Best way to clear debt?

[duckduckgoose123]

We shouldn't be struggling with money, but somehow we are. We earn about £75,000 a year accumulatively (DH earns the VAST majority of that as I just work part time), our monthly income is around £4000. We have a modest mortgage and don't lead a lavish lifestyle although admittedly if there's something we want we don't usually hold back (eg new trainers, take aways etc). We have two young DDs. Our biggest monthly payment is our car which we bought earlier this year.

We have separate bank accounts still, and I do think we both need more transparency when it comes to money - eg until we spoke about it last night I didn't know DH had such a large overdraft and he didn't know how much I owed on a store card.

Our debt - which includes credit cards, over drafts, store cards and money we are paying back to family is probably just shy of £10,000.

So what's the best way to tackle this? We spoke about shopping around for a low interest loan, paying off EVERYTHING, then just having the one loan payment every month? We then need to budget better (food shopping especially) and reign in our unnecessary spending. We also have no savings which we would like to start.

We are also going to get a joint bank account, but because we both have overdrafts (I don't get charged for mine as it's a student account even though I've not been a student for many years!!) I think the best would be to keep out individual account and have our wages paid in then just transfer most over to the joint and gradually reduce the overdrafts?? (Unless we pay them off with a loan of course).

Any money experts out there that could help?

Worth looking on money saving expert, good advice on the forums there.

I would avoid a consolidation loan, they almost never work. Snowball the debt and tackle the highest APR first, find a way to live without all the stuff you buy that puts you in debt in the first place. If you go straight to a consolidation loan you'll just end up accruing more debt on top of the loan.

I'm on a much smaller income and was really careful after a horrible experience with debt a few years ago... but my spending has crept up after a tough year (bereavement, etc ) and I'm now in debt again. I'm not a money expert, but this advice helped before, and this is what I've done/am doing:

1. Transfer as much card debt as possible to an interest free credit card (if you haven't already). The transfer fee is usually cheaper than paying monthly interest.
2. Monitor spending. Just noting down where your money goes really wakes you up. (There's tonnes of evidence that monitoring is the first step to changing behaviour). Try The Demotivator tool on MoneySavingExpert!
3. Set a goal for when you want to clear the debt by and decide how much of your disposable income you will throw at it.
4. Reduce outgoings: do a meal plan. Try Lidl/Aldi - massive savings.

I'd second Money Saving Expert - great resource.

Good luck!

1. "We then need to budget better (food shopping especially) and reign in our unnecessary spending." That I would make a priority. You need to know where money is currently going and then decide where it should be going.

1. Stop using credit. Pay a bit more than minimum due on existing loans/credit. Setup a standing order to do that if possible.

See this very useful message thread from TalkinPeace: www.mumsnet.com/Talk/legal_money_matters/1987219-SPREADSHEETS-for-Debt-Control-Budgeting-Mortgages-etc

1. "We also have no savings which we would like to start."

First is an emergency fund, so you never go back to using debt. Being on a tight budget, start to build up an emergency fund of at least £1000. That should be sufficient to cover most minor emergencies such as tyre puncture, unexpected car repair, emergency plumber etc. For things that are expected - such as car needing a service - plan that in advance using your budget. Christmas is always in December...don't splash out too much and plan ahead by saving up money from several months before.

We had to do a lot of work on our finances to make sure we got a mortgage. We very activity monitored our spending, constantly thinking before be bought anything and cutting back on how much we payed for utilities. We also reduced of overdraft limit each month, not living in out overdraft is life changing for being in control of your money. If you are paying interest move as much as you can to zero/low interest credit cards. Then, pay of those with the highest interest first. When one is payed off use that money to pay extra off another one. Hard work but we are much more in control of our money. Also, we save first. On pay day money goes to saving accounts for Christmas, holidays, long term savings and now a one for overpayments on our mortgage.

