Cutting the Fat advice/Pension planning

Born_Free

Long time lurker. Wife and I had LBM in March 2018 that our debt was bigger than either of us had realized. Due to my car purchase outright (Bank Loan of 10K, on a used Ford SMax), British Visas & Citizenship fees (5k over 3 years), and just being too casual about spending money (groceries, gifts for family and friends) and travelling (our families are abroad but we had been visiting hers in France multiple times a year, and mine once!). We had debt of 26k in March.

I debated posting because I’m embarrassed to admit that on such apparently high incomes as us it’s crazy that we have such a high level of debt. We do have high expenses living in the South East, but I’m embarrassed at how badly we have managed our money. I’m also worried our income will look artificially high here, and I would get flamed as a result (!), when in reality it should be significantly lower than it is due to the worrying fact that I don’t have a pension. I’m 42, and this is the thing that is worrying me the most. I am losing sleep over it. I was stupid when I was younger and setting out on my self-employed journey and didn't worry about not having one, but my wife is very worried for me and it's rubbed off on me now. I have not planned my finances well at all, and I wonder if it’s getting to be too late to fix a pension for me?

We have agreed to start tracking our spending from December (today) for 3 months to see where we can improve because despite tightening our belts since March, our spending is still far too high and still too casual. We wanted to give ourselves breathing room, but I think we have cut ourselves too much slack, and not really changed our spending enough - although we haven't picked up more debt. In light of my pension fears I think we should tighten our spending much more.

To make it worse wife has a medical condition that while not necessarily life limiting, does mean we can’t get critical insurance to cover it. Wife is due to have an op soon which will hopefully cure her, but we’ve agreed once she’s better (which I hope and pray will be the case with no complications), we will focus on getting a pension sorted out for me, alongside debt repayments. She would like us to divert the emergency fund category below plus as much money from budget towards this to try to catch me up ASAP. She has a good state pension, and we both have life insurance and critical illness insurance.

Due to remortgage in May, so timing of wife’s op is a bit dicey.

Would appreciate advice on reducing debts (I have done and will post SOA) – I know we need to tighten our belts big time, just need others to confirm and point out things I can’t see.

Also advice on how much to save in emergency fund before diverting it to a pension for me. (Bearing in mind we will be dipping into emergency fund soon when wife is recovering for a month or two.) Our boiler will probably die in the next year or two, and our house is a wreck but liveable one - not pretty but serviceable so no urgency, and we have no plans to move until retirement.

Born_Free

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.................... 2

Monthly Income Details
Monthly income after tax................ 4000 (remainder stays in my limited company – to pay for tax and updating equipment, there’s literally nothing left after that’s accounted for!)
Partners monthly income after tax....... 3480
Benefits................................ 0
Other income............................ 110 (travel expenses from work-related driving for wife)
Total monthly income.................... 7590

