Trying to avert disaster

becks818

Hi Everyone

My username may make you think of a work famous footballer, however that is where the comparisons end i'm afraid! I am pretty sure that the actual Becks earns enough in a day to clear all of our debt, anyway..let me get on with it.

We are in a HUGE amount of unsecured debt. HUGE. We have more unsecured debt that anyone I have ever know or met. I know people with mortgages less than our unsecured debt. Today we sat and worked out exactly just how HUGE..... 65K. Just typing that was hard.

We are married with 8 year old twins. We are both going to be turning 40 within the next 12-18 months and we are at a point where we HAVE to do something about our debts. I will try not to bore you, however here is a brief summary at how we arrived at this horrendous figure...

As young twenty somethings we led a fun packed life full of holidays, weekends away, shopping trips and endless nights out. We both worked hard and earnt good money but would regularly plug the gap with credit cards, plus a car loan ( or two). Despite our spendy ways, it was generally under control and I estimate that we owed around 30K between prior to having the kids. a Large amount of debt, but nowhere near where we have ended up now.

We needed to undergo several rounds of IVF to have our twins. As we had no savings, a large part of this was funded by loans and credit cards. Of course I don't regret this, however it did add to our debt.

Next came the house. We had actually purchased the house some years before in 2006 for a bargain price however it needed quite a bit of work that we had been putting. It hadn't been a priority. New bathroom, kitchen, rewiring, redecoration and some work to the roof was all funded via credit. We felt it had to be sorted before out two bundles of joy arrived.

My wife didn't work for the first 3yeasr after having the twins. This was a big strain to our finances and despite our best intentions, we often resorted to credit cards to plug the gaps again. She returned to work part time but has recently gone back on a full time basis.

Apart from the IVF, home improvements etc we have generally made really poor decisions with money and have allowed ourselves to fall deeper and deeper into debt.

Anyway, what's done is done and not we want to start the process of sorting it out. We know it's going to be a journey and we are not looking for a quick fix. We have LOTS of things to be grateful and I will list them below in order or priority

We have two beautiful, happy healthy children
We have a nice home
We have a relatively small mortgage of 60K (house worth 200Kish)
We not have a combined take home income of just over 5K per month
We are no in arrears, missing payments etc
We are both 'on the same page' regarding our financial goals.

I will do a full SOA asap, however for now here are our 'numbers'

Take home pay - 5.1K
Minimum debt repayments - 1250
Mortgage - 509
All household bills and insurances/phones etc - 690
Diesel for both cars - 160
Before/after school provision - £120
Food - 300

Total outgoings - £3029

48K of the debt is spread across credit cards. 22K of this is currently on 0% or low rate, The rest is across 2 loans.

We currently pay around £400 In interest each month. We are keen to reduce this but we are not eligible for any more promotional offers at present. I think that our high credit utilisation scupper this.

I have a long conversation with Stepchange. The guy was lovely but explained that DMP or any other formal solution would not be an option for us as we can afford the contractual payments. Not sure if I am relieved or disappointed about this??

Not really sure what I am looking for from this forum... I think it's probably moral support and a place to vent when needed. The only thing I ask is that any comments are constructive. I am fine with tough love, but my wife is struggling a bit with the emotional impact of our current situation. I am sure she will be fine when we get into a better routine with our finances.

ChasingSunshine

Welcome to the forums. Well done on posting, there are loads of lovely people on here who can give advice and support. There are also lots of people who have large debts similar to yours. The good thing is your income is very good and on the numbers you have posted the situation can be improved and your debt cleared. You can do this especially as your wife in on board, you are both committed and you have increased your income from where you were.

When you can please post a SOA so people can help you see other areas you might be able to cut back on. It's frustrating not to be able to get more 0% credit offers but you have a large amount on 0% so that will help and allow you to focus on the more extortionate rate cards.

theoretica

The first thing you need to turn your finances around is good information about them, so you are making a good start. Then there is the challenge of making sure what you have on paper and your SOA matches reality - this is where you will discover money that has just somehow been spent.



