# Making best use of reducing income



## bobart (31 Oct 2009)

Age: *45
*Spouse’s/Partner's age: *50
*
Annual gross income from employment or profession: *€15600
*Annual gross income of spouse:*33280*

*Have both taken a wage cut this week, amounting to €300 per week between us

*
Type of employment: *I am PAYE, spouse is Self employed
*
*Currently saving small amounts regularly but also using Credit Cards too much.*

Rough estimate of value of home - *550k
*Amount outstanding on your mortgage: *70k
*What interest rate are you paying: *3.55% variable -= repayments currently €512 per month*

Other borrowings – car loans/personal loans etc*  Car loan €300 per month until May 2012 (€15k over 5 yrs loan)*

*Van loan €320 per month until June 2011 (€15k over 5 years)*


Do you pay off your full credit card balance each month? *No
*If not, what is the balance on your credit card? *€13500 over 4 different cards

*Savings and investments:*2k in First Active, 2k in Anglo Irish, 2k in Credit Union - have been saving 200 euro a month to First Active.*

Do you have a pension scheme? *Have been putting €100 per month into PRSA but just cancelled as have both taken a cut in wages*

Do you own any investment or other property? *No*

Ages of children: *1, aged 12*

Life insurance: *Yes - to cover mortgage & spouse has other policies for work.*

*What specific question do you have or what issues are of concern to you? *

Monthly outgoings of €1775 per month, covered by weekly transfer to budget account of 375 & child benefit.

Was intending to lodge €100 per week to Cr Union or Instant Access savers account to cover irregular bills, eg car tax, car servicing, heating oil, tv licence, etc.

Then pay €100 per week off credit card balances.

This leaves us with €575 per week to cover food bills, diesel & other day to day expenses.

Would appreciate advice on whether this is making best use of available money - should I be using savings to pay off credit cards?

There is also a high possibility that I may lose my job entirely & spouse may be cut back further so we really need to get a grip on the situation now & set ourselves up for that.


----------



## Diziet (31 Oct 2009)

It makes no sense to carry savings when you have such high credit card debt. You are throwing money away, as credit card interest is much much higher than any deposit account.

Keep an emergency fund aside in case of job loss, then put any spare money (including savings) on the credit card loan and pay it off. Cut up the cards, you can't afford them. Forget about any form of credit. If the money is not in the bank then you can't spend it, it's as simple as that.

Budgeting for irregular bills is a good idea. Do a proper budget, stick to it and whatever you do, don't incur further debt.

The other option of course is to increase your income. Any possibility of looking for better paid work for either of you? Presumably you work part time, can you increase your hours, or look for something better paid? Can you do some additional work for extra money?


----------



## GreenQueen (31 Oct 2009)

€575 per week for food, diesel & day to day expenses seems very very high.

How much are you spending on groceries, take aways, socialising per week?  How much is diesel costing you?


----------



## bobart (31 Oct 2009)

Thanks for the replies.  Diziet, I agree re:  keeping some savings as an emergency fund & then using rest to clear some of Credit card debt.  I think the problem is I am nervous of doing this & then finding we need the money, so unsure what would be a realistic amount to put towrads debts.

The cards are already gone & I am anxious to clear the outstanding debts as quickly as possible.

I am working part-time but things aren't too good for the company so no prospect of increased hours at moment.  Am looking for better paid but little around.  Also, current hours are good for me as they fit in well with school, etc.

GreenQueen - sorry - the figure of €575 is incorrect!  It should be €330 per week.  Would estimate €80 on diesel, €130 on groceries.  Takeaways - maybe €20 once a fortnight & we don't go out to pub, cinema or anything like that.

Any suggestions would be most welcome.


----------



## Bluebells (1 Nov 2009)

Go into your Credit Union and set up a Budget A/C. It will make paying the bills easier, and you will have peace of mind.


----------



## Diziet (1 Nov 2009)

bobart said:


> Thanks for the replies.  Diziet, I agree re:  keeping some savings as an emergency fund & then using rest to clear some of Credit card debt.  I think the problem is I am nervous of doing this & then finding we need the money, so unsure what would be a realistic amount to put towrads debts.
> 
> The cards are already gone & I am anxious to clear the outstanding debts as quickly as possible.
> 
> ...




OK - what is a reasonable emergency fund? Do your budget first. There is a good budget/statement of affairs calculator here:. Be very very honest and accurate with the inputs there; the result is invariably that you have less money than you think... So now you have an accurate picture at least.

Once you have put in the numbers as accurately as you can, do the same exercise with one of you getting unemployment benefit and no other income. This is your worst case. What is the monthly deficit between the two? Multiply that deficit by 6 or 12 months, and add an amount for unforeseen car repairs and the like. This is your emergency fund. The rest can go towards the cards. 

As your child is now 12, you can be a little more flexible with your working hours. Keep that in mind while you look for work. Also, €80 on diesel per week indicates quite a lot of driving. Any way of reducing that?


----------



## bobart (1 Nov 2009)

Thank you so much for the help & advice.

Bluebells - I have already set up a budget account with my bank - a set amount is transferred to it every week on payday & this covers all the direct debits & standing orders.

Diziet - thank you for that link.  Re: diesel - we live in fairly isolated area - 5 miles to school, 10 miles to town, so mileage racks up quickly enough.  Some of that would be used by my partner, which is reclaimable against tax.

Would have to think hard about increasing working hours, although sprog is 12, I wouldn't feel happy leaving them at home alone with no neighbours nearby & also isn't a "mature" 12 year old so would worry what might happen!  After-school childcare is not an option as there isn't any readily available locally & cost would probably negate any increase in income.  Sorry - that sounds very negative.


