Welcome
DebtorsLetters is my new website and blog detailing my struggle with debt and getting out of it! The site also has advice about how to save money and also how to make money legitimately. Please check back to see the site evolve over the coming days, months and years! The site is still in its infancy so a lot of links don't work and some of the content is still what I had from the template so it will appear odd.
I've just added a short guide to making money from websites that can be found under the "Money Making" section of the site, see the link at the top of the page.
Have you made your financial New Year's resolution?
As 2012 gets underway, many of us will be thinking about our New Year's resolutions - improvements we can make to our lives. Every year, one of the main things people aim to improve is the health of their finances.
2011 was a difficult year for many people financially. Rising energy and food prices, amongst other things, contributed to high inflation that peaked at 5.2% - more than two and a half times the Government's target of 2%.
With that in mind, financial solutions company Think Money has called on all households to assess their finances and identify any areas for improvement - and they say it doesn't have to be difficult.
"2011 may be behind us, but many of us will be entering the New Year with a lasting souvenir of last year, in the form of credit card bills and other debts," says a spokesperson for the company, adding that a good starting point for households is to carry out a comprehensive review of their finances - and work out how much they can afford to put towards their debts.
"Different households will need to take different approaches. People with 'spare' cash in their monthly budget could potentially save thousands in interest in the long run if they try to overpay their debts when possible, whether that means paying off a credit card bill more rapidly or making overpayments towards their mortgage."
The report goes onto explain how different debt solutions could help some people manage their debts. For example, a debt consolidation loan could combine multiple monthly payments into one, making them easier to manage, and could give them the option of reducing their monthly payments - although this would mean repaying the debt over a longer period, and could therefore increase the total interest to be paid.
Fuel Brittania
I've just found out that Morrisons are resuming they're offer on reduced fuel prices again - http://www.morrisons.co.uk/Offers/Fuel-Britannia/ . If you spend £40 in one transaction in store, between 18th April and 1st May, you get a voucher entitling you to 6p off per litre of fuel until 8th May 2011. For me this will mean around £3.60 saved as my car takes around 60 litres to fill it. I may split my weekly shop in two so I get two vouchers, to maximise the savings.
It's worth checking fuel prices where you are using a site like Petrol Prices to check that the saving is worth having as for example Tesco are doing a similar offer at the moment.
Thomas Cook Credit Card
It's been an expensive month or so with various bills to pay, divorces aren't cheap! I've managed to save some money by persuading my employer to allow me to work from home though and so that's saved me around £50 a month on fuel which is handy.
One of the credit card companies, Thomas Cook, asked me to contact them with a view to increasing my repayments. I currently pay them £60 a month on the balance of around £4,000 and they've been freezing interest for about eighteen months now. When I rang they were fairly helpful and agreed to keep payments as they are for another 6 months as due to the divorce I can't afford to pay an more at the moment. Hopefully this will all be sorted out before the 6 months are up!
I've got a week off work coming up with the children and so I will report back with some ideas for keeping the kids amused without breaking the bank, wish me luck!Supermarket Sweep
Shopping in its various guises is expensive and my biggest monthly cost is fuel and groceries - there's various ways to reduce these costs and by using loyalty cards you can earn points to get further discounts or "treats".I've got a Tesco Clubcard, Nectar card and Shell card which I use fairly regularly but I also shop at Asda sometimes as well, I try to shop wherever is giving the best deal at the time and if I've got any discount vouchers then that will dictate where I shop.
Tesco have a fairly good scheme with their Clubcard - you get points when you shop both instore and online and you can also use it in their petrol stations and you get bonus points for reusing old carrier bags as well. It works out at a 1% discount as you get 1 point per £1 spent and a point is worth a penny. However, at the moment they are giving double points so it's a 2% discount and if you exchange the vouchers for third party rewards such as cinema tickets they will treble their value. So if you spent £250 in a month you'd get 500 points which could then be exchaned for £15 worth of cinema tickets. Tesco also send bonus vouchers with the Clubcard statement every couple of months and this often includes offers where you get bonus points, for example I got 100 extra points for buying some minced beef - you can easily get over 500 bonus points every couple of months by using these and so I tend to shop at Tesco about once a month.
