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

sparks_2023

With your Deus Ex Machina just have in mind that it isn't just waking up on your 55th birthday, clicking the mouse and the pension drawdown is in your bank. It might take 4-6 weeks or so to see the funds as I don't think everything can be set up in advance for a birthday payday.

But far more important - I suggest you close any credit accounts you clear with the drawdown and commit as much as possible to turning your back on any new credit.

Consider making a deal with yourself : If you use the pension, pretend you are a pensioner too old to get further credit.

blue_eyed_girl123

Could you look at doing piggy banking of sorts? This is a system where you split your expenses into different accounts (or just have one account with different pots, as I know some prefer that option). I've done a limited example below. I find it helps if my money is separated, rather than just having lots of money flying in and out of one account. 

You would have one with your bills, one for debt repayments and you would pay money into these accounts when your income comes in - this would be £1784 for main expenses, based on your SOA (although you made no mention of buildings/contents insurance, so you might want to re-look at this). You would then have £927 remaining after this for other expenses which you and your wife could decide as appropriate. Could you give her a personal spending account instead of a credit card - perhaps with £200 per month in - an account which doesn't allow you to go overdrawn, so once she has spent the money, that's it? 

Could you cut down your grocery spend by doing some fun activities - maybe make your own pizzas or have a "movie night in" where you buy popcorn and watch a film on Netflix or similar? Or go out for the day to a local park or similar and take a picnic? I don't know if this would be helpful for your wife's mental health too?

I've also not included your medical bills - could you look into private medical insurance for this if they are likely to be consistently high? This might also help save some money in the long-term. 

I know you see the alternative as living a "Tesco Value" lifestyle, but I don't think that's necessarily a bad thing, you're just finding ways to have fun with less money for a short time, to be able to maintain your lifestyle in the long term.

Hope this is helpful  

Total monthly income: £4050

Expenses - Bills

Mortgage................................ 1091

Management charge (leasehold property).. 13

Council tax............................. 196

Electricity............................. 101

Gas..................................... 92

Water rates............................. 57

Mobile phone............................ 15

Internet Services....................... 56

Road tax................................ 33

Car Insurance........................... 55

Car maintenance (including MOT)......... 60
Pet insurance/vet bills................. 15

Bills Total: £1784

Debt repayments total: £1339

Total expenditure: £3123

Remaining: £927

enthusiasticsaver

DebtSurfer said:

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.

Good that DW is doing well on not binging hopefully neither on alcohol or spending. 

A DMP does not last indefinitely but those with low affordability and high debt who choose to go on one can be on one for many years HOWEVER the defaults drop off your file 6 years after going on.  The DMP is an informal plan so as such is not registered on your credit record but the defaults will show.  Any arrangement to pay however also shows up on your credit record and to be honest more borrowing is not the way to go for you anyway. Your choice though. The key thing is that your debt repayments will be affordable and you can start to get in the habit of saving for dentist appointments, car repairs, holidays etc etc instead of a high percentage of your income going on debt repayments and interest. 

poppy811

just my opinion but having worked for many years in community health I think this is way beyond our remit.  The length of your posts and your refusal to change anything concerns me.  All the best but please consider more specialist help.

Whiterose23

Agree with Poppy’s post. All advice/suggestions are being rejected and scorned. I’m not sure why the OP has posted asking for advice in the first place.

Humdinger1

Maybe a genuine cry for help? The awareness of what needs to change can be overwhelming especially if it's a difficult loved one that needs to change, not yourself 

sparks_2023

I think the comments here are starting to verge on harsh.

The OP really has 1 issue - sort out the root cause of the problem. This is the availability ( limit level ) and use of new credit.

As for the pension drawdown - not everyone has a £200K pot - that is a bonus. My view is that ( as long as the credit leak is stopped ) the OP has actually got a pension pot balance they haven't been able to afford. £200k pot + 50k debts or £150k pot and no debts ( or, say, £175k pot + 25k debts ) ? is a reasonable debate for the OP to have.

But high danger that it becomes 150k pot + 50k debts if the root cause is not addressed.

Me ? Given selling the car is ruled out, I'd default 1 debt to cut off future credit for 6 years, take the drawdown and close the credit accounts ( maybe leave 1 with a low limit ) and then reboost the pension and attack the mortgage going forward. But that's just me.

DebtSurfer

sparks_2023 said:

I think the comments here are starting to verge on harsh.

The OP really has 1 issue - sort out the root cause of the problem. This is the availability ( limit level ) and use of new credit.

As for the pension drawdown - not everyone has a £200K pot - that is a bonus. My view is that ( as long as the credit leak is stopped ) the OP has actually got a pension pot balance they haven't been able to afford. £200k pot + 50k debts or £150k pot and no debts ( or, say, £175k pot + 25k debts ) ? is a reasonable debate for the OP to have.

