Ohh, what to do...

SaintLethal

Joint debt: £39.5k (6 cc's and 1 loan).
It has never been this high.

The good news:
Joint annual net income: £57.5k
30k of the debt is on 0% until Aug 2018 or later
10k on 0% until at least April 2017 or later
We have no missed payments or arrears
We've had the wedding, bought the house, had a baby (turned 1 in December)
We are just about covering all our expenses (no room for savings or frivolities though)

The bad news
We're only paying the minimum amount towards our debt (approx £500/ month).
We cannot afford to pay more than this in our current situation. Already doing packed lunches, no gifts, vices, holidays etc.

What to do

1. Panic: Get a 2nd job/ new job that demands more hours (both currently in comfortable 9-5), and so reducing the amount of quality time with baby + quality of life.

2. Chill out: Our nursery fees (approx £1500 / month) can be used to clear the debt in the future. Reduced by £200 December 2016, a further £500 December 2017, and eliminated with state reception school - 2018/19. Also potential for moderate pay rises etc.

Note:
Jobs are pretty secure. Life at home with baby is great - so not missing holidays, spending etc. Nursery fees and things like service charge could increase a little.

Would be great to get your thoughts

EssexHebridean

SaintLethal wrote: »

Joint debt: £39.5k (6 cc's and 1 loan).
It has never been this high. That's the *gulp* moment out of the way and faced then!

The good news:
Joint annual net income: £57.5k Very respectable depending on outgoings
30k of the debt is on 0% until Aug 2018 or later Excellent news
10k on 0% until at least April 2017 or later OK...still not bad...
We have no missed payments or arrears Well done for having you LBM in time!
We've had the wedding, bought the house, had a baby (turned 1 in December) Guessing that two of those account for the debt then?
We are just about covering all our expenses (no room for savings or frivolities though) That helps.

The bad news
We're only paying the minimum amount towards our debt (approx £500/ month).
We cannot afford to pay more than this in our current situation. We'll be the judges of that... Already doing packed lunches, no gifts, vices, holidays etc.

What to do

1. Panic: Get a 2nd job/ new job that demands more hours (both currently in comfortable 9-5), and so reducing the amount of quality time with baby + quality of life.

2. Chill out: Our nursery fees (approx £1500 / month) can be used to clear the debt in the future. Reduced by £200 December 2016, a further £500 December 2017, and eliminated with state reception school - 2018/19. Also potential for moderate pay rises etc. Now work out what that approach will cost you in interest...and then think what you could do with all that money...

Note:
Jobs are pretty secure. Life at home with baby is great - so not missing holidays, spending etc. Nursery fees and things like service charge could increase a little.

Would be great to get your thoughts

OK...first thing is to do your SOA - check the pinned post at the top of the board here for a link, post it into this thread and we'll take a look.

Are you getting childcare vouchers bought through your employer? Someone with kids can tell you for definite but I seem to recall there is a tax benefit in doing so.

Can nursery fees be brought down at all - maybe by one or both of you requesting flexible working arrangements? Is it worth thinking about dropping some working hours if that could be done, would the cost saving from the nursery offset this? Can you work from home one day a week for example?

You've had your LBM - that's great, now the key thing is not to panic...or indeed not to be too chilled out either. if the worst came to the worst and one of you lost your job or had to stop working tomorrow, could you keep your heads above water? Do you have an emergency fund in place?

andyfromotley

1, Post an SOA
2. Consideer how you got into such a huge amount of personal debt. Is it still increasing?
3. Ask yourself what would happen if you fell ill tomorrow and were unable to work again or those 'secure' jobs disappeared?
4. If there is another credit crunch and your ability to shift these credit cards onto further 0% deals dissapeared, how would you cope? (this happened to many many people in 2008/9)

Although your numbers are big you could potentially get out of this fairly easily once your childcare costs go. in which case just by switching those payments to your debts then you would clear them in a further 2 -3 years. A lot of things have to run smothly for the next 5 years for that to happen though.

SOA as a starting point!

