where are we going wrong?

[Tammy8912]

Hello, I am seriously stressed about our finances.

We are married with 2 DC's aged 4 & 9. We both now work full time and earning a combined take home pay about 5K per month.

We have signiciant debts of around 60K . We are working hard to bring these down. Our income increased significantly quire recently and this means that whilst the debts are high, we are in a better position to clear them. We pay £1300 per month on debts.

Our mortgage is cheapish at £500 per month. other bills, direct debits, food fuel and childcare comes to £1150 so all in all we pay out around £2950 per month.

This means that we should have about 2K a month left to do whatever we want with, however it never feel like that. I have checked outgoings and I haven't missed anything, we are obviously just spending way too much.

I feel really stressed and worried that we are so out of control

Worrying won't solve anything, so take a deep breath.

Sit down with your bank statements, add up all of your spending in each area: essential bills, supermarket shopping, fast food/entertainment, travel, etc. Then you'll really know where your money goes.

A good way to budget is to take your spendable cash out of the bank when you're paid and split it in to an envelope for each week of the month. Don't touch your bank account again for the rest of the month.

If you haven't already, go through your outgoings and cut them down as much as possible: do you need a broadband/tv package or could you watch freeview? Do you need mobile phone contracts or could you have SIM only deals? Could you do fakeaway meals instead of eating out?

You'll do it, don't panic

Gosh that's a massive amount to not really have any idea where it's going ! I think all you can do is write every spend down until you can account for what you are doing with it. We are similar though as we have around £3700 income, no mortgage, no childcare, no debts but I still can't really account for where it goes except that we are always paying out for something for four teenagers.

You need to set a good budget, check how much is needed for petrol, set up standing orders to cover typical outgoings that can easily be forgotten e.g. Christmas, birthday, car etc. There are list of all these expenses on here somewhere. Then what’s leftover is your spending money that you need to budget and keep to.

As well as the advice above, keep a detailed list of everything you spend in a week and review it. It can be surprising the mount of money spent on coffees, magazines, snacks, lunches at work etc.

Get an app on your phone and record expenditures. Look at energy usage and switch providers if you can. Can you do transfers to get off high % repayments from credit cards? Food- shop at Aldi , Lidl.

Ok we are/were similar in that we have no idea where are money goes.

However back in the summer we set up a pingit account.

I sat down and worked.out how much the children's clubs are a year, lunch money, birthdays and christmas, car servicing Clothes etc and then worked it out on a monthly basis.

We then Transfer that to the various pots on pingit it was a bit of a.shock how much that all comes.to.

We the set ourselves a £500 'goung out: budget which get used for day to day spends (not food). Which we still burn through. We draw that out in cash and the bank account is then in theory not used.

This has massively helped us and we no longer have any surprises when all for example.all the clubs are due in 1 month as we've stashed it away and haven't already spent the money.

We've even managed to save £2500.k which was actually unheard of before.

Pingit is free and owned by Barclays so it's all safe.

I've also started shopping at Aldi. It's a faff because they don't deliver but it is so much cheaper

*Our not are.

I’d actually sit down and work your expenses on the budget part of money advisory service - it’s free - you can save the sheets and it shows you on a chart where your money is going each month

Then open two accounts - one for each of you and set up a standing order at the beginning of the month to each account for spending money for the week or month...once it’s gone it’s gone. This will rein in your spending, make sure you can see the pocket money account on your phone.

It’s all very well working out where you over spend but you don’t want to so put measures in place to stop over spending

Then take a look at snowballing debt, google search and it explains the best way to minimise interest by snowballing accounts - this will ultimately reduce your monthly outgoings, but at first your debts will reduce but the amount your paying stay the same so you pay them quicker

As previous pp check your direct debits and standing orders, cancel anything not needed, reduce everything you can by swapping providers or bartering for lower pricing

Download your recent bank statements and have a look at what has been going out.

Make a list of all direct debits (any things you aren't using anymore?), work out what you spend on food and fuel each month and look at any annual expenses you have.

With the annual expenses (eg birthdays, Christmas, car and Boiler services, car tax, insurance- usually cheaper to pay yearly than monthly, Tv licence, any memberships etc), add them all up, divide by 12 and pop into a separate account).

Work out what's left, decide what you want to save and then pop your spends in another account. We have a starling account for that, which breaks your spending into categories or by shop so you can see where your money is going. We also use the 'rounding up' saving, so it pops the 'change' into a savings pot.

And get your debts onto the lowest interest rate possible (could you remortgage and add some to the mortgage? Could any be shifted to a 0% credit card), but keep making the same payments or more so that you can shift the debt more quickly.

www.moneyadviceservice.org.uk/en/articles/increasing-your-mortgage-getting-a-further-advance

Putting debts onto your mortgage is rarely a good idea and unfortunately could cost far more

ivy if you know you can make the repayments AND you overpay (so pay what you would on the shorter loan), then it can be a good idea to add them add them to your mortgage. But you have to be very disciplined!

If I was you the 2k you spend per month should go mostly on debt. If you paid 1k a month you'd still have 1 k per month to spend. That's enough. In a year you debt would go down by 12k, think of the interest you'd save alone.

Eat slap I think once the spending has been investigated and organised then it could be a solution, otherwise the same pattern could repeat itself a further time and the op could be in the same position further down the line

Some good pointers but for a complete, systematic guide, with signposting towards lower interest credit cards etc, read through this and do everything that's relevant.

But in short, your debt problem can probably be solved with a few years of fairly strict budgeting, enhanced by making sure you pay as little interest as possible and careful control of other costs too.

But you might find that some of the £2k goes on irregular essentials like car repairs, insurance, dental bills etc, which is why a good look at your overall budget is needed.

Could you consolidate the debt onto your mortgage?

Also you need separate bank accounts, one for bills, standing orders over to some savings, long term, Christmas etc and then one for a weekly allowance type of thing that sees you through the week for food petrol spends etc. This is the only one you touch ever you'll soon see a change

I’d make sure you don’t overspend on your essentials (eg expensive tv packages or wine in th weekly shop) to check the you do get 2k left over. Out of that, I’d probably allocate the money as follows:
150 for each parent as ‘pocket money’
500 on kids and bits and bobs
400 into longer term saving pot
800 debt overpayment