I've just exchanged my points that I earned in December for £30 worth of Cafe Rouge vouchers as I don't tend to be able to afford to eat out much at the moment so this will be a nice treat.
Nectar cards are also accepted at other stores such as Homebase and BP and there's an iPhone app (free) which lets you get bonus points. I only shop at Sainsbury's once a month or so and have earned around £20 worth of points in the last 4 months which can be used to exchange for things online.
I do most of my shopping at Asda and while they don't have a loyalty scheme they currently have a price guarantee where they promise to be 10% cheaper than their competitors or they'll refund you double the difference. You can check this by entering your receipt details on their website but so far the only receipt I've got comes up as having invalid details on it and I have treble checked it.
Could be worth doing though as it is effectively a 10% discount compared to other supermarkets.
Finally I've got a Shell drivers card which gives me airmiles (you can choose other rewards) every time I fill up with fuel at Shell. The reward is fairly small in terms of percent compared to what I spend on fuel but it's better than nothing and Shell does seem competitively priced while giving me good fuel economy. I've earned about 50 airmiles in the past 5 months so I'll be able to get a free flight to Paris by 2015 at this rate!Finally remember to use cashback sites such as Quidco, I average around £500 a year by doing this so well worth the fairly small time investment.
The Budget
Everybody, not only those in debt, should do a regular budget to help see where their money is going. It's all well and good estimating how much you spend but it really helps to see the hard figures - if you're lucky this will allow you to save up for a treat and if you're in a similar position to myself it will mean you can better plan how to pay off those debts more quickly.
I've just found a really good budget planning tool on the Money Saving Expert site and recommend everyone gives it a go - MSE Budget Planner
When I first did a budget last year I spotted a whole host of ways that I could save money and also a few ideas for increasing my income.
For example I was shocked to see that I was spending around £60 a month on food and drink whilst at work - that's only £3 a day or so but it does mount up, so I now bring in my own lunches most of the time and the savings are very handy. Sandwiches aren't great so what I usually do is freeze a portion of whatever evening meal I've had and bring that in to work to be heated up - Chilli, curry, shepherds pie are all much tastier a day or two later I find!Have a look at your own expenses closely and ask yourself if you can economise at all.
Another example was the £60 or so we were spending every month on TV/Broadband and telephone - I rang our supplier, Virgin Media and said we wanted to cancel the contract and go to a rival who gave a better deal. I was pleasantly surprised to find that Virgin agreed to give us a loyalty discount that meant we now pay £33 a month and get unlimited telephone calls free as well, including 0845 numbers, great!
You can easily save £100 a month by doing this without any real hardship, perhaps more.
Getting There
Travel is one of my biggest monthly spends and when I say travel I mean largely the cost of running a car. I have a long commute to work and fuel alone costs me around £12 for every trip to work and back and this has been an area that I've been looking to save money on and I can share a few tips.
The first thing I'd suggest is consider if you need a car at all. If you can manage without one you will save yourself a fortune - it can easily cost £100 a month just to have a car sat on your driveway doing nothing as insurance, tax and maintenance not to mention depreciation all mount up quickly. If you only drive a few miles a week then look at alternatives.
I spend in the region of 20% of my net income on my car but unfortunately in my position it really is a necessity as I drive around 40,000 miles every year.The first thing I did when I decided to seriously tackle my debt was to sell my old car. I'd bought this brand new and paid around £10,500 for it, a petrol Ford CMax. I only managed to get £6,700 for the car when I sold it with a measly 15,000 miles on the clock and it being 18 months old - this highlights how much you will lose in depreciation if you buy new. I'd always recommend buying nearly new if you have the money as you will get a bargain, somewhere around 1-2 years old tends to be good as you also are likely to get a warranty as well as saving some cash.Buying an older car may be even more cost effective if you are prepared to accept the risk that the older a car gets the more chance there is of it needing repairs.
In my position I wanted to pay off my debts as soon as I could so most of the money from the sale of the the old car went on my credit cards and I left myself £3,000 for a replacement vehicle. Due to the mileages I commute (150 miles a day) I went for a diesel as these tend to be more fuel efficient. 
