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

ellipticalorbit

Hello all,

It has been a minute, but I need to return to the forum, and sadly not for the reasons I'd hoped. I've undone a lot of the good work and progress which was made back in 2022, and quite frankly I've no idea how it got to this point. The debt has crept up again. We moved house when interest rates were looking threatening and spent far too much of our equity on clearing down some of the position too much, and credit card balances have crept up. At this point I'm just in absolute despair - we've completely shot ourselves in the foot as we now have next to no ability to buy a house for ourselves without saving and tackling the debt at the same time.

Why does this happen? Is there something innately wrong to end up always sticking spending on credit cards? I just cannot be trusted with them. Childcare is so expensive we're struggling to make a dent.

I will update on the latest position later on, but in the interim had to make the confession, and seek out some words of wisdom. Is it too late to start again? Has anyone slipped up badly and then managed it well? How do you change behaviour?

Thanks for reading and staying with me on the journey if you're still here.

I have a lot of replanning to do.

biggerpickle

@ellipticalorbit I've never really been out of debt since being a student last millenia! But in my opinion, it's never too late to start again, I have a solid plan now and a supportive partner so think this might just might work. And a lot of spreadsheets help me - I used snowball calculators to help me develop a strategy.  

I can't imagine how much childcare must hurt finances now - it was bad enough when mine were younger but once at school, the wrap round costs I remember were a LOT less than nursery costs and once through primary they are non-existent. 

Don't be hard on yourself, take a breath and get on with it, no one else is going to do it for you.

twiggy86

Absolutely never too late to start again! I've been back here too many times after being "determined that I'll do it this time" each time! But each time I start off with great motivation, make a dent in the debt, disappear and come back with a bigger debt total! But this time... I'm determined I'll do it! 

Moneywhizz

It is never too late to start again. However you have to be prepared to make the changes that you need to and take on board the advice that is given to you. I had a quick read through your journey and see that you were advised that remortgaging to clear unsecured debt was never a good idea. It could have worked if you had cut up all your cards and not used credit again. The best thing you could do now is post an up to date SOA so that people here can have a look and give you the benefit of their experience and advice on how best to tackle your current situation. While you do that though you should make a decision to not use your credit cards ever again.  There is no judgement on these boards as most people have made plenty of mistakes of their own. Do keep posting and get the help you need from this community. 

ellipticalorbit

Thank you all for your replies, really appreciate you taking the time to comment. Completely agree, it would have worked - and did for a while - had I not used a card again, however cost of life has crept in and it's taken to now to really see how much ad hoc life costs had been stuck on cards - stuff for the kids, food and clothes shopping mainly as we don't buy much other than that.

I've reviewed our costs and will share here. Some are high I know, and I will detail which can be easily addressed, and which cannot. The main culprit which is annihilating our budget is food shopping. I've no idea how much a monthly food bill for 2 adults and 2 children could be, but know ours always ends up way over what it should be.

Starting with the Debt payments:

I've just been approved yesterday for a 0% card which will amalgamate 3 cards. This will leave 2 cards in total on 0%:

Card 1 Balance: £9,827 - payment is £110
Card 2 Balance: £14,753 - planning a set payment of £350

Loan 1 Balance £19,168 payment is £463 - plan to refinance to lower APR once Loans 3 and 4 complete in April
Loan 2 Balance £10,298 payment is £305
Loan 3 Balance £2,287 payment is £323 - finishes in April
Loan 4 Balance £1,826 payment is £292 - finishes in April
TOTAL 1843 reducing to 1228 in April

Business Commitment
200

Costs are as follows:

Mortgage & Housing Costs 1272
Childcare 1031 - this will reduce next year to about 620 
Energy 150 - we have set this as a fixed cost over winter
Council Tax 258
Insurance - Multi - car, contents, buildings 200 - no room to reduce, but this covers the family
Internet 30
Pet Insurance 27
Car 624 - no option to refinance to cheaper alternative just now, would be at a loss
Road Tax 52
Critical Illness 19
Life Insurance for 2 of us 111
Income protection for 2 of us 155 - we require this just now esp while we have no safety net and high costs
Phone 40 - in a fixed deal
TOTAL 3558

Total costs before food: 5601, reducing to 

We have no capacity to put more money in to shift anything quicker this next year as all excess needs saved for a house before schooling starts for child 1. Would gladly welcome any improvements we can make to our food costs though - we typically spend about £1000 pcm which is far more than I think we should or could be spending, it often ends up like this as we run tight for time with the kids after nursery so get a lot of convenience food - not ideal and I've just started cooking again from fresh more this week.

