Asset Rich, Cash Poor - Me vs £130k debt mountain

Contro1

I hope you’re OK man, it’s tough but focus on yourself. 

enthusiasticsaver

I hope she doesn’t claim on your pension. If you have let her in on the plan she may feel that is worth pursuing. I think you are well shot of her and would concentrate on getting your budget in order and assessing which of those debts are hers and which yours. 

DebtSurfer

enthusiasticsaver said:

I hope she doesn’t claim on your pension. If you have let her in on the plan she may feel that is worth pursuing. I think you are well shot of her and would concentrate on getting your budget in order and assessing which of those debts are hers and which yours. 

Hi there Enthusiastic Saver

Loose lips sink ships, right? My dad used to say: "If you know a secret, write 1. If someone else knows, write 11. If some third person knows, write 111..."
I was very careful not to mention anything about pension to her, suspecting that one day she may want a piece. So far that hasn't materialised, but people have been known to surprise me both ways.

Her debts are currently £10.8k on the credit card, at 19.9% APR and a small overdraft.
Her new boyfriend is loaded -- and she started already on her journey. He paid for her Botox and now a laser treatment is due. My understanding is he's now more than £2k out of pocket already. He created a card for her and drops money there "so she can have small pleasures in her life". 
Quite familiar isn't it?

Stage 2 of Getting Out of It

I already completed Stage 1, having fixed my mortgage while I could, for 5 years, at 3.99%
-- a great "insurance" against murderous FCA whose "initiatives about affordability" could prevent me from renewing in 2024 without credit checks, and push me into SVR of 8-9%.
-- and a good wall against no less murderous BoE with its harrowing rate raises, jacking up the waste on all variable rate mortgages...

It is now only 2 months left until my big plan.

I have now sold my Mercedes! £10,532. Yes, not stellar, the original valuation was £12,100, but regretfully at one point there was a repair to the scoffed door not done 100% to standards (substandard repairs are cheaper at the point, but bite you in the back later), and two independent mechanics have easily called that out -- no, regretfully that's not a scam to swindle me out of my money, but the harsh reality. That kicked a bit off the final price -- so this was the best I could get.

I am actually fine with that: If I wouldn't sell by 30/07 -- there'd be a tax to pay, service to do and traffic subscription to end on 06/08 -- all in all more than £600 to waste straight away. None of that has happened. Plus I claimed back the remaining insurance premium and got £62 on top.

Basically this kills 1/5 of the debts on my person. Not bad for a first step. It creates some more breathing space.

>> My first action?

* The payment has killed my overdraft balance (bottoming out at £4,900) here & then.
* Killed the £5500 balance on my Barclaycard 2 which was being charged at 23.2% APR.
Effect: no more £150 per month repayments, of which £100 was going to waste -- and that card will also be out of "persistent debt" notification.
Begone! 
That should bump up my credit score by about 7-10 points in 1-2 months time.

>> Nearest plan?

* Start using the liberated BCard2 for daily expenses and pay it off in full every month as I was doing before (until wife's crazy 3-month long shopping spree had made it impossible anymore) -- instead of charging everything on my debit card.
When you charge everything on debit card, that's money straight away from your current account, -- if you're in overdraft that means they start accruing 39.9% APR interest immediately.
With the fully repaid card, the rolling balance will be charged 0% instead of the overdraft rate at 39.9%. Saving me more overdraft fees in progress.
* Pay off some of Tesco card balance, so that I start getting 0% offers and will be able to relieve Barclaycard 1 whose interest is continually being jacked up in line with BoE rates increases, and has now reached 19.1% APR. Why Tesco and not NW card? From my experience, best chances of getting a 0% deal with the same amount of leeway available.
* The amount of this is chosen so that it will leave me in some small overdraft, but not through the entire month -- effectively providing me a Tesco or BCard1 repayment reduction and even less total of the Waste category, and not at full 39.9% overdraft cost (I'll spare you the math, but effective APR on this small overdraft will be more like 15-20%, but there will be almost no positive balance to linger on the current account when it can be used to reduce cards' interest-accruing balances)
* Start consultations with PensionBee to get full information about tax implications for my planned small dip into pension.

Onwards!

DebtSurfer

Time for some light reading, for those who are unfazed by the sheer amount of text produced, and still care to appreciate it
So...
Why am I not sad a speckle about having parted with my Merc, even though I really liked the car itself?

Here comes, 
"The Mystical Story of my Merc"
(A story of a lovely car, always at the wrong place and wrong time, and carrying wrong people)

I had bought this car (E250 Estate) for these reasons: 
1) To travel to work in comfort and style;
2) To travel by road to foreign destinations faraway, in comfort and style;
3) To carry my potential 2 children and where applicable, a dog in the boot, comfortably;
4) Project the flair of a successful person.

