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

sparks_2023

- There are rumours that annual contribution limit after you took the lump sum will be reviewed from £4k to £10k. I'd increase my contribution significantly, and see if my company could match that. That'd also reduce my tax bill !

That is the MPAA.

For accuracy it is only triggered after you take the 1st £1 of taxable pension.

Taking the tax free lump sum does not trigger the limit.

CRANKY40

So your wife has lots of clothes but you never go out. There must be a storage problem somewhere? How about her setting up to sell some of the overflow? Vinted is better than ebay apparently. Tell her that whatever she makes in sales she can have to spend on new junk  treasures? That may give her a little interest in something other than shopping. Once she's sold her own "spare stuff" she can trawl the charity shops for more things good enough to sell. It sounds like she has a keen eye for detail when she's in her better moods. If she liked the pub outing she could try and earn enough money for the next trip? It might give her more purpose and if not actually adding to the budget she may at least stop taking from it? Sell it to her as an opportunity to put her wealth of fashion and beauty detail to work. 

Whiterose23

I think you’re in denial. Your optimistic nature comes through in your posts, which is commendable, but unless you face up to the problem that is your wife’s behaviour/illness or whatever it is, I think you’ll never get out of this situation.
You say using part of your pension offers a solution and will give you the freedom to start paying off other debts, but you’re not considering the possibility (and most likely the reality) that your wife’s spending will still be an ongoing problem. In fact, it may become more serious if/when she realises you have eased the debt burden. Then you’ll be back at square one but with a miserly pension.
Not all shop/supermarket work is stacking shelves.
Why have you spent so much on dental work? Is it essential or cosmetic?
It seems to be a cultural issue regarding your attitude to your wife. Commendable (I think) that you stick with the marriage despite her behaviour, but she knows you’re going nowhere, however badly she behaves.
You’ve stuck with her through not only horrific spending and drinking problems, but also whilst she’s been sampling the delights of Tinder?! 

And in the middle of all this is a young boy, who will be picking up much more than you realise on how not to live a healthy life. It’s very sad.

alt80

Glad to hear you have a secure job, that’s great. Had to laugh re the roles you see as ideal for your wife though, I’m in the property business, and not a !!!!!! chance your Mrs would last five minutes, it’s fast paced, junior positions pay poorly, you need to be relatively fit - up and down stairs, crawling in cellars, up ladders into roof spaces etc. and a lot of property is !!!!!! disgusting. It’s not all well restored country piles and brand new shiny industrial units. Not be happy working in hospitality but happy to work in property, !!!!!! deluded. I !!!!!! love how everyone thinks they can get into property, earn plenty of coin and keep at arm’s length from the !!!!!! side of it. Anyhow rant over …

 

Personally I don’t think some of your budgeting is entirely realistic and cannot help but wonder if some of your wife’s problems are related to the type of attitudes that leave you letting your home and contents go uninsured, cutting her hair to save a couple of quid and reeling after spending £80 on a pub meal once in a blue moon.

 

You’re more or less back where you started with the overdraft, no assets other than the equity in your home and your pension, you are in an employed position without any need to raise finance for commercial purposes and from where I’m sat with what you’ve shared no real consequence to going down the road of some kind of debt management. OK, it’ll ‘trash’ your credit rating and limit access to credit for the foreseeable future but in your case I’m unsure what you actually need (or want) access to credit for? – all it seems you are currently doing is juggling your income deficit and getting into further debt at worsening rates of interest. None of the debt is secured. Tbh I’m sure @enthusiasticsaver will correct me if I’m wrong but from where I’m sat you’ll likely have a better life with no further access to unsecured debt and some kind of debt management in place?

enthusiasticsaver

DebtSurfer said:

enthusiasticsaver said:

Your soa shows you are not managing the minimums. You have a £400 shortfall. 

A DMP freezes the interest on the cards and overdraft so that would be the biggest help to you. Yes it involves defaults and trashes your credit record but honestly more borrowing would make your situation so much worse and you are a long way off getting 0% deals if those cards are close to the limit and the spending continues at the same rate. You won’t pass affordability checks. That would be my option in your situation unless you can get an iron fist to the spending and cut down the groceries, medical and clothing which look to be the only areas with scope to decrease. 

