Debt... incoming

LBincoming

ladyholly said:

Just read through although I admit skimmed some of it. 2 points stand out to me. You say you need your car for work. Do you you get expenses for running it. If not why not? I may have missed that so apologies if I have. The same with your phones . If you need them for work why arent they paying for them.

The only other pont is you dont need a newish car to be reliable. Ours is 21 years old and has passed the MOT with no advisories for the last 4 years. The previous years was for one of the tyres which needed replacing within 3months. Okay perhaps we have been lucky but you see my point. I know you aare stuck with them at present but think a bit more when you can. Atthe end of the day it is only a tin box to get you from aA to B.

I do get expenses, but in mileage. Which can be highly variable, depending where I'm sent (anywhere in the country) and isn't worth too much with the way petrol has been recently. Phones, just company policy that they don't fund unless you're at the level above me, when you get a separate work phone or an allowance.

My old car was scrapped, hence buying a new(ish) one, but I do wish in hindsight that we'd gone for a slightly older version.

NeverendingDMP

LBincoming said:

NeverendingDMP said:

That's good that you got a pram sorted. What did u go for in the end. I had a britax city jogger with inserts in for newborns at first then the pram itself,it was not forward facing which is a shame but fit through my door, in my boot and I could fold it with one hand whilst holding one of the babies can't say I miss it now. Double prams are ace but a pain in the A. I agree you need  one though:)

I actually managed to get the Bugaboo Donkey Duo, the carry cot was still in its new plastic too! Saved over a grand vs the new price, plus we can use it now in its single version so can sell our old single pram too.

Ooh pram envy. You got a nice one. And a fair bit of money off too. Enjoy

Altior

A couple of points related to the cars and HP, looks like they are both high interest. Well worth looking at potentially getting this debt settled and shifted on to lower interest liability (unsecured). 

You said you were in negative equity on them, but is this including the total liability including the interest? If so, you need to compare a settlement figure with the market price, not the overall liability, as you'd save a lot of interest having them settled.

If you are in negative equity, give serious consideration to GAP insurance. Otherwise, in the unfortunate event of a total loss, you'll lose the car and still have to pay off the outstanding finance. If the insurance settlement is less than the outstanding finance, you'll need to find the difference, and pay that off too. 

LBincoming

Altior said:

A couple of points related to the cars and HP, looks like they are both high interest. Well worth looking at potentially getting this debt settled and shifted on to lower interest liability (unsecured). 

You said you were in negative equity on them, but is this including the total liability including the interest? If so, you need to compare a settlement figure with the market price, not the overall liability, as you'd save a lot of interest having them settled.

If you are in negative equity, give serious consideration to GAP insurance. Otherwise, in the unfortunate event of a total loss, you'll lose the car and still have to pay off the outstanding finance. If the insurance settlement is less than the outstanding finance, you'll need to find the difference, and pay that off too. 

The market value of the cars are approx. £2000 less than the amount still owed for the finance. I'm going to give significant thought about getting rid of one of them regardless, once I'm on maternity leave in a short while.

LBincoming

Hi everyone, just a thanks for all your advice and a quick update!

Baby number 2 is now five months’ old and we’ve managed not to take on any debt this far into my maternity leave by making a few changes to the way we spend and by also having the first figures by from the accountant about how my side-hustle has done this financial year. I would have been going back to work in a matter of weeks, but we’ve taken the decision to extend it until the statutory pay period runs out in a few months, when I then start a new, higher-paid job. 

What we did:

- We kept both cars, as selling them didn’t make financial (or practical) sense, given we live fairly rural so public transport isn’t the best and car is also required for my job. My husband works shifts so there’s no way we could share either. 

- Cut right back on personal expenses, spacing haircuts further apart to minimise the cost, no eating out at restaurants etc.
- Reduced food expenses even further. We do eat meat but (since I do 99% of the cooking) I’ve been padding said meat out with a lot more vegetables/lentils/chickpeas. Husband so far hasn’t noticed much of a difference and says meals are just as tasty as ever. I feel a lot better as we’re also eating a lot healthier with no food waste.
- Husband got a new job just before baby was born, adding around £200 a month to our pot.
- Telling friends and family we were skint was a huge thing! Rather than us accepting charity (“we’ll buy it this time” - no thanks), people actually just lessened the pressure on us to do things (ie spend on things) and were usually quite happy to have a wander round the local farm with the kids, have a dog walk up the coast or just pop over for a cuppa instead. Anything after 7pm is pretty much off the table for the next couple of years anyway haha!

The biggest difference though? My side hustle, which the preliminary figures show averaged £1000 a month profit, after tax, for this financial year. I’ve had the biggest orders since October too, which has come at just the right time. We’ve actually managed to put a small chunk into savings, ready to sort another bedroom out for baby 2 (as he’s still in our room at the moment) and to pay my parents back finally. A lot of this money has to go back into the small business to help make things even more profitable in the next financial year, but it’s seen us through quite nicely.

