Emergency fund vs. Debt payoff

TheR3ader · 7 March 2018 at 5:41PM

I'm pretty new to this place, I'm desperately struggling to get my finances under control and its causing me some anxiety.
My main problem is that I'm a compulsive spender and whilst I'm in therapy now (spending, depression, anxiety, eating disorder) and starting to get that under control, I'm still suffering from the consequences of past actions.

I have a very good paying job and a very good lifestyle, on the surface. I've cut back as much as I see is feasible and want to pay off my debt as soon as possible. My partner and I are talking about the possibility of buying a house together however I need to get out of debt before I can even contemplate adding a mortgage to all of this!!

I guess my question from all of this is can anyone else see a way I can pay off my debt faster? Can I cut back anywhere? Should I use my emergency fund to partway pay off the debts?

Time to dive into it I suppose....

Debt
MBNA CC - £2485.56 (0% interest, 30mnths left)
BarclayCard - £2740.32 (0% interest, 14mnths left)
Loan - £12000

Savings
Emergency Buffer - £650
ISA - £250

Income
Take home pay - £1818

Outgoings
This is where things get tricky, I'm struggling to see where I can cut back on my bills...
Rent - £375 (bills incl. and managed by the landlord so cannot switch)
Phone - £22
Joint account (Food and couple time activities) - £250
Credit card (Minimum payments for both cards) - £80
Car Tax - $24.50
NHS (pre-paid prescription) - £10.40
Petrol - £180
Therapy - £200

Flexible Outgoings
Music Subscription - £9.99
Audible Subscription - £3.99
Loan Repayments - £150
Monthly Pocket Money - £200 (enough to keep the budget on track and feasible)
Personal Trainer - £175 (includes nutrition and injury rehabilitation)

Overall, my total outgoings are £1703, leaving only £114 towards my buffer monthly.

On the plus side, I have recently wiped out my overdraft (£1250).... I feel very foolish having gotten myself into this position, some advice (or even knowing I'm not alone) would be a great help...

Additional side note, my car is 15 years old and I generally have to spend in the region of £200-£400 a time, at least twice a year, to keep her running and safe to drive.

fatrab · 7 March 2018 at 5:47PM

First advice would be to focus on clearing your overdraft. Then get rid of it altogether.

Have you been open and honest about your situation with your other half? "Couple time activities" and pocket money look like areas you could cut right down on until the overdraft is cleared. You need to make distinction between wants and needs in your life. Rent is a need, socialising is want.

Do a full SOA if you have a minute, we're all accustomed to reading them and picking up on areas that need fine tuning:
http://www.stoozing.com/calculator/soa.php

Hope this helps

TheR3ader · 7 March 2018 at 6:04PM

Hi fatrab,
Thanks for replying. I did the SOA you suggested, rather worrying when everything is laid out like that.

Yes my partner is aware, he also has problem with controlling his spending (but he's better than me). You are right, I could definitely asses my pocket money and the couple time bits and pieces - I shall check into that going forward

The overdraft is completely paid back which is a win but I'm not sure where to funnel the money into next.

fatrab · 7 March 2018 at 6:07PM

Sorry I thought you meant you'd spent your overdraft! Apologies for not reading it correctly.

The general rule of thumb is to pay off the debt with the highest interest first.

If you copy and paste the SOA (format it for MSE) into this thread you'll get a lot of responses from people far more experienced than me willing to lend a hand.

Best of luck

fatrab · 7 March 2018 at 6:10PM

You have a loan and 2 credit cards, even if you post the outstanding balances for each and the interest rates that would help

a_silver_lining · 7 March 2018 at 8:25PM

I would leave your emergency fund in place

just in case of car issues.

My only thought is your spending a lot in addition to your necessary bills. I aim for £270pm for food, travel (I do not have a car though so this is generally only a £10 a month), socialising, clothes, subscriptions to things, any vet visits for cat, gym etc. Everything really. I occasionally go over and up to £400pm max if there is a spendy month.

Ignoring your petrol and therapy as essentials you spend £638.98pm on food, couple time, subscriptions and gym. I think a little trimming could be had

Just wanted to add - if you!!!8217;re a compulsive spender (like I was!) then you will have a fair bit of stuff you could sell. I have been selling for about two months now and have made £400 from eBay. That!!!8217;s 20% of my 2k goal. Sometimes only £1 profit for an item, often more. Selling 62 items has made me that £400 and 62 items really is not much, maybe two bin bags. Try filling some bin bags

Aim to pay off one of the 2ks with it.

enthusiasticsaver · 7 March 2018 at 10:42PM

Your salary, whilst ok is not huge and as you know you are overspending and have a significant amount of debt. Getting that debt repaid will involve certain sacrifices or it will take a significant time. The other alternative is to bring in more income by selling stuff, taking in a lodger or getting a second job.

The personal trainer would seem to me to be an easy win given you also pay £200 for therapy. An additional £450 a month for pocket money and food/couple time seems a lot too. Can you cut your personal trainer sessions down and the same for your personal spending money?

As you have an older car which needs a fair amount spending on it regularly I would keep your emergency fund.

MEM62 · 8 March 2018 at 12:02PM

TheR3ader wrote: »

Therapy - £200

Is this really necessary? Or perhaps available free on the NHS or through other support groups?

TheR3ader wrote: »

Personal Trainer - £175 (includes nutrition and injury rehabilitation)

Again - necessary?

You need to post a full SOA as your spending cannot be properly scrutinised from the information you have given. For example your contribution to the joint account includes food and 'couple time activities' Assuming you partner contributes a similar amount £500 is a lot for this - particularly as you have and additional £200 pocket money. On the face of it you are spending a lot on social activities.

It is clear that you are living beyond your means but the information you have provided doesn't allow the experts here to drill into the detail. Also, please do not take offence at my questions above. These are expensive items and you therefore need to ensure that these really are necessities - particularly things like 'nutrition'. What is this offering that you cannot get from a proper balanced diet? Unless you are a competitive athlete the answer is probably nothing.

If you are discussing buying a house then I assume you have a deposit for this. Would it be possible to borrow from this fund to clear some of your higher interest debts and then replace the funds from savings you are making in servicing your debt?

TheR3ader · 8 March 2018 at 1:03PM

HI Everyone,
Thank you very much for your input on this. It does appear that a lot if spent on social activities which I could cut down. I spoke to my partner last night about this and we are going to aim to cut our food bill, we did up our contributions because we moved house about 6 months ago and incurred the usual costs of moving house. We think we can now cut it down to £175 per person for a month which should be more than enough to cover our food and the odd date night.

I'm starting a challenge of trying to limit my personal spending to £20 a week which should bring the personal allowance down considerably.

Currently the therapy is an absolute essential and cannot be cut right now. As for the personal trainer, I could reduce the frequency of sessions. I currently have it as a way of helping keep my eating disorder in check, it helps me remain accountable and forces me to eat (especially as I've started a new weight training program). I will definitely look into re-assessing this spending.

I'm also looking into cycling to work once a week with will shave £20 a month off my fuel, not a great deal but every little bit helps right now!!

anna_1977 · 8 March 2018 at 1:14PM

Well done on cutting things down

However, I still think £175 each for food and a date night a month is A LOT.

I would also look at cancelling the music subscription - free spotify instead? and the audiobook subscription

[Deleted User] · 8 March 2018 at 2:00PM

Home owner or renting?

Car owner or public transport?

Emergency fund vs. Debt payoff

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