A friend was able to get me a Ford Mondeo 2.0 TDCi Ghia (an Estate version, as pictured here), category D write off from an auction for just £1,600 - this was for a 5 year old car with 90,000 miles on the clock. A category D means the vehicle has cosmetic damage and can be repaired and returned to the road and another £1,500 got the necessary repairs done and VOSA gave the paperwork so I could get it taxed etc. So for a total of £3,100 I got a car that would have cost me around £4-5,000 if I'd got it from a garage.
I had done a lot of research into cars and the internet is brilliant for this. Make sure you thoroughly research to find the car that will best fit your needs and also take into account reliability and economy etc. The Mondeo turned out to be best for me and so far it's doing a great job.The car needed a new front bumper, wing and couple of doors plus a few other jobs doing for the MOT but mechanically it was sound and it has proven to be over the past 16 months that I've owned it.The old petrol car was averaging around 40 miles per gallon which isn't bad for a petrol engine but the new car immediately improved on that considerably, averaging 55 MPG, a saving of around 30% even taking into account the slightly higher price of diesel. Today I am getting close to an average of 60 MPG, the rest of this entry gives you some idea about how to improve MPG further.
There's a few other things that can be done to reduce costs further.
Insurance
Always shop around for car insurance, you will save on average 10% on your renewal and if you go through a cashback site you will typically get around £50-£100 cash back as well. When getting insurance quotes try a variety of options, sometimes fully comprehensive insurance is cheaper than third party for example.
Servicing and Maintenance
Consider doing your own servicing and other maintenance. Oil changes are easy to do and you can pretty much do everything a garage would do when servicing your car for little effort. I now service my own car and it cost me around £25 a time for the bits compared to £150 for a garage and only takes me around an hour. Get a Haynes manual, they are well worth the £15 or so purchase price!My partners car needed a new coil pack recently and the garage quoted £150 to fit one - I managed to do it myself in about 10 minutes, cost £20!
Economy
There's dozens of things you can do to improve economy. First of all plan your journey. I always try to be on the roads when they are quietest so as to avoid traffic jams - sitting in a jam is very fuel inneficient and by starting work early I usually get there without any hold ups. I am in the fortunate position of working flexi-time so this wont be possible for everyone.I also check the traffic reports and tune in to the radio for traffic reports so if there is a delay I can take a detour to avoid it. I also work from home when I can to avoid having to travel at all - again something that not everyone will be able to do.
Driving Style
The absolutely best way to improve MPG is by driving slowly and steadily. Don't accellerate hard but gradually build up speed and look well ahead to see what conditions are like. If there's a red traffic light ahead then ease off the accellerator and coast towards it, if it changes to green before you get there then you have saved fuel as you can keep momentum going rather than having to start from being stationary etc. By driving at a constate 60 mph on the motorway you are going to save around 25% of the fuel that you would use doing 80 mph for example.There are various car sharing websites, register on these to see if you can car share to save money. I've done this myself a few times and it is worth doing if you can share with more than one other person then you can save even more.I fitted some fuel saving tyres to my car, the Michelin Pilot Primacy tyres weren't cheap but I got a discount from Costco and they turned out to be not much more expensive than the cheapest budget tyres in the end. The savings aren't huge, around 5% in my experience but that still works out at around half a penny a mile and the tyres are durable enough to last over 40,000 miles so they will save me £400 or so over their lifetime - more than paying for themselves (cost was £260 for 4 fitted)Make sure your tyres are properly inflated so they last as long as possible and this will also help with the economy and safety. I also bought a chip for my car which improves performance by allegedly boosting the power - I wasn't interested in this but I was interested in the improved MPG, but to be honest the results haven't been great. I keep a spreadsheet of all my car related expenses and I cannot see a clear improvement due to this chip but it might give me a 1-2% saving. When you take into account the cost of the chip (I got mine for around £80 from eBay) and the fact that it may cause problems for your insurance it probably isn't worth having one. My advice would be to borrow one if you can and see if you get an improvement in MPG by carefully measuring it - if the difference is worth having then it might be a consideration.I'm now considering fuel additives - Millers make one that you add to a tank of diesel and reports suggest an extra 3MPG is possible - I'll try it and report back once I've done a few more miles to see what the results are like.