Doing a DMP won’t cost you your home or your pension. The debts are unsecured. You can also self manage a DMP if you don’t want to use a debt charity. You can still remortgage with your current lender when a deal expires even with a DMP. Without doing that you are facing a long haul. You have obviously been relying on credit for a while but eventually there is a tipping point even without the poisoned chalice of a wife who won’t stick to a budget. 

Think this is what the Money Worries lines offer, or about the same.
Once I even rang this line. (after they were trying to send me "You're in persistent debt" notice over my overdraft). I know you gotta tell them no I am not, and they get off your back. However they suggested that I call this line and so I did.
I straight away said that I didn't think I belonged there, and just wanted to know what it is all about.
 
Indeed they were going to offer me to freeze interest on overdraft. 
Much good it would do me... £50-80 interest a month not paid, but -- I'd probably be restricted from running more debt on this overdraft, which is the way to cope with unexpected bills for me. 
If I went into DMP they'd force me to repay repay repay only at the condition of frozen interest.
However that would put severe limitations on my ability to cover what life throws at me. No more manoeuvre space.

I am afraid that DMP would thus cut all my ability to put anything on credit.
That would really suck.

Also DMP would not rid me of any debt. It will still be there for ages to come. Only my minimum repayments would turn from £1300 into £600. This will not quicken my repayments at all, I'd still be paying minimums. But hey this is what I can do right now by spending a bit of what I've repaid -- where there is still hope of getting back into 0% deal with Tesco.

I have thus a £600 or so reserve. 
Only I'm not spending it all. On good months I don't spend any of what I've just repaid. When there are no extra bills and Her spending is manageable. 

If push came to shove, and I really need more money -- I'd also underpay on my mortgage payment -- even though I don't take it lightly and am hellbent on paying maximum of it ASAP, now that monthly interest bill on it is £300 due to BoE trying their monetaristic solutions on us all. Already didn't do any of these since June '22 and intend to continue this way, the sight of mortgage going down steadily brings joy to my heart!

Hope: the rates on variables (and credit card interests) will start to go down in the second half of '23, the war will somehow end or get frozen, the prices will stop growing that badly, this will allow to pay off mortgage faster, reduce interest bills and make my life generally better.

RE: Affordability.
General rate loans are firmly not available due to yes, affordability checks, which is currently 0-20% according to all of my credit reporting services. Even though my credit score is fair and almost good. 
I suspect that the normal cards are the same. Again, darned affordability checks.
I won't touch with a barge pole the available to me bad credit offerings. These are not for me. Let them stick their 49.9% APR cards with 3 months 0% where the sun doesn't shine. This is merely insulting my intelligence!
Likewise I'm not touching secure loans at 9% APR - yeah right, let them go fly a kite, I'm not putting my house into peril.
A few years ago I tried to increase my mortgage to consolidate all debts at 1.19% rate. That would've been lovely and in all truth should have worked. But the advisor merely put in the digits and said £0 available -- even though putting them there would clear them all. Monkey, he was, no ability to decide, merely repeated "no affordability mate" and I was on my way.

 

First of all you are in persistent debt unless you have paid off more in 18 months  on your debt than you have paid in interest and charges. So if your interest over a year is £8k then you would need to have repaid more than £12k off your debt over the last 18 months. What was the debt September 2021? 

You say you would not take out a secure loan but would remortgage to consolidate debt? Either of these would put your house in peril. As we have seen interest rates can move so the 1.19% can go up three, four or five fold. It is the principle of borrowing on your mortgage to repay unsecured debt which is wrong. 

You are relying on credit and your plan is to sometimes spend less than you repaid. You are afraid a DMP will affect your ability to borrow (yes that is the point). You are afraid no more overdraft gives you less manoeuvre ability but you cannot repay debt that way anyway. Shuffling it around won’t repay it.

I admire your optimism in that you may get another 0% sometime or interest rates may come down or your wife may spend less on the cards than you repaid on the odd month or you may underpay your mortgage or cash in part of your pension so I am sure in your mind you are taking action but I cannot agree. I wish you well though and sincerely hope you manage to deal with the almost £60k of unsecured debt without the drastic step of drawing on the pension.  In the meantime though you are leading a “Tesco value life” and there is nothing wrong with that. Many people do. 