SaintLethal

Hi both,

Thank you for the responses.

SOA below.

In response to your questions:

We are getting the maximum childcare voucher allowance
Nursery fees cannot be reduced. We live in central London and the amount is standard across nursery, childminders and nanny's. At least the kind we'd be happy to leave baby with.
We would lose money if we reduced work hours to reduce nursery hours/ fees.
Working from home isnt possible.
We dont have friends or family who can help out during the mid week.

We got into the debt mainly through wedding, new house purchase and furnisings. reduced salaries (SMP) through maternity leave.
The debt is stable now.
If we lost jobs or got ill we'd struggle, but live in central London (generally there are jobs available), and well qualified.

Statement of Affairs and Personal Balance Sheet

Household Information
Number of adults in household........... 2
Number of children in household......... 1
Number of cars owned.................... 1

Monthly Income Details
Monthly income after tax................ 1950
Partners monthly income after tax....... 2280
Benefits................................ 80
Other income............................ 486
Total monthly income.................... 4796

Monthly Expense Details
Mortgage................................ 982
Secured/HP loan repayments.............. 0
Rent.................................... 342
Management charge (leasehold property).. 300
Council tax............................. 132
Electricity............................. 60
Gas..................................... 0
Oil..................................... 0
Water rates............................. 15
Telephone (land line)................... 15
Mobile phone............................ 35
TV Licence.............................. 10
Satellite/Cable TV...................... 10
Internet Services....................... 10
Groceries etc. ......................... 250
Clothing................................ 50
Petrol/diesel........................... 50
Road tax................................ 12
Car Insurance........................... 50
Car maintenance (including MOT)......... 45
Car parking............................. 0
Other travel............................ 80
Childcare/nursery....................... 1550
Other child related expenses............ 100
Medical (prescriptions, dentist etc).... 0
Pet insurance/vet bills................. 0
Buildings insurance..................... 0
Contents insurance...................... 30
Life assurance ......................... 20
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 50
Entertainment........................... 25
Holiday................................. 25
Emergency fund.......................... 50
Total monthly expenses.................. 4318


Assets
Cash.................................... 0
House value (Gross)..................... 225000
Shares and bonds........................ 0
Car(s).................................. 3000
Other assets............................ 10000
Total Assets............................ 238000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 168000...(982)......4
Total secured & HP debts...... 168000....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
FD Loan........................6500......145.......7
Halifax cc.....................7500......75........0
HSBC cc........................6300......63........0
Post Office....................3700......37........0
Barclaycard cc.................4300......43........0
Sainsburys cc..................7100......71........0
RBS cc.........................3400......34........0
Total unsecured debts..........38800.....468.......-


Monthly Budget Summary
Total monthly income.................... 4,796
Expenses (including HP & secured debts). 4,318
Available for debt repayments........... 478
Monthly UNsecured debt repayments....... 468
Amount left after debt repayments....... 10

Personal Balance Sheet Summary
Total assets (things you own)........... 238,000
Total HP & Secured debt................. -168,000
Total Unsecured debt.................... -38,800
Net Assets.............................. 31,200

Created using the SOA calculator at.
Reproduced on Moneysavingexpert with permission, using other browser.

northerner999

You have listed rent and mortgage as outgoings, is that right?

Your outgoings list £50 into an emergency fund but you have £0 in assets. Is that right? Do you actually have an emergency fund? How would you fund a prescription, say, if your little un was ill?

I am sure you can trim outgoings but living in London some will always be high.

I would suggest an emergency attempt to cut back, use up what you have in the house to cut back on your next weekly shop, change to lower brands to minimise outgoings for a bit.

In tandem, see if you have anything you can sell - Jewelry you don't use/need? CDs, DVDs etc. Search eBay to see what anything you have which you don't want is selling for.

Then use all your extra money towards emergency fund and/orpaying off the credit card which comes off 0 per cent first. You really need an emergency fund first, though.

