Budgeting to clear big debt

[QforCucumber]

We've worked out that other than the mortgage we have just under 25k of debt in total (car, loan, couple of credit cards) currently servicing at approx £500 a month. No missed payments or anything like that, but we'd like to try and get it paid down sooner.

Does anyone have any advice on sites or budgeting ideas to help? Joint income is 45k per year. Nursery fees of £500 a month but will get the 30 hours in April. We'd like another child in the next couple of years so aiming to have the debt under 10k by then if not even lower if possible.

Are you using the standing order trick on the credit cards?

Yes we are. Loan is £250 a month, 8k remaining. Car is on a 0% credir card - 8k also - paid at £120 a month. Then 2 other cards of 4500 each. Both paid at £70 each per month.

If no fees think about selling the car for a cheaper one?

Track all spending (I used to spend over £400 a year at Starbucks, tracking the small stuff can really show you spend quite a lot over a period of time). You need to know where money is going so you can then reduce expenditure in areas in which you current spend too much. Also look at increasing income... any overtime opportunities at either of your jobs?

Once you know what you are spending money on, decide in advance what you will be spending money on the following month. If you find it useful, list planned expenditure by priority, such as keeping a roof over your head, reasonable amount of food, keeping the lights and heat on, work through the categories. Clothing - you probably have enough, sort through what you have and determine if anything needs a quick repair to make it last a bit longer. Plan for your child out growing clothes, shoes etc... allocate some budget to that.

Do you like making lists? Are you more a spreadsheet person? Find a way that suits you both for how to track and plan expenditure.

The car on 0% credit card I see as being an issue... the 0% deal is unlikely to last forever and you are paying it back at £120 a month, so it will take over 5 years to clear at that rate and if the interest percentage does not change. Make sure you know when the 0% deal runs out and plan for how you will pay it off by that point.

Def find out where your money is going! Lots of apps to track these things, though I use an envelope and put all receipts inside.
I’d recommend a book called your money or your life by joe Dominguez and vicki Robin. Also check out Dave Ramsey’s “financial peace university” in YouTube. V motivational.

Not meaning to be cheeky but that's a real warning about living within your means surely? You must massively overspend if you have 25k debt on 45k salary. I wouldn't think get it down to 10k and then have a child... I'd be thinking no debt and 10k savings before child. Have a good look at where your money goes.

Thanks those are great ideas. The car on the credit card ended up working out cheaper than their finance offer (no arrangement or completion fees etc) tbf its a 7 year old car now so probs not worth that much as it is. We ran the last one until it died and will do the same with this so intend to have it at least another 5 years. We are both terrible for buying £5 a day lunches and £15 takeaways easily once a week - its something we need to stop.

The book and YouTube recommends aren't ones i know of so will check those out. Thank you.

When the nursery fees reduce use that money to clear some debts quicker instead of getting used to spending it again. X

highland it probably is yes, but we have a £400 a month mortgage. The house in all costs £1100 a month and then nursery fees on top of 500 a month I dont think we've done too badly personally. I'm 34, so 4 years to pay off debt and another 4 to have 10k savings are not feasible to us. Hence my asking for additional tips on how to get this down.

www.mumsnet.com/Talk/credit_crunch/2270347-Frugal-January-everyone-welcome

In the op of this thread are a few money saving threads. A good book for you both to read is Alvin hall spend less, live more.

Definitely cut down on the lunches, coffees, magazines, trips to town and takeaways. Channel that money into the debt.
25K is actually a huge debt. It wouldn’t put me off having more kids, but I would worry about paying it off if we lost our jobs. You need to keep a roof over their heads

Thanks all for the recommendations and advice. We've had a childfree afternoon discussing options and wondered on your opinions - the loan was originally 11k, taken out when we bought the house to make it liveable (bathroom, kitchen, boiler, plastering) its down to 7850 now and we are overpaying the min on it but would you add it to the mortgage as thats what it bought? Im reluctant as it's on 2.9% and will be cleared in 3 years rather than 20 adding it on. Dh thinks better to free up the monthly cost to clearsomething else.

Long term adding debt to mortgage is poor value, bide your time and pay it down.

No don't add it on to the mortgage. You'll end up paying masses more interest.

