Third-Life Crisis

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  • Thank you all for your replies. I've obviously made a few mistakes in my SOA so just to clarify a few things...
    As you are paying interest on all of that debt now realistically it will never be paid off as your payments are probably barely covering the interest. If you are going off on maternity leave then your income will reduce further and as you say your OHs income is variable.

    Some cards/bits of balances on cards are still at 0% or a cheaper 6.9% but it's difficult to show that on the SOA!
    My income won't reduce during my maternity leave, I'm very lucky to get 6 months full pay and then a mixture of SMP and annual leave will cover the rest of the time i'll take off.

    Agree with you all that the household cleans should go, I'd already highlighted them on my budget spreadsheet along with the £35 entertainment and Sky.

    We have two cars! My husband has a van and I have a car. Neither of us could work without these since both jobs involve travelling. So the petrol, insurance etc is for two vehicles.

    Mobile phones are still in contract.

    Only remortgaged last year so can't do anything with that at the moment.

    The pet insurance bit I lumped in insurance, vet bills (annual vaccinations, flea treatments etc) and food. We have a very large dog who without the pet insurance would have cost us over an extra £5000 in the last couple of years. And before anyone suggests it, he's not going anywhere!!
    Ditch the bank charge as well and get a normal bank account with no overdraft or charges. You will need one if you do a DMP unless your overdraft has gone.

    Our bank charge covers mobile phone insurance, breakdown cover and travel insurance amongst others so is it a good idea to get rid of it? It also earns us about £5pm in cash back. It's so confusing knowing what's best to do. We no longer have an overdraft.
    Oh - why no buildings insurance? This is actually far more essential than pet insurance!

    Our buildings insurance is covered through our rent, we only need to pay for contents.
    Enthusiastic saver is correct that you need to speak to Stepchange asap about a DMP.

    So I did send off our details yesterday evening, but could anyone tell me how they actually work? How do they negatively affect you? As in, if we wanted to move in a few years time? Obviously I know we're stuck in this situation anyway but is it better to scrimp by? We still have access to 0% card offers (unbelievably) but only for 6 month deals. Can we close our credit cards so that they are absolutely not an option to spend on? Or is that a bad idea?

    I feel more ready than ever to tackle this I just need a plan of action!
  • Treadingonplaymobil
    Treadingonplaymobil Posts: 1,895
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    edited 3 February 2018 at 9:51AM
    Huge well done for coming back and trying to make a difference. I agree that A Big Plan Of Action is what you need, to stop you feeling overwhelmed.

    In your shoes (and I know it is SO easy to say this from the outside looking in, I appreciate it's not as easy as it appears) I would do the following:
    1. Redo your SOA with interest rates as they are now (so any that are 0% put as 0%) so you can get an idea of how much you are paying off your debt RIGHT NOW and how much is going on interest. Any cards where part is 0% and part interest bearing, list it on the SOA as, eg 'MBNA1 part 1, MBNA1 part 2' etc.
    2. Cancel any and everything you can live without - bin cleaning, window cleaning, satellite tv. Change any insurances etc that you can to cheaper deals.
    3. Put in the things that you need to put in - is car/van maintenance covered under an existing warranty? If not you need to put something here. Likewise can you really spend nothing at Christmas/birthdays? That seems unrealistic. Also baby stuff - you don't need much but chances are you'll need to spend something. Costs will rise thereafter too, but worry about the next 12 months for now. You will need maternity gear too.
    4. Can you get rid of the HP car and buy a cheaper runaround? Our car cost £1,500 three years ago, is crap and ugly but is fuel efficient, big enough for us all and does the job. We will run it until it is scrap, and hope to start a saving fund to replace it within the next 18 months.
    5. Redo your SOA to reflect the above changes and decide whether you can manage as you are or need a DMP. I'm no expert on DMPs so don't know much about the implications for mortgages/moving etc, but you will get loads of advice on here.
    6. Think longer term - will you need childcare? How much can you pay off your debt before childcare costs impact?

    Then it's only the small daily slog of actually doing it. Making those small choices on a daily basis. But get the big stuff sorted first - give yourself the week to get that done before you stress too much about everything else.
    Trying to figure out a whole new life. Trying to figure out a whole new budget.
    Divorcing, unclear on final debt total right now, but focusing on building a financial buffer zone.
  • Thanks for your thoughts TOPM. Your first point reminded me that I break all the interest down on a debt spreadsheet I've been keeping since 2014. It shows the rates, how much interest we pay and what actually goes towards the debt! I'd updated it last weekend so after having another look - of our £1665 debt payments each month, £1360 actually makes a dent in the debt. Which doesn't seem to bad. Although if the other £300 was going towards the debt too it would clear a lot faster.
    We've somehow knocked off £1500 in the last six months, even though we added £2000 on pet surgery.
    So this has made me a feel a little better and that we might be able to manage this by really taking control of our spending and perhaps boosting our income here and there.

