To ask those of you who are sensible with money to take a look at my plan to clear my debts and get back on track

[TwiggyCat92]

I'm in a mess financially and have been for a long time. I have never been good with money and was even worse going through a period of quite severe depression. Can I please kindly ask those of you who are sensible with money to take a look at my plan to clear my debt and change my bad habits with money permanently, if there are any more tips you can offer me I would be grateful

Step 1: Get my credit report and see who I owe money to (I know who I owe money to, but if there is anything from tha past I have missed)
Step 2: Set up affordable repayment plans to those companies (I am on a low income)
Step 3: Open a savings account and work out my incomings and outgoings
Step 3: Put £20 a month in to the savings account for DC birthdays/Christmas/etc (£20 is all I can afford as I won't have much disposable income)
Step 4: Learn to be better with money. Before buying something, think "do I really need/want this?" Put it back if not. Meal plan, take food and drinks out with us and leave my bank card at home whenever possible.
Step 5: If anything is left from my disposable income each month, put half of that in my savings account and half towards the debt as extra to clear it quicker
Step 6: Get a cheap sim only contract to start rebuilding my credit rating

I would start with the budget - what are your incomings and outgoings? You will need to have this ready when you try to make payment plans. Moneysavingexpert has a good free one here: www.moneysavingexpert.com/budgeting-debt-help/

[quote Aquicknamechange2019]I would start with the budget - what are your incomings and outgoings? You will need to have this ready when you try to make payment plans. Moneysavingexpert has a good free one here: www.moneysavingexpert.com/budgeting-debt-help/[/quote]
Thank you :) I have my current incomings and outgoings, I meant work out my new incomings and outgoings including the repayments once they are set up. Sorry, should of been clearer with that :)

I'll start. You seem to have some of those in the wrong order.

1. Should always be know where your money goes. That is different from knowing your debts.

You need to know where every penny you spend goes. When you know that you can put each spend into separate categories

Essential: rent, utilities

Debts to be serviced: minimum outgoings on all debts, individually and combined

Living expenses: food, essential transport

Other: all the things you have that could be cheaper or just not had at all. From mobile phone to Sky subscription. Forget do I really need/want this? want is not affordable! If it is essential you can budget for it! If it isn't you can't have it! Same with savings. Get debt free first.

So, before you do anything else, look at your bank records. You should be able to download them to an ecxel spreadsheet and then you can really drill down into them.

You sound really together about this, well done. Something else I have heard of is making sure that you pay off the debt with the largest interest rate first.

Are you able to get a 2nd job at all? When I had a lot of debt my 2nd job earnings went entirely on paying the debt - I understand it may be difficult under COVID ...
Once you have paid your essentials meal plan and pay cash for everything to stop racking up more debt on cards.

Sounds a very good start Op..

Check any insurances each year, also utilities, look at remortgaging if you are a homeowner, to see if any better deals are available,

Don't buy branded cleaning products, dilute cheap bleach for the loo, it will last 5 times as long and be 5 times cheaper to buy, buy one good all purpose cleaner ideally in 5 litres and dilute for kitchen and bathroom. You need nothing else.

Don't shop for food when hungry or go shopping online or otherwise when bored!

Go all out to clear the most expensive debt first, usually credit cards.When done.....

Reward yourself with a cheap treat, take away or bottle of favourite wine, then set yourself your next target....ie clear personal loan..

Don't cheat in between, but celebrate each good step towards becoming debt free..

Well done on taking control, good luck

Also - I was always told “Ditch your debts”. Of course try to keep a bit of money aside but you’ll always pay more in interest on what you borrow than you earn on what you save, so by clearing debt rather than saving you’ll get there faster.

The advice is generally shift as much as you can onto zero interest and make sure you pay every single spare penny into the highest interest debt first. Just slightly over the min payment can make a big difference.

When that one has gone, take that repayment and push it into the next debt - don't think woo hoo that card is paid off I now have an extra £50 to spend. Put the £50 into the rest of the debt

And so on - so by the time you get to the the last debt you should have a massive monthly payment hoping it won't take too long

Martin Lewis calls it the snowball effect if you want to read up on it more.

I think you need to stop spending money on anything but essentials. You sound as though you have spare money if you are able to save 20 a month for Christmas presents. Cancel your TV subscription, don't buy meals out or drinks, cancel phone contract, get a cheap second hand phone on pay as you go, don't buy any new clothes, furniture, magazines etc.
If you need things for the children, try and get second hand.
Debt repayment should be the priority (most expensive debt first). Then savings for emergencies. Christmas presents are way down the list. I don't know how old the children are, but if they are young they don't need or appreciate expensive things - a few second hand toys will be fine.
Try and see it as a fun challenge to spend as little as possible for a while - it's better for the environment too !