All in all I now have a car that is costing me less than 20 pence a mile to run which is extremely economical - this includes all costs including depreciation. The only problem is due to my mileage this still works out at around £600 a month - without depreciation it comes out at a more manageable £395.The last MOT only cost £50 as the car failed on just a faulty sidelight bulb and headlight adjustment, fingers crossed for many more trouble free miles! I aim to get this car to last me another couple of years that will see it going past the 200,000 mile barrier.
I've been asked by Amy Lewis, a financial writer for the Oak View Law Group, if she can do some guest posts on my blog. I feel her input might be interesting and useful for people in a similar position to myself and so here's her first post:Get rid of debts with debt settlement
Being down with hefty debt burden is the last thing you would want to experience. But many a time things just do not happen your way. You land up owing huge debts and the debt collectors turn your peaceful life into a living hell with their harassing debt collection procedures. If your debts are troubling you this way, then you should consider debt settlement. Debt settlement is a simple debt relief option where the creditor accepts a lower amount from the debtor, which is regarded as full payment of the obligation. It is the most rational solution and the best alternative to bankruptcy when you cannot afford to meet your entire debt obligation. Here are the two ways you can get your debts settled:1. Negotiate directly
If you are willing to settle your debts without having to spend any extra money, then you should try negotiating with your creditors directly in order to reach a settlement of your debt accounts. There is practically nothing to feel intimidated at the thought of negotiation. All you need to do is put your settlement offer rationally on the right track. First, you need to inform your creditor that you are experiencing financial hardship and that you are willing to settle your accounts. But remember that you should save up quite a bit before you make a settlement offer, because a big settlement amount is the bait to coax the creditor into a settlement deal. It is also important to let your creditors know that you might have to file for bankruptcy if your debt settlement offer is rejected. Your creditor knows that a bankrupt debtor is a sheer loss of money, whereas a debt settlement deal is more lucrative. So, both your lump sum settlement amount and possibility of bankruptcy filing are likely to convince your creditor to accept the settlement offer. There are chances that your creditor will try to modify your settlement offer. But it is advised that you do not agree on anything more than 50% of the total amount owed. You can pay the settlement amount either in installments or in lump sum. Make use of it and negotiate a payment plan so you can pay the sum in affordable installments within your budget.2. Enroll for professional debt settlement services
If the negotiation stuff does not seem to be your cup of tea, then you can enroll with a reputable debt relief company that offers successful debt settlement services. But make sure the company you are hiring has a Better Business Bureau accreditation. When you enroll with the company, it will look into your debts and financial standing and then legally notify your creditors that your debt issues are being handled by the company. Then, the company will create a trust account in your name and you will have to deposit a certain amount every month for your debt settlement. After a specific amount gets saved in your account, the company's debt arbitrators will negotiate with your creditors and help you reach an amicable settlement of your debt accounts. Once the settlement amount decided, the company will negotiate a payment plan that will help you pay off your debts easily. Regardless of the way you settle your debts, make sure your creditor reports your settled account to the credit bureaus as "settled" or "paid" so your credit score receives a boost and makes way to a good credit report. Author bio : This is a guest post by Amy Lewis who is a financial writer for Oak View Law Group. She has helped lot of debt burdened people with free counseling and advices on many finance related topics.Field Agent
I've just heard about a new iPhone app that sounds interesting, it's called "Field Agent" and it's basically a mystery shopping type of software that allows you to earn a bit of extra cash. The app will list any "jobs" that are nearby and you can then choose to accept them if you have time to complete them. Typically a job will involve looking in a store for a certain product and then taking a photo of it and submitting it. You'll get an average of around £3 or £4 for each job completed and you have a time limit of around 3 hours to complete a job or it gets allocated to someone else.Competition Corner
