At the end of the financial road - need help

[phillers]

Morning,

In a terrible situation. Years and years of poor communication and financial mismanagement have led us here. I am broken, ashamed and not sure if this is something that we can ever get out of. Terrified of losing our home

please be kind

Household Information[/b]
Number of adults in household........... 2
Number of children in household......... 2
Number of cars owned.................... 2[b]

Monthly Income Details[/b]
Monthly income after tax................ 4355
Partners monthly income after tax....... 2511
Benefits................................ 0
Other income............................ 250[b]
Total monthly income.................... 7116[/b][b]

Monthly Expense Details[/b]
Mortgage................................ 801
Secured/HP loan repayments.............. 386
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 139
Electricity............................. 98
Gas..................................... 112
Oil..................................... 0
Water rates............................. 35
Telephone (land line)................... 0
Mobile phone............................ 67
TV Licence.............................. 13
Satellite/Cable TV...................... 36
Internet Services....................... 21
Groceries etc. ......................... 600
Clothing................................ 30
Petrol/diesel........................... 220
Road tax................................ 22
Car Insurance........................... 64
Car maintenance (including MOT)......... 30
Car parking............................. 0
Other travel............................ 0
Childcare/nursery....................... 0
Other child related expenses............ 120
Medical (prescriptions, dentist etc).... 9
Pet insurance/vet bills................. 28
Buildings insurance..................... 22
Contents insurance...................... 17
Life assurance ......................... 49
Other insurance......................... 9
Presents (birthday, christmas etc)...... 100
Haircuts................................ 20
Entertainment........................... 150
Holiday................................. 0
Emergency fund.......................... 100[b]
Total monthly expenses.................. 3298[/b]
[b]

Assets[/b]
Cash.................................... 0
House value (Gross)..................... 320000
Shares and bonds........................ 0
Car(s).................................. 14000
Other assets............................ 0[b]
Total Assets............................ 334000[/b]
[b]

Secured & HP Debts[/b]
Description....................Debt......Monthly...APR
Mortgage...................... 140098...(801)......4.11
Hire Purchase (HP) debt ...... 17000....(386)......0[b]
Total secured & HP debts...... 157098....-.........- [/b]

[b]Unsecured Debts[/b]
Description....................Debt......Monthly...APR
updraft loan...................21000.....360.......16.9
updraft loan 2.................8000......210.......18.9
Updraft loan 3.................6500......165.......18.9
overdraft......................2500......80........42
Creation Credit card...........7100......192.......21
very...........................700.......48........50
halifax cc.....................2400......24........0
fluid..........................3600......170.......39
LLoyds.........................3890......132.......8
HSBC loan......................7309......210.......7.9
Lloyds.........................10500.....269.......29
barclaycard platinum...........12600.....258.......4.9
barclaycard....................4960......109.......4.9
natwest........................2000......20........0[b]
Total unsecured debts..........93059.....2247......- [/b]

[b]
Monthly Budget Summary[/b]
Total monthly income.................... 7,116
Expenses (including HP & secured debts). 3,298
Available for debt repayments........... 3,818
Monthly UNsecured debt repayments....... 2,247[b]
Amount left after debt repayments....... 1,571[/b]

Cards are all cut up. No possibility of us moving to 0% right now as we have too much debt and are seen as high risk

If I'm reading this correctly you have 93k worth of debts yet have a really recent income and outgoings way less than your earnings ? First call needs to be working out how you got into this much debt or was it accrued before your earnings were so good ? I would speak to somewhere like CAB, stepchange or CAP.

Im sorry but I’m not sure what the issue is.

If I’m reading all of that correctly after all your outgoings and debt repayments you still have £1500 left.