I think your best bet is a DMP or complete block on using credit whilst cutting back. Anything else is really “fiddling while Rome burns”. Happy to be proved wrong though. 

jokono

You are very against a dmp but I am not sure you understand what it involves. There is a thread here for help that can maybe bring some light over it. You stop paying your unsecure debts and wait for them to be defaulted. During this time you put any extra money (that would normally go to debts) in an emergency fund, so when something unexpected comes up (like dental work) you have the money and don't need credit. You also start saving for expected stuff, like car service or home/car/life insurance, holidays, etc. When you get defaults you can then arrange a payment plan with the creditor, you can do that yourself and you only have to pay what you can afford. You set up the payment plan considering you still have to pay into those saving pots. The interest is stopped so you know that everything you pay go towards getting rid of the debt. You have savings and you keep saving, so you don't need any more credit, which means whatever your credit ranting is for the next 6 years is irrelevant. You also get to keep your pension.

I added some comments, can't find a way to change the text colour. Not going to comment on anything else, but your logic doesn't make sense. All the arguments you have for dipping into your pension are very good arguments for taking the DMP route and not touching the pension.

DebtSurfer said:

Pension Dip

Practically everyone on the forum think that dipping into pension is a really bad idea. 
- I agree that this is a decision not to take lightly, but that would kill my debts and stop wasting the thousands I am losing on interest (probably about £8000 a year!!! - not if you stop paying and get defaults) practically instantly, and enable me to start attacking my mortgage immediately with a vengeance, then start saving in earnest. - you can do this once you stop paying the debts and the interest stops
- Everyone talks about how that will lose me pension in the older age, but no one remember that in 6 years I'd lose £50k hand over fist into interest...- not if you stop paying and get defaults
- Who knows whether I'll be able to hold bastions for 6 years?... - at least if you default and there's no interest you could still pay them by then and still have your pension
- I still have 12+ years until State Pension age, there'd be enough time to replenish a bit of lost pension fund.
- There are rumours that annual contribution limit after you took the lump sum will be reviewed from £4k to £10k. I'd increase my contribution significantly, and see if my company could match that. That'd also reduce my tax bill !
- I'd open ISA/LISA and start saving there. 
- And an investment account for a few thou.

- I was also thinking about a combined solution where I'd just take £20k-30k-40k sum only (£20k is honestly within the limits of my pension account annual fluctuations!) -- that wouldn't rob me of much, but would let me to pay off a few of my cards, reducing monthly outgoings, and enabling 0% deals again -- that would let me to detoxify lots of my debt to 0% and/or 8% balance transfer deals and start to pay off things by a normal snowball method. - 8% is still more then 0 and it can start now while keeping your pension

In this case and in this case only I might even go ahead and replace my £12k Merc with an old, £5k range, Audi A6 or Volvo S80 for a few years, to kill the debt faster. I could eat the humble pie for a set amount of years, but not when it's forever. There has to be hope in front, then I'm ready for limited sacrifices.

My snowball calculations showed that in 5 years I could be debt-and-mortgage free. - you can still do this when defaulting and making affordable payments while building an emergency fund and keeping your pension
Promotion or better job title + increased incomes + snowballing would make it possible. - none guaranteed

I could be meeting my 60 free of my gorram debt mountain. - still possible while not touching your pension. If you take the easy way out you will most likely end up with no pension and just as much debt, if not more. Get defaults, pay your debts while not being given any more credit because of the defaults, and keep your pension.

Think I saw somewhere a free pension advisor appointment for 1 hour. 
Might just have a chat with them. What do they think?
Will check among benefits at work as well, our pension provider may be offering free consultations as well. 
Costs me nothing, hurts me never, expands my mind for sure.

DebtSurfer

Hi All,

Just returned to the thread after a little bout of work that required me to put things aside for a moment.
Wow, I've received quite some feedback meanwhile. Thank you for spending your time and not giving up on the stubborn me!

I want to say that
I really value your insights you are offering.
Harsh they may be sometimes, but then they are honest and without painting things over with milk & honey, and some of the criticism is well deserved.
(You won't be judged, they said ) 

Make no mistake, I may not be agreeing with some parts of your evaluation of my character or indeed my wife's, or not expecting you to fully understand some aspects of our behaviours. That is fine.
But all your feedback is extremely useful to me as it offers a point of view differing from my own.

