Niggling debts; how / which to clear?
Discussion
Regular user but new account set up for the purposes of this post. I'm after some pragmatic advice re my personal finances, if you please.
Currently my financial picture is:
£1,600 credit card debt; the interest rate on my CC being 35% (which hurts!)
£1,000 outstanding finance on a sofa (about 15 months left at 0% interest so I'm not in a rush to clear)
£1,000 outstanding finance on an engagement ring: 2 years left (again 0% so not too worried here)
Usually overdrawn to the tune of about -£500 immediately before pay day every month (for which I'm charged about £7 a month).
Salary is £2,390 per month after tax. No other savings / investments apart from a private pension.
I live with my fiancee and we bought our first house together in November last year. My monthly outgoings at the moment are:
£850 a month into our joint account to cover mortgage and bills
£70 a month paying off the sofa
£38 per month on the engagement ring
£50 per month on my mobile phone contract
£48 per month on the gym membership
£120 PCM on parking
£200 PCM on fuel (although approx £100 of this is paid to me back from work via expenses)
£300 a month on 'luxuries' - meals, nights out, clothes etc.
And I've been paying £300 a month off the credit card to try and get it down.
Trouble is that I also use this for other work expenses (e.g. a trip to London this month cost me £400, but I will wipe that off the CC as soon as expenses are paid next week), and the interest rate is steep.
So, that lot amounts to just under £2K, which given my salary is manageable (although doesn't allow me to save much).
I think my goal needs to be to clear myself of the CC debt and out of my overdraft inside the next 6 months and then begin saving. Having qualified for the mortgage and obtained finance on the sofa and ring over the last 12 months, I know my credit history is OK (rated as 'very good' / 'excellent' on Experian), but the problem is my recent applications for credit seem to be affecting my ability to obtain a balance transfer credit card, which I'd like to do to clear my CC balance; I've had rejectons from Barclaycard and NatWest in the last 3 months.
So, do I:
- Spend less over the next couple of months to clear my overdraft, and continue paying my CC back at £300 per month until it's gone (will probably take a while)?
- Use the full amount of my overdraft, which is £1350, to clear off as much of my CC debt as possible, and swallow the overdraft charges (max of £20 per month and less than the CC interest), then dig my way out of my O/D as time allows?
- Some other plan to try and reduce my outgoings / debt?
And yes, I'm aware that I need to spend less on the 'luxuries' element. That saving will be happening as of now, and I intend to bring this personal spending down to about £150 per month or less if possible.
All replies gratefully received (even sarcastic and funny ones, I know this is PH after all
)
Cheers.
Edited for spelling, and to apologise for the lengthy post!
Currently my financial picture is:
£1,600 credit card debt; the interest rate on my CC being 35% (which hurts!)
£1,000 outstanding finance on a sofa (about 15 months left at 0% interest so I'm not in a rush to clear)
£1,000 outstanding finance on an engagement ring: 2 years left (again 0% so not too worried here)
Usually overdrawn to the tune of about -£500 immediately before pay day every month (for which I'm charged about £7 a month).
Salary is £2,390 per month after tax. No other savings / investments apart from a private pension.
I live with my fiancee and we bought our first house together in November last year. My monthly outgoings at the moment are:
£850 a month into our joint account to cover mortgage and bills
£70 a month paying off the sofa
£38 per month on the engagement ring
£50 per month on my mobile phone contract
£48 per month on the gym membership
£120 PCM on parking
£200 PCM on fuel (although approx £100 of this is paid to me back from work via expenses)
£300 a month on 'luxuries' - meals, nights out, clothes etc.
And I've been paying £300 a month off the credit card to try and get it down.
Trouble is that I also use this for other work expenses (e.g. a trip to London this month cost me £400, but I will wipe that off the CC as soon as expenses are paid next week), and the interest rate is steep.
So, that lot amounts to just under £2K, which given my salary is manageable (although doesn't allow me to save much).