Yes you have a lot of debt and it must be difficult to keep track of them all but you are managing the repayments. A couple if those could be paid off very quickly if you paid more than the minimum

A lot of it was accrued before we we were earning so well, but we have basically lived separate financial lives for years and have totally messed things up. I would like to be able to offer a justification about why we are here but I can't. It's totally self inflicted. I think that for the past 2 years we have been in ostrich mode but the plaster has totally been ripped off now and we have to sort it before we lost everything

Sorry that should say a really good income.

Don't feel ashamed! You need to acknowledge what drove you to accumulate debt, forgive yourself and focus on the future.
I wonder if you've had any counselling or couples counselling to help you understand the root of your problems?

Suggest posting on MoneySavingExpert debt free wannabe as well, if you haven't already - some really experienced posters there and it tends to be quite a non judgemental forum.

BTW I would suggest tackling very and the overdraft first. You need to attack high APR debts first which then gives you more to throw at the others, I think it's called debt snowballing.

Looking at your SOA, I imagine most on MSE will tell you to cancel satellite TV, reduce mobile phones cost (go sim only - mine is 10 per month for 50GB) and look at your entertainment budget to understand if it can be trimmed.

100 per month on presents seems like quite a lot with a 2 child household - any way you can trim this? What are the ages of your children and are you also being drawn into buying gifts for their friends?

Is there any opportunity to consolidate expensive debts into the mortgage?

I know rates are high atm but you are paying expensive APR on cc & loans. That way- it is just one total amount over x years.

Looking through your budget, there's emergency fund but no holiday. Maybe £50 so we can all have something to look forward to.

Other suggestion would be a zero-based budget, account for every pound. What's leftover each month is making overpayment to the highest APR debt.

Good luck, this is achievable only if you both share the same goal

I can see why consolidation loans are appealing but they're generally not recommended because they turn unsecured debt into secured debt and unless the spending patterns that caused the debt in the first place are resolved, it increases the risk of losing the house.

As babyroobs has pointed out there should be spare money so this SOA is probably not capturing all of the spending that led to the debt in the first place. Would probably be a good idea to track all spending over the course of 2 months to understand where it really goes, that or going back through bank statements with a fine tooth comb. I like snoop (which can do historic reporting) but others like YNAB.

Have a look at the snowball approach for the debts:
https://www.femaleinvest.com/en-gb-investment-dictionary/debt-snowball-method?gad=1&gclid=Cj0KCQjwxuCnBhDLARIsAB-cq1pcZ3A6XP0x2baADjIhUbGQgQTcMUQQK4JQM7gL8hXmcRlnp3ygG08aAtSEALww_wcB

Honestly with that amount of equity in the house and the APR on those cards, I would be giving serious thought into remortgaging to clear at least the highest interest debt. But ONLY if the factors that led you into that amount of debt are resolved. To have almost £100k debt with an income that size means that either you had an unforeseen period of time where your income was severely affected or you are living far far beyond your means. If it's the latter, then you need to seriously look at your lifestyle before attempting to tackle any of it.

I'd speak to a debt adviser at StepChange or somewhere to discuss options.

I've replied on your other thread, but will post here to ask about when your mortgage is up for renewal and that you will need to account for how much it goes up by.

Like @Clefable says, including debt on a mortgage is not normally recommended because many people continue to overspend, it increases the chance of losing your home if you lose an income, and it can be a lot more expensive if short term debt is converted to long term debt even if the interest rate appears lower BUT, if you are 100% sure that you've learned your lesson and will not borrow for lifestyle spending again, and will overpay the mortgage (which you should easily be able to afford) it might be worth including some of the more expensive debt when you remortgage.

But you must regard it as an absolute last chance situation, because if you get into debt again, or something goes wrong like loss of income, you'll have debt and a bigger mortgage, which means it's a lot more likely that you'll lose your home.

One point about the SoA: is this based on your actual spending? Ie. have you gone through bank statements to see where the money is going? Or is it based on what you think you should be spending but may not be an accurate reflection?

If you aren't actually putting the money aside each month for those things then it will just be getting consumed in the normal budget. Do you usually have £600 sitting waiting when you reach December for Christmas? Or say £200 waiting when your MoT arrives?

