When is debt a reasonable position to be in or does context affect ideal pace of repayment

Cowparsley16

When I met my partner, I had a well paid job and a flat in a popular city. When the relationship drew to a close I had barely more than the clothes I stood up in. I got into debt to do a masters which I gained with distinction and in the months before my 50th birthday I got a very well paid job off the back of that masters, bought a fixer upper house off the back of having a job and then bought a car using a government grant because the house is very rural. So it was basically a talking heads lyric. However, the house needed immediate work doing to it and having no savings has meant that I have had no insulation against unexpected costs which seem to happen more months than they don't. I don't budget, but I do keep a meticulous account of every expenditure. It shows that I basically spend all my 'spare' money on food and weird ad hoc things that befall me. 80% of my income is fixed liabilities. So part of me thinks, 6 years later and I have a home, transport a great job and somewhat amazingly have supported my daughter through university (eyewateringly expensive) so the fact that I have partly managed that through debt was maybe sensible? I am also now at the end of a PhD and when that completes, I will be so much better off as that is expensive and not covered by student finance or saas. So is debt ever the answer for someone trying to get back on track, or does it come back to bite you in the end? To try to reverse it whilst I am still in the thick of big things would mean eating a lot of toast. My worry is that the debt spiral becomes debt crisis.

ManyWays

Eating toast for more than a couple of days is never a good option. But we really can not guess what your options are at the moment, and the reasons behind the debt often matter very little in trying to work out what you best route forwards is.

I am not sure if you are asking if you should borrow more, if you are, what are your options for borrowing this?

Worried_fool

https://forums.moneysavingexpert.com/discussion/6682228/when-is-debt-a-reasonable-position-to-be-in-or-does-context-affect-ideal-pace-of-repayment

When you are near the end of a PhD, you have no time nor energy for expensive hobbies. Concentrate on your PhD, and your life will necessarily be fairly frugal.

Borrowing for house repairs is sensible, because problems that are not fixed are likely to get worse and more expensive.

Enjoy your toast for now, and allow yourself to celebrate how much you have achieved.

gwynlas

You are keeping meticulous records and presumably still have great earning potential so are in a reasonable position though you lack an emergency fund.

Your being in debt but having a house car etc is not the same as someone else who supports themselvs using credit cards whilst earning minimum wage

Cowparsley16

https://forums.moneysavingexpert.com/discussion/comment/82126653#Comment_82126653

Gosh no, I don't want more debt. I suppose I am trying to understand whether I have made okay decisions or not. I have always lived on a super low income until I got this job so it just feels weird that I am worse off financially now than ever, because I never had debt before and now I have a huge amount (over £20k). Where I live rents are very high so housing is a cost either way. It just all happened so fast.

tigergambit

I don't think that debt per se is necessarily bad but only if the cost of debt is controlled - note how many are struggling with mortgages following the leap of interest rates from 1.5% to 5%. There's also the question of exposure - if you earn £80k then 20k of debt is much more serviceable than if you earn £20k. Debt at high interest rates isn't good unless over a very limited period.

If I were you I would be considering renting a room if possible. This would be tax free up to £7,500 annually and given your description of the local housing market you should have your choice of tenants. I have done this as has my son and it makes a massive difference - principally because it is tax free. I'd be happy to discuss this with you if you're interested.

MillQueen

I'll join you on the toast, provided we can put nutritious things on it. It sounds like everything you have spent money on has been in good faith - like you have gambled with some ambitious things to make a good future for yourself and you're currently in the bit where the risks haven't fully paid off yet and you're trying to keep the faith in your decisions. It sounds like a matter of keeping going until the end of your PhD and sometimes you don't have to try to get ahead of yourself, it's enough to keep trickling along. I know what you mean about it feeling like food is the only place you have any room to make movement on costs when you're just surviving month to month. I have toast for lunch today with a tin of sardines on it and tomatoes. Have you had a look at the Too Good To Go app? This saved me a fair bit earlier in the year on grocery shopping, as I would get the supermarket bags and then be creative with whatever was in there.

MEM62

I don't budget, but I do keep a meticulous account of every expenditure. 

It is interesting that you put effort into the latter when effort into the former would serve you so much better.

MasterG83

You may have succumbed to the well know term "Lifestyle Creep" instead of creating the gap for youself, you've earned more and spent more, live in a more expensive area etc.

The holy grail, so to speak, is to keep the gap, between income and expenditure as large as possible, this then is true wealth.

If you havent heard them already I would recommend starting he Rebel Finance School on Week 1 on you tube and watch the whole ten episodes. You will learn a lot along the way and perhaps the penny will drop?

enthusiasticsaver

I think some level of debt is ok as long as you have a regular income and it is not out of proportion. I would also say that debt taken out as you did for a masters, a PHD and a house and renovation is a relatively good investment. If you include the car and supporting your daughter through FE that again is an acceptable use of debt providing the interest rates are not too high.

Given you are hopefully coming to the end of these liabilities now I think it is wise to say no more though. How much debt do you have and what is your income? I think keeping a record of expenditure is good but I would also try and draw up a budget as one without the other is not useful.