In reality, during these 9 years that I had it:

1) I had to travel to work by rail and bus, sleeping on the way -- or didn't travel at all being unemployed, -- or was working from home. Yeah, right, some bleedin' style and comfort I got instead...

2) Now you'll grasp, what does it mean "always at the wrong place, wrong time, with wrong people":
- I tried once to go to Switzerland to visit my cousin. I planned everything nicely. I left our Goldie dog with a good friend, a dog sitter, for the duration of this trip. It took us 2 days to get there and more than 1200 km, Eurotunnel tickets, loads of road fees in France, and fuel expended, Airbnbs etc (one of which I didn't even use!). Wife made the road trip a living hell by constantly whining and quarrelling. After we've arrived, on our 3rd day at our destination in the Swiss mountains, our dog sitter has called us and said that our dog whined all 2 days and she and her hubby are at the end of their tether. We decided to cut the stay short & go back. What else could we do? Instead of a relaxing Swiss holiday of 10 days rest, -- there were 2 and a half days of pure holiday and 4 days crazy drive, exhausted after our second 1200 km (750 miles) drive over 1.5 days just three days after having completed the first one, plus lots of wasted money for broken reservations. Some "nice, relaxing holiday" we had...
- Then another time we went to Cornwall. We planned the route, a stay on the bucolic farm in Devon... Wife had a terrible headache, threw up and made our days miserable. No walking, no nothing. Then the car's back air suspension developed a fault and we were stuck on the motorway on our way back. Instead of "travelling in style" we got "rescued in style"... in a big cabin of a rescue truck, then half a day sitting on Merc dealership in Bristol,  forgotten about by everyone, and only asked who we were because it was time to close the doors. Thankfully the great sales manager gent had understood at this point the scale of their !!!!!!-up, pulled his strings and organised us emergency travel (which we were entitled to anyway!) and we then drove home in a (thankfully paid by Mercedes's road recovery) rented BMW 320 saloon  with the huge hairy dog on the back seat
- We went to The Hague once to see friends. It was a 3-hour drive to the port first (on pure caffeine), then ferry, then 50 km/h (30 mph) all the way to the Hague. The temperature was well above 30 degrees, our then-10 month old son nearly contracted a heat stroke (thankfully I noticed and scurried him home to apply cold wet compresses -- no damage done). Heat and babies don't live together well. Even in the night it was humid and 25-27 degrees. We couldn't even open the windows b/c it came to the front patio with public access. Not to mention refusal of Dutch supermarkets to accept VISA and Mastercard Debit and Credit cards because they are not from a NL bank, -- they want Debit from local bank, or cash (at least I could withdraw cash and pay with it, losing fees over fees). Alongside with rude and arrogant cyclists who occupy ⅔ of the road and have no intention of slowing down -- one even shouted "Off my Effin Way!" on the top of his lungs to us -- I'll let them simmer in their bucolic crammed Euro-bliss without my custom in the future.

- Enough examples?

3) 2 children were not to materialise. Just one child, and disabled (probability that would happen was 1 to 2,500, and we have pulled the Crappy Jackpot lottery). Thankfully, the advance of the medicine, as we hope, may well make him nearly-fully-healthy eventually. We tried travelling with the dog once. Huge problem of frozen dog food becoming not frozen anymore (storage space, smell), and the kibble gives him upset stomach.
- So remind me, why would I need such a barge then?

4) But have I got that invisible but tangible flair of success?
-- in dry residue, my "success" was measured as a steady migration from an aspiring middle manager worth nearly £300k in cash -- to an "individual contributor" with £60k cash debt -- and to feeling an impostor in that Mercedes, when you cringe and get infuriated with a £80 dining out bill with wife (and you hate the experience in the process) -- and by Mercedes dealership bills...

Selling the unnecessary luxury car:

1 - gave me instant respite from caring about two cars, where one would suffice. If you don't care about them and don't drive them, they will deteriorate. Was chased by endless feeling of guilt which always accompanies waste for me. Now I'm not.
2 - this Volvo is where I feel really comfortably now, no waste, can transport everything (its boot had swallowed a new flat-packed chair for my son easily), good fuel economy, and even parking under the sky and not under the trees (with their endless tree sap and pigeons' droppings). It is also kind of stylish, not an econobox, and its sound system is premium -- better than the one in my now gone Merc!! It's also very zippy, inviting thoughts it might be performance-modified! can't imagine 148 bhp can provide such fervor!
3 - naturally, savings -- as calculated before, having an unneeded car costs at least £1600-2000 a year which I'll repurpose to my goals. And not paying for the service, tax, and traffic subscription, of a gone car is so liberating And on top, no interest lost over this unnecessary spending, either.
4 - just don't laugh, but at one point I developed a theory, that this Merc was just not intended for me and hence, kept bringing me only bad luck all around. Having read the above mystical occurrences, you'd tend to agree with me.