Joint net income is £7,457, but is due to rise a small amount in Jan 25.

Am I missing any info?

Moneywhizz

There are a lot of things missing that would normally be on SOA, like petrol, parking, clothes, presents, entertainment ( even if that is Soft Play for the kids), eating out. These kind of things could easily use up your surplus money each month which is probably why you are struggling to save. £1000 per month for food is very high for two adults and two small children. Of course it would be much cheaper to meal plan and cook from scratch but when you are pushed for the time at the end of the day it is so easy to pick up convenience food. However if all other costs are fixed then it is the one area that you could really cut back and make substantial savings.

Have you stopped using your credit card? It is the key to getting this situation under control, especially if you have been using them for essential spending like food and clothes. 

Things will be a bit easier for you when the loans finish in April, but that doesn't give you much time to save towards a house move. Is it absolutely essential that you move next year? It might be difficult getting a new mortgage with the level of debt repayments especially when you add your car finance to the debt total. And of course much of your savings will be eaten up with moving costs. 

dawnybabes

Are you still in a mortgaged house ? Can you not stay there ? I know you said schools weren’t good can you not send them (when it’s time) and pay for tutors to plug the gap ? 

Have you looked at the food boxes like Hellol Fresh, the meals are quick annd easy to prepare not the cheapest but a lot cheaper than the £1000 a month you’re currently spending. 

ellipticalorbit

Thanks both - I'll answer the questions you've added.

Good points about petrol and clothes etc.

Fuel is usually about £250 a month as we charge the car and that covers the rest which is accounted for by our electricity bill. We don't have any parking costs where we live or go. I maybe buy clothes once or twice a year for £200-300 for myself, I try my best not to.

I buy the children clothes as they need it - maybe £600 a year each child including shoes, boots and outerwear including extra sets for nursery. I buy nearly everything in the sale and some things on vinted. I also sell what they grow out of on vinted which generates about £300 a year. So probably £900 a year net spend for both - this has been reducing year on year, uniform will be there for the youngest next year so that is already bought, and I buy a lot of things in neutrals so the youngest can then wear them once the oldest grows out of them, like trainers, wellies, pjs, some leggings, gloves, some jackets etc. So hoping the annual costs become more efficient.

Presents for Christmas and Birthdays - would probably average about £150 each for Christmas and birthday respectively so about £600 across the year, and we maybe spend about £200-300 on other family / children in total. I buy most things in the sale well in advance, so Christmas is already all in the cupboard.

We do spend on eating out - this is accounted for in the food costs, we probably do this too much at 2-3 times a month but are now trying to only do this once a month. We do also have classes for the kids which probably come in at £100 a month. All other leftover month beyond the food shop goes into savings every month.

I don't use the credit card - have moved everything to 0% now, so all spending is out of our bank account and budget. I agree it will be easier once the loans finish to ramp up our savings until we get the house move sorted in next 12-18 months. It's absolutely essential we do move by summer after next - we have spoken to our broker and can get a mortgage of the size we want with our debt (it is less than when we last took a mortgage) with our current lender who we've been with so we're lucky in that regard, and we have a pot of savings we're building every month in conjunction with the equity still in the property we own just now. We will stay where we are until we find the right property that we're not paying a lot over value for so we need to be flexible over the coming year and a half around when we move. We are considering just staying where we are for the next year though while we make head way into clearing the debt and while our mortgage cost is low.

The car is very expensive though as a monthly cost, and once the term ends on it we will get something a bit cheaper, although we will stick with a hybrid or electric car next time too as we value that. If the car was prohibitive to getting a mortgage (we've been told by the broker our debt levels are fine in the lender's calculation with our incomes) for any reason then we'd trade the car for something much cheaper.

We actually tried Hello Fresh a while back and agree it was quick, easy and a lot cheaper - so great shout! We've just done this week's food shop for about £120 all in, but have enough food to do the whole week cooking from fresh so going to try seeing how we go with this week. If we can half the food cost then we would have an extra £500 a month to save, and once the house move is sorted next year we can use the excess each month to clear the debt. As everything is now on a set payment each month the debt balance is due to come down by 1688 a month, so the next year of that will reduce it from 58 to 41.

It would be helpful to understand what others spend on average for things like presents, kids clothes, meals out and the food shop - we think we overspend on these so would like to drive these costs down a bit more.