140k Unsecured debt - advice

EssexHebridean

I agree that there is no call for the judgement around your view on the childcare costs - and I think it might be appropriate for some folk to remember that children can not always be planned, it would be marvellous if everyone was in a position to advance plan but life just isn’t that simple.

I assume you have checked out all possibilities on the childcare costs - there used to be something about getting tax relief on it via vouchers - is that the scheme you already use? 

well done on posting the SOA - there are a few wins there I suspect, but the easiest and most obvious is that grocery bill - which is HUGE! You should be able to cut that by 50% just with relatively minor changes I suspect - less branded items and more cooking from scratch.  Mobiles are high too - I suspect you already realise that though? Diarise when contracts are due to end and ensure that you switch to SIM only at that time - you should be able to get a package with calls, texts and  reasonable amount of data for £10 or less. We’ve already touched on energy costs - do check that you haven’t built up more credit there than , and also do an energy audit - go round the house room by room and work out what is using energy and whether that can be reduced. If you have smart meters then the IHD can help with this.  Your car maintenance costs seem high too - I budget £145 a month for two cars and that not only includes insurance but also allows a bit of credit to build up towards future car replacements as well as all the usual servicing and consumables.  On the subject of car insurance - how come yours is so high? Do you have a claim or several pushing it up, and if so how long before those drop off?

In terms of things not accounted for - no life insurance? Other than that you seem to have most things covered, just be sure that where you have budget lines in there, you do actually set aside the money for them each month. 

Ultimately - you can’t afford to carry on paying the debts as they are currently, so I’d suggest taking a deep breath and stopping payments to all unsecured debt. You then need to work on your budget - and indeed learn to budget within the expenses you have in your life as it looks now.  That includes going through everything line by line and seeing where costs can be cut. Any surplus can be set aside both to build a really robust emergency fund and also to give you the possibility of a fighting fund to make full and final offers down the line. Once the debts have defaulted interest stops, and that in turn makes clearing them more manageable. 

EssexHebridean

jackieblack said:

ldn83 said:

Floss said:

ldn83 said:

.... We can definitely shave something off of our expenditure but the main issue we have is the crippling childcare bill for another 12-24 months. The debt would be near manageable without the almost £1900 a month in childcare. Saving or trying to pay down debt with this kind of outgoing is impossible which has pushed me/us into the red by some distance.
......

.....Very uneasy about simply cancelling the DDs and getting CCJs.
 

By demonising the childcare costs, you are turning your daughter into an issue which is resented. That is not good parenting. Childcare is a bill as valid as your mortgage, and as pointed out, you could save that cost by dropping to a 1-income family & one of you staying at home to parent her. However, you are choosing to both work hence you have the childcare bill.

Perhaps you need to rephrase it as "daughter's preschool care & education" rather than "crippling childcare"

Let’s just be crystal clear here, there is no demonising or resenting of our daughter, she’s the best thing that’s happened to us, if there’s any resentment it is aimed squarely at the system that penalises hard working families with excessive childcare costs. Parents shouldn’t have to leave their careers that they’ve spent decades building simply because there’s almost no provision for childcare for children aged between 1 & 3. Not everyone has family nearby that can help out. I’ve always thought the 30 hours free should start at 1 years old and thankfully the tories have seen sense and bringing it in for future parents in 2025. 15 hours free starting this April, which will help us somewhat.

Also someone else saying that we chose to have a child and stop complaining. Let’s not get into personal matters on a forum designed to be non judgemental and about finance. Whether we chose it or not is not a topic for discussion here.

Aside from this, some really helpful answers so far, thank you. 

No-one said stop complaining about having a child. I said please stop complaining about having to pay for your child to be looked after at nursery, which is necessary because you’ve both chosen to work full time. 

This really isn’t helpful. If you aren’t comfortable with the wording the OP of the thread is choosing to use around their outgoings, please just move on to a different thread. This is coming across as judgement regardless of your intent, and DFW is not a place for judgement. 

sourcrates

ldn83 said:

sourcrates said:

Just some basic facts to mull over.

With an IVA you would repay the full amount of your outstanding debt, plus fee`s and other associated costs, there would be no write off due to your large income, and you would also have to release equity in year 5, of a 6 or 7 year arrangement.

With debt management you can make that income work for you by obtaining settlement deals at various points in the process, and by employing the snowball method as well, you can be debt free a lot sooner.

Consolidation is a terrible idea, which could potentially be terminal, you should forget that idea.

Not sure I understand this right, if we were to repay the debt in full within 6 years what would be the difference in just repaying the debt normally? The longest term debt we have is 6 years. Surely an IVA is an insolvency arrangement where the creditors agree to a part settlement within a time frame. 

