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

vampirotoothus

Hi Surfer, there are much better savings interest rates out there. I would save, as having that in the bank gives you many more options than overpaying the mortgage. You can withdraw and pay off the mortgage later, if you choose. Best wishes to you all V x

enthusiasticsaver

Goodness me what a lot of happenings for you recently.

First of all congrats on the debt free although I normally exercise caution when paid off by windfall like your pension lump sum but I am sure you will keep on top of things and not allow the debt to creep back up.

Good plan to maximise pension contributions while still working. I have just opened an 8% savings account so some good rates out there and of course overpaying your mortgage is a great idea. I strongly recommend emergency savings first though.

As for your wife and her sudden health deterioration could her recent behaviour be anything to do with that?  Even if the relationship has broken down it is good you are visiting for your sons sake if nothing else. I agree no more access to credit for her and suspect the new boyfriend will fade away. Look after yourself and your son. 

Contro1

Glad that your debt is finally gone man, hope this time around it works out better for you, deeply sorry for your situation with your wife.

at least £900 of ‘waste’ is back in your pocket now! After the initial end of card interest is paid. I have an issue with how you will use your cards now.

martin normally explains once it is paid off to cut it up and throw it/cancel the account it seems that you still want to use them? I don’t think this is a good idea as it could be exploited again…

can’t work out if I’m right or wrong?

congrats anyways!

SuzeQStan

Contro1 said:

Glad that your debt is finally gone man, hope this time around it works out better for you, deeply sorry for your situation with your wife.

at least £900 of ‘waste’ is back in your pocket now! After the initial end of card interest is paid. I have an issue with how you will use your cards now.

martin normally explains once it is paid off to cut it up and throw it/cancel the account it seems that you still want to use them? I don’t think this is a good idea as it could be exploited again…

can’t work out if I’m right or wrong?

congrats anyways!

DS explained already

those balances you have gotten rid of - are you able to close the cards & credit accounts completely so that there is no chance your wife can spend on them again?

If she ever recovers enough to be able to spend (yes, this is that serious...) -- no more credit card for her and no overdrafts on the debit card. Just some money on the debit card. When it's gone, it's gone. Want more? there's that other guy. Doubtful though he'll stick with her after she's been stricken like this...

I will use the credit cards but will pay them off in full, just like I was doing for ages before all this ton of sh%t dropped over me.

Why?

1. spending and paying off keeps pumping your credit rating.
2. spending and paying off prevents the cards from being attacked for inactivity, which could be: reducing limits, or even attempting to close it.
3. as my commander used to say "part with money at the latest opportunity" -- it's additional 26-56 days of dough in your account, earning interest.
4. Nationwide card for general spending (easier to track alongside current account within one app), Tesco card for grocery spending. Kinda shows the running balance, where you are on the budget, easier to see overspend and take measure. Payment by DD, only ever the Full balance.
5. purchases made on credit cards have additional protections

Sarahwithlove

If your mortgage will allow underpayment then I would definitely put some of it there. Could you look at doing some kind of 3 way split? Increase pension and then with whatever extra is left over split between savings and mortgage. That way should any large expenses crop up you have some kind of buffer and not just rely on credit cards 

Contro1

SuzeQStan said:

Contro1 said:

Glad that your debt is finally gone man, hope this time around it works out better for you, deeply sorry for your situation with your wife.

at least £900 of ‘waste’ is back in your pocket now! After the initial end of card interest is paid. I have an issue with how you will use your cards now.

martin normally explains once it is paid off to cut it up and throw it/cancel the account it seems that you still want to use them? I don’t think this is a good idea as it could be exploited again…

can’t work out if I’m right or wrong?

congrats anyways!

DS explained already

those balances you have gotten rid of - are you able to close the cards & credit accounts completely so that there is no chance your wife can spend on them again?

If she ever recovers enough to be able to spend (yes, this is that serious...) -- no more credit card for her and no overdrafts on the debit card. Just some money on the debit card. When it's gone, it's gone. Want more? there's that other guy. Doubtful though he'll stick with her after she's been stricken like this...

I will use the credit cards but will pay them off in full, just like I was doing for ages before all this ton of sh%t dropped over me.

Why?

1. spending and paying off keeps pumping your credit rating.
2. spending and paying off prevents the cards from being attacked for inactivity, which could be: reducing limits, or even attempting to close it.
3. as my commander used to say "part with money at the latest opportunity" -- it's additional 26-56 days of dough in your account, earning interest.
4. Nationwide card for general spending (easier to track alongside current account within one app), Tesco card for grocery spending. Kinda shows the running balance, where you are on the budget, easier to see overspend and take measure. Payment by DD, only ever the Full balance.
5. purchases made on credit cards have additional protections

Ah! May have skimmed that part! aha thank you!

DebtSurfer

Sarahwithlove said:

If your mortgage will allow underpayment then I would definitely put some of it there. Could you look at doing some kind of 3 way split? Increase pension and then with whatever extra is left over split between savings and mortgage. That way should any large expenses crop up you have some kind of buffer and not just rely on credit cards 

This is something that I'll comment immediately because you totally nailed the whole idea of my plan.