(For example, you might think I was ready to go for secured loan or take a second mortgage -- not really. The first thought I disposed of immediately without even considering in earnest, the second quite soon after learning that it won't be further borrowing on existing mortgage with its rate, but rather a second loan from the same provider attached to my house, with second ongoing payment. I'm not that stupid to put my "home forever" into peril.

You may think I went easily for being without home insurance for a while... or didn't realise the gravity of potential implications. Wrong and wrong. With our storms ever increasing, and home getting older... something is bound to happen.

The whole Tinder thing -- Yes, I did allow this willingly and no, I don't regret doing that. The result of this was as I intended. The door opened is no longer lucrative as the door closed. I have enough Zen for doing that.)

To those of you thinking I am in denial.
I must be indeed in at least partial denial, shielding some facts even from myself -- opening myself up to (as much as I can deal with in a single bite), shielding off the rest to prevent mental overload.

But I'm taking the information piece by piece and try to chew through the gory details gradually, to decide what to do with them. Not afraid of facts. Just our minds sometimes play tricks with us, closing whole areas to us.

=====

Historical Review

I spent half an hour with my financial software to review historic information (maintained since 2014 or so)

I looked at the total debt amount over last 3 years and it is going down steadily.
However, the graphs show that if the mortgage is excluded from the equation, the unsecured part of debt hasn't changed much for last years, but the waste has increased (waste be the interest on debt). Bummer.

I suspected something like that, b/c the net worth figures I see every day might be lulling into false feeling of security (especially if you PensionBee value increases due to market fluctuation). They make you think you are in £80k+ plus. No, you are not.  Pension is not an expendable asset. So in reality, it is a £131,900 (as of today) -- or £128,600 (tomorrow) mountain of debt.

This is why Emma app's main display where you see the total amount of your unsecured debt (it can account for mortgages but in a Pro plan, which I would normally get gladly, but not in my current situation). And it's just pumping up & down.

In plain English,
1. I've been paying off my mortgage steadily, but
2. Been just coping with the other debts without really getting far or indeed anywhere into repaying them. 

That reduces the overall debt mountain, but not doing anything with the card debts.

Considering that the cost of debt coping has increased (a few 0% recently expired), and yet I'm not sinking deeper,
1. we have improved a bit on the compulsive shopping (gone are the months where £2000 would go and there'd be denial from the other side) and
2. also improved on her alco.
Progress is present, but still lots to do on that front.

Also,
the SOA has shown we indeed spend a lot on supermarket shopping in addition to the clothes/shoes/beauty/cosmetics/fragrance we already know. And this is not compulsive, since it is me doing groceries shopping, and I only ever shop by a defined list. Not in list -- not in the bag (unless I remember what should be there but has been forgotten). Analysis has started, I might share later what actually runs up such a bill.

Wife said it's just probably because we're eating healthier now. Greens cost, indeed. Nah, something else. I'll return to it later.

=====

"Money Worries Line"

Since so many of you think DMP might be a better option than dipping into pension for part of the debt,
I wish to get more information about it.

I don't seem to be keen to go to companies doing it, they take over a part of your life. I had enough of people controlling my life when I was on unemployment benefits. Hate the experience.
But I thought about the Money Worries line. Which seems to be eventually doing the same as DMP -- freezing interest in exchange for some conditions. That would kill the credit score a bit.

Why my score worries me is NOT because I won't get more debt to spend. I have enough credit limit and can juggle it. I'm also not going to get a mobile contract anytime soon. I'll buy my next phone off someone getting an upgrade, when time comes, for a 1/4 or so original price. 

However I am honestly afraid I could be forced on prepayment meter by my energy company b/c British Gas do run hard credit checks -- should I ever try to change provider, that may leave me ineligible for direct debit, and hello, prepayment meter. THAT would really suck. I'm NOT taking this, paying more for the same energy, and being relegated to the bottom rung of society.

Nevertheless,
If any of you have done the Money Worries line call thing,
please tell more of how this works?

