Hi momoney,
Firstly, I have a good common sense view of managing money and I've had to cut back my own expenses in the past. However, I am not an expert in reviewing SOAs to find cost savings. I've asked a couple of more expert folk if they wouldn't mind taking a look to offer their comments.
However, here is what I would do if I were in your position. Before that, let me just put a thought in your head ... for you to mull over and/or discuss with your wife. Given that you are part of a family unit, then your SOA is only half of the story, so it is difficult to give a really good assessment. More importantly, it's only half the picture for
you too! It is more common than it was for married couples to maintain their own finances and to each contribute to the common good ... and I can see many reasons why this is seen to be a good thing. However, it is my belief, that it hampers the ability to maximise the use of finances for the family as a whole. So, have a think about whether it would be better to pool your resources together and do a joint SOA that covers the whole family - income and expense.
For example, the £500 per month budget that your wife manages for groceries has some room for getting trimmed back to £350 or £400. That would free up an additional £100 to £150 to pay down the debts. I guess that potentially takes us into other territory like ... are the debts in your SOA, debts that have been run up trying to make ends meet for the family as a whole or are they your own debts that you have run from an expensive hobby or a personal passion for designer clothes? If they are effectively 'family debts' then wouldn't it make sense to address them together? However, that then begs another question. Does your wife also have debts that she is managing or are yours the only ones?
So, to summarise the above, if you are a family unit and there are difficulties making ends meet, then consider doing a joint SOA. Something to think about.
OK, now let me comment on what I would do in your situation. As you can see, you have a monthly shortfall of £354. Unless you balance the books, you will get further and further into debt. The danger of consolidating debt onto the mortgage is that you continue to rack up a similar shortfall each month which gets you further and further into debt. More on that later.
OK, so you have £12,000 in savings and an investment of '
£5,000' in shares which has lost value. I put the share value in italics because you don't actually have that amount any more - it is a lower amount. My guess is that would probably be worth about £3,000 if invested a year ago (maybe a bit more?). Is there any reason why you can't use that £3000 to pay off your debts? Sure there is the psychological reasoning that says
"I don't want to crystalise the loss. I want my £5000 back and I might take it out then"., but that is a flawed argument. There is
risk that the value of those shares will decline further, so you may get a negative return on that money. "Risk" is the key word in that sentence. Now let's say you used that £3000 to pay off your Sky credit card, then you'd get a
guaranteed return of 22.9% on that money (!!) i.e. you'd save the £687 (22.9%) interest on your Sky card every year.
So, if it were me, I'd throw the savings and the share money at paying off your debts. Pay off the debts with the highest interest rates first. This would be Store Card (£200), GM Card (£4000), Halifax (£3000), FD (£5000), Sky card (£3000). That would reduce your debts by £12,200 and would free up £413 per month in min monthly payments. This means that your monthly budget would balance - probably for the first time for a long time
Mind you it is still tight and you don't have much spare cash to start overpaying the other debts, so I'd still look to cut down expense a bit. There isn't much scope in your SOA - but I expect that there might be if you combined it with your wife's. However, you are spending £91 per month on cable/sat TV, broadband and phones. That's quite a lot so you should be able to get that down to £50 per month. Ideas here would be to scrap Sky (I guess that's what you have) or get broadband included in your Sky package and drop the separate charge. I can't see the need of £30 landline plus £35 mobile every month. Should be able to get to £30 total for both.
Beyond that, your car expenses are quite high. Could you sell one car and survive on one? I bet you could if you had to. That would make a big difference. £100 per month on petrol/diesel is a lot for one car or does that cover both you and your wife?
I'd also look to get a lower mortgage interest rate. If you could chop £150 off that, that would also make a huge difference. I can't rememeber if you were on a repayment or interest only. If the former, then you could go interest only for a while to allow you to pay your debts off more quickly. But that's only a short term measure.
Another option may be to enter into a Debt Management Plan (DMP) which is where you negotiate with creditors to pay reduce monthly payments and request them to freeze interest for a period. However, this is only a temporary measure. The SOA calculator has a button "Creditor Offer". Click on the help below the button to read about DMP and how the calculator can help you work out what you can pay each lender.
Hopefully, one of the experts will be along later to offer their thoughts. They can also comment better than me on the DMP approach.
Clariman
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