high income and debt

worriedwilf

Hey!

Had a conversation at work today with a friend who is in a similar financial situation to me. Similar household income (60Kish) and similar unsecured debt levels (30Kish)

Our attitudes couldn't be different. We are trying really hard to get rid of our debt asap whereas he and his wife don't think its a big deal!!

Just struck me how different peoples attitudes are. They feel that its 'just' 6 months salary whereas I think " S**t it's 6 months salary"!!!!!!

Who do you agree with??

Thrugelmir

Your colleague is bluffing you. Bet they are treading water just trying to stay afloat. While maintaining appearances to their friends.

[Deleted User]

Not necessarily bluffing; their attitude could be that if the repayments on the debt are manageable, then why worry. Everyone's different.

frugalharry

Deleted User wrote: »

Not necessarily bluffing; their attitude could be that if the repayments on the debt are manageable, then why worry. Everyone's different.

I agree with your statement.
Everyone is different.
I'm surrounded with people who seemed to think that "debt is normal".
They don't worry about it as long as they can manage and I didn't know how bad it was until I lost my job last year.

onamissionEU

Everyone IS different but I would go so far as to say that most "normal" people realise that debt (of the unsecured type rather than mortgage etc) is generally a bad thing and that the more you pay to service debt, the more you are likely to go further into debt. It is simple maths. Those who are in debt are highly unlikely to have savings (Why have savings earning 1% when your debts are costing 5-10%?).

This generally being the case, when life's little problems creep up on you (such as car repairs, broken boiler etc) how do you pay for them? By borrowing more and increasing the cost of servicing debt. This is the "debt spiral" and most people are ignorant of it.

You colleague is almost certainly bluffing to keep up appearances. If not he has not yet fully appreciated the sheer scale of his debts. 30k unsecured when earning 60k is HUGE. It is NOT 6 months salary. After paying taxes and cost of living, how much money would he have left to pay off this debt? On that salary you are realistically looking at several years to pay off this debt unless you have other assets (home equity etc) to pay them off.

Some debt is a nesessary evil (like mortgage) but by and large debt is a bad, bad thing. Sorry for the long post but please do not let other people influence you regarding debt - your colleague's attitude is likley sending him down a long and painfil financial path & you do not want to follow - trust me.

ch3101

I work for a loans company and a couple who earned around 35-40k each applied with me for 25k with me to consolidate a credit card and pay off car finance.

They had around 72k of unsecured debt, monthly payments above 2k a month, 2 kids to feed, 1k mortgage, 2 cars etc.

At the end of the application I told the guy he was declined due to already owing too much money and he was actually surprised!! From basic calculations he was losing money every month already!

I have your opinion - the correct one, and I wish you the best of luck on becoming debt free.

somethingcorporate

I agree with you OP - I am risk averse when it comes to unsecured debt and have very little. We do have a significant amount of low (ish) interest secured debt but do feel this is manageable so it doesn't bother me so much even though it is around 8 times my income across a couple of properties!

Bad_Weather

Another long post...

I used to be of this mind frame. I earned around 35K and had approx 15k of debt in total at one point.

I thought "If I wanted to" I could clear this debt in months, and I'm easily meeting minimum payments, so what's the problem? I genuinely did not see a problem, no bluffing, It was more - it will all sort itself out eventually.

But a couple of years after the recessions when redundancies kicked in, and a flippant comment to my sister (who knew of my debt) on how do people let themselves get so bad that they end up bankrupt. My sister replied, well you can meet all your payments just now, but could you cover all your bills and debt if you were made redundant tomorrow? (I was working in the financial world at the time - therefore that was a very realistic possibility). The answer was No.

That comment is what spurred me to get the debt cleared. The more I cleared it the more I realised how much I was actually struggling and in denial. I tried to clear it, but it was roughly November 2011 when I got really serious about clearing it and it is only now, September 2013 that I am beginning to see light at the end of the tunnel. And am more relaxed about it all. Now I genuinely could probably clear it in a couple of months.

I took the long route to debt freedom (I never went really hardcore, I still did alot of things) but I can honestly say I will never EVER get myself into that situation again. I still slip up, but I know they are slip ups that are sorted the following month. The goal is now to get savings in place for slip ups and holidays.

My credit has improved, my finances has improved, my frame of mind has improved, my attitude has improved. The last couple of years have been tough but it will be worth it in the long run! :money:

trixie888

When I was still single and only thinking of myself - I thought a loan of 20K can be paid in 18months as long as they automatically debit it in my account. I did. I was cool with it because I never felt I had a loan because my life continued as it is. Enjoyed travel and all. I wasn't thinking of tomorrow.

That was then... My mistake was that I made the same amount of loan and accepted the loaning company to compute payment up to 5 years. Re-used the credit card that has just been recently paid in full instead of discarding it. Did not change the lifestyle and then had a baby.

Things changed. Debts.. debts... more debts.

I am alarmed now but I am trying to calm myself and not allowing to get stressed. I am now thinking of possibilities of tomorrow. Things are not cool anymore.

ReadingTim

Deleted User wrote: »

Not necessarily bluffing; their attitude could be that if the repayments on the debt are manageable, then why worry.

I think you've hit the nail on the head - if you can cover the minimum monthly repayment(s) then you're fine, and keep borrowing until you can't!

I also think some people think that being offered more credit means they're somehow more creditworthy, rather than simply being a more profitably customer for the lender; don't realise that simply making the minimum repayment takes far longer and costs considerably more to repay borrowings than repaying more every month; and have no idea what they'd do if their income dropped, or rates rose suddenly.

HOK3Y

I'm with you, WW. I think if they are telling you the truth from their perspective now (which I doubt), then they are going to have a nasty wake up call at some point in the future. I hope they get a grip before it ends up too far down the line.