It would be dependant on how much you could muster towards your monthly payment, as you have quite a substantial monthly income, but your spending is quite extravagant, as an example, £700 on food, would not be allowed in an insolvency for 3 people.

Simply cutting back on your spending somewhat would remove the need for a debt solution entirely, you have assets of 18k, and a 16k car that can be realised, honestly all you need to do is budget better, and try and reduce the childcare costs if at all possible, problem solved.

ldn83

EssexHebridean said:

I agree that there is no call for the judgement around your view on the childcare costs - and I think it might be appropriate for some folk to remember that children can not always be planned, it would be marvellous if everyone was in a position to advance plan but life just isn’t that simple.

I assume you have checked out all possibilities on the childcare costs - there used to be something about getting tax relief on it via vouchers - is that the scheme you already use? 

well done on posting the SOA - there are a few wins there I suspect, but the easiest and most obvious is that grocery bill - which is HUGE! You should be able to cut that by 50% just with relatively minor changes I suspect - less branded items and more cooking from scratch.  Mobiles are high too - I suspect you already realise that though? Diarise when contracts are due to end and ensure that you switch to SIM only at that time - you should be able to get a package with calls, texts and  reasonable amount of data for £10 or less. We’ve already touched on energy costs - do check that you haven’t built up more credit there than , and also do an energy audit - go round the house room by room and work out what is using energy and whether that can be reduced. If you have smart meters then the IHD can help with this.  Your car maintenance costs seem high too - I budget £145 a month for two cars and that not only includes insurance but also allows a bit of credit to build up towards future car replacements as well as all the usual servicing and consumables.  On the subject of car insurance - how come yours is so high? Do you have a claim or several pushing it up, and if so how long before those drop off?

In terms of things not accounted for - no life insurance? Other than that you seem to have most things covered, just be sure that where you have budget lines in there, you do actually set aside the money for them each month. 

Ultimately - you can’t afford to carry on paying the debts as they are currently, so I’d suggest taking a deep breath and stopping payments to all unsecured debt. You then need to work on your budget - and indeed learn to budget within the expenses you have in your life as it looks now.  That includes going through everything line by line and seeing where costs can be cut. Any surplus can be set aside both to build a really robust emergency fund and also to give you the possibility of a fighting fund to make full and final offers down the line. Once the debts have defaulted interest stops, and that in turn makes clearing them more manageable. 

Yes we use the gov scheme where we get 2k off the bill a year, bill is approx 21k a year, it’s not much but a help. In April 15 hours for all kids over 1 kicks in which will take off around £350 off the monthly bill. Then Jan 25 the 30 hours kick in which will reduce the bill to around 1k a month until she starts school.

My insurance went up from 600 to 980 last year, have 6 years no claims and no points. Probably because we live within M25, other insurers quoting over 1.5k. We drive a medium sized SUV.

Just spent £750 on mot, oil change and rear discs and brakes at BMW specialist (not BMW dealer), may get another little bill in the year so 1k a year is what it costs for car bills for us.

£160 a week is our supermarket shop. Before Covid and added inflation it was around £110. Added costs for nappies, powder etc as well as price increases has added to the bill. We cook mainly fresh meals, no microwave or ready except the odd frozen pizza. Agree though definitely room to reduce. We’ve tried the discount supermarkets but the savings aren’t really that much.

The house should be much cheaper to heat now that the works are almost complete, we expect the bill to be around 3k this year. Our BG account is around £700 in surplus currently as we had some charges refunded for estimated readings from last year.

Life and accident insurance is via my wife’s company benefits for both of us.

Mobile bill is £60 each for both of us and runs for 18 months more.

I will give the DMP epic threads a good reading over the next few weeks and look at that as a serious solution. 

Still unsure on the IVA to be honest, need to do more research to wrap my head around it better. If it doesn’t reduce the debt for a lower payment it’s pointless.

TheAble

One thing just to mention if you're considering debt solutions is the effect they may have on your job. You've mentioned you work in finance so there could be implications there e.g. if you need FCA approval and the like. I'm not too sure on the exact details but would recommend checking into that as one of your next steps.

Do update with the APRs as well when you get the chance, as well as expiry dates of any promotional rates. These will guide on how best to allocate capital.

ldn83

TheAble said:

One thing just to mention if you're considering debt solutions is the effect they may have on your job. You've mentioned you work in finance so there could be implications there e.g. if you need FCA approval and the like. I'm not too sure on the exact details but would recommend checking into that as one of your next steps.

Do update with the APRs as well when you get the chance, as well as expiry dates of any promotional rates. These will guide on how best to allocate capital.

