Is the total amount of the debt the most important factor?

baconbutty81

Hello, I have set up a new account on here as I Can't for the life of me remember the details for the profile I set up a couple of years ago. I have not posted before though.

This site has helped us enormously over the last 14 months. 14 months ago we were in 62K worth of unsecured debt along with a £300 per month car lease payment. This debt accumulated due to us basically living above our means for many years along with home improvements. Thankfully we have quite a decent joint income ( 62K for me and £20k for my wife) so whilst the debts were very high, we were able to manage it without it having a massive impact on our life. 14 months ago we decided that enough was enough and using advice from this site we have paid of 21k in 14 months. We are very proud of this and we can;t wait to be debt free.

My younger sister ( she's 30 and I am 38) is having money problems. She broke down at a recent family gathering and told my wife about it. She is married with 1 kid and they are 30k in debt with a joint income of 25k per year. She is currently at uni so only working part time. Her husband works full time as a driver. Her husband is a proud guy and got angry when he knew she had told us. We have been open about our debt free quest and I feel no shame about it.

Her husband, who I usually get on really well with got quite confrontational with me when I expressed concern over my sisters emotional state. His view is that they 'only' owe 30K compared to our 62K at the start of our debt free plan. Whilst this is true, he failed to see the difference in our situations - we owed double their amount of debt, however we were in a position to service the debt without it impacting on our basic living. My sister and her husband are struggling to pay their rent and utilities.

I am close to both of them and I would like to help them, however her husbands attitude has annoyed me somewhat. I am going to suggest that they take a look at this site.

My view is that the amount of debt is not the most important factor as it's all relative to income but wondered what others though?

kangoora

Of course it's relevant to income. A £10k debt is small if you are earning £100k/year but huge if on minimum wage of £17k.

Using your figures (I've assumed no pension payments made for ease)

62k debt and 82k income = £5.7k disposable income per month = almost 11 months to pay off (if no other money spent on anything)

30k debt and 25k income (split 20k and 5k) = £1.9k disposable income = almost 16 months to pay off. (if no other money spent on anything)

Not a huge difference at first glance, however, the big difference comes when you look at true disposable income. Each household bill will consume a larger proportion of the lower wage earners disposable income, all things being equal.

If housing costs, utilities, food etc = £1.2k for each family then the lower earner only has £700 to throw at debts. This takes their 'free from debt' date timeline out to 43 months.

Conversely the higher earners, even after taking out £1.2k can still throw £4.5 month at a 62k debt - taking their timeline to only 3 months longer at roughly 14 months.

If the high earners have a massive mortgage, big HP car finance, kid going to private school etc then this would all impact on their timeline negatively so it wouldn't be linear like this in real life.

JayRitchie

It depends. If your sister is working part time and attending university presumably she is expecting an increase in pay when she has graduated and can work longer hours. That changes the whole debt to income ratio hugely.

theoretica

How well you can cope with the debt is hugely important - and coping both financially and mentally.
I hope this site can be as useful to your sister's family as it was to you!

Potbellypig

In fairness I can see why he would be angry/upset at you sticking your nose in his business.

stingey

I've noticed that for some men talking about their finances and the level of debt that they are in can be very difficult. For some men it's ok, for others it's a no no. My dad made it clear to us growing up that we never discuss how much someone gets paid, how much your outgoings are etc. The way he explained it to us was that this invoked comparison/jealousy between people and gave the impression that people were better off than others. For men he said it was very difficult to be 'seen wanting' by your peers and you were less of a man because you couldn't provide for your family. Pride.

It's all comparable. It depends on left over cash from servicing debts and paying for essentials. I live in a wealthy town but i regularly see women get out of their new plate 4 x 4 Mercedes and go into the local Co-op and raid the reduced stock. Kids are with them asking for stuff and every parent knows the sound of the 'No' as in don't ask I don't have it.

Before the financial crash both my husband and I had a healthy incomes, but a huge mortgage and large debts. We looked as if we had made it, but we were miserable, each month robbing Peter to pay Paul. Made changes, got rid of the large house, paid down some of our debts, but we're happier and can 'live'.

My advice would be to say to your sister and brother-in-law we understand, we're here if you need us and leave it at that. You can't force them to accept help. It's only understandable that you want to make sure they're ok, especially when your sister is distressed.

Grazeley

Potbellypig wrote: »

In fairness I can see why he would be angry/upset at you sticking your nose in his business.

This seems a little unfair, his sister confided in him. And he wants to use his experience to help, up to his BIL if he doesnt want to take that help and be defensive, he should discuss that with his wife if he doesnt want his finances discusssed with her family.

Defensiveness is usually the first reaction OP, I would give them time but let them come to you and then you can help advise them.

baconbutty81

Potbellypig wrote: »

In fairness I can see why he would be angry/upset at you sticking your nose in his business.

This is a bit rude to be honest. I think that most people would offer help and support if their sister was sitting in front of them crying and clearly in distress.

baconbutty81

I haven't spoken to her in any more detail however from what she has told us it sounds as though they are at the stage where are having to choose between paying the unsecured debts, or the priority bills. I am no expert, however my view is that they should pay rent utilities and food first and then use what is left towards their debts. I am not aware of any rent arrears but I am going to ask her about this as I know that her rent is about £700 per month. My mother has already said that she will help with the rent if necessary ( she was there too when she became upset).

I am sure that her partner will be fine. We are actually good mates. I am going to suggest taking him for a pint over the weekend and if he wants to talk then I will listen, but I won't force the subject.

At the height of our debts we were paying about £1600 per month on our unsecured debts and car lease. Our mortgage is £600ish - we were lucky that my wifes parents gifted us a fairly large deposit in 2005. After paying our mortgage and essential bills we were left with somewhere in the region of £1700 per month, so whilst our situation was not ideal, it was not a crisis. I am grateful that we got the ball rolling before it got any worse.

My wife is going to speak to my sister as they are quite close. I just want her to know that they are not alone and that there is always a way forward.

Potbellypig

baconbutty81 wrote: »

This is a bit rude to be honest. I think that most people would offer help and support if their sister was sitting in front of them crying and clearly in distress.

It's not rude, it's just a different opinion to yours. I've only got your few words on the internet to go on, you've got the whole picture. So your opinion on your sisters situation will be much more informed.

But I regard my finances to be very much a private thing. I don't talk to anyone (apart from strangers on the internet) about it and whenever I've been asked how much I earn, I've always stated I don't like to say. So in my opinion, if I was the partner of your sister, I would be angry and upset that you are asking me. Hope that clears it up.

BabyStepper

If you want to help then tell them about making a budget. Let them know that is the first step. You don't have to see the budget, but they need to do it together, write everything down and look at it in black and white. They will need to see if they can cut down their expenses enough to get solvent and deal with things. There is nothing worse than not having paid your essential bills and worrying constantly that someone is going to appear and demand money. Your poor sister, what a stress for her.

Then make sure they can accept help from your mum. You're right, there is no shame, and family members like to help each other. They can use this help to sort out the emergency debt, rent and utilities.

You could always share your tips for saving money with them. Where to get the cheapest things, what daft things you've done to save money (we've all been there). Mostly just keep calm while they're in a spin and trying to find their feet.

I suspect of your BiL finds this thread he might be annoyed about you sharing their info...just saying. I don't think your nosey at all, I think you're a concerned brother. And that's kinda nice.