1. What they offer you?
--> My impression'#s that they can freeze your interest, which could be helpful. After all £630-720 is wasted every month right now. That would put me into positive monthly balance, allowing for actual repayments.
--> Anything else?
--> Remember I am still managing my payments without going under. Does that matter I'm not someone who can't pay bills?
2. What do they want for their offer?
--> E.g. precondition of no more spending on this line of credit, or else interest is restarted.
3. What exactly adverse information will be registered on the credit file that kills your credit rating; is it 
--> a "Default" on the card? "Late payment"? "CCJ"?
4. How badly, and how long for, it will affect credit rating for? Right now it's fair-in-the-middle, or fair-closer-to-good. Can go back to good if I reach below 90% on some cards and kill Barclaycard 2 below 50%.
--> E.g. it will go to "below fair" or "p!ss-poor".
--> E.g. until 12 months you finish the plan, 24, or 72.
5. Will the credit score suffering be worse, if I chose to implement "Money Worries" measures on several or even all of my accounts, rather than if I implement this only one one account?

You'd say "just call already and learn for yourself, why are you procrastinating?". 
Easy, tiger...

-- I know all too well that my Money Worries line call (as any other call) will go into their CRM. It may attract their undue attention and lead them to assumptions that I'll be unable to repay my balance. That in turn, may lead to credit companies starting to kill the credit lines or even indeed force me to repay debts here & now. NOW THAT would be really scary.
--> Again, it's not my paranoid assumptions!
A few years ago, Barclaycard tried to cut my credit limit. Of course, that's how business works. They extend you credit when you don't need it, but cut it frantically soon as you really need it (which is why I took special caution to never attract attention). I rang them and gave them a mouthful that they are not trying to be "responsible lender" but they are killing perfectly good paying clients' credit ratings by pushing them into higher credit utilisation bands, and causing a chain reaction.
The end result was that the man moved some limit from one card to another (it was impossible to revert the limit cut as you would guess) but they never tried it again with me again.
-- It may well even be a "honey pot" to collect intelligence pointing that some people have become higher risk -- to batter them with even crappier conditions or indeed withdraw things like 0% balance transfer offers on risk assessment grounds.

Hey I work for a finance company myself and know how credit risk is assessed... been shared a few insights to, privately.

-- Yet, lots of people seem to just pray by that advice they get on those lines...
--> OK, I'm listening! But I'll get the whole info first.

Working_Mum

Hello @DebtSurfer
I was in a similar situation to yourself back in 2009 - my then husband left me with a £220k mortgage, £90k worth of unsecured debt when he left our marriage. I had 2 young children to support on a precarious self employed income.

He wasn't an addict but he had racked up MY credit cards during the final year of our marriage and I was left to pick up the fiscal pieces when he left. I believe he was in the middle of an ugly mid-life-crisis (which continues today).

I couldn't go bankrupt or do a DMP as I was a Director of my Limited Company (and the only source of my income). I had no choice other than to stand and deal with the fallout £ at a time.

I felt like I was falling down a rabbit hole for a couple of years as my ex-husband behaviour was erratic - he eventually lost his job and didn't pay me for over 2 years but eventually I got onto solid ground and worked my plan. I am convinced the cortisol hits from constantly dealing with the stress are the reason I had cancer in 2014 - stress is such a huge disruptor in your body so don't minimise the impact of living your life at a high stress levels constantly.

I did a lot of self reflective work, looking at how I managed to get myself into such an awful situation at 42 - despite being a smart woman! One of my main areas of learning was how I set boundaries and the "co-dependant" nature of my marriage. It hadn't started out that way but I certainly ended up displaying traits which didn't help my overall sense of self and wellbeing. You cannot really influence your wife - her path is her own - all you can do is minimise the impact of her behaviours on you and your son. This self awareness doesn't have to come at any cost - there are lots of free resources available to you but I would certainly encourage you to step back a little from your situation to try and see patterns of behaviour which are unhealthy and seek to find healthy replacements.

It took me 10 years to eventually sort everything - finally I sold my home and bought a new one cash so I am now mortgage free without debt and still running my business but only working one day a week. I am now 56. I am very lucky but I worked very hard to have this secure life.

You seem a smart and caring guy but you will always be running hard to stand completely still whilst your wife is still spending money which she expects you to repay.

I wish you luck on your journey - the people here are incredibly knowledgeable. Their stories should bring you hope in the darkest of days

WorkingMum 

DebtSurfer

Working_Mum said:

Hello @DebtSurfer
. . .