But high danger that it becomes 150k pot + 50k debts if the root cause is not addressed.

Me ? Given selling the car is ruled out, I'd default 1 debt to cut off future credit for 6 years, take the drawdown and close the credit accounts ( maybe leave 1 with a low limit ) and then reboost the pension and attack the mortgage going forward. But that's just me.

Dear sparks_2023, Thank you for your kind words.
Replying to you first b/c you hit the bull's eye with these: "reasonable debate for the OP to have" (on proportion of what part of debts to pay out of pension fund) and "high danger that it becomes 150k pot + 50k debts".
Absolutely.
These are my two things I'd really like to discuss here, not how far bonkers me or my wife are.

First, re: danger of getting back into credit.
I know my DW all too well.
My plan is, I won't really tell her immediately that our debts are now gone / partially gone. For her I've found a solution that will start reducing our debts significantly but will require absolute spending discipline. For those of you who will think this is unfair to her, please bear in mind that this is a person who would seriously ask "where are we going on holiday this year?" despite £2k+ bill for such holiday and to all "ain't got no money for that, Dearest" would respond "but I want to!!!"
- I'd take over her credit card (why waste the big limit?), and ask her to use debit card instead (I'll remove overdraft on this one). That's a bit harsh, but bears a big NO CREDIT ANYMORE slogan on it.
- My idea is about £400-500 for her to waste per month, which will allow her to decide what to do with her money, rather than mindlessly keep putting it all on credit. To buy a new dress, or put aside for our son's new book?
- She's keen to find some job, but for now nothing concrete has turned out.
- Klarna will have to go. I hate Klarna. Easy money for which someone else then spits blood next month as Direct Debits keep coming. This is the main source of ruin, as credit cards are pretty much maxed out, but who wants to waste, will find a way, right? I'm discussing it with her now. 

And second, re: the main question at this moment:
£220k minus £50k in debts, £190k minus £20k in debts, or £170k minus £0k in debts? Or??

Someone said I won't sell the Merc? actually, I would, to kill the debts there and now. Provided that I can clearly see how in a couple of years I'll be able to afford another decent car (can be older and higher mileage, just a nice comfy one, not the banger with all warning lights on bringing you bill after bill - been there, done that).
The knowledge I'm now debt-free (or almost) would help me through the period of eating the humble pie.
I just don't want to waste the remaining part of my healthy life eating the said pie!

My current plan draft:
1 - paying off not everything at once from the pension, but about £30-40k, which would make me eligible for 0% or low balance transfers, which will have same effect as DMP to lower the "waste" category -- monthly interest payments, sans the bad credit aftermath and being dependent on other people.
For that I intend to have a chat with a few, available free of charge, pension advisors. No, am not paying 4% of my pension to hear the same crap I can calculate myself even better then them. I'll make my decision then.
2 - lowering waste category will provide me with more disposable income to be able to prevent to have to use credit again.
3 - concentrate on paying off things, allowing to snowball the remaining debts rather than pay minimums.
4 - once only mortgage remains, build a small emergency fund like £2k for now (in about 5 months).
5 - start to boost the pension to recover from the dip.
6 - kill off remaining mortgage ASAP.
7 - once debt free, start investments.

I just refuse one thing -- to eat the mentioned "humble pie" for too long. The DMP would just do one thing: deprive me of manoeuvre space and kill my credit history until I'm 60 (54+6 years to lose the defaults). At 700 per month to pay off debts comfortably and no interest accrued it will require me about 7 and a half years of mindless debt bashing, in a Tesco value life. Even if DMP goes to plan, I'll be 62 when it ends.
I may be able to sustain it (grudgingly) but my wife won't. She'll just hang herself on my necktie, she's not created for hardships... no amount of "professional help" will change that.

________________

I intentionally made a pause as some comments were indeed turning a bit judgemental. I thought it's written in the rules not to judge. No problem, this man has seen things in his life, and won't run away crying.

"You need professional help". This could mean one or two things. 1) "You're bonkers and so is your wife". If you please. Maybe we are, in your Cartesian coordinates system. Isn't that a waste of breath to talk to bonkers people? 2) "Financial professional help". Regretfully there are no new avenues they can offer, except taking my money for this. It didn't come to me easy to post in Debt-Free wannabe. And I know my case is not the easiest. Everyone is welcome to participate, or not. 
Maybe there is a third meaning to this...

"You scorn the solutions offered." Dear Colleagues, I'm not scorning anyone. I am grateful for each idea as this here is a brainstorm thread. I do share my views, too. What can I do if the existing avenues our Gov't offering us to get out of debt do not appeal to me  
See above -- this is my current plan, these are my real options, not paying off every available pound towards debt black hole for 7-10 years... 

