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  • FIRST POST
    • TheR3ader
    • By TheR3ader 7th Mar 18, 4:41 PM
    • 7Posts
    • 13Thanks
    TheR3ader
    Emergency fund vs. Debt payoff
    • #1
    • 7th Mar 18, 4:41 PM
    Emergency fund vs. Debt payoff 7th Mar 18 at 4:41 PM
    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.
Page 1
    • fatrab
    • By fatrab 7th Mar 18, 4:47 PM
    • 852 Posts
    • 2,236 Thanks
    fatrab
    • #2
    • 7th Mar 18, 4:47 PM
    • #2
    • 7th Mar 18, 4:47 PM
    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
    You can have results or excuses, but not both - Wannabe debt free by Dec 2022
    June's targets - Be 15st by end of month, 19/30 AFDs
    39 x £2 coins (#32)
    • TheR3ader
    • By TheR3ader 7th Mar 18, 5:04 PM
    • 7 Posts
    • 13 Thanks
    TheR3ader
    • #3
    • 7th Mar 18, 5:04 PM
    • #3
    • 7th Mar 18, 5:04 PM
    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
    • By fatrab 7th Mar 18, 5:07 PM
    • 852 Posts
    • 2,236 Thanks
    fatrab
    • #4
    • 7th Mar 18, 5:07 PM
    • #4
    • 7th Mar 18, 5:07 PM
    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
    You can have results or excuses, but not both - Wannabe debt free by Dec 2022
    June's targets - Be 15st by end of month, 19/30 AFDs
    39 x £2 coins (#32)
    • fatrab
    • By fatrab 7th Mar 18, 5:10 PM
    • 852 Posts
    • 2,236 Thanks
    fatrab
    • #5
    • 7th Mar 18, 5:10 PM
    • #5
    • 7th Mar 18, 5:10 PM
    You have a loan and 2 credit cards, even if you post the outstanding balances for each and the interest rates that would help
    You can have results or excuses, but not both - Wannabe debt free by Dec 2022
    June's targets - Be 15st by end of month, 19/30 AFDs
    39 x £2 coins (#32)
    • a_silver_lining
    • By a_silver_lining 7th Mar 18, 7:25 PM
    • 227 Posts
    • 679 Thanks
    a_silver_lining
    • #6
    • 7th Mar 18, 7:25 PM
    • #6
    • 7th Mar 18, 7:25 PM
    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.
    Last edited by a_silver_lining; 07-03-2018 at 7:31 PM.
    19/12/14: Spent 10 years of savings!!
    ..... to buy my first home.

    2018: 1500 savings --- Family Loan (3250 direct + 2000 saver) 5250/10K paid 52.5%
    #38 1% Challenge: £514.70/ £2018, now at 25%!
    • enthusiasticsaver
    • By enthusiasticsaver 7th Mar 18, 9:42 PM
    • 6,617 Posts
    • 13,917 Thanks
    enthusiasticsaver
    • #7
    • 7th Mar 18, 9:42 PM
    • #7
    • 7th Mar 18, 9:42 PM
    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.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • MEM62
    • By MEM62 8th Mar 18, 11:02 AM
    • 1,610 Posts
    • 1,231 Thanks
    MEM62
    • #8
    • 8th Mar 18, 11:02 AM
    • #8
    • 8th Mar 18, 11:02 AM
    Therapy - £200
    Originally posted by TheR3ader
    Is this really necessary? Or perhaps available free on the NHS or through other support groups?

    Personal Trainer - £175 (includes nutrition and injury rehabilitation)
    Originally posted by TheR3ader
    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?
    Last edited by MEM62; 08-03-2018 at 11:06 AM.
    • TheR3ader
    • By TheR3ader 8th Mar 18, 12:03 PM
    • 7 Posts
    • 13 Thanks
    TheR3ader
    • #9
    • 8th Mar 18, 12:03 PM
    • #9
    • 8th Mar 18, 12:03 PM
    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
    • By anna_1977 8th Mar 18, 12:14 PM
    • 692 Posts
    • 939 Thanks
    anna_1977
    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
    • Bedsit Bob
    • By Bedsit Bob 8th Mar 18, 1:00 PM
    • 10,274 Posts
    • 55,384 Thanks
    Bedsit Bob
    Home owner or renting?