• There could be a significant disposable income (I only now realised that I actually earn quite a lot, it just was  being sapped with all that interest waste and CC payoffs)
• The rainy day fund is a wise idea, so some of the money should be in the instant access savings account. 
• However, it would be not optimal to let it ALL simmer in Savings which gives me 3.75% when my mortgage rate is 3.99%.
• I have the underpayment facility available; so then, the money will be effectively deposited at 3.99% into my mortgage -- with up to £979 available for access within a month however -- not suitable for larger withdrawals.
  
• If the unexpected outlay is really bad -- I'd put it on credit card, grab the 1st underpayment (£979), then will be the statement where it becomes due to pay in 26 days; grab another underpayment (£979), and when there's due date -- you got additional £1958 to kill this card's balance alongside with all the money you have in save etc.
• Pension increase makes total sense, what with the tax optimisation it brings as well. However I don't want to put more than necessary into it, as this is money NOT easily available; I still have some part of the tax free lump sum available, but I rather let it be there (God permitting!), until the days I will need it due to being less able to work.
  

Thus the plan will look like:

• initially start with fixed pension contribution jack-up (I reckon salary sacrifice plan to lower effective salary to £50k) and money to rainy day fund, nothing yet for mortgage;
• as the said fund builds up, start diverting money from the part allocated to it towards mortgage overpayments.
  
• once the rainy day fund is at 3 months worth of food and bills (sans mortgage as in case of calamity mortgage payments will pause), I'd leave a trickle still flowing toward it, but start hitting mortgage in earnest.
  
• If a big bonus at work comes my way, it's worth "pensioning it" due to tax savings
• but if it's more money left at the end of paycycle (they've already been taxed), I'd rather drop it into mortgage when I don't need more rainy day stuff.

For a part of that rainy day, Nationwide is currently offering a good idea -- saving up to £200 a month, for a year -- special rate 8%. Could be suitable for a part of the rainy day fund. (We have no emotions about investment and know maximum you can say like that is about £2500) -- if I must save anyway, why not doing it at 8%.

Strategy:

• Since pension refills are planned, it may be worth it for my next place of work (when the time comes) to find a company that contributes more to pension if you contribute more -- like match or match + X%. The current one only pays 4% regardless of how much you pay.
  
• May be worth to take some courses to increase income further yet -- carefully thinking next step in a career so for a change, I don't get let go, but go when and where I want to.
• God permitting of course!

Yours, Surfer.

DebtSurfer

Just a quick update.

Wifey.

After 8 gruelling days in coma, my wife started to exhibit life signs. My sister-in-law and her best friend were receiving updates from me as I visited her every day along with our son.
Believe it or not, talking to people in coma works quite often. Her perception was that me and our son have with quite some urge pulled her out of the Great Nothingness, taking one of her hands each. (In reality physical configuration was different, but the sense of pull was quite strong.)
After that another 9 days, each of which brought some progress. Firstly, she came about physically, but her noggin was completely screwed up with massive volumes of viscose delirium closely intertwined with reality. Then slowly the delirium started to give way to reality. Soon as she was able to, she was transferred to a normal ward and on her second day there, skedaddled home (3 km!) -- causing quite some ruckus and me having to deal with that situation amiably. At that point she still tried to ... believe me or not... threaten me to never ever call ambulance on her again! some gratitude that was. Told her though, she'd be lying in a nice coffin with ruches if I waited another few hours on calling the triple-nine.
Yeah, after that experience I became harsher -- but not in abusive sense. Just wouldn't take any crap anymore.

I also let her "special friend" know on day 10, when it became obvious that she'll make it. Looks like he treats her well and with respect and care. He was genuinely scared for her. Well, as we say, ... "may you two have concord and love" -- I'll think of something after that, too. Life happens. I'll still have my son though, we go together quite well, he's more Daddy's boy, more keen on military games rather than drawing flowers and insects.

Finances.

