Should I be more worried than I am??

gettingtheresometime

Whist I agree that any debt at 0% is better than a debt you're paying interest on, especially a secured debt, I can see where your wife is coming from....somehow a debt called a mortgage for £40k is more respectable than a debt on cc for £40k.

Having been up against the wall myself, and now within a hair's breath of being debt free, the thought of being £40k in debt - regardless it being @ 0% - would freak me out.

Personally, I'd be throwing the £400-£500 per month in addition to the £1,000 if only to clear the debt so that once cleared I had £1500 to do exactly want I wanted each month

Happyharry78

gettingtheresometime wrote: »

Whist I agree that any debt at 0% is better than a debt you're paying interest on, especially a secured debt, I can see where your wife is coming from....somehow a debt called a mortgage for £40k is more respectable than a debt on cc for £40k.

Having been up against the wall myself, and now within a hair's breath of being debt free, the thought of being £40k in debt - regardless it being @ 0% - would freak me out.

Personally, I'd be throwing the £400-£500 per month in addition to the £1,000 if only to clear the debt so that once cleared I had £1500 to do exactly want I wanted each month

Hi,

I understand what you are saying, however a mortgage would cost us several thousands of pounds over the course of the term. Our home would also be at risk if we were ever unable to pay. 2.5 years from now this debt will be gone.

quantic

I think the reason there is a preference for remortgage is because it adds more certainty to you actually paying the money back - unless of course you can't - whereas with credit cards people are more prone to topping them back up as the balances go down.

If you are disciplined and religiously pay back the credit cards every month without adding back to them obviously the CC is the better approach in terms of savings.

If you also have £15k which you do not plan on spending I would do as you say and keep that for if SHTF and you clearly have enough income to get rid of the debt quite quickly.

EssexHebridean

Congratulations on a really good solid workable plan, and having your budgets all in order.

If you can continue to pay off the lump each month against the cards, plus saving £500 p/m, then you're well on your way to also creating a good emergency fund too which particularly as a homeowner is pretty essential. Think about putting the monthly amount into a regular saver account or similar - see what your bank or building society offers - as this reduces the temptation to dip in, and also generally pays in the region of 5% interest.

I'd show your wife this thread if I were you - and on the chance that you do I'd say this to her. I can absolutely understand why this is a daunting figure, BUT at the rate you can make inroads into this, it is FAR better to have it on 0% than to be paying interest on it. Doing it this way also, if the worst happens, gives you MORE security in some ways, not less - on 12 months that 40k will have dropped to 28k. If the worst happens at that stage, then the 15k thrown against it brings it down to 13k, and the minimum payments at that level will be FAR more manageable than they look currently. Think forwards two years and the picture is even more different - 40k has dropped to 16k...and all of a sudden that inheritance plus £1000 from your (now looking very decent) emergency fund and "BANG! The Debt Is Gone!" to nick (and adjust) a phrase! On the flip side, transferring the amount to your mortgage increases your monthly payment for the foreseeable future - and in the event of a SHTF situation means your monthly costs will be less manageable than they currently are...making it more likely you could default on the mortgage.
Tough though it is, try not to stress too much about it - as things stand it IS just figures on paper, where those figures are in terms of which financial "pot" is not that relevant. By all means though look at your spending and see if there is any extra you can free up to set against savings and ultimately get the debt gone sooner! (And give your husband a hug - he's got his head screwed on right!)

ReadingTim

Assuming both of your wages increase or at least keep pace with inflation annually, your wife doesn't get pregnant with a 3rd child, you want to move to a more expensive house, and you don't suffer some expensive misfortune that's not covered by insurance over the next 3-4 years then it sounds like you'll be fine as you are.

Personally I'd invest the inheritance in something which will get a decent rate of return, knowing it's there should anything go wrong. I'd also be thinking of investing something for the kids: university tuition fees ain't cheap, for example. Don't secure previously unsecured debt until the "s" has well and truly "htf", not merely on the off-chance that it might....

MrsTinks

Happyharry78 wrote: »

Hi,

I understand what you are saying, however a mortgage would cost us several thousands of pounds over the course of the term. Our home would also be at risk if we were ever unable to pay. 2.5 years from now this debt will be gone.

Could be me but i don't think that's what they meant

It's socially seen that a mortgage is more "respectable" or socially accepted than credit card debt. Neither is good

What was being suggested is saving less each month and over paying your debts to clear them earlier - Especially if you already have your wifes inheritance of £15k sat in savings as a buffer.