"You write too long posts". I type quickly and like the detailed discussion. Such level of details is not for everyone. I know. But those who read everything, get a bonus of getting the full picture at once, without 100 additional questions and back-and-forth.

Thank you everyone, for support and for scorn as well, all your answers participate in my brainstorm process.

DebtSurfer

This is meant to be my diary, so... here comes. Take the popcorn and recline your chairs

This month is being a bit of a grievous body harm assault on my finances.

Only 13 days passed out of 30... and already:
- £394 for DW's Volvo service (never again will I go to that dealership!)
- £299 for DW's dental work (75 min appointment, and another one due in May)
- £60 for British Gas electrician callout excess (my electrical knowledge regretfully was not enough to isolate the faulty ring) - last day of insurance
- £115 for my wheel work today, new valves

That's nearly £900 of unexpected expenses. What really irks me, they are all necessary maintenance & repairs, nothing new to celebrate your money. Just banal drudgery.

Waste (fees & interests) this month:
-  £783.75 -- higher due to Barclaycard jacking up APR% according to BoE %% raise, 0% deals slowly expiring on NW card.

Incoming biggies:
- £220 for Volvo's car tax on 30th
- £80 for dog food (22nd probably)
- £90 for a fuel tank somewhere in a week - 2 weeks time.

Tried to join two Barclaycards today - suggesting transferring the limit from a second card into first card, and the balance too. Supposed to lower my interest payments.
Regretfully an operative was with non-native English and firstly didn't understand what I want, then tried to run a credit limit increase despite me telling him this is not what I want... Eventually suggested that I pay off entire CC2 limit (£5700 or so). And when I tried to move at least a part of limit, he said there's not enough available credit when there clearly was.
2 hours of on-and-off alongside with Barclaycard app popping out every minute or so...
Overall, 1 out of 10 experience... customer service reps like that can exhaust even the angel's patience.

Good:
- somewhere between £730 and £800 benefits still to be paid.
- council owes me £400 or so for the time I was on Universal Credit last year (took me 5 months and 4 calls to exact my payments out of them)
- a few old phones for sale, why not?
- and a stroller, too!
- there's been talks of pay raises starting April payslip (chances are, once I've written it, they'll say I haven't been with the co. for entire year, so would be ineligible).

Overall Outlook: 
- Manoeuvre space reduced this month, but hopefully not for too much. Need to work it up again. Don't come close to 100% on CC's, it is becoming increasingly difficult to push the balances back due to interest payments going up seriously.
- Major concern is the amount of waste, so card debt increased a bit and so did the overdraft. 
- Interests lead to minimum payments not shifting back the balances.
- My department head is leaving on 5 May. My immediate "manager" doesn't fully understand me and is sometimes very abrupt and rude to people. Note to self: cough up a plan of what do you want to do next, time horizon 6-12 months, so if push comes to shove you don't have to frantically seek just any work.

Prognosis: 
- Reduction of debt utilisation ratios is required to get 0% and low% deals enabled. With cards full to the brim, they won't come. Priority cards to pay off: Tesco (ability to get 0% b-transfer) and Nationwide (potential for 7.9% per 18 months rate). Next, BCard 2 as rate is really too high -- no new credit on this if can humanly avoid. 
- Selling the Merc alone won't fix it, stupid BoE still is likely to jack up the interest a time or two again before it goes down, raising the APR% and minimum payments and waste, of course.

Immediate action plan:
- Get free pension advice.
- Calculate various scenarios of partial debt payoff with pension lump sum -- but not entire 25% lump sum, rather a lesser %. How long it's gonna take? How can switching to one car for a while help reduce the pay off term?
- Think how to get Klarna out of the equation? Can only work with conjunction to switching the DW to her Debit card and debit card only, removing all credit cards from her apps.
- Then except Klarna there's PayPal Credit, and other Buy Now Pay Later (BNPL) solutions. Problem is, they are offered to everyone!
- Remove shopping apps from her phone (got about 15 of them!) and subscriptions, which keep inviting her to buy buy buy, with all their bells & whistles, notifications etc.

*** 
I am under the weather, nasty cough, had to take day off sick. Guess what? Wife had 2 doctor's appointment today, car wheels had to be diagnosed and aligned, surgery calls answered... and so on and so further, only at 2am I could finally be returned to myself.
Tomorrow - will make it sick as well, I'll send everyone to hell and just spend it getting the rest. The body should take care about itself

NeverendingDMP

Hope you get some rest to feel better. It sounds like there is a clearer plan forming which is a good start. And a plan that suits you and your circumstances which is the main thing. Good luck with it all.