What to do next

mandb2014

Hi All,

Hope everyone is safe and well during this difficult time.  Just wanted someone to give me some perspective and maybe some advice on what to do next.  My situation is I will be made redundant on 31/12/2020 and I will receive £16000.  I am lucky enough to have secured another job on roughly the same income as before starting 04/01/2021.  I've made some bad choices however and have a mess to clean up and am stressing about it.  In addition to redundancy we have £1k savings and we have a daughter aged 4 and we have saved £3k for her so far with the aim of having £10,000 when she's 18 to try and help her with a first car or whatever is needed at the time. We have £38000 left on the mortgage, I'm 33 and my partner is 30.

Due to my partner attending university we have about £25000 of debt which is made up of a loan, credit card debt, a car loan and a sofa payment.  This was living as frugally as we could throughout there just wasn't enough money on one income and bursary and a bad decision in hindsight but I cant take it back now.  The good news is she's now qualified however and has been working about a year so between us we make about £50,000 now gross.  The situation was actually worse than this and we have put out the immediate fires during COVID and the emergency situation we had has been done and we've probably paid off about £8000 since last October on the highest interest things we had.

Now we have this £17,000 most people would say pay off more than half the debt but I was thinking to keep back 3-6 month of expenses and then used the rest on the highest interest debts in case in these uncertain times we face redundancy again.  I am going to get redundancy income replacement insurance as well going forward as not having it was a bad choice previously also. 

I am at a cross roads in life which what I do in January will impact the rest of my life as its tempting to use even some of it so have a well earned break away and so on but I want to address the situation I've gotten myself into, does my plan sound sensible or is there anything you do differently?

getmore4less

This probably best on the debtfreewanabe

There they can help you  develop a budget  going forward and look at the details of the debt to decide what to do about those.

Without a detailed  plan it is just guess work 

AskAsk

quite a lot of numbers flying around in your original post OP. 

but to summarise, you now have a debt of 17k and you are wondering if you should use your 16k of redundancy pay to pay that off?

mandb2014

getmore4less said:

This probably best on the debtfreewanabe

There they can help you  develop a budget  going forward and look at the details of the debt to decide what to do about those.

Without a detailed  plan it is just guess work 

Thanks will post in there instead wasn't sure whether it would fall under redundancy planning or debt free wannabe to be honest. Can threads be deleted as its not needed here.

mandb2014

AskAsk said:

quite a lot of numbers flying around in your original post OP. 

but to summarise, you now have a debt of 17k and you are wondering if you should use your 16k of redundancy pay to pay that off?

Sorry I wasn't very clear, the stress of it all is getting to me as not thinking clearly.
Basically I have 25k debt (both of us together). £16k redundancy and 1k in savings plus both still have jobs.  Is it best to side 3-6 months emergency funds and the rest on the debts?  What would be the best strategy? 
Appreciate usually its the debts are costing you money and usually it makes sense to pay as much as you can.  Im not sure in the uncertain world whether another redundancy isn't round the corner and I dont want to be left with absolutely nothing.

AskAsk

mandb2014 said:

AskAsk said:

quite a lot of numbers flying around in your original post OP. 

but to summarise, you now have a debt of 17k and you are wondering if you should use your 16k of redundancy pay to pay that off?

Sorry I wasn't very clear, the stress of it all is getting to me as not thinking clearly.
Basically I have 25k debt (both of us together). £16k redundancy and 1k in savings plus both still have jobs.  Is it best to side 3-6 months emergency funds and the rest on the debts?  What would be the best strategy? 
Appreciate usually its the debts are costing you money and usually it makes sense to pay as much as you can.  Im not sure in the uncertain world whether another redundancy isn't round the corner and I dont want to be left with absolutely nothing.

i see.  that makes more sense.

how much interest are you paying on the 25k debt?  and how much of that 16k are you thinking would be put aside for the emergency fund?

mandb2014

AskAsk said:

mandb2014 said:

AskAsk said:

quite a lot of numbers flying around in your original post OP. 

but to summarise, you now have a debt of 17k and you are wondering if you should use your 16k of redundancy pay to pay that off?

Sorry I wasn't very clear, the stress of it all is getting to me as not thinking clearly.
Basically I have 25k debt (both of us together). £16k redundancy and 1k in savings plus both still have jobs.  Is it best to side 3-6 months emergency funds and the rest on the debts?  What would be the best strategy? 
Appreciate usually its the debts are costing you money and usually it makes sense to pay as much as you can.  Im not sure in the uncertain world whether another redundancy isn't round the corner and I dont want to be left with absolutely nothing.

i see.  that makes more sense.

how much interest are you paying on the 25k debt?  and how much of that 16k are you thinking would be put aside for the emergency fund?

£1000 sofa 0%
£1200 car 37% (ridiculous but I was backed into a corner as old car broke and didn't have anything to get another and needed it for work, this is more than 50% through agreement so can be given back if needs be)
£15000 on two credit cards on 0% this is persistent debt where creditor has stopped the cards and wants its money back
£8000 on a loan at 19% 
As you can see we arent in a good place but the situation was much worse than this believe it or not a year ago.
I was hoping to put back 3-6k for emergencies but Im not sure whether to just pay off the full £17k and just hope for the best as it would clear up 75% of the above horrific mess.

getmore4less

You can ask it to be moved to the debt board. 

Other useful info
What are the details of the mortgage. 

The income split. 

mandb2014

getmore4less said:

You can ask it to be moved to the debt board. 

Other useful info
What are the details of the mortgage. 

The income split. 

£38000 approximately left on the mortgage. (£230 a month). Income is about 55% her and 45% me on about £50,000.  We are a committed couple and both agree its our problem and accrued together.  Could a mod please move to the debt forum if possible?

getmore4less

Rate and term. 
Any plans to move?
The trick will be to be able to cover all essentials on 1 salary if you can.

That gives a fall back for one job loss needs a smaller fund to get through a few months.

With £3k+ a month coming in carefull spending should give a decent surplus to tackle the debt once the higher rate stuff is paid off. 

mandb2014

getmore4less said:

Rate and term. 
Any plans to move?
The trick will be to be able to cover all essentials on 1 salary if you can.

That gives a fall back for one job loss needs a smaller fund to get through a few months.

With £3k+ a month coming in carefull spending should give a decent surplus to tackle the debt once the higher rate stuff is paid off. 

If we lost one income completely now there would be a £400-£600 deficit per month created including all the current debts, food and petrol included, that would be having no life and bear essentials only.  Not a good scenario at all  but it is what it is and can only get better at this point but I have stopped the bleeding in a year.

The personal loan has 3 years left same for sofa, car has just one year.  The credit cards I hope just three years (I need it to be for my sanity really but at this stage the damage is done and it doesn't make sense to pay these first now they arent charging anymore interest).

No plans to move, Im a mortgage prisoner as wouldn't pass the affordability test now like I could (I know my fault like the other stuff).  I think the situation is salvageable but its really starting to affect me. Please could you critique this plan:
* Give the car back via PCP and buy a bus pass (saving is £100 a month in payment tax insurance less the pass and partner has a car).
* Pay the sofa off saving £25 a month.
* Pay the loan off saving £265 a month.
This costs me £9000 hopefully assuming they take the car back and all is good.  This leaves £8000 and I have saved £385 a month.  I up the credit card payments by this amount I have saved.