. This will have the double effect of reducing minimum monthly outgoings and freeing up wiggle room, and make a start on reducing your debt, while it is on 0 per cent you are reducing your debt all the time anyway AND your minimum payments will drop slightly each month... so wiggle room will increase month by month.

SaintLethal

Hi,

Yes, we've a shared ownership home. So mortgage, rent and service charge.

Thank you for the advice.

enthusiasticsaver

What is the £10000 other asset?

Naturalbornspendthrift

I think there is some potential wiggle room here...

£100 a month "other child related expenses" what is this exactly?
£30 a month contents insurance seems high, I pay £99 a year and this includes add-ons for big ticket items.
£50 a month on haircuts- get yourself to your local college or use a trainee at your local salon.

If you want to really go for it, scrap the holiday fund and the entertainment fund (lots of free stuff to do in the Capital anyway)

The groceries are pretty good, it will help when you eventually potty train (though that will be a while off)

Sanctioned_Parts_List

This looks like me, 2 years ago. You're managing, everything checks out, you've overspent to the point that you're treading water waiting for the future to happen, but are not in any immediate trouble.

Anecdotes aside, you live in central London - do you really, really, absolutely, life-will-end-without-it need a car?

Wouldn't you be better off with one of those rent-by-the-hour or carpooling schemes than maintaining an expensive lump of iron in a busy city full of public transport?

Selling it would pay off most of the Barclaycard and free up £157/month that you could throw at the rest of that balance to pay it off in just over 3 months (assuming you actually get £3k for the car, of course). Then the snowball effect will take over.

sugarcube84

I think I'd do something in between option 1 and 2. For me you don't have enough wiggle room in that SOA currently, although there are lots od areas you can make cutbacks. The worry with sitting back and carrying on the min payments is what happens if your situation changes lost job, another baby, illness, boiler blowing up or as happened to me my washer/fridge freezer/tumble dryer and hoover all dying in the same month. Have you enough put aside to cover all bills for a couple of months? If the answer is no, then I would be looking at cutting back and trying to reduce your outgoings so you can build a decent emergency fund and then overpay on the debts.


There are also a lot of round numbers in your SOA, have you been through your bank statements for the last year and worked out exactly what you did spend in each category?


and remember childcare costs will go down but you will still have before/after school club or childminder to pay, plus school trips/uniform, birthday parties etc


I'm not being doom and gloom, I've been where you are now and after a bit of bad luck we were left not being able to afford everything this made us sit up and take notice and then we stripped back our spending and started to prioritise our debts. Good luck

SaintLethal

Hi all,

Thank you.

The 10k is jewellery - engagement ring mostly - and perhaps 1/2k of electronics.

There is some slight roundup but also round down - it is fairly accurate.

Last year was tricky to track as incomes and expenses changed monthly - SMP for 4 months, childcare voucher changes with the introduction of nursery, child benefit etc. Living at home costs, back to work costs and so on.

Some of this is planned rather than past e.g. we'd like to start putting £50 into an emergency fund but haven't until now - this month.

The £100 baby expenses covers things like healthcare, nappies, creams, wipes, classes, trips and similar. It can be nothing one month but then £200 the next. Things come up.

I think one of our issues is that we're now dealing with fairly big numbers - 1.5k nursery, 1.5k house fees etc. So it is hard to see that £10, £25, or £100 saved here or there could make a massive difference. We can really, really cut back and save £100 and that would allow us an extra 1,200 / year to put to debt. But that would clear just 2.5% of the total. Whereas if we're making sacrifices we might as well get 2nd jobs, earn an extra £1000 per month - and use that to pay off the debt at a decent rate, quickly, over the next 2/3 years.

Hard to get head around sacrificing current happiness though (at such a nice time of life - early 30's, new baby, new home etc), because there's a chance of future job loss/ illness/ recession. But I appreciate how terrible things would be if one of these things were to happen - there's no fall back.

Seems to me we - sell what we can, make sure we're cut back in all places, look for ways to earn extra income, build emergency fund, clear debt asap. Resolve to fix the issue now.

Thank you all again for all the comments.