I'm always trying to get something for nothing and I've noticed there's quite a lot of competitions around at the moment that centre on unhealthy food. As someone who eats a fair amount of crisps, chocolate and drinks the odd can of Coca Cola, it has come to my attention that there are companies out there trying to raise their profiles by offering prizes to their patrons. The Walkers Crisps compeition is most interest - you simple visit their website at http://www.walkers.co.uk and enter the code from your packet of crisps (assuming it has the promotion on it, look out for the rainbow logo). When you've entered the code you get to predict whereabouts on a map of the UK you think it will rain for a given day. If it rains on that spot at the time you choose (you get to choose morning, afternoon or evening) then you win £10. The competition is open until 16th Novemer 2010 so there's a potential to win up to £300 if it rains every day. I've won this so far on just the one occasion as we've had untypically dry Autumn weather so far but I'm praying for rain now! A few tips to note are you can enter once a day and you may want to use a weather forecast to maximise your chances of winning - it's pretty much a guarantee that there'll be rain somewhere in the UK on any given day. Also don't bother buying the multi-packs of crisps as you only get 3 entries with those even for the 18 bag packs - much more cost efficient to buy a single bag of crisps instead. I must confess my crisp intake has risen quite sharply due to this offer as I am eating a packet every day at the moment but my winnings have already paid for a months supply! The next competition that I have been lucky with is in conjunction with Kit-Kat who are giving away free gig tickets if your code is a winner. There are only 2,000 prizes which I assume is quite a small percentage of the Kit-Kat consumption of the UK but I managed to win a £100 voucher for Ticketmaster that I am now selling on eBay! You can only win one prize with this one so no more Kit-Kats for me! I need to cut back on my junk food intake at the moment due to the crisp intake shooting up. Finally onto Coca Cola - they give away points that can be used to buy things on their Cokezone website. I've already had £10 worth of HMV vouchers from them but I am now saving up the 1,300 poins needed to get an XBox 360. Currently only at the 80 point mark but this is only after about six weeks of collecting the points. I hope to have my free XBox before the end of 2011, wish me luck!Minty Freshness
I had a letter from one of my creditors last week, asking me to telephone them to discuss the financial arrangement we had in place and looking for increased payments. The company in question is Mint and I owe them around £6,500 on a credit card. They agreed to freeze interest back in July 2009 and I'd been paying them £60 a month ever since. I was rather nervous when I called them, armed with my latest Statement of Affairs. I needn't have been though - as it turned out they were very helpful and courteous and the conversation only lasted a few minutes. I was asked if I was in a position to increase my payments and I told the lady that I had taken on some part-time work and although the income from this wasn't very regular I could afford to pay an additional £20 a month. This is all absolutely true and I was pleased that they accepted this after a short pause and I was told this arrangement will stay in place for another 6 months. Finding that extra £20 shouldn't be a problem as long as I can keep doing a reasonable amount of Mystery Shopping and I could probably have offered more but I am concerned that if my other creditors approach me they won't be so easy to deal with so I need to try to keep a little bit of surplus income if I can. So far my experience of dealing with creditors has been fairly positive, maybe I've been lucky or maybe because I've not tried to bury my head in the sand and contact them when required.Mystery Shopping
There are lots of ways to increase your income, one of my favourites over the past six months or so has been Mystery Shopping. What is Mystery Shopping? Many retailers (not just retailers in fact) are keen to keep an eye on how good their customer service is and how the general public perceive their brand. It's very competitive on the High Street and so in order to help gauge this information a lot of companies will pay for their stores to be "Mystery Shopped". This involves them engaging a third party company to get people to visit their stores and write a report about it afterwards. For example, the company might want you to visit a certain branch of theirs (or a competitors) and perform certain tasks such as buying an item, and asking certain questions. Once you've done this you'd submit a report about the experience and then you'd get paid for your work. The work is fairly interesting (especially if you like shopping!) and not too difficult but the pay isn't great. I usually get around £10 for each visit that I complete and depending on the amount of detail required in the reports it takes less than an hour to do the visit and the associated admin. Some of the best jobs I've done pay around £25 and the worst paid ones might only give you around £2.50 but these tend to be telephone/email based and so are quicker to complete. If you're really lucky you may get to visit a restaurant or stay in a hotel for free (usually you pay and claim the money back) but I've not had such a job myself as yet. Work is flexible as you can decide what jobs to do, how many and when to do them. The main problem is usually there's not enough work to go around. For example I've not had any Mystery Shopping work for almost two weeks now whereas back in May I was doing 3 or 4 a week. You need to be