Refresh: My 6 year journey from -5 figures to +5 figures (it was 4 years, but I messed up)

ellipticalorbit

Hi all,

I thought I'd post a bit of an update as it's been a few weeks since everything got me thinking about whether to sell the house or not.

On the job front, I have a couple applications and an interview lined up - I'm beginning to feel a little more hopeful I'll be able to land another job in the company. If not I'll let them pay me off with statutory mat pay and we'll survive.

The whole thing has been nothing short of a very scary wake up call that I need to do what I can to clear as much of the debt as fast as I can while making sure I have a safety net and make sure I'm never in this position again. That was already the plan which I've been chipping away at slowly but I guess the dire consequences of it all going wrong have been a bit of rocket fuel to stay motivated to clear the decks.

We've modelled out various scenarios financially and it's difficult to know what we'll do yet as we need to wait a few more weeks to see a sale go through and also see if I get a job so we have some actual numbers to work with, rather than large variables which could go one way or another.

We've evaluated the option of moving to the flat and renting and decided it's probably the worst decision we could make financially long term as we'd have no equity growing and be handing money away rather than investing it in a mortgage, which at least some of we'll see again. We've also decided despite the schooling commitments longer term, we get so much from the part of the country we live in and moving would only mean similar costs spent on property rather than schools - whereas where we live nice property is much more accessible at a lower cost. We also have some time to make some long term decisions about where we live, so we've decided not to conflate a short-medium term debt-income issue with a longer term life decision, unless there is a clear financial benefit in doing so.

So it's left us with two options if I can get another job:

1. We sell up and move locally, downsizing slightly. We have two options within this -
a) either we take a mortgage on a cheaper house in my partner's name only and we're still invested in property but it allows me to clear 60% of the debt and roll the last 40% into 0% or a very low APR loan (or combination of the two) and save back up again as my monthly costs would be almost halved; or

b) sell and rent for 6 months, which would allow me to clear 60% of the debt and roll the last 40% into 0% or a very low APR loan (or combination of the two) and save back up again as my monthly costs would be almost halved. Once the debt utilisation and outstanding balance reduction hits my credit report we could apply for a joint mortgage, which we'd get no problem assuming I have some form of job on a lower income than current - this would mean we can get a similar size of family home, we just revert to a 90% LTV rather than 80% LTV (given our current property has grown a lot in value since we bought it)

2. Stay where we are and take the longer more painful road to chipping away a few hundred pounds a month off the total balance. It'll take several years to reach zero and mean my income has to remain pretty high to manage this.

Has anyone faced a similar problem?
Any advice?

For clarity, I'm acutely aware how I got into this position, and I'm all over the balance and budget like a rash - my habits have changed a lot since my LBM.

Thank you x

Working_Mum

I haven't faced your situation per se @ellipticalorbit but I have faced HUGE debts (£90k) on a variable self employed income when my husband left me in 2009.

I had 2 young children in private education at the time and my ex-husband was very good at not paying his way!!

The big issue for me was to stay ON the property ladder as I have always shied away from renting because it is so precarious. I chipped away at my debts until I could get them onto 0% interest and lived a very frugal life for many years - I finally moved from the marital home last year, downsizing and becoming mortgage free.

Whatever you decide I would say you have to make choices based on what is in your heart  - keeping my children in their home was a big thing for me (I'd read it was one of things which was really important to children of divorced parents) so I protected that at all costs which meant that I chipped away at the debt slower but it was a compromise I was happy to make (all that extra interest also served to remind me that I was NEVER going to be so precarious again). It's a lot easier to stick to a plan when times are tough if you are doing it for reasons which resonate deeply.

Having gone through a divorce I would suggest to any of my married friends please make sure you protect yourself and your fiscal future - so find a way of ensuring you're financially covered if you do go down the route of getting a mortgage/property in your husband's sole name. 

You are also on the cusp of becoming a Mum so make sure you find some time to enjoy this wonderful time in your life! My little business served me incredibly well whilst I raised my children - they are now 23 and 20! but I work 2 days a week and am looking to retire next year at 55. It certainly isn't the life I imagined I'd be living when I was 42 and my husband left but it is one I carefully curated and is filled with lots of good stuff. Remember you are in control of so much in your life and becoming a parent can really focus your mind on what's important.

I am not sure I really answered your question but I couldn't just read ad run.

I wish you lots of luck with the next steps and feel sure you'll make the decision which is right for you and your family.

((Hugs))

WM

Aspiration

Hi,

Have a lot of similarities to your story. We had some debt pre kids but managed to aggressively clear enough and brought a house. Then didn’t have the money to fix it up. 