WorkingMum 

Thank you for sharing your story!
Taking off my hat to the determination it took you to wriggle yourself out of impossible situation.
But 10 years!
Ten years of hard labour and austerity...

Somehow my entire being shrugs off the solutions that trash my credit history, or leave lots of marks in my or her medical history, or invite uncalled for people into our life, or involve extended self-discipline and austerity for years and years. Probably because I am turning 55 this September. Each year from now you get relatively healthy is a valuable resource.

There are seemingly not many options, except some deus ex machina solutions (like dipping into pension or winning the lottery), which can be done here, at the first sight. What I'm shuddering thinking, is that all my 50's and 60's -- i.e. relatively healthy years left, would be spent in "Tesco value" life, ("nothing wrong with it", they said) and then I might be debt free when in all honesty it's time to think about aeternity... 

In my previous life there had been situations which were seemingly impossible to get round. When I thought about emigration, most software developers went to States, under a "bodyshop" umbrella companies which invited them into the US, gave them basic dwelling, solved a few minor problems, charging a massive share of their earnings. It was firmly believed that there's no other way to get there. And yet I found a solution. I went to the UK instead, without any bodyshops, getting all my earnings, with a case full of money earned for 20 months before departure. No thieving "bodyshops", all "zero to sixty" (0 to 100 km/h as we'd say) in a blink.

That was just one example that there might be smarter solutions which we overlook or are in denial about, that may hand you a "get-out-of-jail" card.

Another example:
One of my colleagues, an Army sergeant, went to work as comms engineer for some NATO peacekeeper mission. The rate, he said, was £120k a year. Plus you've got food and dwelling free. Not bad, not bad. He got his backside out of quite a pinch this way, after an acrimonious divorce.

Next example: 
Another friend of mine, went into UAE on a yearly contract as a Head of Development position (These pay £100-120k, may be more now, even in the UK). I don't count money into others' pockets, but he bought a new, bigger house, after finishing this stint.
======

So, reading the typical solutions, I more and more am heavily thinking on how to bypass the existing constraints by getting into 3rd dimension...

DebtSurfer

Hello April,
Volvo "small" service took £394. These Volvo dealers are crazy, found £4,080 worth of "problems" to fix on a car with £1,500 or even less remaining value. Of course they were not allowed to indulge themselves, it's ridiculous. A/C compressor -- £1,200? On a 12-year old car?
Note to self: Volvo, you're disappointing. Mercedes do apply discounts on older cars service, MOT and maintenance. Audi have fixed price service. You don't. Moreover, I have an Audi dealership within walking distance!

On 6th, Dearest Wife has another 75 minutes dental appointment, bracing up for another 3-digit cost.

Downstairs sockets aren't working -- there is an electrical problem somewhere, which trips a breaker. Called British Gas electrician under HomeCare agreement that expires already today. Chances are he won't fix it as it's outside. 
All we have is three pairs of working sockets in the kitchen. However, I'm not renewing with these shameless people. This time they tried to increase payments another 20% -- they can go fly a kite  
If they choose to fix, that'll be just £60. Regretfully this is unavoidable.

Thank God for BT's Halo 3+ plan, which provides backup internet connection and makes our phone data unlimited until it's all fixed. I whipped up a 4G mini-router from my storage. 30 down, 15 up. Something that keeps us connected. Plus two our phones can be used as mobile hotspot. We are managing.

Reviewed more thoroughly what a DMP is in the UK. It can last indefinitely and will destroy my credit rating for years to come. One step sideways and the creditors are on my backside. They have all the rights, I have none except pay pay and more pay. You're at their mercy -- and the DMP provider's.  Not sure it's for me at all.

Time to get rid of this steaming debt pile. I haven't worked for nearly 35 years to end up in this. And I won't. 

Despite what can be said, the deus ex machina still remains the most attractive option. Moreover, it seems like smaller withdrawals, not topping the entire 25%, can be even more beneficial. All I need is to reduce minimum repayments to an amount which doesn't require dipping into what has just been repaid. And that's not really that much relief I require. That would allow to start reducing the card balance consistently, and to use the snowball method.

DW tries really well not to splash back into binge. Just hold yourself, my dear, and we'll get there for sure.