I'm all for enjoying your money whilst over paying, but maybe making a bit of a game of it and seeing who can save more each month and over pay. Even if between you you only over pay an extra £250 a month that's £1500 extra in a year which would bring forward your debt free date even more.

Verbatim

I totally agree with the logic. I did something similar when we refurbished 11 years ago. But our then very comfortable situation changed and the debt seemed overwhelming and I obsessed about repaying the ccs daily. I'm pretty sure it led to my heart problem. It was also when I joined mse! Don't know if having it on the (also much increased for building work), mortgage would have stopped me worrying so much, but I suspect it would.
But I'm intending to use the 0% cards again shortly to keep the remortgage down on another refurb I'm about to start so this is just an insight into different ways of looking at cc debt. This time I'm determined to stick to what I know helps me not worry and sleep at night and keep the overall prospect and as I said logic of the situation in mind.

ani*fan

I've found this thread very interesting to read, thanks for posting it OP.

Just to add to what others have said, the 0% CCs along with £1000 per month payments and £15k backup looks entirely manageable for you. This sounds well thought out and considered. It's also ok for your wife to be a bit worried, it is a big chunk of money after all and I'd be concerned of there was no worry around at all, but between you you're managing it. Sounds like a great team to me.

I can't help wondering why you didn't save up for at least some of the renovations though? You could have used half the inheritance, £7.5k, and saved for a year, £12k, and then had half the amount of cc debt £20.5k to deal with. What's another year when you've been in the house for 10 years already?

I'm just wondering if the attitude of needing to have things right now, that gets so many of us into unmanageable debt in the first place, is still hanging around for you. And that maybe this is what your wife is worried about, rather than the figures. As someone else said, there is always the possibility of some expensive misfortune that you just can't anticipate, a job loss, an unexpected pregnancy, whatever, and I wonder if there was a way to still get the renovations done but to keep your back better covered while you were doing it.

Like I said already, your plan looks good and likely nothing will go wrong. I just wondered if you had any thoughts about that.

Best of luck.

moneyfacts

You certainly should be worried as you have £40,000 in credit card debt! My household income is similar to yours and we have no children. There is no way I would down play the seriousness of the situation.


Even though it is all on 0% and your incomes are secure, the psychology of it is worrying. Firstly going to work each month and waiting for payday, just to pay off a chunk of the debt would be awful. (I know, I used to be in debt years ago). Had you done it the other way round, you should be working each month and saving for what you wanted. Working to save is more rewarding than working to pay of credit cards.


The other issue is that you think its ok to spend £40,000 of money you havent earnt. Yes I know all debt isnt bad and everyone has a different interpretation of what essential spending is, however the fact is that no one 'needs' to spend that much money on house renovations. The risk also is that people find it easier to spend money they havent earnt (I used to with student loans for example) and you would have been slightly more frugle had you waited and spent money you had worked so hard to save.


I am not for one minute suggesting that you are some debt ridden fool, its just not how I would run my finances and in answer to your question, yes (i think) you should be worried.

Happyharry78

ani*fan wrote: »

I've found this thread very interesting to read, thanks for posting it OP.

Just to add to what others have said, the 0% CCs along with £1000 per month payments and £15k backup looks entirely manageable for you. This sounds well thought out and considered. It's also ok for your wife to be a bit worried, it is a big chunk of money after all and I'd be concerned of there was no worry around at all, but between you you're managing it. Sounds like a great team to me.

I can't help wondering why you didn't save up for at least some of the renovations though? You could have used half the inheritance, £7.5k, and saved for a year, £12k, and then had half the amount of cc debt £20.5k to deal with. What's another year when you've been in the house for 10 years already?

I'm just wondering if the attitude of needing to have things right now, that gets so many of us into unmanageable debt in the first place, is still hanging around for you. And that maybe this is what your wife is worried about, rather than the figures. As someone else said, there is always the possibility of some expensive misfortune that you just can't anticipate, a job loss, an unexpected pregnancy, whatever, and I wonder if there was a way to still get the renovations done but to keep your back better covered while you were doing it.

Like I said already, your plan looks good and likely nothing will go wrong. I just wondered if you had any thoughts about that.

Best of luck.

Thanks for posting! You are right, we could have saved up, however we were desperate/impatient to sort the house out asap! I still don't have any regrets about taking on the debt. So far the plan is working well and we don't have any issues with the repayments. I will be glad when it's gone though