I think my goal needs to be to clear myself of the CC debt and out of my overdraft inside the next 6 months and then begin saving. Having qualified for the mortgage and obtained finance on the sofa and ring over the last 12 months, I know my credit history is OK (rated as 'very good' / 'excellent' on Experian), but the problem is my recent applications for credit seem to be affecting my ability to obtain a balance transfer credit card, which I'd like to do to clear my CC balance; I've had rejectons from Barclaycard and NatWest in the last 3 months.
So, do I:
- Spend less over the next couple of months to clear my overdraft, and continue paying my CC back at £300 per month until it's gone (will probably take a while)?
- Use the full amount of my overdraft, which is £1350, to clear off as much of my CC debt as possible, and swallow the overdraft charges (max of £20 per month and less than the CC interest), then dig my way out of my O/D as time allows?
- Some other plan to try and reduce my outgoings / debt?
And yes, I'm aware that I need to spend less on the 'luxuries' element. That saving will be happening as of now, and I intend to bring this personal spending down to about £150 per month or less if possible.
All replies gratefully received (even sarcastic and funny ones, I know this is PH after all
)Cheers.
Edited for spelling, and to apologise for the lengthy post!
First of all STOP applying for credit, your not helping yourself and each rejection puts you further away from an accept.
Put as much money as you can humanly afford into paying the CC off first (35%!!!!)
Then clear your overdraft and close it. Learn to live within your salary, not your overdraft.
Clear the 0% debts asap as the monthlies detract from your disposeable income.
Get a cheaper phone tariff (giffgaff £12).
Put as much money as you can humanly afford into paying the CC off first (35%!!!!)
Then clear your overdraft and close it. Learn to live within your salary, not your overdraft.
Clear the 0% debts asap as the monthlies detract from your disposeable income.
Get a cheaper phone tariff (giffgaff £12).
Some thoughts:
- in general pay off the highest interest items first; so cc then overdraft. Don’t max out your o/d though because you’ll have nowhere to go in an emergency.
- am I right that you are putting work exes on the cc while you haven’t cleared the previous balance ? That’s a bad idea because it increases your interest costs. Can you get the office to front you, or give you a work c/card ?
- You’re on 0% on a couple of items. Just let them run.
- I assume your pension is not a final salary one. For sure that’s not getting you a 35% return. Can you take a holiday on repayments for twelve months and redirect that to your cc ?
- 50/mth on a phone seems high. Can you buy a cheap phone and go to a SIM only plan ?
- Suspend the gym for twelve months. Run round the park.
- Is your Mrs earning ? What’s her financial situation ?
- in general pay off the highest interest items first; so cc then overdraft. Don’t max out your o/d though because you’ll have nowhere to go in an emergency.
- am I right that you are putting work exes on the cc while you haven’t cleared the previous balance ? That’s a bad idea because it increases your interest costs. Can you get the office to front you, or give you a work c/card ?
- You’re on 0% on a couple of items. Just let them run.
- I assume your pension is not a final salary one. For sure that’s not getting you a 35% return. Can you take a holiday on repayments for twelve months and redirect that to your cc ?
- 50/mth on a phone seems high. Can you buy a cheap phone and go to a SIM only plan ?
- Suspend the gym for twelve months. Run round the park.
- Is your Mrs earning ? What’s her financial situation ?
Newc said:
Some thoughts:
- in general pay off the highest interest items first; so cc then overdraft. Don’t max out your o/d though because you’ll have nowhere to go in an emergency.
Noted.
- am I right that you are putting work exes on the cc while you haven’t cleared the previous balance ? That’s a bad idea because it increases your interest costs. Can you get the office to front you, or give you a work c/card ?
Yes, although any work expenditure is cleared from the CC as soon as work exes are paid to me, and I'm no longer spending anything on it personally. Just need to clear the balance. I was discouraged from taking a work CC by my manager as the expenses process is notoriously complex and those with work CC's (an Amex)have experienced trouble getting expenses paid in the past. This has been confirmed by colleagues at my level I know have had similar problems
- You’re on 0% on a couple of items. Just let them run.
