Today I am writing about my debt and the first steps I am taking in order to begin to sort it out. For at least the last 12 months the monthly budget has been running at a deficit. This means that more has been going out than has been coming in.
The difference hasn’t been too great, less than £100 per month and by continually moving payments here and there things have survived. One of things I have looked at recently is performing a review of where our money goes and what it is spent on.
Whilst I say on my debt story post that the debt is all mine, some of it belongs to my partner but is directly related to the actions I took all those years ago. On that basis I take full responsibility for it and it is me who repays it.
Reviewing the Monthly Budget
Some expenses are unavoidable. One of those was my car. However two things have happened recently: –
- I got a Job Closer to Home.
- 50% of the Hire Purchase Agreement has been repaid.
What does this mean? Well two things, one I can cycle to work and two, I can Voluntarily Terminate the Car Finance Agreement. One of the reasons I needed a car was my previous job was at a place that wasn’t well served by Public Transport and Cycling there was out of the question.
A Voluntary Termination essentially means I contact the car finance company and say I want to Voluntarily Terminate the agreement. As 50% of the repayments have been made they will do this and there shouldn’t be any additional charges assuming the car is in good condition taking into account its age. There also shouldn’t be any effect on my credit rating either, although the Car Finance Company insisted there would be, my own research tells a different story. One effect would be that this particular finance company would not lend to me again in the future. That’s a price I’m willing to pay to be honest.
I rather foolishly took out a car on finance and because of my poor credit history, the interest rate was very high. By getting rid of the car under the Voluntary Termination I would save a fair amount per month, and that’s before considering the costs of insurance, petrol, parking, maintenance and tax.
It’s a no brainer and has to happen if some sort of order is going to be restored to our finances. The next thing to go is Sky Television and it will be going in July once the contract is up. In total I estimate that with these things gone, we will save around 25% of our monthly expenditure. Yes having a car is nice and convenient but in order to escape this debt, there has to be some short term pain for the long term gains this pain will cause us.
In terms of our debts this will knock around £6,500 from what is owed, bringing us to £41,500. The extra money freed up can also be used to repay existing debts as well.
One other thing we also did recently was to change from shopping at Sainsbury’s to shopping at Aldi. This has cut a huge amount from our Food Bill each and every month. I am not going to lie, it took a bit of adjustment shopping at Aldi but the best bit was always when you get to the checkout and are told the amount you owe. Bargain. Most of the stuff is OK some of it is not as good but overall we are quite happy.
Another thing this new Job of mine brings is a Childcare Voucher Scheme. This is also saving us around £80 per month. All of these savings will add up quite quickly and we should be in much better shape financially moving forward.
Tackling the Debt
High on the agenda is taking control of the debt. I have managed to settle a few of the debts this year but like I say, progress has been slow. By reducing our costs further we should be in a position to make more progress with our debt repayments and begin to reduce the balance down to zero much faster.
Only time will tell if things will move in the right direction. Things feel different now though, like there is much more freedom to get back on top of things and resolve this issue for good. I hope I am writing on this blog this time next year with loads of progress behind us in repaying this debt.