    You're right though, we really do need to make room for spending because you can't just go without things like haircuts, presents, car repairs etc. And I think this is the reason we overspend every month, because we're trying to ignore things you have to spend on!

    Good point RE the HP car, I hadn't thought of that. Not sure how long we're tied in for so will need to do some research.

    I may be being very naive but I feel quite confident that the baby won't impact us too much. We picked up a lot of things we'll need in the Aldi baby event a few weeks ago using money we were given for christmas and also a second hand cot. MIL has offered to buy us a travel system and my mum has offered to buy some bits too. I was given a whole load of maternity clothes by a friend who gave birth recently.
    I have also failed to mention, because I'm sure everyone will have different views on this - but I guess honesty really is the best policy here, that I've just had a £300pm pay rise (after tax). I'm putting this aside to cover the last few months of maternity leave and then when I go back to work will be able to use this for childcare costs. Both our parents will also be more than happy to help with childcare.

    Aside from winning the lottery this problem isn't going away. I just need to work out how to manage it so that we can actually live whilst sorting it out.
  • On another note, I'm not sure if it makes it better or worse that I've been so organised about this debt for so many years. Tracking it on spreadsheets, constantly shopping around for better deals on utilities, getting the best 0% deals. Yet here I am...
  • Your debt has only reduced by around £2k in six months in spite of paying £1600 each month. This is why I think the interest must be very high unless you have continued to spend on the cards in that timeframe. That £3000 on 26% interest is £60 a month but the repayment is £40 so the debt on that one must be rising. At that level of debt this will take decades to clear unless the majority is on 0% which it obviously isn!!!8217;t. 6 month deals are no good as the BT fees will wipe out the gain on interest. Moving house and remortgaging is not going to happen without a drastic change in circumstances which is why I suggest a DMP. If your creditors will accept 0% interest and you continue to pay £1500 each month then it would be cleared in 40 months. Your credit record will be affected for 6 years after debts defaulted which you need to do immediately and save an emergency fund if this is the way you want to go. Realistically you won!!!8217;t be able to afford £1500 each month though as childcare costs are expensive. I am sorry to be so brutal but I cannot see how you can continue throwing so much at the debt and paying off so little. You are mainly paying interest each month and not making inroads into the debt.

    The bank fee is a waste of money. You can!!!8217;t afford holidays so you don!!!8217;t need travel insurance and you can get breakdown cover for around £30 or £40 a year. You also won!!!8217;t be able to afford to move in a few years with that millstone of debt around you. I would resign yourself to living frugally for 6 years and live with no credit for that time.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
  • I have just seen your last post saying you added £2000 to the cards for vet bills. I cannot say this loudly enough and I said it back in July YOU NEED AN EMERGENCY FUND. You should be adding nothing on the cards. Cut them up. Otherwise you are going one step forward and two steps back.

    However if you had not done that then you would have reduced the debt by more than £3500 which is not as bad but still it is going to take you a long time to get down to a manageable level of debt. I think it makes it worse you have been tracking it and not doing anything about it but you are not alone. It often has to get to crunch point before people are forced to deal with it.

    If you have a payrise and have family help with childcare then that will certainly help. Maybe do as debtaggh is doing and give it 6 months to a year to really try and get it cleared and then think again about a DMP. Motivated and debtaggh diaries are good to read to see the impact high debt has had on them.

    You need to budget for emergency fund, haircuts, presents, clothes for baby at least and the odd thing for you and DH. This will be a long haul so it is unrealistic to allow nothing for it. Car maintenance is also a common reason for adding to debt and so you need to allow for that.

    I would certainly cut the cards up but you can!!!8217;t close them until you clear them. Pick the most expensive first if you are not going to do a DMP.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
  • Treadingonplaymobil
    Treadingonplaymobil Posts: 1,895
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    Forumite
    edited 3 February 2018 at 11:12AM
    Thanks for your thoughts TOPM. Your first point reminded me that I break all the interest down on a debt spreadsheet I've been keeping since 2014. It shows the rates, how much interest we pay and what actually goes towards the debt! I'd updated it last weekend so after having another look - of our £1665 debt payments each month, £1360 actually makes a dent in the debt. Which doesn't seem to bad. Although if the other £300 was going towards the debt too it would clear a lot faster.
    We've somehow knocked off £1500 in the last six months, even though we added £2000 on pet surgery.
    So this has made me a feel a little better and that we might be able to manage this by really taking control of our spending and perhaps boosting our income here and there.

    You're right though, we really do need to make room for spending because you can't just go without things like haircuts, presents, car repairs etc. And I think this is the reason we overspend every month, because we're trying to ignore things you have to spend on!

    Good point RE the HP car, I hadn't thought of that. Not sure how long we're tied in for so will need to do some research.

