high income high debt!

optimizm

Hello!

I chose my username as I do feel optimistic about tacking my debts.

We owe around 49k unsecured debt on a net montly take home pay of £5050 ( joint). Thankfully mortgage and other monthly outgoing are relatively low so it's manageable, albet high.

Why is it that so many people with decent incomes ( like us) end of with very high debt levels?

Is our level of debt an unusually high amount?

System

Compared to your debt, you haven't got a particularly high income so try not to think like that. You can't afford 49k of debt unless you are earning a six figure salary.

-taff

You end up with high debt leels because you earn a good wage and when you take out credit, you don't think, oh, that's going to be 5000 we owe, you think, it'll only cost 50 pounds a month to pay back, we can easily afford that.
Then you stop thinking about amounts you spend on credit cards because you think, it'll only be 50 minimum payment a month, we can easily afford that.
Then you think, we earn quite a lot of money between us, we could buy a nice car/holiday/expensive food and it'll only be 50 quid a month to pay back, we can easily afford that.
Then you think, well, we earn a good wage between us, we deserve this treat, or that treat, we work hard, we can play hard too, and it's only 50 quid a month and we can easily afford that.

Then you forget how much you are actually paying out and before long, without any budgetary restraints, you're taking credit out all over the place because instead of thinking of the total amount you owe, you've broken it down monthly and decided you can afford the monthly repayments. You don't save any money because you think you earn a good wage and can afford to pay [and then pay back] for any emergency spends.

And then you wake up one morning and it's smacking you in the face how much you owe. And that's how you get into debt if you earn a good wage.
The 'you' I'm referring to is a general 'you' not a specific 'you'.

datlex

People tend to live to their means rather than within. This means you might for example be tempted to buy filter coffee from Waitrose rather than instant coffee from Tesco (I appreciate their are differences in tastes between filter and instant) if you have a higher income. The problem with living to your means is that you aren't putting aside money. Then you are "expected" to maintain a certain life style- newish and certain class of car (probably bought on a loan), certain standard of holidays.
There's probably a lot more pressure on people like yourselves, at least one of whom is not a high income earner, to keep up with the Jones. For those of us on a more modest income, certain things are out of our reach financially so we don't even consider them.

System

datlex wrote: »

There's probably a lot more pressure on people like yourselves, at least one of whom is not a high income earner, to keep up with the Jones. For those of us on a more modest income, certain things are out of our reach financially so we don't even consider them.

OP has duped themselves into thinking they are high earners and have treated their finances the same way.


Split down the middle 2.5k take home (I'm assuming). Considering the average wage in the UK is between 2.k and 2.5k...I'd consider your income very average indeed.


We earn similar and owe around 10k for the kitchen we did last year. We have savings and planning a large holiday - that's it. That's our money gone. We have a 7k car, eat out once a week and struggle sometimes with money at the end of the month. So that's our life, what are you spending in yours to rack up that amount of debt?

fatbelly

optimizm wrote: »

Hello!

I chose my username as I do feel optimistic about tacking my debts.

We owe around 49k unsecured debt on a net montly take home pay of £5050 ( joint). Thankfully mortgage and other monthly outgoing are relatively low so it's manageable, albet high.

Why is it that so many people with decent incomes ( like us) end of with very high debt levels?

Is our level of debt an unusually high amount?

Yes, it's higher than average for non-priority debt.

What are your plans for dealing with it?

optimizm

I should stress that I want trying to appear like I was bragging about our income- I have nothing to brag about when it comes to finances.

I do think our income is reasonably high though- around 78k joint, I think. Is that considered average?

optimizm

We basically plan to chuck as much as possible at the debts each month. We would like it gone within 4 years

fatbelly

That's reducing your debt by £1000 a month. Do you want to discuss the detail?

If so we will need a statement of affairs

GothicStirling

Someone once explained it to me like this, as our wages increase, instead of keeping our spending the same, and increasing our savings, we buy the higher priced car, a bigger house, holidays with a higher price tag, shopping at Marks & Spencers instead of Sainsbury's. Then there is the credit card . . .

I work for the NHS, and I get sick of hearing Band 7+ complaining of being skint. One day I'll say, you want to try living on a Band 1 salary. Or go out of the NHS there's people raising a family on less that 10k!


I watched a great video on Facebook yesterday, the basic gist of it is: "you are not your car, you are not your house, you are not your clothes etc. I'm going to remember that from now on in shops. For instance I saw a DVD of a film I would like to see but it cost £10, but thought "nah, give it a month of two, and it'll be £5 in the CeX store. I'm a book worm too, and never buy novels new now (unless its a gift), just bought 4 for £8 for a British Heart Foundation store instead. We need a new sofa, and I need a new bed we've been looking in BHF Furniture and Electrical stores for them too. I also have a rule for my credit card (just got it after 8 years of appalling credit history), it stays at home unless I need it for something (i.e. knew I had to buy new glasses from opticians) and gets paid off at the end of the month.


Good luck.

GothicStirling

optimizm wrote: »

I should stress that I want trying to appear like I was bragging about our income- I have nothing to brag about when it comes to finances.

I do think our income is reasonably high though- around 78k joint, I think. Is that considered average?

I wouldn't fixate on whether your income is average. What matters is disposable income, and the quality of life you are after. I know high earners who have less than me once they've paid bills out.