Monthly Expense Details
Mortgage................................ 1385
Secured/HP loan repayments.............. 0
Rent.................................... 0
Management charge (leasehold property).. 0
Council tax............................. 252 ( unsuccessfully challenged banding in May)
Electricity............................. 67 (I feel I could improve this by switching)
Gas..................................... 71 (I feel I could improve this by switching)
Oil..................................... 0
Water rates............................. 23
Telephone (land line)................... 0
Mobile phone............................ 27
TV Licence.............................. 0 (No live TV we do have Netflix & Prime. Prime comes from my company which has an acct, and we get Family Prime as part of that)
Satellite/Cable TV...................... 0
Internet Services....................... 37 (Have tried other providers but speeds not sufficient for my work as I upload large files)
Groceries etc. ......................... 320 (Wife shops at Aldi and “tops up” at Tesco, but the top ups are very expensive brands (Heinz ketchup, Kelloggs), and it’s not helping us save. We are going to try full shop of Aldi only brands in December).
Clothing................................ 30
Petrol/diesel........................... 200 (Wife commutes 80 miles once a week, but lots of local driving in her job. I think her old car is haemorrhaging fuel. She needs 3 fill ups a month, mine only needs one. I drive less than 200 miles most months though)
Road tax................................ 18
Car Insurance........................... 88
Car maintenance (including MOT)......... 42
Car parking............................. 12
Other travel............................ 0
Childcare/nursery....................... 790 (including free nursery hours. Long hours mean we need wraparound care for son. 675 childminder, 115 pre-school for lunchtime supervision)
Other child related expenses............ 16.5
Medical (prescriptions).... 20 (wife)
Pet insurance/vet bills................. 0
Buildings insurance..................... 8.5
Contents insurance...................... 8.5
Life assurance ......................... 52.39
Other insurance......................... 42.94 (critical illness but specifically excludes wife’s medical condition)
Presents (birthday, christmas etc)...... 33.33
Haircuts................................ 10
Entertainment........................... 60
Holidays................................. 167 (one set of parents live in Europe, one set in Australia)
House updating costs.......................... 50
Son's Child Saving Acct........................ 100
Kitty/Sundry (Leftovers go to Debt)..... 400 (we use this as “breathing room” each month – pays unexpected bills, and remainder distributed to debt on last day of month. Have needed most of it approximately 6 months a year for surprise plumbing/car bills etc. Remaining months has gone as overpayments to debts which has accelerated things. I think we need to work on reducing/eliminating this as feel more on top of debt now…)
Amazon Prime Family..................... 0 (my company pays)
Netflix................................. 10
NEST .................................... 13
AIAS GAP Insurance (Car)................ 33
House Alarm............................. 27
Dentist................................. 20 (wife needs regular dental cleanings due to medical condition)
Garden Waste............................ 5
Local Kids Outdoor Farm Membership................. 7
National Trust Couple Membership.......................... 10
Professional Insurance Fees............. 117
Professional License Fees............... 76
Emergency (Critical Illness/Job Loss)... 1400 (only started in October)
Hair ........................... 50 (v. high but wife’s hair type is tricky to manage on her own and she needs to look professional. Has to go every two months, costs £100 each time. She has said she would reconsider this spending though if needed, and we can, but I do want her to feel comfortable at work as high-pressure environment.)
Total monthly expenses.................. 6109.16


Assets
Cash.................................... 3000
House value (Gross)..................... 470000
Shares and bonds........................ 0
Car(s).................................. 12000
Other assets............................ 0
Total Assets............................ 485000


Secured & HP Debts
Description....................Debt......Monthly...APR
Mortgage...................... 381478...(1385).....1.59
Total secured & HP debts...... 381478....-.........-

Unsecured Debts
Description....................Debt......Monthly...APR
Bank Car Loan..................3726......386.......3.5
Barclays Credit Card...........3917......30........0
Santander Credit Card..........1270......150.......0
Fitness Machine................1546......0.........0
Student Loan, wife (France)..........690.......110.......5
Total unsecured debts..........11149.....676.......-


Monthly Budget Summary
Total monthly income.................... 7,590
Expenses (including HP & secured debts). 6,119.16
Available for debt repayments........... 1,470.84
Monthly UNsecured debt repayments....... 676
Amount left after debt repayments....... 794.84 (We have cleared some debts so have this snowball figure each month – we use it to make overpayments onto the car loan - aiming to clear that loan by February).

Personal Balance Sheet Summary
Total assets (things you own)........... 485,000
Total HP & Secured debt................. -381,478
Total Unsecured debt.................... -11,149
Net Assets.............................. 92,373

Born_Free

Oh dear - I made a mistake in the figures. We pay £27 for the fitness machine monthly. I had to edit a couple of things and I think I accidentally deleted the number there

-taff

Do you really need NEST? Have you no other way of setting your heating?

Get your utilities sorted asap. You're paying 10 for Netflix? You could change that to two screen or one screen.

You could use your holiday fund to pay off debts for now, since it's unlikely you'll be going on holiday with your wife having an operation. You can also use your sons savings pot for now.

Your 400 pot is basically a slush fund where you do end up spending it on things you shouldnt be, Your emergency fund is for these things that crop up and should be also geared towards replacing the boiler.
With this 400, and the 167 and the 100, that's another 667 towards debts each month.
Do you really have 794 left over each month to pay off the car debt?


Go through your spending from the last couple of months to see exactly where you are spending, because if you did have 1300 a month to add to the debts, they'd be gone in much less than a year.
Stop any unecessary spending for now, clear the debts, then you can start saving what you were spedning on debt on savings/pension instead.

theoretica

Born_Free wrote: »

Statement of Affairs and Personal Balance Sheet
Groceries etc. ......................... 320 (Wife shops at Aldi and “tops up” at Tesco, but the top ups are very expensive brands (Heinz ketchup, Kelloggs), and it’s not helping us save. We are going to try full shop of Aldi only brands in December).
That is not low - do you throw any food away?