With childcare costs my wife stopped working and this made it very hard to catch up and clear the cards. When we moved we cleared our short term debt twice and I remortgaged once.

I then built up to just over £100k again on short term debt. Reality really hit last Jan that I was in trouble when I couldn’t transfer £15k from a credit card into my account. 

Since then we’ve been disciplined to clear and had some great months but other really stressful months. 

From my experience, the risk with downsizing or selling and clearing is if the debt rebuilds back up. 

You may have cracked it and I’m sharing my experiences but we must have wasted over £100k due to taking remortgages or taking equity out when we moved, then letting it build up again. 

Good Luck as I know it’s not easy with young children and thinking/strategising about money. 

Aspiration 

elbree

Hi @ellipticalorbit 👋
Sounds like you've been really through it the last few months and you're discussing and making sensible plans. Only you really know what your gut is saying is the right choice for you and the family - stay and stick it out or have a fresh start. Personally I'd want to live in an area with good, free, schools for long term affordable living but that's just me. Think about life in 5 years, where do you want to be? Good luck and keep us posted! ☺️

ellipticalorbit

Hi all,

I thought I'd post an update since my last update a fortnight ago. It's crazy the difference two weeks can make but in very strange timing I think we've had a turn of luck.

Firstly an update on the job front. I've had an interview for a role at my level which went really well and I should hear the outcome later this week or into next week. I've also got another interview for a different role at my level in a fortnight's time. I'm in the top 2 applicants for both roles according to one of our ELT members who has spoken to both hiring managers so I'm feeling hopeful I'll land at least one of the two and not need to take a pay cut or be out of work (while pregnant!). I've also applied for a couple slightly more junior roles just in case as a back up so at least I have a good chance of staying in the company and keeping a good income. Fingers crossed things go in my favour.

On the house move front we'd pretty much decided to sell the house when our circumstances changed. It looks like my husband is getting an inheritance from his grandpa who has just passed away. It's been a hard month with this sad news on top of everything else going on but this may be the silver lining we needed. I also have a big sale due to go through at the end of this month and if it goes ahead then we think we can cope without selling the house. The new plan would be for me to borrow £20k of my husband's inheritance (which is almost all of it) and use the sale funds (hopefully another £20-30k) or borrow £20k from family. This would allow me to pay off £43k of the credit card debts, which is almost all of it. If I can do that then we've spoken to the mortgage broker who has confirmed we'd have no issues getting a mortgage with just the loan and one card balance remaining. So the plan would be to remortgage, rather than moving, as we have a fair bit of equity in the house - so I'd take back out the £20-40k I've borrowed to pay back the husband (and potentially my brother if it's needed) so they're only out of pocket for a few months. The remaining loan and card can be paid off in full over the next year. It's clearing the credit card debt but really it's just using some of my equity in the house to pay it off and increasing our mortgage a little to do so but it would save about £1400 a month and the interest would be much much less costly.

Obviously this plan only works if:

1. I have a job
2. I save back up to overpay on the mortgage over the next few years so we're not just adding the balance to the mortgage permanently
3. I never use a credit card ever again!

It would give us a fresh start without selling the house and means we don't need to step off the property ladder and rent. I think we really need to have the fresh start. We have a baby and another one on the way, due in spring so we need to get our finances in order to make sure they have some financial security. It also means we can spend the next couple years figuring out what we want to do with schools - do we stay here and do the private school or do we move to another area with great free schooling. At least it won't be a rush decision we might regret though.

Anyway, thanks as always for your support and encouragement. Hopefully things will continue to pan out in line with the new plan over the course of this month! x

savingholmes

Wow great turnaround. Definitely need to look at what was at the root of your spending though. Perhaps get counselling - it could save you thousands long term if you manage to stop yourself having repeated cycles of debt. (Speaking from experience). 

jody51

Hi Elli!
lovely to read your diary! Just wanted to say well done and keep going. I have 2 young children and the childcare cost was the most painful thing for our family, it was 5x our mortgage payment at it’s worst but we managed. Like you I was the breadwinner which put a bit more pressure on me as a mum too but again- we’ve managed. I remember wondering why on earth I was heading off to work each day essentially just for my pension payment but I reasoned that I’d still have a job after it all and still have my finger in the pie. Children are 6&4 now, costs have reduced a bit and I’m ready to get back to serious debt paying. My advice is just to plough on with it all, you’ll get there, your spending priorities change and if you’re anything like us you could think of nothing worse than heading abroad with 2 young kids! We bought a cheap touring caravan- far from the luxury holidays we were used to but oh my, when we head off it’s paradise to us. I hope all works out with your job but a lower salary might allow for child Benefit and help towards childcare costs that you weren’t previously entitled to which may help. Try not to worry too much- it’s a marathon not a sprint! Good luck!

ellipticalorbit

savingholmes said:

Wow great turnaround. Definitely need to look at what was at the root of your spending though. Perhaps get counselling - it could save you thousands long term if you manage to stop yourself having repeated cycles of debt. (Speaking from experience). 