- I assume your pension is not a final salary one. For sure that’s not getting you a 35% return. Can you take a holiday on repayments for twelve months and redirect that to your cc ?
I haven't asked. Work run private pension scheme (not final salary).
- 50/mth on a phone seems high. Can you buy a cheap phone and go to a SIM only plan ?
Yes, will be doing this upon expiry of the contract in August.
- Suspend the gym for twelve months.
Run round the park.
Again, will be doing when my contract expires in June.
- Is your Mrs earning ? What’s her financial situation ?
The better half is currently back at Uni completing a Masters degree, with no income but no debt either (although she pays £300 pcm in to our joint account from savings / inheritance to assist with the monthly outgoings). No kids and the joint account balance is healthy, around a £1K surplus in case of extreme emergency.
In a nutshell, I'm not spending any more than I earn each month now, and certainly won't be getting into more debt, but I want to get on top of the debt I do have, particularly as I'm the only one at home bringing in a salary until at least the end of this year.
- in general pay off the highest interest items first; so cc then overdraft. Don’t max out your o/d though because you’ll have nowhere to go in an emergency.
Noted.
- am I right that you are putting work exes on the cc while you haven’t cleared the previous balance ? That’s a bad idea because it increases your interest costs. Can you get the office to front you, or give you a work c/card ?
Yes, although any work expenditure is cleared from the CC as soon as work exes are paid to me, and I'm no longer spending anything on it personally. Just need to clear the balance. I was discouraged from taking a work CC by my manager as the expenses process is notoriously complex and those with work CC's (an Amex)have experienced trouble getting expenses paid in the past. This has been confirmed by colleagues at my level I know have had similar problems
- You’re on 0% on a couple of items. Just let them run.
- I assume your pension is not a final salary one. For sure that’s not getting you a 35% return. Can you take a holiday on repayments for twelve months and redirect that to your cc ?
I haven't asked. Work run private pension scheme (not final salary).
- 50/mth on a phone seems high. Can you buy a cheap phone and go to a SIM only plan ?
Yes, will be doing this upon expiry of the contract in August.
- Suspend the gym for twelve months.
Run round the park.
Again, will be doing when my contract expires in June.
- Is your Mrs earning ? What’s her financial situation ?
The better half is currently back at Uni completing a Masters degree, with no income but no debt either (although she pays £300 pcm in to our joint account from savings / inheritance to assist with the monthly outgoings). No kids and the joint account balance is healthy, around a £1K surplus in case of extreme emergency.
In a nutshell, I'm not spending any more than I earn each month now, and certainly won't be getting into more debt, but I want to get on top of the debt I do have, particularly as I'm the only one at home bringing in a salary until at least the end of this year.
Edited by ManNeedsAPlan on Thursday 21st March 14:35
So ignoring the luxuries bit of spending you should be able to knock the credit card debt off in a couple of months, then the month after the overdraft goes. Sure, you won't be eating out or buying new clothes for a whole three months but I suspect that's a lot better than paying a fortune in interest.
A proper work cc = a card in their name which gets sent to their office and they are on the hook to Amex, not you. Then you don’t care how long it takes to process expenses. Ask if you can get that. Maybe get some of your colleagues onside and make a joint pitch. Or maybe just a fuel card if that’s appropriate ?
In that setup, altering your pension contribution will be in the Too Hard category. I’d leave that alone.
However….running a joint a/c positive balance and a big c/c bill ? And your Mrs has savings ? Hmmm. You both need to have a word with yourselves over that. Even if you pay her interest, it’s going to be less than your c/card.
In that setup, altering your pension contribution will be in the Too Hard category. I’d leave that alone.