From the figures you have given so far it looks like you have a choice - how much of the £2000 you have 'left over' are you going to throw at the debt and how much are you going to spend? There will be a sweet spot for your family between debt looming over you and feeling you are scrimping on everything- but make a conscious and discussed decision in advance, don't try to reinvent your budgeting every time potential spending comes up.

Karonher

A complete SOA will help people give advice. You don't mention money for entertainment, presents, holidays and I am sure there are other areas missing. There is often a suggestion of keeping a spending diary and trying to account for every penny. It may help cut out un-needed expenses such as lunch at work and overpriced take away coffee all the time.

I know turning unsecured debt into secured is not seen as a good idea, but with so much equity in the house could that be used to your advantage?

JayRitchie

Hi. Tough though it looks you are in a way better position than many. Having a relatively low mortgage makes a huge difference. As said above its best to prepare a detailed SOA - I'd pay particular attention to the interest rates and any end periods on the cards. Also, how were your cars funded and when might they need replacing. Could you cope with one car for a while?

System

You have equity of 140K in your home and 65K of debt.

I think you know what you have to do ...

It's either that or bankruptcy and it's taken anyway.

JayRitchie

beany_bot wrote: »

You have equity of 140K in your home and 65K of debt.

I think you know what you have to do ...

It's either that or bankruptcy and it's taken anyway.

They are no-where near to bankruptcy from the information given. They have £2k a month left over after minimum debt payments of £1,250. Depending on how outrageous the interest rates are they can clear this with no major dramas required.

becks818

beany_bot wrote: »

You have equity of 140K in your home and 65K of debt.

I think you know what you have to do ...

It's either that or bankruptcy and it's taken anyway.

Whilst I acknowledge that our debts are high, I know that we are not anywhere near bankruptcy, in fact I doubt that we would even be allowed go go bankrupt even if we wanted to. We aren't even eligible for a DMP.

I hope that your post was based on you not reading all of the info ( I did go on a bit!) and not out of a desire to alarm or cause concern.

becks818

JayRitchie wrote: »

They are no-where near to bankruptcy from the information given. They have £2k a month left over after minimum debt payments of £1,250. Depending on how outrageous the interest rates are they can clear this with no major dramas required.

Thank you!

Worst case scenario would mean that around 35K of debt would accrue interest at 20%. This would mean about £600 per month. Now as much as we would HATE this scenario, we would just have to chuck as much as we could at the highest interest. We have played around with snowball calculators and with our disposable income it would still be doable. i asked Stephange about this and the explained that even in this situation a DMP wouldn't be appropriate as we would be able to afford the payments. It would mean about £200 more in interest than we are currently paying.

I am confident that we will continue to be able to shift at least some of the debts onto promotional rates as the balances decrease.

enthusiasticsaver

You have £2000 a month spare but i think a full soa is needed for you to start budgeting, living within your means and start reducing the debt. You need to account for everything. Entertainment, clothes, car maintenance and presents.

I would start paying off the credit cards first starting off with the one with the highest interest rate. Read up about debt snowballing. You also need an emergency savings account so you are not tempted to put more on credit cards. Resolve not to use them again. You don't have the highest unsecured debt on here - many have more without your level of disposable income. The 0% deals are not as readily available now but hopefully as the debt reduces you will be able to get the rest of the debt on 0% as time goes on. It will be a hard slog though and you need to be disciplined and focused to sort this out.

trailingspouse

Well done for coming this far. You've done the two most important things - you've realised there's a problem, and you're both on board with trying to fix it. Everything else is just paperwork.
A spending diary is key. I found that the best (and most accurate) way to do this is to use your debit card for everything, even the smallest amounts, wherever possible. That way your bank statement becomes your spending diary. And there are some 'quick and dirty' ways to work out if you're spending too much on certain things. For example, buying a coffee every day on the way to work doesn't sound much - but that's 10 coffees every 2 weeks. So do 'cost of coffee x 10' in your head, and if that figure shocks you, then you know what to do.

Once you've posted your SOA, the lovely people on here will set to work on it and tell you where you're spending too much (and, sometimes, where you're not spending enough!!)