You need to come up with a budget for everything. How much do you need to cover living costs? Things like groceries, have a budget and stick to it. Also look at switching your utilities to a better deal.
Then see what’s left to pay off your debts. If any can be transferred onto 0% then switch them. Then look at minimum payments and see what you can afford to over pay. Target the highest interest rate first.
Depending on your circumstances you may be able to open a Help to Save account with HMRC which has a brilliant return on it. Much better than you’ll get on a savings account.
Another way is to have your child benefit paid into a separate account. You’ll be surprised how quickly it builds up for treats or unexpected bills.

I'd change step 5.
Any disposable income left over goes 100% to the debt with the highest rate.

So, that needs a modification to step 1 - find out who you own money to, and what interest you are getting charged on the debt.

Step 7. Check all your current direct debits, and make sure they are all competitive, and is essential.

Good luck!

Don't pay for a credit report use the one on money saving expert for free. If you are able to try to shift credit card debt to 0% interest card. The money saving expert site is generally really useful for advising on budget and debt. Good luck :)

Forget step 4. You cannot afford to even pick something up and debate it. You cannot afford it. Full stop.

Step 4 needs to be: standing orders for all bills, debt repayments and amount towards Christmas/birthdays. Take out a fixed amount each week for supermarket shopping in cash. Spend nothing else.

Contact CAP - Christians Against Poverty who can help you deal with all of this. You don't need to be Christian - they are there to help everybody.

All good advice so far, but if you find that you can't afford your essentials including a reasonable amount of food, you might need a more formal solution. A lot of people try to cut food spend down to unsustainably low amounts in order to prioritise their debts, but you don't need to do this.

Same if it's going to take more than about 3-5 years to pay off your debt or a lot of the payments you make are swallowed up by interest. Go through the MSE debt help stuff and seek further advice if necessary.

I'm teaching my OH about budgeting. He's not had to until we moved in together so he's got into some bad habits of buying what he wants and over stretching the budget. Things that have come up this month:

1. I'd already worked out all mortgage, bills, food and divided in half to put in a joint account so that is the minimum we have to keep away each month.

1. From his account we worked out insurance, loan payments and solo contracts.

1. Then we took all of this from his wage, multiplied by 12 and divided by 52. This is the maximum he can spend in a week but I've challenged him to make it maximum a half and you'd be surprised how fast your money grows.

1. No branded food... Your paying for labels.

5 In weekly shopping, nothing over £2.50 unless it's a pack of 6 around that price. Obviously it wouldn't include nappies, alcohol, baby milk. Our weekly budget 2a 2c is £60 but we are both FT.

Well done on planning to get your finances under control.

I would recommend doing the budget planning as mentioned by @Aquicknamevhange2019. It makes you consider occasional payments such as haircuts, school uniform, etc, and how much you need to budget for these.

If you have credit card debts, consider moving these to a lower interest loan or balance transfer.

I agree with clearing debt before savings.

Please check out Dave Ramsey's baby steps. Emergency fund first the snowball the debt.

@Tinuviel

Contact CAP - Christians Against Poverty who can help you deal with all of this. You don't need to be Christian - they are there to help everybody.

Yes, I would recommend doing this too. They have helped a couple of my friends sort things out. They offer a free service and are good at helping people consolidate and reduce debt as well as plan for the future.

Are you eligible for a help to save account? They’re amazing. More interest than you’d pay on any debt, so worth moving money to a low interest card and paying while you save.

Experian are doing a free month atm- just remember to cancel the subscription before they charge.

Undebt.it is really good for inputting all your debts with percentages and minimum payments and plya around with them to see what order to pay things off in.

How much debt do you have? If It’s substantial you may benefit from consolidating debt into one payment. Or switching debt to a 0% card but only if you will definitely pay it off. I’d say get it then cut up the card so that you aren’t tempted to use it.

Do you rent our own a house? Check best mortgage deals or potentially ask landlord about reducing rent, they may be willing given current circumstances.

I’d pay debt rather than save, concentrate on highest interest rate cards and debt first.

Check all subscriptions to see if you can find it cheaper including utility bills. Manage my bills gets very good reviews.

Have a clear out and sell things on Facebook marketplace, gumtree etc. I made about £800 doing this at one point. Especially if you have kids things, even clothes.

Look at clubs DC goes to, are they essential? Expensive?

Depending on your home situation are you entitled to any benefits? Check with citizens advice or the job centre.

www.gov.uk/benefits-calculators

You can check for benefits here.

I've said this on a few threads but contacting a debt management company is your best solution.

I used stepchange, a charity, who talk you through whether a debt management plan, IVA or bankruptcy is best for you.

They create a realistic budget with you, then they contact your creditors to negotiate reducing your monthly payments.

Then you set up a direct debit to the company, in my case stepchange, for the total of each companies agreed amount, and they pay each creditor.

It's exceptionally difficult to get out of debt on your own, as day by day, year by year your financial situation may change.

You need someone who deals with debt on your side.

Thank you everyone, great advice so far. One thing I have read about online is a debt relief order. Would this be a better option for me? :( I meet the criteria and I am currently a single parent on UC. I'm in about £6k of debt so not masses, but to me it is a lot.