Well then -- it's now gone, so bad luck should be sent off, and good luck should be around the corner.
Right

=== 

In case you'd ask. 

I am feeling really good. After the tribulations of last week, I brought the wife to the rail station, and came back in such a good mood, to see the ice cream truck stopping right by us -- so treated me & son with some nice Sherbets and got a movie. 
Also I started taking annual leave, lest I want it to be wasted at the end of the year. A good week off is exactly what I need now. So the coming week is for relaxing!

Onwards and Upwards!

dawnybabes

Lots of positives

DebtSurfer

Just realised that if I paid to Tesco card account £870 now, my normal Direct Debit of £241 probably won't be taken, b/c payment was already made. Leaving me even more money in the account.

Time to try that £400 stint -- reclaiming council tax I paid while getting Universal Credit. Which I shouldn't have been charged. The holiday time is good for catching up on these long-delayed tasks you always wanted to do, but had no energy left at all when the child has settled in his bed...

Mortgage_Minimiser

@DebtSurfer I read your entire diary last week and just wanted to say keep going. You've had a torrid time and i hope you are ok. Not heard from you for a little while. 

MM
x

Getridofdebt66

@DebtSurfer i just wanted to say ive read your whole diary this week, you have been through some trials and tribulations but well done for continuing so hard with the debt busting. 

Sorry about your wife, especially for your child, just awful for now, it will feel different in the long run. With regards to her new partner earning loads and being well off, all I say if good luck to them and think no more. Its hard but thats there path they will have their own trials and tribulations, leave them too in 😉

Well done on the journey so far and I can wait to read about the rest of it. 

DebtSurfer

Just a short update. 
The Day is approaching fast, 17 days till my eligibility, but God knows how long it will take.
Plan DeM (Deus ex Machina) is standing by.

Selling my Merc has improved things a bit, e.g. one of the cards, BCard2, was paid off, alongside with a hefty overdraft, and now instead of paying for everything from my current account, I only pay the running balance on BCard2 in full. Overdraft is still sometimes the matter, but the balance on BCard2 gets paid in full, so is held at 0% and so does her BCard.

The wife's purchases from minus 2nd month (30 days BNPL) kept running up the card balance. That month overdraft charges still hit as well, so this month the "waste" part of my spending was reduced only by about £100, & the last month still finished visibly in red. 

Everything takes time. My payoffs haven't yet materialised into 0% offers. One of the credit agencies upped my rating, but both NWide and Tesco cards still don't offer any feasible balance transfers (i.e. those which are not "standard rate + fee on top" -- they can stick these "deals" where the sun does not shine). One of the reasons is that Barclaycard (scorn be to it) is very slow to report changes -- the last update is still 19/08... that's before I sold the Merc...

I evaluated the variant with partial repayment and leaving the rest of card balances to be repaid. Regretfully there seem to be no upsides in doing so. Balances will cost more to repay overall, card interest rates being way higher than pension fund actual performance, and the debt misery would be dragging on and on, instead of being dealt with straight away and giving me more valuable trouble-free time.
It looks like the optimal solution is to pay off everything except £5k or so (that's how much is possible to comfortably pay off at a 0% balance transfer deal for a year), being careful not to trigger the flex access and MPAA, and then concentrate on using my "salary sacrifice" pension scheme to partially replenish the used part of the pension fund, while optimising the taxes at work, from 40% into 20% band. 

It is a shame that tax-free portion of my pension will be fixed at ¼ of pots as they are today. However, worry not; the overall tax loss difference could be realistically about £4k (based on projected +£80k fund value increase at the point of beginning to take it, hence the ¼ value will increase by +£20k, and the tax implications -- by 20% of that sum, or £4k).
So what?
These £4k are well worth it. This is just about 5-6 months of what is currently going to "interest waste" at my current debt level, which will be eliminated after DeM plan -- so definitely worth it to get rid of that waste immediately.

My response may be start pumping up my ISAs instead, rather than trying to recover pension to its original; the ISA will be taxed at source and pension taxed later. If I reduce salary by salary sacrifice to 20% band boundary, the tax losses will be the same 20%, be it ISA or pension outside that ¼.
But then ISAs will be tax free to delve into it at any moment, and replenishable at the rate of £20k a year. Stocks ISA can offer reasonable long-term performance.

Not long now till I pull the handle of DeM, Deus ex Machina plan.

SuzeQStan

Keep those plates spinning - no one knows best what’s right for you except you.

as long as your plans keep your gold digging cheating missus off your cash then it must be good. Are you ringfenced & protected as you can be from any future claims from her? Surely if she has taken up with another that must reduce any claim she might have on your future earnings, pensions, savings pots etc?? I’d get as much proof as I could together IMO