After initial payoff, and all new spending going to BCard 2 which I paid first of all, -- I devised a new configuration.
1. Tesco card would start accepting all Groceries and Fuel
2. Nationwide credit card would bear the brunt of non-supermarket expenses (insurance, purchases, shopping etc)
3. Her shopping freedom stays within a part of £250 balance. 
4. All the other things would go to BCard 1 with my approval only. There will be no saved card on her shopping.
5. Klarna is now forbidden. It creates illusion of "nothing has been bought" as is not reflected on a running balances, and then, next month, it just sucker-punches you in the guts. Also there is no trace except in the Klarna app. Constant purchase-return-(retaining some)-purchase cycles make tracking of real amount spent a complete untraceable nightmare.
6. Purchases can go ahead on BCard 1 -- next tryouts only will happen after refunds on previous ones and clarifying how much was left. 
7. Her Nationwide card is now strictly forbidden too. (At 23% APR you really don't want to be spending on it with interest).
8. BCard 2 will be paid off one last time, then its credit limit will be merged into BCard 1, creating instead of two BCards, one big BCard supercard with £19,300 limit -- for ultimate emergency situations -- at 17% it's still one of the lower interest cards. (Hope they won't decide to cut the limit immediately). You can buy a decent car on that one, just I'd rather not
9. Ensure there are never overdrafts on current accounts, even one day -- less bills to track. Will try to keep £200 buffer on my current account at all the time, the rest is stored at my old savings account, which grandfathered  the 3.75% AER rate.
10. Killed the stock private medical insurance at work. With excess of £250 I won't be tempted. Will probably save me at least £40 a month or so.
11. Soon as my next salary comes, Home and Content insurance returns. Enough living in an insurance limbo. Time to start earning that NCB on this. Especially that my neighbour just had a pipe burst downstairs which flooded the entire ground floor.
12.
Sad news about MoneyDashboard going out of business. It's been with me for 7 years... super easy to use and very useful in tracking expenses. Now they're unable to sustain the business model and are switching to B2B operations. RIP...
As a replacement, they recommended Snoop app, which also has Web interface. I liked it so far, waiting for the things settling down in my finances, any interest payments going away, has a lot of stats; also even the free version is great, but with paid version at £31.99/year it provides even better features, including one of my favourite -- expense tracking by paycycles and not months. So far I'm given 3 months "migrational" free trial, expiring in Jan '24
13. Savings arrangements -- pension, savings, mortgage overpayments, after a month or two when it becomes obvious, how much net I really have left after the month, at the end of my paycycle.

Just a few comments.
1. Not putting all running expenses on one credit card. Currently BCard2 with a limit close to £6k would be carrying (completely paid off every month) balance about £2k -- that's above 25% and 30% and is hurting the credit score a bit. Distribution of expenses throughout three cards would avoid that.
2. It also avoids the situation where in case of very high emergency spend I would not be able to pay off the monthly bill. Maximum, only one card will be not paid -- and instead either paid with the mortgage underpayment, or a balance transfer (which I expect will start to provide 0% deals in 2-4 months).
3. Having separate bills ensures I see roughly what goes where -- some sort of a easy-a*se budget with immediate visibility.
4. It also ensures all the cards are engaged somehow -- countering the banks' efforts to close cards for inactivity (wife lost one £5000 card this way), or reduce credit limits as a "helping to protect your finances" (No).
5.Some credit report agencies started to see new balance. Alongside with killing the manner of using BCard 2 which leads to its overuse above 30%, it should start repairing my score from "Fair" into "Good" territory, hoping for the better after 6 months or so.

The results will probably start to become visible in November, which should become the first month without debt toxic waste (well, almost, there can be a pound or two of overdraft interest, that all). See how the credit score feels, too. 

Work.

I started with submitting my concerns to the boss and the boss's boss. The boss tried to undermine a few of my achievement, but was pointed at his mistakes. New responsibilities: Yes, New Salary: No, did not yet materialise. We'll see in a few months, there's an indication of potential salary reviews. 
Will get what I can from this workplace, lots of amiable, expert people, each of them can offer to teach me something.

Hoping that when next time for a new job comes, I'll do it on my own, not just anywhere they'd take me. I know it's a tall order when you're 55, but -- "I have a dream"

Life repairs.

When the Wife returned, I asked her help in washing everything. While making plans.

After you live on a shoestring for 7 years, I still am overprotective with money, keen to see the figures growing. 
1. Start with backyard fence repairs, it's now unstable and prone to fall.
2. Get out the cuts from the garden to the tip, cut that grass finally, sow some, too, ask an electrician for a new properly made electrical outlet in the garden.
3. Urgent home repairs (Handyman).
4. Stop the leaks in all the sinks and toilets (As suggested by one helpful Forumite ). After that try & claim the overuse of water bill as suggested by company.
5. Install that funky Camera doorbell (everyone has it, I do, too, just couldn't care less while laid at the bottom sunk in debts caring alone for a child, a dog and a cat, looking after sick wifey, while trying not to lose a job).
6. Install a water leak detection device (yes, I have it, too, again, had zero energy left).
7. Finish diagnosis on my car's A/C -- might be working after all. They have dye put in to detect any leaks with UV lamp.
8. START SELLING OLD STUFF -- once the previous stuff is done, few old phones, 2 child car seats, pram, extra stuff.
9. Claim £400 in overpaid council tax from my council from my 2022 unemployment time when I received Universal Credit.
9. Sort out my wardrobe.
10. HEALTH. It's generally very good (Thank God!), just a few little things to be looked at.
... 

But, as usual, "Man plans and God decides."

Till next time!

SuzeQStan

Hey DS - good to hear your missus recovery. & some excellent positive sounding plans in your update! 👍🏻

just wondering though how you are going to stop your missus using kl@rna?  Isn’t it linked to online shopping accounts etc? I’m wondering if you reached out to kl@rna explaining the situation they might agree to refuse her credit? 

When you say she is ‘banned’ from using credit cards does she no longer have any access at all to them?  She might have these cards saved in online virtual wallets & various online stores.. 

after all your hard work it would be a real shame if she was allowed to go back to bad old habits.

SuzeQStan

Hope all ok @DebtSurfer