    Car owner or public transport?
    My job is Top Secret. Even I don't know what I'm doing.

    Amount I have so far denied the BBC - £1308

    Who are you to question why your god doesn't want me to believe in him?
    • phizzimum
    • By phizzimum 8th Mar 18, 1:12 PM
    • 1,697 Posts
    • 9,247 Thanks
    phizzimum
    I think you will find doing a SOA to be helpful. Calling your spending Pocket Money is vague, once youíve broken it down into haircuts, presents, parking, eating out youll see better where the money is going.

    You definitely need an emergency fund, otherwise you will have to increase your debt when something crops up - and something unexpected always crops up!

    Well done for facing up to things and making a good start

    I would also recommend you put aside money for expected expenses like car maintenance, insurance, gifts etc

    If you are just paying the minimum on your cards they wont be cleared before the interest free period ends. You will need to start over paying using the savings you make from other areas, or the money you make from selling your stuff.

    If the therapy and trainer is helping you address the underlying issues that caused you to overspend then I would say they are money well spent. However until youíve made a proper budget you just dont know how much you have left over for your non essentials
    weaving through the chaos...
    • TheR3ader
    • By TheR3ader 8th Mar 18, 2:49 PM
    • 7 Posts
    • 13 Thanks
    TheR3ader
    So here's my SOA, finally figured out how to post it (it's been a very long week....)

    Statement of Affairs and Personal Balance Sheet

    Monthly Income Details

    Monthly income after tax................ 1818.03
    Partners monthly income after tax....... 0
    Benefits................................ 0
    Other income............................ 0
    Total monthly income.................... 1818.03


    Monthly Expense Details

    Mortgage................................ 0
    Secured/HP loan repayments.............. 0
    Rent.................................... 375
    Management charge (leasehold property).. 0
    Council tax............................. 0
    Electricity............................. 0
    Gas..................................... 0
    Oil..................................... 0
    Water rates............................. 0
    Telephone (land line)................... 0
    Mobile phone............................ 22
    TV Licence.............................. 0
    Satellite/Cable TV...................... 0
    Internet Services....................... 9.99
    Groceries etc. ......................... 175
    Clothing................................ 30
    Petrol/diesel........................... 180
    Road tax................................ 24.5
    Car Insurance........................... 110
    Car maintenance (including MOT)......... 70
    Car parking............................. 5
    Other travel............................ 0
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 10.4
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 0
    Contents insurance...................... 0
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 80
    Haircuts................................ 15
    Entertainment........................... 15
    Holiday................................. 0
    Emergency fund.......................... 0
    Personal Trainer........................ 175
    Therapy................................. 200
    Total monthly expenses.................. 1496.89



    Assets

    Cash.................................... 900
    House value (Gross)..................... 0
    Shares and bonds........................ 0
    Car(s).................................. 640
    Other assets............................ 0
    Total Assets............................ 1540


    No Secured nor Hire Purchase Debts


    Unsecured Debts
    Description....................Debt......Monthly.. .APR
    MBNA...........................2485.56...30....... .0
    Barclaycard....................2740.32...62....... .0
    Loan...........................12000.....150...... .0
    Total unsecured debts..........17225.88..242.......-



    Monthly Budget Summary

    Total monthly income.................... 1,818.03
    Expenses (including HP & secured debts). 1,496.89
    Available for debt repayments........... 321.14
    Monthly UNsecured debt repayments....... 242
    Amount left after debt repayments....... 79.14


    Personal Balance Sheet Summary
    Total assets (things you own)........... 1,540
    Total HP & Secured debt................. -0
    Total Unsecured debt.................... -17,225.88
    Net Assets.............................. -15,685.88
    Last edited by TheR3ader; 08-03-2018 at 2:54 PM. Reason: Forgot to include Therapy and Personal Trainer is expenses
    • anna_1977
    • By anna_1977 8th Mar 18, 2:54 PM
    • 692 Posts
    • 939 Thanks
    anna_1977
    So here's my SOA, finally figured out how to post it (it's been a very long week....)