Thanks savingholmes, that's a good suggestion. I looked at where the money was spent and it was a bit of a mix of the following:

• Wedding costs a few years ago
• Some furniture for our home
• Several holidays which should have been paid off at the time, but I never prioritised clearing the balance after putting them on a credit card so they just stacked up - lesson learned to never book when you can't or aren't willing to pay off in full immediately, and if I'm honest, I was probably travelling too often and while I wouldn't take those experiences back I wouldn't book multiple big trips a year nowadays
• A bit of a fashion problem - which I think is now under control, I've been trying to cut down my consumption and live a much greener life the last year and a half and I think very carefully before buying now and really do only buy clothes occasionally when I have a real need (such as maternity clothes that fit) or if I really love something. And not on credit now
• Dining out too much - problem solved now by having a baby, as we maybe go out a couple times a month now, usually for lunch with the wee one rather than dinners several times a week

It's scary looking back, I don't even want to think about how much money I spent given the debt balance is what it is and I managed to spend a very good income on top of that, but lesson truly has been learned and I can't see me ever repeating the pattern now. I've had one big slip since my LBM when I spent too much money on some baby things and it was a setback, so I've been much more considered since then in what I buy, but that said I will still buy the wee one some toys that are developmentally suitable and the basics...

Do you think therapy was worthwhile? I'll definitely consider it if I think it's needed. Right now though I'm trying to be pretty frugal so not sure I want to spend the money...

ellipticalorbit

jody51 said:

Hi Elli!
lovely to read your diary! Just wanted to say well done and keep going. I have 2 young children and the childcare cost was the most painful thing for our family, it was 5x our mortgage payment at it’s worst but we managed. Like you I was the breadwinner which put a bit more pressure on me as a mum too but again- we’ve managed. I remember wondering why on earth I was heading off to work each day essentially just for my pension payment but I reasoned that I’d still have a job after it all and still have my finger in the pie. Children are 6&4 now, costs have reduced a bit and I’m ready to get back to serious debt paying. My advice is just to plough on with it all, you’ll get there, your spending priorities change and if you’re anything like us you could think of nothing worse than heading abroad with 2 young kids! We bought a cheap touring caravan- far from the luxury holidays we were used to but oh my, when we head off it’s paradise to us. I hope all works out with your job but a lower salary might allow for child Benefit and help towards childcare costs that you weren’t previously entitled to which may help. Try not to worry too much- it’s a marathon not a sprint! Good luck!

Thanks Jody, I appreciate the encouragement!

The childcare costs are a huge expense aren't they?! Even with the government childcare accounts which give you a little bit back it's definitely a big cost. We'd been planning for it in the budget but it definitely puts a bit more pressure on both of us to stay in well paid employment to afford it. I can very easily see why a lot of families stay at home, especially with multiple children. That's exactly what I thought, I better just keep the finger in the pie as it means that I'll be able to provide a good life for the family, which will get easier in the future and keep the pension contributions going as I've a long way to go until retirement!

It's definitely helped not going on big holidays the last couple years and we've decided not to do anything overseas for the next couple years either - a four year break from foreign holidays is probably what was needed. Much easier to pack up the car and go to a cabin or a lodge somewhere for a week or a long weekend! Your caravan sounds amazing, would love to do that one day - camping by the beach or some mountains would be the dream, very hygge and at one with nature and the great outdoors! Did your caravan cost a lot? It's something I would consider in a few years time once the debt is balanced off and some savings have been built up!

You're right, it is a marathon - just need to focus on each milestone along the way and the end will be in sight before we know it!

savingholmes

I think childcare can be extortionate - but at the same time - I think it was really valuable for my kids and helped them with social and other skills that have helped them throughout life. My DD at 18 still has a friend she met at nursery and went through primary and high school with her. 

I think counselling can be useful as over-spending may have its roots in childhood or later trauma or just bad habits we learned from our parents before we knew better. Perhaps start by watching some of the spendaholics type episodes or Rich House, Poor House as that could give you more insight into what's behind your own approach to money - the good and the bad. I think debt - especially repeated debt - strains relationships and narrows choices long term so definitely worth fixing early.