Thanks for the heads up, I actually work in construction and my wife in banking but she does marketing for a big bank and so not directly involved in finance so this wouldn’t matter.

ldn83

Another alternative I’m thinking is to preserve her credit record as she *only* has 30k approx in unsecured debt, then help her pay her side off whilst I default on my own. At least then if we want to sell up a few years down the line and move out of London we may stand a better chance of another mortgage if one of us is clear.

katsu

Definitely research an IVA as I'm sure you are supposed to remortgage at around the 5 year point to get extra money for your creditors out of the house equity, and I also think getting out of one early is complicated/ can be difficult and expensive so it's not an arrangement to get into without being clear on all the facts. 

Re your expenses:

You say discount supermarkets don't save you much... if you saved £20 ish a week you'd be getting rid of an extra circa £1k a year of debt. I would be shocked if you couldn't save over £20 a week when you are spending £160 now you say. 

What is the entertainment? I would reduce that and cut out the holiday this year. 

Your car seems bad luck to be worth 16k and cost you 1k a year in garage bills. Do you really drive that much? Between insurance, garage and depreciation you are spending a lot of money and  in London could you mostly use public transport? That's a lot of taxis etc before you are worse off  

The joy of MSE is that the lightbulb moment helps change how we think. You'll find it gets easier  to make different choices and your money goes a lot further. 

Sea_Shell

ldn83 said:

EssexHebridean said:

I agree that there is no call for the judgement around your view on the childcare costs - and I think it might be appropriate for some folk to remember that children can not always be planned, it would be marvellous if everyone was in a position to advance plan but life just isn’t that simple.

I assume you have checked out all possibilities on the childcare costs - there used to be something about getting tax relief on it via vouchers - is that the scheme you already use? 

well done on posting the SOA - there are a few wins there I suspect, but the easiest and most obvious is that grocery bill - which is HUGE! You should be able to cut that by 50% just with relatively minor changes I suspect - less branded items and more cooking from scratch.  Mobiles are high too - I suspect you already realise that though? Diarise when contracts are due to end and ensure that you switch to SIM only at that time - you should be able to get a package with calls, texts and  reasonable amount of data for £10 or less. We’ve already touched on energy costs - do check that you haven’t built up more credit there than , and also do an energy audit - go round the house room by room and work out what is using energy and whether that can be reduced. If you have smart meters then the IHD can help with this.  Your car maintenance costs seem high too - I budget £145 a month for two cars and that not only includes insurance but also allows a bit of credit to build up towards future car replacements as well as all the usual servicing and consumables.  On the subject of car insurance - how come yours is so high? Do you have a claim or several pushing it up, and if so how long before those drop off?

In terms of things not accounted for - no life insurance? Other than that you seem to have most things covered, just be sure that where you have budget lines in there, you do actually set aside the money for them each month. 

Ultimately - you can’t afford to carry on paying the debts as they are currently, so I’d suggest taking a deep breath and stopping payments to all unsecured debt. You then need to work on your budget - and indeed learn to budget within the expenses you have in your life as it looks now.  That includes going through everything line by line and seeing where costs can be cut. Any surplus can be set aside both to build a really robust emergency fund and also to give you the possibility of a fighting fund to make full and final offers down the line. Once the debts have defaulted interest stops, and that in turn makes clearing them more manageable. 

£160 a week is our supermarket shop. Before Covid and added inflation it was around £110. Added costs for nappies, powder etc as well as price increases has added to the bill. We cook mainly fresh meals, no microwave or ready except the odd frozen pizza. Agree though definitely room to reduce. We’ve tried the discount supermarkets but the savings aren’t really that much.

I'm surprised that you found this.    We did a comparison for one of our typical weekly shops, and found that Aldi was at least 25% cheaper than Tesco.  

It's not just about saving money on food when we talk of "groceries", it's the toiletries and household products that can make the biggest difference when buying at the discounters.

Do you have favourite brands that you usually buy for non-food things?     Are you willing to try own brands for these items, or do you have "red line" items that are non-negotiable?

EssexHebridean

Your higher car costs are almost certainly a penalty of driving a prestige badged vehicle then I suspect - I can't remember whether you said your car finance was a tradition HP or one that has a balloon payment? If the former, then it may well be worth looking at changing car once the current one is paid off to a less "status" marque. Both of our cars are French - mine is a hatch, OH's a small SUV but either would have plenty of space for a child and all the accoutrements that go with, and with the benefit of insurance and repair bills that will be substantially lower. It  may be worth looking for recommendations for local "non specialist" garages though - you may well be paying a premium there for someone claiming "specialist" status when in fact if your car is a fairly mainstream model any good mechanic would be able to work on it without issue. if the car already had faults requiring "specialist" attention at what is presumably a fairly new age, then that is something for concern and something to take up with BMW themselves I would think. 