    [font=courier new]Statement of Affairs and Personal Balance Sheet

    Monthly Income Details

    Monthly income after tax................ 1818.03
    Partners monthly income after tax....... 0
    Benefits................................ 0
    Other income............................ 0
    Total monthly income.................... 1818.03


    Monthly Expense Details

    Mortgage................................ 0
    Secured/HP loan repayments.............. 0
    Rent.................................... 375
    Management charge (leasehold property).. 0
    Council tax............................. 0
    Electricity............................. 0
    Gas..................................... 0
    Oil..................................... 0
    Water rates............................. 0
    Telephone (land line)................... 0
    Mobile phone............................ 22
    TV Licence.............................. 0
    Satellite/Cable TV...................... 0
    Internet Services....................... 9.99
    Groceries etc. ......................... 175
    Clothing................................ 30
    Petrol/diesel........................... 180 - the car is costing you a whopping £380 a month!!
    Road tax................................ 24.5
    Car Insurance........................... 110as above
    Car maintenance (including MOT)......... 70as above
    Car parking............................. 5
    Other travel............................ 0
    Childcare/nursery....................... 0
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 10.4
    Pet insurance/vet bills................. 0
    Buildings insurance..................... 0
    Contents insurance...................... 0
    Life assurance ......................... 0
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 80
    Haircuts................................ 15
    Entertainment........................... 15
    Holiday................................. 0
    Emergency fund.......................... 0
    Total monthly expenses.................. 1121.89



    Assets

    Cash.................................... 900
    House value (Gross)..................... 0
    Shares and bonds........................ 0
    Car(s).................................. 640
    Other assets............................ 0
    Total Assets............................ 1540


    No Secured nor Hire Purchase Debts


    Unsecured Debts
    Description....................Debt......Monthly.. .APR
    MBNA...........................2485.56...30....... .0
    Barclaycard....................2740.32...62....... .0
    Loan...........................12000.....150...... .0
    Total unsecured debts..........17225.88..242.......-



    Monthly Budget Summary

    Total monthly income.................... 1,818.03
    Expenses (including HP & secured debts). 1,121.89
    Available for debt repayments........... 696.14
    Monthly UNsecured debt repayments....... 242
    Amount left after debt repayments....... 454.14


    Personal Balance Sheet Summary
    Total assets (things you own)........... 1,540
    Total HP & Secured debt................. -0
    Total Unsecured debt.................... -17,225.88
    Net Assets.............................. -15,685.88
    Originally posted by TheR3ader

    Well done on posting

    So with that amount left over you can focus on paying an extra £400 a month at the debts and £50 into your emergency pot monthly.

    Good luck
    • TheR3ader
    • By TheR3ader 8th Mar 18, 3:44 PM
    • 7 Posts
    • 13 Thanks
    TheR3ader
    Hi Anna_1977,
    I forgot to add my Therapy and Personal Trainer in as expenses (corrected now). If I move the Personal Trainer to every other week this brings my Amount Left to £167 left over.

    Yes my car does appear to cost me a small fortune!! Hopefully the insurance comes down in May as I will be over the 25 age limit then. I did look into getting a newer car more recently however when I worked out the numbers (incl. Fuel, tax and maintenance) it ended up being more expensive than keeping my current car.
    • phizzimum
    • By phizzimum 8th Mar 18, 4:28 PM
    • 1,697 Posts
    • 9,247 Thanks
    phizzimum
    Well done for putting together your SOA. Remember its not just about getting rid of debt, you are developing the money management skills that you will need if you want to get your own place