observant and organised if doing this type of work as you must remember key details and make sure you get and keep receipts etc or you might not get paid. Also if you earn an extra income you need to be aware of the tax implications as you may have to fill in a tax return and pay tax on any additional earnings. It's worth bearing in mind if you do file a tax return that you can claim back for certain expenses such as any extra mileage you do to get to and from the jobs etc. You aren't going to be able to earn enough from Mystery Shopping alone to make a living wage (although if you signed up to enough companies it might just be possible) but I find the extra £100-£150 a month I earn is handy as I split mine 50/50 between paying off my debts more quickly and giving me a little pocket money so I have some kind of life while I'm paying off the debts. I've signed up to three different companies, the links to their websites are below: All these are genuine companies and I have been paid by them all. Payments usually take 2 - 6 weeks to come through. In order to start Mystery Shopping you need to register with the companies and usually there's a simple test to complete. There are many more companies than the ones listed here, you can find more on the Money Saving Expert Forums. If you have any questions then please use the link at the top of the page to contact me.Creditor's Letter
I've just had a letter out of the blue from one of my creditors - Thomas Cook Credit Cards. They have contacted me proposing to end the arrangement we had so I will be paying interest (at 17.9% according to their website) and going back onto the standard minimum repayment. This is 2.5% according to their site which would be around £118 a month. I had been paying £60 a month with interest frozen so it's a fair jump and while I can probably just about afford to pay it I've decided to see if they'll continue with the existing arrangement as I don't really want to start accruing interest. If I start paying interest and the minimum repayments it would actually take me longer to clear the debt than with the current arrangement. Their letter states that if I don't contact them within 30 days then they'll assume my financial situation has improved - that's quite an assumption to make I think.There's no way I can afford to pay all my creditors the minimum repayments they would normally charge so I don't think it's right for me to agree to pay any of them in my current position. I'd be concerned that if the other creditors found out I'd agreed to this with Thomas Cook that they would want to know why I hadn't told them about it. I have written back to Thomas Cook with an up to date Statement of Affairs offering to pay an additional £20 a month as my finances are marginally better. I've told them that if I go back onto their standard repayment model then I will suffer financial hardship as a result.I'll update the blog once I get a response.Incidentally, I've just calculated my "Debt Free Day" based on my recent financial transactions and it's going to be July 2017 - hardly a short term propsition! This is unlikely to be accurate in any case as it assumes my creditors continue to freeze interest which is unlikely for such a length of time. Wish me luck!Increase Your Income
When people are in debt and trying to get out of it, from what I've seen and heard, they try to concentrate on reducing their spending. Of course this is a good idea and needs to be done, not just when trying to get out of debt, but something that tends to get overlooked in my opinion is the chance to increase the amount coming in.Often this is easier than you might think and the potential for increasing your income is greater than that for reducing your spending - you can only reduce your expenditure by a finite amount, while in theory at least there's no limit to your income.This is an area I have looked at in great detail and by exploring a few options I am now bringing in around £700 a month (net) more than I was just over a year ago, here's how I did it:First of all I took on extra overtime - ask if you can do the same but bear in mind the tax implications.I cancelled my pension contributions and subscription to share plans I had through work. Cancelling a pension is drastic but I intend to resume payments once my situation improves - although I've cancelled my contributions the company I work for are still paying into it as it's quite a good company pension scheme.I checked my tax code was correct - it was but this is well worth looking at as it can increase your income by quite a lot - ring your local tax office to check.I've been using cashback sites such as Quidco for quite a while and if you remember to do this regularly (check every time you buy anything, or renew your insurance etc) then you can average around £50 a month without much trouble.I took on some extra work as a Mystery Shopper - there are lots of companies who will pay you to basically go shopping and while the pay isn't great you can earn around £100-£150 a month by doing about 2 or 3 assignments a week, typically these take in total an hour or less. I'll go into more detail into this if there is any interest in it so please comment if you'd like to know more. It's fairly easy to do and flexible and also quite interesting at the same time, certainly not a hardship to give up 10 hours or so a month in my opinion.I also earn a bit of money from my various websites, you'll find links to them at the bottom of this page - only about £40 a month or so but it all adds up. I'm interested in this type of work as it's a hobby of mine and my long term goal is to have enough sites so I can retire - bit of a way off at the moment but maybe in a couple of years!Even with my cost savings (I will explain those in my next blog), if I hadn't increased my income I would be living a miserable existence with nothing spare and I would struggle to pay even the lower minimums agreed by my creditors.There are no doubt other methods of raising extra cash, please put a comment if you know any especially if you use them yourself - try to stick to legal methods if you can!Statement of Affairs
