 30
Petrol/diesel........................... 200
Road tax................................ 10
Car Insurance........................... 25
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 200
Other child related expenses............ 0
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 15
Contents insurance...................... 15
Life assurance ......................... 38
Other insurance......................... 0
Presents (birthday, christmas etc)...... 50
Haircuts................................ 10
Entertainment........................... 250
Holiday................................. 0
Emergency fund.......................... 0
Total monthly expenses.................. 2180.2

Assets
Cash.................................... 0
House value (Gross)..................... 205000
Shares and bonds........................ 0
Car(s).................................. 12000
Other assets............................ 0
Total Assets............................ 217000

Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 71500....(518.2)....1.95
Hire Purchase (HP) debt ...... 12000....(179)......6.9
Total secured & HP debts...... 83500.....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
credit card 1..................10500.....260.......18.9
credit card 2..................3000......65........0
credit card 3..................4800......50........0
hmrc...........................1300......131.......0
tesco CC.......................4600......140.......16.9
barclaycard....................7000......195.......0
mbna...........................5000......120.......19.9
loan ( Halifax)................17250.....345.......7.9
loan (creattion)...............9000......248.......9.9
Total unsecured debts..........62450.....1554......-

Monthly Budget Summary
Total monthly income.................... 4,897.8
Expenses (including HP & secured debts). 2,180.2
Available for debt repayments........... 2,717.6
Monthly UNsecured debt repayments....... 1,554
Amount left after debt repayments....... 1,163.6

Personal Balance Sheet Summary
Total assets (things you own)........... 217,000
Total HP & Secured debt................. -83,500
Total Unsecured debt.................... -62,450
Net Assets.............................. 71,050

System · 9 April 2018 at 12:06PM

Welcome - sounds like you are at the start of a great journey to getting this sorted.

At the moment your SOA has nothing in it for emergency fund - read about the £17K, but in the meantime I think you should prioritise putting the "spare money" into the EF - perhaps with setting an extra £5 on top of each minimum payment for your CC' as this will help with your credit score as you are paying over minimums and hopefully help to attract you some 0% BT deals)
Then in a couple of months you will have £2K in the EF, and if the £17K comes in you could then throw that £2K at one of your debt (prioritising your highest interest ones first)

Saving cash into your EF rather than off the debt will also help manage if your SOA is actually right as it usually takes a few months to iron things out?

I'm guessing you will want to start smashing the debt, so purposely not doing this, and building an EF feels a bit counter productive. To keep you motivated you could try doing something like PAD (payment a day) - rounding down your account to the nearest pound, and sending the pennies to a CC.

There's nothing in the holiday fund, but a good amount in entertainment - I definitely think you need to keep life "nice" otherwise it' all too easy to get demotivated with debt busting - so make sure you plan how you spend this cash and get good value out of it (not just frittered for costas!!)

Telephone and internet seems a bit high -are you locked in? I got a £28 a month deal with sky for all calls anytime (mobile inc) and umlimited broadband - plus got £75 Topcashback for signing up....

Car maintenance is a bit low at £30 for 2 cars

Good luck!!

National_Debtline · 9 April 2018 at 12:15PM

Hi mandi

Your attitude and approach to this bode well as you're clearly very determined to get on top of things.

Just a small observation - there doesn't appear to be any figure for water in your SOA - are you in Scotland, where it's included in your council tax?

Dennis
@natdebtline

mandi80 · 9 April 2018 at 12:39PM

HI, It appears that my DH actually paid out water rates in full - using a credit card, so they are in the SOA - they are just part of the debt!!!

zippygeorgeandben · 9 April 2018 at 12:46PM

You know I'm excited for you, I genuinely am. I think you and your DH should start a diary.
My advice would be like other people and do not rely on the 17k. Some people suggest building a 3-6 months emergency fund so you are totally prepared for any emergency which comes along due to not being able to work.
A monthly income of £4,800 multiplied by three is £14,400 so you should think of that £17k as your emergency fund. That's what I think anyway.
Also, if I may say, I really admire your frankness, honesty and 100% responsibility.
Regarding the 50k, in the words of Elsa in Frozen just 'Let it go'. People never let go in things in life (this was a drunken conversation in the pub I had on Saturday!) and it just takes over you, causes friction, makes you become bitter etc.. so let it go!
I look forward to reading with interest. Good luck.

System · 9 April 2018 at 2:04PM

mandi80 wrote: »

HI, It appears that my DH actually paid out water rates in full - using a credit card, so they are in the SOA - they are just part of the debt!!!

They need to be listed as a separate figure. Next year you'll not be putting them on a credit card but instead paying by DD.

You actually don't seem to be doing too badly on the outgoings on the face of it. The only thing I can see is telephone/internet. You can get BOTH combined for what you're paying for just one of them. I'm paying £31 a month for both phone line and fibre broadband combined and there's cheaper deals than that around. Not a lot of savings but its another few hundred quid a year in your pocket. Groceries is a little high depending on what you include. The ONS states the average food shopping for a family in the UK is a little over £55 a week including £4 on booze.

I would also set aside an amount per month in your SOA for holiday otherwise it becomes another expense that goes into the "where the hell did all the rest of the money go?" pot when you do the sums and it doesn't all add up

smem18 · 10 April 2018 at 4:56PM

I'd say £300 on groceries for 2 adults and 1 child per month is huge - where do you shop? I reckon you could cut that in half with some savvy shopping!

Also, £250 on entertainment per month seems like a lot to me.

I also agree with others that you should have a view to build up an emergency fund with your remaining income. Then once you've done that, throw everything you've got at those debts. You are both on good money so I totally believe you can clear this over time, but you'll need to be strict and dedicated to it

Sorting out this massive mess

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