    Dont be tempted to go crazy buying another car. It does seem that youve got to the point where the car is costing more to run than itís worth, but you donít have to spend loads to replace it. My daughter paid £1400 for her car (Toyota Yaris) - only £30 to tax for the year and although sheís only 19 the insurance is about £750
    weaving through the chaos...
    • enthusiasticsaver
    • By enthusiasticsaver 8th Mar 18, 4:31 PM
    • 6,617 Posts
    • 13,917 Thanks
    enthusiasticsaver
    I think you should put £50 of your surplus into your emergency fund. When do the 0% deals on MBNA and Barclaycard finish? Any extra money you have put to the card with the shortest deal.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • MEM62
    • By MEM62 9th Mar 18, 10:07 AM
    • 1,610 Posts
    • 1,231 Thanks
    MEM62
    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.
    Originally posted by TheR3ader
    Still way too much. We feed a family of four on less than £250 per month and are far from frugal in our food shopping.
    • Tarambor
    • By Tarambor 9th Mar 18, 2:02 PM
    • 3,071 Posts
    • 2,223 Thanks
    Tarambor
    I did look into getting a newer car more recently however when I worked out the numbers (incl. Fuel, tax and maintenance) it ended up being more expensive than keeping my current car.
    Originally posted by TheR3ader
    It always does every single time. Lots of people also make the mistake of thinking that buying a more economical car saves them money as well. I did the maths on the two cars I have which have a 20MPG difference in economy and over 17,000 miles I do it was a saving of just £781 a year. For most people to get that difference over their current car they're going to be buying a newer one and that saving would be more than wiped out by the increased depreciation. In fact if they'd got a new car year 1 depreciation on many cars would be equivalent to almost half a decade's worth of savings on fuel.

    To add...

    Is it possible for your partner to get work, even if its just a part time job? 10hrs a week would give you both an extra £3500 a year.

    £175 per month per person is absolutely ridiculous for food. The Office For National Statistics states that the average FAMILY in the UK spends a total of £56 a week on grocery shopping and that includes £4 a week on alcohol.

    Music subscription can be binned, use Spotify free and put up with the odd advert. Mobile phone can be seriously slashed with a SIM only deal. Use billmonitor.com to check your bills and work out what your actual usage is, not what you think it is. Many people pay for unlimited calls, texts and data and actually use far far less than they think they do.
    • Tarambor
    • By Tarambor 9th Mar 18, 2:09 PM
    • 3,071 Posts
    • 2,223 Thanks
    Tarambor
    It does seem that youve got to the point where the car is costing more to run than it's worth, but you don't have to spend loads to replace it. My daughter paid £1400 for her car (Toyota Yaris) - only £30 to tax for the year and although she's only 19 the insurance is about £750
    Originally posted by phizzimum
    It is almost NEVER cheaper to replace your current car than repair it even if you're spending several hundred quid or more. Say that other than servicing your car needs £1,000 of repairs a year and your car is maybe not even worth that. Most people would balk at the idea of spending £1000 a year on a car to fix it so will go buy another. So what would your options be?

    1) You spend £1000 on a replacement car. You end up buying a car which will have problems but unlike the car you currently own you'll not know what they are because you don't know anything about the car. So that £1000 car will most likely need repairing. At least when you spend £1000 on repairing the car you currently have those repairs are unlikely to ever need to be done again before the car needs to go to the scrapyard.

    2) You get a much newer one on finance to stand a quite good chance it won't need repairs. If the interest on the finance doesn't cost you more than the £1000 repair the ANNUAL depreciation will. I bought a 2 year old car for just 1/3 of its new value and even though I've owned it over 5 years the depreciation has worked out at over £1000 a year. The person who owned it for the first two years paid at least an average of £8000 a year in depreciation going on what I paid for it.

    My sister in law made this mistake a couple of weeks ago. She had an old W reg Astra worth maybe £150-£200 when running OK but with a slipping clutch and only a month or so MOT. I told her to put it through its test, see what it failed on and make a decision after that. Well it passed straight through the MOT and the clutch was going to be £300 to fix. So she fixed the clutch right? Wrong. She went out and paid £300 for a Corsa and then after a week found out why it was £300 and had to take it into the garage to have £250 of suspension and brake work done.
    Last edited by Tarambor; 09-03-2018 at 2:15 PM.
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