One of the first steps I took to start getting out of debt was to make sure I knew exactly where my money was going. The best way to find this out is to complete a Statement of Affairs (also known as an SOA). Even if you aren't trying to get out of debt completing one of these can be a real eye opener and could mean the difference between getting by and having enough to make some decent savings.The first time you fill in a Statement of Affairs a lot of it will be guesswork, or educated guessing at best - for example I thought I was spending around £300 a month on groceries but it was actually nearer to £500 which was a nasty shock. However, because I could see this I was able to change my behaviour and I now find my monthly grocery bill is under £400 - still haven't managed to hit the £300 target as yet but I am working on it! My grocery bill is for a family of 4 and it includes things like cleaning items so it's not as horrendously high as you might think!Once you complete your SOA, the work isn't over. It will give you an indication of how bad, or good (I wish!), your situation is and if you are running at a loss every month or if you have some surplus cash. This will help you to decide if you need to go down the route of a Debt Management Plan, Individual Voluntary Arrangement (IVA) or indeed bankruptcy or if you simply need to cut back a bit on some of your spending.Once you've drawn up your first SOA, I recommend tracking it for a few months at least, or on an ongoing basis as it will then become much more accurate and you can start to target certain areas for saving money. If you are concerned then you can post your SOA on websites such as The Motley Fool or Money Saving Expert where people will usually be only too happy to give you some friendly advice.I've managed to reduce my outgoings by around £200 a month, largely due to me having an SOA that I update on a monthly basis - if it wasn't for this saving I'd be having a very miserable existence.I'll do another update in a couple of days about making extra money as this is an area I think a lot of people in a similar position to me tend to ignore - saving money is all well and good but making a little extra can make a real difference and is often easier to do.Dumping the Debt Management Plan
With my Debt Management Plan (DMP) in place I initially felt quite relaxed about things as I could afford the repayments without too much trouble and I knew as I wasn't being charged interest the debts would be repaid - albeit in around 9 years time!However, over the coming months I did some research and discovered I was being charged by the Debt Management Company for their efforts and also that creditors don't tend to stick to what has been agreed for the term of the agreement. Most creditors will want to increase the amount of the repayments and will not freeze interest indefinitely so I decided to cancel the Debt Management Plan early in 2010.I then wrote to my creditors advising them of my position with revised figures in a new Statement of Affairs and crossed my fingers to see how they responded.I was pleased to discover that they all responded positively, agreeing to continue freezing interest and keeping my repayments at the same level. This took a few months to agree as they weren't very quick to respond, one of them taking three months to do so! I was now in control of my own destiny once again and saving around £50 a month by not having to pay the Debt Management Company - it should be noted that not all of these companies charge for their help - look under the Resources section for details of those who don't.Since then, around July of 2010 one of the creditors has indeed increased the repayments but not by very much and I am still able to afford this repayment. Another creditor has told me they will be reviewing the situation in October, so wish me luck!In my next blog entry I'll be explaining some of the methods I've used to reduce my expenses and increase my income, crucial if you are struggling with debts.Feel free to comment on my blog, the comments section is now working although I need to improve the presentation of that area.My Debt Management Plan Woes