However….running a joint a/c positive balance and a big c/c bill ? And your Mrs has savings ? Hmmm. You both need to have a word with yourselves over that. Even if you pay her interest, it’s going to be less than your c/card.
Newc said:
A proper work cc = a card in their name which gets sent to their office and they are on the hook to Amex, not you. Then you don’t care how long it takes to process expenses. Ask if you can get that. Maybe get some of your colleagues onside and make a joint pitch. Or maybe just a fuel card if that’s appropriate ?
In that setup, altering your pension contribution will be in the Too Hard category. I’d leave that alone.
However….running a joint a/c positive balance and a big c/c bill ? And your Mrs has savings ? Hmmm. You both need to have a word with yourselves over that. Even if you pay her interest, it’s going to be less than your c/card.
Fair points well made. On the last one, we both know the state of each other's finances (it's fair to say she's always been a bit better off due to help from family and also managed her money better than me), but we've always contributed to the joint account - equally at first until her scenario changed - on the basis of that being our joint contribution, and whatever was left was our own cash.In that setup, altering your pension contribution will be in the Too Hard category. I’d leave that alone.
However….running a joint a/c positive balance and a big c/c bill ? And your Mrs has savings ? Hmmm. You both need to have a word with yourselves over that. Even if you pay her interest, it’s going to be less than your c/card.
Actually typing it out is making me see some sense though, so cheers!
Newc said:
However….running a joint a/c positive balance and a big c/c bill ? And your Mrs has savings ? Hmmm. You both need to have a word with yourselves over that. Even if you pay her interest, it’s going to be less than your c/card.
I think that's a key point, use the savings to clear off the CC debt now, then build that back up again afterwards. If a real emergency comes along before you've paid that back, you've still got your CC, after that you can bin it.ManNeedsAPlan said:
the joint account balance is healthy, around a £1K surplus in case of extreme emergency.
I would use this to pay off £1k off the credit card. In an extreme emergency to could use the credit card or overdraft again, but until that emergency you've wiped out a load of interest on the credit card. I'd then move £600 from the overdraft to the credit card (again, lowering interest payments).
Newc said:
A proper work cc = a card in their name which gets sent to their office and they are on the hook to Amex, not you. Then you don’t care how long it takes to process expenses. Ask if you can get that. Maybe get some of your colleagues onside and make a joint pitch. Or maybe just a fuel card if that’s appropriate ?
In that setup, altering your pension contribution will be in the Too Hard category. I’d leave that alone.
However….running a joint a/c positive balance and a big c/c bill ? And your Mrs has savings ? Hmmm. You both need to have a word with yourselves over that. Even if you pay her interest, it’s going to be less than your c/card.
This. If your OH has savings, she won't be getting much interest from them. Borrow the money from her to pay off your cc, then pay her back at 15%. This way it will be much cheaper for you and give her a significant benefit over just leaving the money in a savings account In that setup, altering your pension contribution will be in the Too Hard category. I’d leave that alone.
However….running a joint a/c positive balance and a big c/c bill ? And your Mrs has savings ? Hmmm. You both need to have a word with yourselves over that. Even if you pay her interest, it’s going to be less than your c/card.
Sarnie said:
Shes sitting on a pot of cash whilst you subsidise her going to uni whilst you then drown in 35% apr CC debt?????
Also, theres no point in you having £1k in a bank account earning you circa 2% and you owing £1k on a credit card being charged 35%!?!?!?!?
Yes. Crazy I know, when you point it out. No excuse, but the position has evolved over time as we have kept our personal finances completely separate.Also, theres no point in you having £1k in a bank account earning you circa 2% and you owing £1k on a credit card being charged 35%!?!?!?!?
High time to sort myself out, me thinks...
It's worth pointing out that Credit Cards only cost a lot in interest if you don't pay them off.
They're very useful if you pay them off fully on pay day, and then use them to buy stuff over the month. And repeat.
What you need to avoid doing is leaving anything on them, and paying cash/debit card through the month.