Do you know if your debt is still increasing and if so by how much monthly on average? How much are you paying overall in interest per month? Do you know the respective interest rates for each of the debts?

Try the Barefoot Investor approach to budgeting and saving. He is an Australian personal finance expert but his advice is fairly universal when it comes to Family finances. You can get the book on Amazon.

It is such an eye opener when you realise how much money you spend unconsciously and how different life and stress levels are when you are a conscious spender.

His approach is to allocate 60% on you income to your expenses (including annual expenses like the car servicing) and to keep one account for this. To allocate 20% to splurge (eg on holidays, clothes, meals out etc) and the other 20% on your long term goals (firstly to repay debts, then overpay mortgage and pension and then build wealth).

You keep your splurge money in two accounts - half for saving for big ticket items like the holiday and the other half to spend now. Once it's gone -it's gone so you don't end up dipping into the money you've set aside for the gas bill or the house insurance.

It's been life changing for us. We are now happily living on one salary instead of chasing our tails with us both working but not having a clue where the money was going.

My DH and I are just coming to the end of an IVA. This has forced us to learn how to budget.
We have one account for bills. We transfer enough for the bills every month. He has an account for his spending money and I have an account for mine. The food money also goes in mine as I do all the shopping. Once it's gone it's gone so we have to make sure we don't overspend. Part of the IVA terms is that you cannot have extra borrowing so no credit cards or overdrafts.
The plan when we finish our payments is to pay a big chunk into savings every month and have a bit extra for treats.
Budget and stick to it. It's hard but when you finish paying things off think of all the extra money you will have.

I'm by no means an expert but I would suggest looking at the following websites -

youneedabudget.com
undebt.it

From what you've indicated a lot of your money goes on 'uncontrolled' spending , the first step is to monitor that and see where your money is going. I think you'll find you can free up a chunk of your money to put towards savings and then a debt snowball.

Also as PP said make sure debts are on as low interest as possible, whether that's balance transferring to a zero % interest or if they are currently super high then a consolidation might work. Depends on how much money you can afford to pay towards them

Thank you so much everyone. I honestly wouldn't have even considered us 'in debt until we really looked at everything last night.

I think first thing will be is to write down ALL of our outgoings and look at the interest we are paying on debt.

I think it'll be tough but necessary.

For example my eldest is asking to go the cinema this afternoon, that will be £20 gone so I should probably say no but it's difficult as she loves the cinema and it's nice to be able to treat her (she prob goes once a month)

Budgeting doesn't have to mean not having money to spend. You just need to prioritise what you want your money to be doing

It's worth finding an SOA link on the debt free boards on the MSE website. It lists all the things you spend money on, its amazing what you forget.

Duck duck you still have to live and given you’re incomings are fairly high I would still allow the occasional treats, just curtail them a little, I don’t know how often you have takeaway for example but maybe make it a once a month thing instead of every week or cinema every other weekend instead of every weekend. Look at how often you eat out whilst shopping or work lunches and coffees, those little bits add up fast accross the month and it’s easy to cut back on them with a little forward planning, packed lunches and a flask instead of costa on the way to work for example.
I said there’s anything you can compare and change for a better deal-utilities? Phones? Mortgage? If you can get a interest free card for 24 months you could start making real progress on debt instead of seeing half the monthly repayments being swallowed in interest, just make sure you pay ata least the minimum, but as much as you can afford and set it up as a standings order so you are consistently paying the same amount off each month.

I think that pooling your money so you both have access to all of it is key. It makes you far more mindful of spending it too.

Some great suggestions here - I'll look at the Barefoot guy. I like YNAB but am not very good at keeping it updated, so for now I'm just keeping a pen and paper in my wallet to write down my spending instead.

I took my 12 yo dc to the cinema the other day but we took homemade popcorn and water bottles. He moaned, but I told him it was either homemade or nothing. Popcorn cost 10p (from kernels, not from a microwave pack) and saved us at least £8. Water, another £3 saved. (A cinema manager told me that the food/drink is where cinemas make their money rather than ticket sales. No surprise there).