I had my "light-bulb" moment in July 2010 and decided I had to tackle my debts head-on.I'd usually be very diligent about this type of thing and seek advice but for some reason I went into it without thinking too much and ended up with a Debt Management Plan.I'd tried a consolodation loan but been turned down and couldn't go for an IVA or Bankruptcy as I work for a financial company and may have risked losing my job, so the Debt Management Plan appeared my best option.I contacted Debt Free Helpline (I won't put a link to them for reasons that will become clear!) who were very helpful - they told me that if I paid them in the region of £300 a month I'd be debt free in 9 years time. As my debts were over £30,000 at the time I thought that was pretty good and so I signed on the dotted line.Before continuing I should explain I am not qualified to offer financial advice and I am simply telling my story and giving opinions - it's always worth getting proper advice if you are making financial decisions of this nature.So I signed up and DFH told me to stop making payments to all my creditors and forward and communications on to them. I thought this was a bit odd but did as I was asked to do - they'd also told me my credit rating wouldn't be severely affected and this turned out to be a blatent lie.I'd sent DFH a copy of my financial situation, a Statement of Affairs and using this, along with the fact I'd stopped paying them, DFH negotiated with my creditors and within a couple of months they'd all agreed to reduce the minimum payments and freeze interest.I was now being asked to pay £301 a month (sent to DFH who then forwarded on payments to my creditors) which was a huge relief as my minimum payments were around £800 a month beforehand and more than £400 of that was interest. Of course I didn't realise that DFH were charging me 17% a month for their services so around £50 a month wasn't going to pay the debts - I might as well have still be paying interest, albeit a smaller amount.My credit rating was damaged beyond repair by the DMP and so I'd generally advise not to go down this route unless you have no other choice. It's going to take 6 years for this information to be removed, even if I pay the debts in full tomorrow.If you really do have to go for a DMP then try CCCS as they don't charge any fee. I believe there is another company who also don't charge for this, Payplan.There are a few other options you might want to consider if you are in debt and struggling:- Consolodation Loan
- IVA
- Bankruptcy
- Full and Final Offer
My Story
I've been struggling with debt for years but if I tell you my entire story it's going to be overwhelming so I'll break it down into more manageable chunks!I finally realised that I had to do something about my debts after the break up of my marriage when I was left with over £40,000 worth of debt and had to start paying rent and child maintenance. I quickly realise that I wasn't going to be able to afford even the minimum payments on my credit cards with the additional expenses and then to make matters worse one of the credit card providers wrote to tell me they were increasing the APR on one of the cards to a staggering 33.9% - oh no!One of the key points when it comes to becoming debt free is to realise and admit to yourself that you have a problem with debt. This is a bit like being an alcoholic I suppose - unless you have this realisation you're never going to be able to solve the problem so congratulations if you've reached this stage yourself. My "light-bulb" moment came in July of 2009 and I've never looked back.The first thing I tried to do in order to tackle my debt was to get a consolodation loan - you need to be aware that this may or may not be the right thing to do depending on your circumstances. In the event I was turned down for my consolodation loan probably for a combination of reasons - the credit crunch being one and the fact that I'd just moved into rented accommodation the other. Also I was over-committed when it came to personal debt.If you do want to go for a consolodation loan then be very careful that you don't start racking up more debt!In the end I decided to go for a debt managemen plan and so I contacted a debt management company in order to facilitate this. In my next blog entry I'll explain the pitfalls of this type of plan and the good and bad points of them as well as some alternatives.This blog is predominantly aimed at people in a similar position to myself, those struggling to get out of debt, but it can also act as a warning to anyone as the trap of debt can befall anyone who isn't careful. So forewarned is forearmed as they say - read this blog and take heed!First Entry
Welcome to my blog, where to begin! I suppose the beginning is as good a place to start as any so here goes.I've been struggling with debt for many years, this was largely due to be being made redundant three times in the space of eighteen months during the last recession in the early 1990s. Despite my best efforts I never managed to get on top of that debt and things really got out of hand during my marriage.At one stage I owed around £40,000 and then, just after splitting up I had my "light-bulb" moment and realised that I had to do something to get rid of the debt or it was going to blight the rest of my life. This happened in July 2009 and this blog will describe how I have gone about getting myself out of debt. As things stand I am still in debt but it has shrunk to around the £30,000 mark and I am seeing improvements on a month by month basis. I intend updating this every few days and will be giving advice as well as simply telling my own story.The next entry is a guest post on behalf of theThinkMoney.com's website. It contains some useful advice for anyone struggling with debt.