You definitely do NOT need to be spending £160 a week in the supermarket! There are others here with larger families cheerfully spending not much over that for a complete month. The old style board might be of help there as if you are already meal planning and cooking from scratch, something is awry somewhere that you are spending that amount, and not seeing savings from discounters.  (One thing on that though - do you have both an Aldi and a Lidl locally? If only one or the other, savings can be reduced as they price match to the their local "big" supermarket instead of the race to the lowest prices between themselves - so that could be a factor). the "Trolley" app would enable you to shop around a bit to see where savings might be able to be made on your regularly bought items. that would also be well worth using for your best prices and special offers on nappies and formula too. I'd suggest your first step is the "downshift challenge" - so run through the things you currently buy branded items and see where you can drop to shops own brand, then if that's OK, drop again to "value" ranges. "Wonky" fruit and veg is also well worth a look and if you are currently buying organic foods then have a look at some of the studies that have been done in recent years analysing both the "health" benefits (it's now widely acknowledged that they are in fact far less than was originally assumed) and also the environmental factors - in some cases organic can actually have a greater impact than traditional farming methods. You could instead switch to looking for more local, seasonal produce - or assuming you eat meat, to reduce your meat impact. If you eat fish, you could aim to ensure that everything you buy is sustainably caught. Another thing to think about with shopping is your habits around how and when you shop. A delivery, for example, might cost you a delivery fee, but it might also mean that you only buy what is actually on your list, and resist being derailed by tempting offers in store, which can in turn save you money. In your case it could also save you time which I can imagine might be a benefit. Do you currently shop once weekly to cover you until the next weekly shop, or are there "top up shops" sneaking in there which may be driving the costs up further than needed too? 

I'd also strongly suggest doing a fridge, freezer and cupboard audit, then challenge yourselves to plan the next few weeks meals using items you already have as the main components - so you have a pack of mince in the freezer? Cook up as a big batch of ragu, bolstering the meat content with a few handfuls of red lentils to stretch the meat further. (Another trick if you like them is to replace half the meat with very finely chopped mushrooms - cook them off alongside the mince until everything is just beginning to catch and all the juices have been reabsorbed, then add other veg, your tinned tomatoes etc, and a big palmful of red lentils per portion you want to get out at the end.) The ragu then gets split into portions - you can add italian herbs to one for a bolognese, a tin of red kidney beans and some spices to another to make into a chilli, keep the other plain for use in a cottage pie. You use one immediately and the rest are frozen once cooled - and you already have the basis of one meal for each of the following couple of weeks. saves time, energy and money, which is a triple whammy we like round here! The idea is that using what you have in both resets your thinking, ensures that your food gets used and not wasted, and also means you can start the whole debt busting process with a few low-spend grocery weeks. If you have a Lidl nearby then give them a go for this week's main shop - if you download their app then your spend this week will almost certainly earn you a free bakery item next time you shop there in the month  - that's worth £1.99 if you buy the highest priced loaf of bread. (which happens to be a rather tasty sourdough style loaf with rye flour in it - makes AMAZING toast!) 

ldn83 said:

Another alternative I’m thinking is to preserve her credit record as she *only* has 30k approx in unsecured debt, then help her pay her side off whilst I default on my own. At least then if we want to sell up a few years down the line and move out of London we may stand a better chance of another mortgage if one of us is clear.

I think you are getting too hung up on the credit file thing here. How soon "might" you want to move out of London - particularly as you now have what is presumably your dream home approaching as you want it? If the debts defaulted in the next few months, you'd have a clear file in 2030, and potentially be in a position to think about moving at the point when your child goes from "infant" level to "Junior" - the next logical point to move would be as she approaches age 11 I should think - so that again is further ahead. Either way though I assume you have joint finances already, so keeping your wife's file "clean" if yours is defaulting won't really be possible. 

Energy bills - if you have done all the logical things that one would expect in the refurb (you said Victorian I think, so cavity wall insulation, a good wallop of loft insulation, new energy efficient windows) then I'd expect that your bills should be a lot lower than £3k a year now. I don't think you confirmed how your home was heated? I'm in a good sized 3 bed terrace with a large rear single storey extension with 3 velux windows fitted in the roof. Windows are all double glazed and a mix of ages with the newest being around 2017 I think - the extension was in 2006 so that was obviously done to the standard that was usual then, and the cavity walls have insulation. We have an elderly gas boiler for heating and water. We've only been in since the beginning of September but even our vendors used well below the "typical figure" of 11,500kWh for gas (a little over for electric as they used rather more electric heating than we do). Our current estimate for annual costs is in the region of £1600 per year.