----------



## Bluebells (2 Nov 2009)

bobart said:


> Thank you so much for the help & advice.
> 
> Bluebells - I have already set up a budget account with my bank - a set amount is transferred to it every week on payday & this covers all the direct debits & standing orders.
> 
> ...



I did see that you mentioned  a budget a/c, but then you mentioned car tax, service etc., and wondered why these are not budgeted for in the a/c. The CU Budget A/c includes everything -  from mortgages to TV Licences.


----------



## bobart (2 Nov 2009)

Bluebells said:


> I did see that you mentioned a budget a/c, but then you mentioned car tax, service etc., and wondered why these are not budgeted for in the a/c. The CU Budget A/c includes everything - from mortgages to TV Licences.


 
Hi Bluebells.

The budget account I have with bank is used for all the regular bills - ESB, mortgage, home insurance, car insurance, etc that are set up on monthly Direct debit or standing order - basically what goes into this account = what comes out of it over a month.  I find it helps to keep "bill money" separate from "available cash".

I then intend to use Credit Union (possibly) to lodge funds of €100 per week to cover the more irregular but foreseen expenditure - annual bills such as car tax, tv licence, car service and also more regular but variable costs - our big one would be heating oil.

From what you are saying, I'm not sure if a Cr Union budget account would allow me to do this but I could always use our ordinary savings account I would imagine?


----------



## Bluebells (4 Nov 2009)

Hi Bobart,
The best thing for you to do is go into the CU, and get them to explain it.  I pay _all_ my bills from my C/U Budget A/C. Please check it out, it has been my salvation, and the best way I can think of to manage my money.


----------



## bobart (4 Nov 2009)

Hi again Bluebells.  Thanks for your input.  I will be going to Cr Union tomorrow, so will make enquiries then.  I assume the Cr Union account is more flexible in that it will allow you to overdraw if the need arises without the type of penalties the bank would impose?

Am pleased to have made a big saving today - over €100 per month by changing our health insurance to a cheaper scheme, without a huge loss in benefits.

Happy days


----------



## Colndas (4 Nov 2009)

Hi Bobart, looking at your posts the first question that jumps to my mind is :

Are you looking  cut your monthly expenditure to a minimum and take whatever hit on the long term cost of your borrowings or are you looking to try and keep your expenditure on debt at a similar level? 

Also, while it is a great idea to budget you should also look at changing your utility provider. If you are after a short term cost reduction then from an advice point of view I would suggest approaching a new supplier for utilities and writing to existing debt providers asking for a drop in payments.


----------



## bobart (4 Nov 2009)

Colndas said:


> Hi Bobart, looking at your posts the first question that jumps to my mind is :
> 
> Are you looking cut your monthly expenditure to a minimum and take whatever hit on the long term cost of your borrowings or are you looking to try and keep your expenditure on debt at a similar level?
> 
> Also, while it is a great idea to budget you should also look at changing your utility provider. If you are after a short term cost reduction then from an advice point of view I would suggest approaching a new supplier for utilities and writing to existing debt providers asking for a drop in payments.


 
Hi Colndas

In answer to your first question:  we are in a position where we have taken a hit of €1500 per month, so need to make some pretty severe adjustments to our regular expenditure.  With regard to borrowings, we are aiming to clear the credit card debts as quickly as possible, to avoid punitive interest charges.  We could then look at increasing payments on the vehicle loans to clear them, if that is possible.

Re:  utility bills.  Fortunately we only have the one utility to pay - electricity.  We have recently changed provider for this and are making the promised small saving.  Having said that, our monthly bill still seems to be very high - currently €150 per month on Budget Plan.  Was intending to put a post on here somewhere to ask for possible reasons as to why it would be so high as I wouldn't consider us to have excessive usage.  Or maybe that is an average amount to be paying?


----------



## Colndas (5 Nov 2009)

If you can clear the debt with the highest interest rate first then in the long term that will stand to you. If it is a case of the loaves and fishes then I would look at the debt with the lowest interest rate and look to freeze payments or reduce payments to a more manageable level while you clear the higher rate debts. 

It would appear that 300 of your monthly mortgage payment is being offset against capital, could that be better used against reducing sums outstanding at rates of 10% upwards instead of reducing monies outstanding at an interest rate of 3.55%. A short term switch to interest only may help.

If that is not enough then you should look to reduce the payment to interest only on the borrowings with the next lowest interest rate.

Do the same with every debt until you are in a position to clear the credit cards first, while still covering the basics.

Once the Credit cards are clear, restart capital payments on the loan with the highest rate and so on.


----------



## bobart (5 Nov 2009)

Thanks again Colndas that seems to make good sense.  At the moment I think we can manage to keep up current mortgage & vehicle loan repayments, plus pay 400 per month off CCs.  Am intending to use some savings to completely clear the one with highest interest rate (& lowest balance) in the coming week, which means the 400 will go that bit further on the remaining ones.


----------



## Westgolf (5 Nov 2009)

no advice, just good wishes, you are on the right track and knowing that is half the battle.

westgolf


----------



## bobart (5 Nov 2009)

Westgolf said:


> no advice, just good wishes, you are on the right track and knowing that is half the battle.
> 
> westgolf


 
Thank you for your wishes.

I had misgivings about posting here - was expecting to get some negative posts & criticism but have been very pleasantly surprised to receive only constructive advice and positive support.

Thanks again, everyone.


----------

