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Consolidation can someone advice please? sorry long.

(10 Posts)
Crawling Wed 09-Feb-11 13:22:54

Right I am young I was 17 having my first child and really struggled. I am now 23 with a mortgage on a 3 bedroom house and better off money wise but I am not very good at handeling money and so I am wasting a lot of my money partly because I am young and still learning . When we were struggeling we had no luxuries and when we started to have more money didn't watch as closely an enjoyed being free of money worries, this has now got me into trouble sad.

We have £600 overdraft
£2000 credit card
£1000 loan

I do better with something I can set a standard amount up to pay off so I was thinking of getting a loan and having one payment each month. Is this a good idea?

Secondly I am wasting money left right and centre after bills (not including, food, clothes, going out) we have a £1000 which is more than I used to have in total, but I keep wasting it and I am left with nothing at the end of the month.

Am I right that there is no way I need to squander this much does anyone have any tips on how to set a limit and stick to it? Also what is a resonable breakdown of spending for a family of 4 with no car, or bus or taxi costs. TIA to any answers.

Chil1234 Wed 09-Feb-11 13:49:39

Start from square one with a budget. Work out exactly what you have coming in each month and set that against your regular/necessary outgoings (bills, rent, insurance etc.) What you have left is your disposable income. Don't count your debt payments at this stage.

Next take your disposable income and keep a very careful track of every single penny you spend for the next week or two. See exactly where the money goes. For most people groceries take up a big chunk. If you're wasting money on stuff you don't need it will instantly spring out on you. From that you can work out a more realistic budget for day to day cash items.

Finally you should end up with a number which is the amount of money you can afford to spend on tackling your debts. Loans are expensive at the moment. And a consolidation loan will only work if you are absolutely conscientious about paying it off each month and you cut up all your credit cards, never go overdrawn, and budget very sensibly once you've got it. That's why you have to work out the available budget first. No point getting a consolidation loan only to keep adding to the debt by overspending elsewhere.

Alternatively, you can 'snowball' pay off your debts. This means you take the debt that's costing you the biggest interest %, use all of your available, spare money to pay that first, paying the minimum on the other debts via DD. Once you have settled debt #1 you pay off the one costing the next highest interest rate.

If your situation turns out to be less 'not knowing where all the money goes' and more 'can't manage to finance my debts on what I earn'... then some free debt advice from an organisation like CAB could be advisable.

Crawling Wed 09-Feb-11 14:23:07

Thank you you have given me a great place to start.
As for debt I find my loan the easiest to pay off because I set up a high direct debit and stick to it, the loan I only used to get my mortgage. We were told we had a week to get the money to damproof our house or we lost the mortgage and we had already put alot of money into the house so got a loan.

My boiler also broke last Christmas and we used the credit card for that, so I would have no problems cutting card up and removing ovd because now the only two major jobs that needed doing are done.

Chil1234 Wed 09-Feb-11 15:17:43

Then that's a good start. Resolve not to add to the debts whatever else happens. You've got to be ruthless from now on about what you spend and keep that spending diary. If you chalk up a Starbucks coffee a few days every week, for example, it tots up.

Other tips would be.... work out how much spending money you need in a week, take 2/3 of that out of the cash machine and don't go back until the following week. As the cash money in your purse gets lower and lower, you 'feel' it and you'll spend less and less to spin it out.

Stay out of shops to the best of your ability. Don't window-shop, browse Amazon, read glossy mags or 'pop in for a loaf' to a hypermarket. Shops, advertising and shopping websites are designed to sell more and make spending easy and painless. The fewer times you walk through the doors, the less you spend.

Have you done a comparison exercise on your regular outgoings btw? If not, that's another source of ready cash. Print out your bank statement, look at every DD and SO coming out of your account and ask yourself a) what is it buying? b) do I actually need it? and c) can I get the same thing cheaper if I shop around. An afternoon spent doing that and you could easily save yourself £100/month

Crawling Wed 09-Feb-11 15:34:17

I Have looked and can cut my outgoings down by £50 which will help, thank you. DS school is on the over side of town so I have to walk through it everyday and I am sure that is where my money is going.

Chil1234 Wed 09-Feb-11 15:40:39

Well good luck. Once you get into the swing of it, it can be quite rewarding.

AlexSV Mon 30-May-11 20:11:36

Message deleted by Mumsnet.

DorisIsAPinkDragon Mon 30-May-11 20:31:58

Have you looked at moneysavingexpert.com run by martin who goes on bbc radio 2. (it's not for profit)

It has a massive amount of tips and advice, I used to use it quite a bit, as saving money becomes quite addictive. It also has a budget you can download and fill in to help see where things can be improved.

DorisIsAPinkDragon Mon 30-May-11 20:35:13

Have no idea why an american loans website is useful here, I think it's a spambot. and am reporting.

Pekkala Mon 30-May-11 20:38:33

Not sure what AlexSV has tried to post that advice on American student loans for?
I'd second looking at moneysavingexpert.com where there is LOADS of advice - also try their forums. The advice you will likely hear is to not get a consolidation loan, but to move your CC debt over to a new card where you get charged a v low rate of interest for 12/18 months, so all money you pay off goes into reducing the CC debt rather than paying off just interest.
Good luck.

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