I thought it seemed more logical not to - wanted to make sure I'm not missing some obvious reason why it might make more sense. A skint 4 years to clear it and we will be out of the hole. Also made the decision to use 80% of our bonuses/overtime for debt and the other 20% on the 3 of us so we don't lose sight of each other too.

Also recommend Dave Ramsey and also #debtfreecommunity on Instagram.

Do not add to the mortgage! Could you get rid of the car? You really need to start living a bit more within your means and stop buying lunch and coffees etc out. Packed lunch all the way. Money saving expert has a great forum.

Getting rid of the car isnt an option. The public transport where we live is atrocious - it'd turn a 20 min commute into 1.5 hours due to bus changes. We are also nowhere near a supermarket or even local shop. Car is necessary. Its all food for thought, thanks.

How can the house cost £1100 if the mortgage is only £400?

Moving to 30 free hours will make a decent dent in childcare costs. Make sure you agree now to pay all of that saving into debt overpayments

Have you used the snowball calculator?

You put in amounts owed, interest rates, how much you can afford to pay per month and it works out for you the fastest way to clear it all.

Make sandwiches at home for lunch, or things like pasta salads, wraps etc. If you don’t already have a thermos or an insulated coffee cup then get one each and take a coffee into work. Replace the takeaway with something home cooked. For example if you like curry then make a large batch one weekend and freeze it in single portions. The next weekend make a different curry. If you like Chinese takeaway buy frozen veg and something like soy sauce, use 1 chicken breast or 1 piece of steak for a stir fry. Whichever type of food you prefer you can find recipes on line.

That will save a surprising amount of money each month. Use that towards the debt, continue once the debt is cleared and save the money.

@nevertwerknaked
Mortgage - £425
Council tax - £163
Gas And Electric - £85
Water - £42
Tv License - £12.50
Insurances (life, car, home, pet) - £80
Mobile Phones - £47.50
Car Tax - £13.75
Broadband & Tv (inc Netflix) - £34

Then add in grocery shopping at approx £200 a month. There's our household expenses of £1100.

The £500 a month nursery costs will drop to around £110 in April (still have to pay for school holiday times etc) so that difference is already set to hit the lowest credit card first - which means will be cleared by this time next year and cancelled.

The last couple of weeks we've consciously made packed lunches and meals at home daily and we both have bank balances still, it's amazed me how the little pops to the shop at lunchtime have really dented into our overall finances. We've not been thinking about the overall and instead just the daily 'wants'.

OK from what information you've given I'm guessing after all your bills (inc. childcare) you should have £1300. I'm going to guesstimate that your monthly pay is £3000 after TAX/pension, etc.
You should have added what your paying to your credit card and % of that. I'd recommend reading/listening to Dave Ramsay. He says you should have £1000 EF and everything spare should go to debt. Focus on paying the debt off, cut lunches out, meal plan, see if there is any deals that you can get online by going on go compare or MoneySuperMarket. With the money you have left over saying it is £1300 you should still be able to save half of that if you buckle down, you need to be strict on yourself. No take away, no lunches, I know it'll be hard because if you go out right now with the Christmas season you might be going out more but once your in the new year stop going out, cut down on buying clothes/beauty items, etc. You can do this!
DR says that if your in that much debt you should or your DH should get another job or see if there is a way for you to progress in your chosen fields. 25K is a lot of money when your annual wage is 45K. It's a whole long thing but you should only pay a % to your mortgage, a % to food, % to all other bills, etc. Sorry I'm not very good at explaining this but it's worth a read/listen if you want to take it seriously.

Income estimate is about right I'd say. Household outgoings + Nursery + Debt = 2100 ish. Then add in fuel at approx £20 a week gives monthly out of £2200. That does allow £800 a month and this is what we need to find, it is being frittered and having it written down like that seems like a crazy 'spare' cash amount.

If I was you OP I'd be setting up a DD to a bank account that you can't get into unless you go into the bank and get it with interest so like a saving account. Start small and only put say £300 away and then see if you can live on that 'spare' cash but you don't want to be spending £500 willy nilly. Use an app that tracks all the money you spend and see where you can cut down. Really you should be able to save half of that £800 but try £300 right now and see how you get on first. Or you have a look into the envelope system give that a google and it'll give you a better idea of what you should do but that's helped a lot of people.