Good point @Clefable because if the OP did spend like that, they wouldn't be in debt.

OP, what's not in the SOA that you have been spending on, that you will now stop, so you stick to the stated budget and be able to reduce your debts, while at the same time be able to pay for things like the MOT?

Well done for getting all these details down, must have taken a while to dig out all the debt details so that's a great start to taking control.

Are your outgoings based on true amounts from reviewing your spending from the last six months, or is it intended as your future budget?

How old are your children (assuming teens as no childcare costs are are listed?) as some of these figures may a little high or low depending on circumstances. Entertainment is quite high for example, especially as satellite TV is showing as an extra cost on your budget so it's actually more like £186 a month? Can you pay for streaming on Netflix instead at £11 a month, or are you still in contract with Sky? I personally would reduce this to £100 and save £50 a month for a few days away somewhere next summer, but you may prefer more regular spending to get you through the year.

What does other child expenses include, is it kids after school activities and pocket money?

Clothes at £360 annually seems quite low if that includes school uniform and all footware?

Do you need both cars to get to work or could you go down to one and take public transport? Are they leased, company car or do you own both (£14K is listed as car assets). Your budget for maintenance/MOT seems low for two vehicles? We budget £4-500 annually for repairs, tyres, service and MOT for one.

I think your first issue is that you say you "don't know how" you got into so much debt?

How is that possible? I know you say you have separate finances (which obviously isn't working..) but surely you can both go through your separate spending and see where the rot set in?

Don't panic would be my advice and post in the mse debt forum.

With your income you should be living very comfortably tbh.

Good luck x

I think you should effectively reboot your lifestyle.

1. Re-mortgage to pay off all debt except the cars

2. Massively overpay your mortgage going forward or reduce the term, e.g. get a £240k mortgage which on a 12 year term at 6% would be £2,342 a month or 8 years is £3,154

You would still be loaded each month compared to most people.

You have a really good income. You can't be spending 100 a month on presents every month surely? And 600 a month on food? You can easily pay more of your debts off each month but yes you need to make major cutbacks.

You’ve taken an important first step in acknowledging the debt, and developing a detailed budget so you can start tracking money in vs money out

The good news is, this does look recoverable. It may not feel like it, but it is. You’ve got a good amount left every month after outgoings to start tackling the debt.

For now I wouldn’t recommend remortgaging or getting a consolidation loan; you’re too fragile and it may just cause you to start filling up debt again.

You have £1500 left over. I agree with others that you need to think about sinking funds for a few non-monthly costs like MOTs, general house maintenance etc, plus allow for some sort of entertainment. So let’s call it £1300.

There are 2 really popular methods to clear debt, the Avalanche and the Snowball. I’ll describe the Snowball here.

So carry on as you are, paying all the minimum payments on your debts each month.

But, for the smallest debt (in this case, your Very debt); chuck the extra £1300 at it. Once you’ve cleared it, throw the £1300 PLUS the previous minimum payment at the next debt.

So in this case, you’ll actually be able to clear your Very debt next month, PLUS pay £600 off your NatWest debt. The month after, you’ll have £1348 to throw at debt, which combined with your minimum payments from those 2 months should leave you with only a few quid left owed - so if you decide to challenge yourself to spend £20ish less on groceries or entertainment that month you’ll have managed to clear 2 debts in 2 months.

Then it rolls over again, so you’ll have £1368 to put towards your Halifax cc. And so on and so forth.

The avalanche method is a similar principle, except you tackle the highest interest debts first, therefore overall saving more in interest. But it may take longer to clear individual debts as you don’t always get those early quick wins so some people find it harder to stay motivated.

In your case, regardless of if you do snowball or avalanche, you can be in a position of clearing your Very debt by next month!

The more money you can save in your budget (cutting down on Sky etc); the more you can throw at your debt.

