What a Right Pickle!

racing_blue

I've been thinking more about your situation. Been there: big income, big outgoings. The key difference is I never took on unsecured debt and as a result it has been easier to turn things around after making some fundamental shifts.

The solution is: you need to earn even more than you do already.

Sorry if that seems like a glib thing to say, on the face of it. But is not meant that way. I'm serious- I really believe earning more is the most likely way to solve the jigsaw puzzle you have given us. This is the only way I can fit together the four pieces of the jigsaw: income, school, house, debt. It is the only piece that is stretchable. The other solutions involve making a jigsaw of only three pieces, and you have made it clear that you do not want that.

You have told us that you have a net household income of about £85k. Problem is, your discretionary income, the money you actually see and can spend, is disproportionately smaller- about £10k. This is because it is necessary to knock off £24k for mortgage and council tax, £21K for school fees and £28k for paying interest on debt (that must really sting?)

£10k just doesn't cut the mustard for a family of 4 to live on & means you are vulnerable. Losing child benefit next month is going to reduce your discretionary by at least 10%, for example. And as others have said, an interest rate rise on your mortgage will be unaffordable. If you wish to maintain your current lifestyle, I think you need to increase your discretionary income to a point where you have enough to live on, and enough to make significant inroads into that debt. As you already have gross household income well in excess of £100k, this maybe not impossible?

So my approach would be something like:
1) earn more
2) build up a cash emergency fund
3) remortgage home interest only as soon as possible and pay off all unsecured debt. See a mortgage broker to find out when this will be possible.
4) change your relationship with money: 2 books often recommended here are "the millionaire next door" and "your money or your life". Both are excellent books which spoke powerfully and directly into my situation, and will do the same for you. Get them from the library, or second hand on Amazon!

cutestkids

Hi OP,

I would agree with what many others are telling you, take the children out of private school for a few years until the debt is under control, there will be plenty of time until secondary school to get things back on an even keel.

You say that it would Be heartbreaking to take them out but to be honest they would take it in their stride and you would get used to it.
The points that you raise for the reasons that you have them in private school have their pros as well as cons.

A small class of eight is good in some ways but in others not so, limiting the amount of friends, less chances for proper group work and team playing in such a small group of children.

What children need at this stage in education is to learn the basic building blocks of life and they will be more able to do this if they are in a larger class with children from all different backgrounds.

As others have pointed out the support is not there in private schools there are no full time assistants, etc and to be honest help for children needing additional support is pretty non existent in private schools.

Surely much better to get things sorted out mow when they are young and moving schools will not really have an impact than it all falling apart years down the line during important exams etc.

At the end of the day although you have a very good income it is not enough if you want your children to be privately educated, even without your debt you would need to cut back in other areas to make it truly affordable.

The next bit may appear harsh but it is not a dig or meant to offend in any way just a reminder of what a very good position you are actually in compared to most.

To be honest the idea of someone trying to go down the route of a DMP and wondering if they will allow £1800 a month in school fees is laughable,
People on here have had to justify children's swimming and dance lessons at a few pounds a week when embarking on a DMP so I really cant see it as being allowable.

Just to add £1800 is more than many people have for the entire month for everything so I think perhaps a bit of a reality check is in order.

nomoredebtplease

Wow. Some amazing and humbling comments from people there. I really appreciate you all going to the trouble to provide suggestions to us about what to do. It has certainly given us a lot to think about. And I do appreciate that we're a lot better off than some others and have choices where others may not.

We're still in two minds about what to do.

I'm massively concerned about going with a DMP and trashing our credit ratings any more than it currently is given our high qty of debt as that will kill any chance of a decent re-mortgage in Sept 2013. Moving to the SVR then will probably add around £350 to our outgoings every month. That's not affordable.

We have started cutting back on non-essential outgoings. Sky / mobiles etc etc.

Some of the numbers for gas and electric are wrong - they're too high from looking at my statements - should be nearer £150 a month.

We have already spoken to the school and this term have been offered a 25% bursary - I didn't include that discount in the numbers so it's slightly better than it looks there.

I'll provide some comments in posts below to some specific questions from others over the last few days. We really are dead against taking our twins out of the school though. It would be an absolute last resort.

nomoredebtplease

FinKite wrote: »

Sell your car. If it's worth £10K, sell it, put £9K to debts (on the repayments listed that's about £200 a month less to pay) and spend £1K on a 2004 Ford Focus like mine! Your insurance may come down, and I expect your tax / maintenance too.
That's more than 10% of your debt paid off instantly!

What is the £325 child care - breakfast / after school club? Can you reduce that - maybe its provided by school and a child minder would be cheaper? Can you change working hours to cover it yourself?
I presume you're both using CCV towards it?