It’s been a big learning curve (even though we didn’t actually go into ‘proper’ debt) and I definitely know that, as soon as I’m back to work, we’ll be working hard to make sure we always have a six month emergency fund aside, as having one before finding out I was pregnant would have saved months of worrying. 

Thanks again!

thebikemechanic

Thanks for the update post! I read through all 8 pages of this thread today and really happy to see a positive post by the end of it! Your early realisation that you had a problem incoming is/was a massive deal and shows foresight that should hopefully set you up for future years too. The skills you've learned in budgeting and planning will hopefully be permanent and I imagine you'll stay away from HP deals in future!!! 

For your income and family size, your mortgage payment is (imo) excellent and with increased income you can hopefully save for emergency fund, and the future, and allow yourself a few pleasures in life too. Imagine how good it will be when you reach a stage where you can pay the cars off though, and have that money freed up every month. Are the sofa payments finished yet?

Keep an eye on creeping costs/expenses and do a family audit on a regular basis to keep you and your partner on the same page and there's a very bright future ahead! Congrats

EssexHebridean

A big thank you for returning and updating, a big congratulations and welcome to the world Baby 2, and the biggest of all well done for how much you've achieved! 

Definitely ensure that you keep the budget updated as things change, make every penny work for you and keep an eye on any frittering keeping in, and try to ensure that the new budget for your return to work counts the side hustle money as "extra" not standard income too - that way if things change in your market the whole house of cards doesn't come tumbling down. 

kimwp

That's great news, thank you for coming back to update us, it's always great to hear a success story!

flipflopflo

Thanks for coming back to update us on your journey and congratulations on your new addition. 

Once you are back at work and  are debt free with your emergency funds in place it might be nice to start the journey to become mortgage free. 

LBincoming

thebikemechanic said:

Thanks for the update post! I read through all 8 pages of this thread today and really happy to see a positive post by the end of it! Your early realisation that you had a problem incoming is/was a massive deal and shows foresight that should hopefully set you up for future years too. The skills you've learned in budgeting and planning will hopefully be permanent and I imagine you'll stay away from HP deals in future!!! 

For your income and family size, your mortgage payment is (imo) excellent and with increased income you can hopefully save for emergency fund, and the future, and allow yourself a few pleasures in life too. Imagine how good it will be when you reach a stage where you can pay the cars off though, and have that money freed up every month. Are the sofa payments finished yet?

Keep an eye on creeping costs/expenses and do a family audit on a regular basis to keep you and your partner on the same page and there's a very bright future ahead! Congrats

Thank you everyone! Just another quick update:

No HP agreements in the future, never again (even 0% ones!). They just aren’t worth the added pressure. Sofa payments are finally done and it feels amazing! 

We do live in a cheap part of the UK, so the mortgage is cheap too (I can’t believe some of the costs of housing further south!). It’s only going up £90 a month on renewal in a couple of months too, as we’ve dropped below 70% loan-to-value thankfully. That’s the now-done sofa payment haha!

We manage our money together solely from a joint account, as that really works for us, but we’ve changed over to Monzo, to allow us to utilise the savings and budgeting pots which our previous bank just didn’t have. It’s already made us a lot more aware of where our money is going and we’re finding it fairly easy to stick to a budget now. Shame a lot of the good features aren’t on joint accounts yet, but hey ho, better than what we were doing. 

EssexHebridean said:

Definitely ensure that you keep the budget updated as things change, make every penny work for you and keep an eye on any frittering keeping in, and try to ensure that the new budget for your return to work counts the side hustle money as "extra" not standard income too - that way if things change in your market the whole house of cards doesn't come tumbling down. 

Oh definitely! I’ve set up a separate savings account for the side-hustle money (after tax savings and business reinvestment) which is earmarked to pay my car off in a lump sum as soon as my parents are paid back in full, which is our first priority.

I’ve also been binge-watching Caleb Hammer on YouTube as it’s really made me change my mindset on the car debt - I genuinely used to think of car debt as necessary debt, like a mortgage is, even though it’s high interest on a depreciating asset. And I’m not a car person at all, I never buy new, I don’t care about people’s opinions of what I drive or anything, so it’s a very stupid mindset I had about the amount owed.

Not much maternity leave left, we’ve sorted out a nursery place and factored that into our future budget and it’s also made me realise how many baby purchases are completely unnecessary - we’ve either done without or bought second hand and not a single person can tell the difference. The toddler would rather play with soil in the garden than fancy toys anyway!

Thank you to everyone. Hope this thread helps someone in a similar position (and if you’re planning a family, make it a priority to have an emergency fund. It would have saved us sooo much worry!) I’ll aim to update again in another few months, but for now we’re feeling under control and we’ve got a solid plan to be out of all debt (except the mortgage) in the next two year’s maximum.