Petrol/diesel........................... 200 (Wife commutes 80 miles once a week, but lots of local driving in her job. I think her old car is haemorrhaging fuel. She needs 3 fill ups a month, mine only needs one. I drive less than 200 miles most months though)
I suggest you calculate the mpg you are both getting. Start the trip counter with a full tank and keep track of how much you fill up with so you know mileage and fuel whenever you have just filled up. Then you will have the knowledge to work out what best to do about cars. Are you both insured on each vehicle? Maybe she should take yours for the longer trips.


Holidays................................. 167 (one set of parents live in Europe, one set in Australia)
Are you booking in advance to get the best deals?


Professional Insurance Fees............. 117
Professional License Fees............... 76
Are these yours or hers? Can they be paid pre-tax?


Total monthly expenses.................. 6109.16

Yes you need a pension and better now than later.

Born_Free

Thank you for that. I can’t believe how much extra cash you’ve come up with!

Yes NEST can go, and I will look into revising both Netflix and my utilities. I agree also with the travel fund - we changed our Christmas plans once we learned of the op. I realise that I didn’t include that money in our SOA - it’s in a hidden away acct that I rarely access and it has over £1200 in it so that’s a bonus!!

My wife changed jobs and her hours, and got a substantial pay rise in October (£1400 a month payrise). So we started the emergency fund at that point as we were used to not having that income. So our income hasn’t been this high throughout and we didn’t have an emergency fund until then so we did use the ‘kitty’ money for emergencies. But yes that £400 is too big, too vague and is redundant now that we have a proper emergency fund.

I think the snowballing is working as we paid the extra £800 last week which took 2 months off the loan term. The month before it was £400 overpaid (and our last payment of £400 on another debt). Aiming for the same again this month.

I will take a look at our spending for the last few months to see exactly where everything has been going. We should have more money leftover at the end of each month than we do.

What do you reckon a good figure to aim for for emergency fund might be?

Born_Free

Thanks for that!

That’s a top tip about her taking my car on longer trips - it is much more fuel efficient than mine. Yes I will look at what we’re getting as far as mileage is concerned - I’m shocked at how few days a tank seems to last her. Although she does claim it back so I suppose that evens out the cost, but then we would stand to gain if we could improve the mpg she gets at work duties.

These are her professional fees - we have to claim the tax back from HMRC - I tend to do it once a year in April but yes we do get that tax back.

Yes - there is definitely food wastage and this has been a sore point between us. We are both time-poor and son gets his tea at childminder 3 days a week, so whilst she does batch cook at weekends I find that some things are forgotten about in the freezer and get freezer burn. Also sometimes fresh veg that is intended to be cooked doesn’t and goes off. I think because of wanting to batch cook she tends to buy too much but she’s said she’s going to try meal planning and buying less than what she thinks we need to try to avoid waste and to make sure we use leftovers. She also told me about a tip she found on MSE where you spend the last week of the month eating out the freezer and pantry to prevent stockpiling.

Born_Free

(I mean my car is more fuel efficient than hers)

Born_Free

I can use the £1200 to pay off Santander card! Thanks so much!!

What is an average figure for groceries for family of 3 would you say? Our son is a big eater, lol, but he does get tea away from home 3 days a week and he is only 4!!!

CapricornLass

I'm not a real expert, but - are you officially an employee of your limited company? If so, wouldn't your limited company have to provide contributions to a pension for you ( in addition to your own)?


You would have to seek Expert Advice - maybe your accountant would be a good starting point, as it would affect your tax liability as well.

-taff

A good start for you emergency fund is six, and then twelve, months bills and outgoings. If your boiler is on it's last legs, add another 3 to 4k to that figure.
Any veg due to go off can go in a soup and then in the freezer. Doesn't take long to make, and can be left cooking.
I know you can cut your groceries by at least 100, but honestly, until you both look at meal planning [ and I mean both] and what you buy, I would worry more about where the rest of your money goes.
Go to the old style board, loads of hints and tips about getting bang for your buck, look at the grocery sticky threads for inspiration. Meals are 21 per week less your sons three, so you have to make 18 per week. Once you break it down by that, you might see a reduction in that.
Look carefully at what you spend because it's easy to just go and spend a tenner here, a tenner there, and it all adds up eventually. You might find you're spending over 100 easily on stuff you didn't even realise, ike coffes, papers, sandwiches, snacks, a toy here or there, a drink in a pub here or there, a meal out etc.