I'm going to be a bit harsh now about IVF babies - and I have one myself... IVF does not make our children any more precious or special. They're ALL special. So you know, we don't have to give them private schools just because of that. It doesn't matter how they were conceived, YOU CANNOT AFFORD PRIVATE SCHOOL.

You CAN afford it, once you clear your debts. So my advice is to move school, get the debts paid off then put them back in private school again.

Now I know you've said no to that, so IMO your other option is to downsize your house. There is lots to be saved in your SOA as others have pointed out. But not enough to cover that debt shortfall. Why not just downsize?

We have started the process of selling our car and seeing what else we could get. It would help out massively in terms of tax (it's in one of the £400+ tax brackets), on diesel (it's thirsty!) and on insurance.

The £325 childcare costs are for after school clubs and clubs during school holidays. As we both work full time, we have to use these services. Yes, we both contribute towards childcare voucher schemes.

nomoredebtplease

primaryteacher wrote: »

A class of 8 might sound lovely but actually leaves children with very few options for making friends/ team work etc. While I would love to have less than 30 in my class for obvious reasons, I really feel that the optimum number should be about 15.

8 is an unusually low number for the school. 12-15 is probably normal in the early years - probably more in the latter years. It's the credit crunch / recession / whatever that has meant people have withdrawn from the school and we're 'benefitting' from such a small class at the moment.

primaryteacher wrote: »

Finally perhaps, THE most important thing is your parenting! You sound like devoted and supportive parents who fought hard to have your twins. Both my partner and I would say to you that no matter what kind of school your children go to, the children who thrive are those who have supportive parents who spend time with them, encourage, play, talk, read with them etc etc. Which kind of school they go to is a huge second to this - so please remember that when you make any decisions.
Best of luck

I do agree with you there. We always read to them, play with them, go out with them and try new things at weekends. I agree that if the parenting isn't right, then it doesn't matter what school they're in.

kj*daisy

You may be faced with having to take them out further down the line if you don't do it now anyway, and its harder the older they get to move across into state school. I know you really want to keep them in but if you take them out now, pay off the debt with the spare money, then later you can easily afford the school fees.

nomoredebtplease

racing_blue wrote: »

So my approach would be something like:
1) earn more
2) build up a cash emergency fund
3) remortgage home interest only as soon as possible and pay off all unsecured debt. See a mortgage broker to find out when this will be possible.
4) change your relationship with money: 2 books often recommended here are "the millionaire next door" and "your money or your life". Both are excellent books which spoke powerfully and directly into my situation, and will do the same for you. Get them from the library, or second hand on Amazon!

Thank you for your comments. I've been thinking along these lines myself too.

I could earn more in the short term but it would mean leaving the safety of a permanent position and moving into the more volatile contract market. I currently earn about £86K gross. plus annual bonus of around 10-15% - Let's say around the £95K mark all in. Included within that are a matched contribution pension, private healthcare etc etc.

My skills are worth around £500 - £600 per day as a contractor. Assuming working 10 months a year would give me an income of £100K to £120K but obviously without the pension benefit / private healthcare, safety of a permanent position, travel expenses etc. There is the benefit of lower tax rates but would it be beneficial ENOUGH to compensate for the additional risk?

Re-mortgaging interest only is not an option at the moment. For most lenders, this is too high a LTV for interest only. And anyway, most would now seem to want to see evidence of a capital re-payment plan.

gizmo111

Can you go interest only on this mortgage for a few months - that with the burary and some cutbacks should help you through to September when you can remortgage and then consider your options re the debt and new school year.

eyeopener2

With the bursary, which I assume is temporary, and the small savings on mobiles etc. How much are you short of balancing your budget? On a quick glance is it about £700.

Selling the car, as long as it used to pay debt, could be another £200 a month, so your down to £500 a month (ish) short of treading water. Have I added that up right?

Could you use your skills to do contract work as well as your employment? Or does your line of work make that impractical for weekends and evenings?

gizmo111

eyeopener2 wrote: »

With the bursary, which I assume is temporary, and the small savings on mobiles etc. How much are you short of balancing your budget? On a quick glance is it about £700.

Selling the car, as long as it used to pay debt, could be another £200 a month, so your down to £500 a month (ish) short of treading water. Have I added that up right?

Could you use your skills to do contract work as well as your employment? Or does your line of work make that impractical for weekends and evenings?

There is holidays and entertainment that can be cut as well and the energy bills thats another £450 per month - so now a very small gap and groceries and clothes can be cut.
It can be done in the short term - if mortgage drops to IO only another £450 ish to overpay cards with and then make decsiions after the new mortgage in Sept.