With the right card, you will even earn a little bit of cash back using the correct method.
If she's sat on a bit of cash, borrow it from her for a small amount, eg £1200, paying back £105 a month for a year. She get a bit, you get a bit.
They're very useful if you pay them off fully on pay day, and then use them to buy stuff over the month. And repeat.
What you need to avoid doing is leaving anything on them, and paying cash/debit card through the month.
With the right card, you will even earn a little bit of cash back using the correct method.
If she's sat on a bit of cash, borrow it from her for a small amount, eg £1200, paying back £105 a month for a year. She get a bit, you get a bit.
So you are usually at the end of the month 4100 in debt (including overdraft)
Outgoings according to you are 1976 (including luxuries and you have 400 left over of which 300 is paying down your debts... there is still 100 missing.
What to do:
Take out of the bank the money you have for the week for luxuries (call it 40GBP) at the same time every week and don´t overspend. (Saving per month - 100)
Take sandwiches into work to stop you spending a fiver a day on un-necessary things (100 saving per month)
Cut out the gym membership (Saving 48 per month)
Find out where the other 100 goes? It must be somewhere and is probably in luxuries (100 saving per month)
Cheaper mobile contract - (30GBP per month)
Go onto Martin Lewis moneysaving website and change your gas, electric TV deals (Call it 20GBP)
Thats another 350 a month to add to your 300 you are currently paying off... 6 months hard work and job done
Outgoings according to you are 1976 (including luxuries and you have 400 left over of which 300 is paying down your debts... there is still 100 missing.
What to do:
Take out of the bank the money you have for the week for luxuries (call it 40GBP) at the same time every week and don´t overspend. (Saving per month - 100)
Take sandwiches into work to stop you spending a fiver a day on un-necessary things (100 saving per month)
Cut out the gym membership (Saving 48 per month)
Find out where the other 100 goes? It must be somewhere and is probably in luxuries (100 saving per month)
Cheaper mobile contract - (30GBP per month)
Go onto Martin Lewis moneysaving website and change your gas, electric TV deals (Call it 20GBP)
Thats another 350 a month to add to your 300 you are currently paying off... 6 months hard work and job done
Newc said:
Some thoughts:
- in general pay off the highest interest items first; so cc then overdraft. Don’t max out your o/d though because you’ll have nowhere to go in an emergency.
- am I right that you are putting work exes on the cc while you haven’t cleared the previous balance ? That’s a bad idea because it increases your interest costs. Can you get the office to front you, or give you a work c/card ?
- You’re on 0% on a couple of items. Just let them run.
- I assume your pension is not a final salary one. For sure that’s not getting you a 35% return. Can you take a holiday on repayments for twelve months and redirect that to your cc ?
- 50/mth on a phone seems high. Can you buy a cheap phone and go to a SIM only plan ?
- Suspend the gym for twelve months. Run round the park.
- Is your Mrs earning ? What’s her financial situation ?
More or less what I'd say. - in general pay off the highest interest items first; so cc then overdraft. Don’t max out your o/d though because you’ll have nowhere to go in an emergency.
- am I right that you are putting work exes on the cc while you haven’t cleared the previous balance ? That’s a bad idea because it increases your interest costs. Can you get the office to front you, or give you a work c/card ?
- You’re on 0% on a couple of items. Just let them run.
- I assume your pension is not a final salary one. For sure that’s not getting you a 35% return. Can you take a holiday on repayments for twelve months and redirect that to your cc ?
- 50/mth on a phone seems high. Can you buy a cheap phone and go to a SIM only plan ?
- Suspend the gym for twelve months. Run round the park.
- Is your Mrs earning ? What’s her financial situation ?
In future - I'm trying not to sound preachy - try not to buy things on finance unless there's an urgent need.
My OH and I aren't skint but we waited until we were cash rich before buying a new sofa - and the old sofa would have been turned down if we'd tried to donate it to a tramp.
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