Description....................Debt......Monthly...AP

very...........................700.......48........50
overdraft......................2500......80........42
fluid..........................3600......170.......39
Lloyds.........................10500.....269.......29
Creation Credit card...........7100......192.......21
Updraft loan 3.................6500......165.......18.9
updraft loan 2.................8000......210.......18.9
updraft loan...................21000.....360.......16.9
LLoyds.........................3890......132.......8
HSBC loan......................7309......210.......7.9
barclaycard platinum...........12600.....258.......4.9
barclaycard....................4960......109.......4.9

halifax cc.....................2400......24........0
natwest........................2000......20........0[b]

Monthly Budget Summary[/b]
Total monthly income.................... 7,116
Expenses (including HP & secured debts). 3,298
Available for debt repayments........... 3,818
Monthly UNsecured debt repayments....... 2,247[b]
Amount left after debt repayments....... 1,571[/b]

The amount left after debt repayment - pay this to the top debt on the list, I've reorganised in order of interest rate

very...........................700.......48........50 pay off £1571 so £871 remaining to pay off overdraft
overdraft......................2500......80........42 leaves £1629 after month 1, then use £1571 to pay towards overdraft in month 2 which will leave £58 to pay in month 3
fluid..........................3600......170.......39 month 3 you'll have £1513 to pay towards Fluid leaving £2087 to pay towards in months 4 & 5 leaving £1055 to then pay in month 5 towards Lloyds
Lloyds.........................10500.....269.......29 after month 5 you'd have £9445 This will take you a further 6 months to clear taking you to month 11. If you think about it you'd have cleared £17,300 within the first 12 months and those are the debts that are keeping your debt high with the interest rates.
Creation Credit card...........7100......192.......21. 16 months along and you'd have cleared this debt
Updraft loan 3.................6500......165.......18.9. Can you actually pay these debts updraft loans early? Or will you incur a penalty of you do so?
updraft loan 2.................8000......210.......18.9
updraft loan...................21000.....360.......16.9
LLoyds.........................3890......132.......8. 19 months along you'd have cleared this debt (if you skip the updraft loans)
HSBC loan......................7309......210.......7.9 In 2 years you'd have cleared all but 7 of your debts
barclaycard platinum...........12600.....258.......4.9
barclaycard....................4960......109.......4.9

I don't know when the zero interest credit cards revert back to paying interest - so can't slot them in. Though by the time you get to 2 year, theoretically you should be able to apply for zero credit cards again and swap some of these debt

I strongly advise you to seek help and advice from Step change or Christians against poverty. Its really important as they may be able not get interest stopped and also advice you in how to tackle these debts as they have a wealth of experience.

We’ll do e for a decent list of finances, not many op’s bother

I would contact step change

I think you can pull through but it’ll take time to get the debt down

Well done..

I recommend watching Dave Ramsey videos, he explains how best to get out of this.

Do not put any extra debt on your mortgage, remember your house is at risk if you cannot keep up repayments on it.

Never turn an unsecured debt into a secure debt.

This is going to be a long journey and I would recommend setting up a debt free wannabe diary on MSE to keep up motivation and accountability and get support from other people.

I agree with others and you need to address why you were over spending and nip it in the bud. Even if it is as simple as saying we weren’t looking at finances so every week we will check our balances and budgets.

Is there anything you can return to lessen the debt? Recently bought unused items. Is there anything you can sell, going down to one car could massively impact your finances.

I would make cutbacks to your budget where possible. I think you could cut down your food budget a bit as well as entertainment and I would check through all your bills to see if you can get cheaper. You could get a sim only deal when the phone contracts are up.

I went really hardcore to clear our mortgage but I know everyone is different but decluttering and selling on Facebook made me feel like I was doing something positive to help clear my debt and speeding up the process.

It will get easier with every debt cleared.

Hope you've managed to get a few things sorted over the weekend op! You will get through this