We went for a walk yesterday and took doughnuts (50p for 5) with us. I got ds to work out how much cheaper this was than cake from the tea shop... He's really getting into it now!

We both eat at home for lunch every day, petrol, petrol costs are low, take away every 2-3 weeks - I think our big spendings is on interest of our debts and unruly food shopping! We only have a Tesco and co op here and no online shopping, so limited with that but could start buying own brands and make use of offers that I can freeze (although have a tiny freezer!!)

Go back to work full time. You are obviously living outside of your means massively.

@sunsandandwaterslides

Childcare costs if working full time would be more than my extra earnings, We did look at it but it's not worth it.

Our debt isn't increasing, but it's not getting any better either. I do think there are ways to clear it without having to go back to work full time.

One account for all the bills to go out of then a separate account each where you individual money can be paid into and spent from.

A budget showing everything that needs to be paid over the year.

Reducing interest as much as possible on all debt by transferring if needed.

Then chucking all money at the highest interest debt first whilst keeping the others ticking over.

Good luck

Hi OP
There's lots you can do fortunately to get your debt down.
Firstly - read the money saving expert website. It probably tells you everything you need to know.

Look at the interest on all your debts. Do any of your credit cards offer an 0% balance transfer deal? Or a money transfer deal?

I transferred mine and my DPs credit card debt onto a 0% credit card and also did 0% money transfer to our overdrafts to get us both in the black. Then we cancelled our overdraft facilities so we couldn't then go back in the red.

You can make huge savings on food by shopping at places like Lidl and Aldi. You will notice very little, if at all difference in quality. There are also fantastic online resources to make excellent meals very cheaply.

I like the recipes by Jack Munroe
cookingonabootstrap.com

Make a month diary and write down EVERYTHING you buy.

Carefully go through your direct debits / standing orders and cancel anything you no longer need or want

Do some babysitting work in the evening to get some cash

Just some ideas off the top of my head but the money saving expert website is really quite exhaustive

Moneysavingexpert is your friend. Have a look at the money makeover

www.moneysavingexpert.com/family/money-help/

You basically need to separate out your money into several categories:

Basic bills and debt repayments. Maybe get them all to come from one account and send a set amount to this account each month and don't touch this account for anything else.

Savings for annual and irregular expenses like insurances, Christmas, car repairs, holidays, white goods replacement etc. Likely to be a few hundred pounds a month and why a lot of people come unstuck. They don't save for these things and then complain they have an 'unexpected' bill. Set up a standing order and only take the money out when you need to spend it.

Essentials that you are likely to buy each month including food, travel/fuel, pocket money for teens, stuff that is moslty essential but also needs watching to make sure you don't overspend. The difference between a careful lowish budget and willy nilly spending can be hundreds of pounds a month.

Once you have accounted for all the above, what's leftover should be shared between you and DH as your general spending money, to be spent on a 'when it's gone, it's gone basis'.

If you still have a good credit rating, see if you can get as much debt as possible on interest free credit cards. Some do money transfer, so you can use these to sort the overdrafts.

The link below will tell you which cards you should qualify for:

www.moneysavingexpert.com/eligibility/credit-cards/

If your DD or anyone else in the family likes going to the cinema, a monthly pass might work out worth it.

Make sure everyone is on board with the new budget. It's no good if one person is cutting back if another is still leaking hundreds a month on unnecessaries. Also try not to use credit cards for new spending, as if you do, it's likely you'll never get out of debt.

Do you need the expensive car? Could you sell it and buy a much cheaper one to make do for a couple of years until you are in a better financial position?

Also have a look at how much money you are spending on takeaways and food/drink outside the house. Can be hundreds of pounds a month and massively more expensive than home made/supermarket deals. If you like pizza, find a frozen one you like and have that instead or make your own.