    I may be being very naive but I feel quite confident that the baby won't impact us too much. We picked up a lot of things we'll need in the Aldi baby event a few weeks ago using money we were given for Christmas and also a second hand cot. MIL has offered to buy us a travel system and my mum has offered to buy some bits too. I was given a whole load of maternity clothes by a friend who gave birth recently.
    I have also failed to mention, because I'm sure everyone will have different views on this - but I guess honesty really is the best policy here, that I've just had a £300pm pay rise (after tax). I'm putting this aside to cover the last few months of maternity leave and then when I go back to work will be able to use this for childcare costs. Both our parents will also be more than happy to help with childcare.

    Aside from winning the lottery this problem isn't going away. I just need to work out how to manage it so that we can actually live whilst sorting it out.
    Couple of points spring to mind...
    1. Does that mean you are knocking £1,360 off your debt every month? In which case, brilliant. If you stop spending on CCs and manage to juggle your budget so real costs are accounted for, you will pay off thousands and thousands even in the 6 months before the baby comes. If that's not the case, look at what is actually coming off the debt if you stopped spending on CCs today.
    2. Presumably you are still spending on CCs as if you weren't even the pet surgery wouldn't have cancelled out the payments made since last year (if that £1,360 figure is correct). Is that right? What are you using them for?
    3. Linked to the point above - you need to save for things that actually you can't cut out completely. For me this includes an expensive Christmas (much to the horror of my diary readers ;):D ), a reasonable sum on car maintenance as we have high mileage, a budget for clothes etc etc.
    4. Do do the research on the HP car. It seems impossible to contemplate when you're in it, but a big win like changing your car can make a massive massive difference, more than any amount of shopping in Aldi over Sainsburys (although don't underestimate those costs!).
    5. I think you are entirely right on the baby expenses - we spent very little in the early years thanks to generous grandparents. More thoughts on the downside of this in a separate paragraph below...
    6. Save that extra £300 somewhere you can't fritter it away, or it will get used for everyday expenses. Or, conversely, consider putting it (or even part of it) towards debt repayments if you feel there is the tiniest risk of it being spent over the coming 6 months. Do the sum of how much you could reduce your debt repayments by if you used it towards debt now - you may find the reduction in your outgoings in 12 months if you do that will make up for not having that money there. I understand the wanting of the cushion, I am exactly the same, but also be realistic about the chances of it being spent and therefore neither reducing debt nor being available at the end of mat leave.

    A point on baby costs: Like us, your debt is going nowhere fast - you have years of this ahead of you. I agree entirely that babies don't need to be expensive, you will get given stuff, you can buy secondhand, you really can spend very little.

    BUT in a few years those expenses rise and rise and rise, and you will still be making debt repayments in a few years. Do what you can no while you are still (comparatively) well off in terms of your budget to reduce your debt so you aren't up the proverbial creek in a few years. This is doubly (triply!) true if you intend to have more than one DC.

    We have three DC and conservatively budget £60pm for clothes just for them, around £100pm for clubs (not essential but ALL children do clubs and it will be very noticeable to yours if they don't unless you plan a very unconventional homeschool hippy lifestyle IME. I have found that people with older children don't 'get' the importance of this expense as I think it's a new phenomenon, and bucking the trend is harder than you'd think here), £150 for family entertainment and something like £140pm for Christmas and birthdays, and they still get noticeably less than their friends (and we don't move in the world's most affluent social circles) All that adds up to a lot of extra money to find per month, and is before you consider any holidays with children (much more expensive when they are over three) or meals out (my 9yo eats a normal adult portion and is skinny!). We are not yet into more expensive clothes and having teens eating us out of home, which I am dreading, and will add more cost.

    I don't say all of that to frighten you and put you off being frugal now, but simply to remind you that this cheap phase of parenting is very very possible, and an excellent thing to do, but it does come to and a lot sooner than you think - certainly a lot sooner than your debt will be paid off - so you must start to consider your debt in terms of those long term cost rises, not just look at your immediate minimal child-based expenses.

    I know it all seems ridiculous and enormous and insurmountable to make any changes just now, but just focus on changing what you can and, importantly, continuously looking for the next change you can make. We are in such a different place to where we were 12 months ago. Still a long long long way from perfect in MSE terms (if you read my diary you will see the regular despair from the MSE heroes! :D ), but we are starting to really get to grips with our spending/lifestyle priorities and learning from the mistakes made in our first year of debt repayment.

    Gosh, that was long. Sorry.
    Trying to figure out a whole new life. Trying to figure out a whole new budget.
    Divorcing, unclear on final debt total right now, but focusing on building a financial buffer zone.
  • Well done on coming back, and thanks for clarifying a few things.

    Re the cars - if they are both needed for your jobs, are you able to claim petrol/mileage back? Do your OH's rates cover the cost of his travel appropriately? Can he increase his hourly rate? I'm sorry to keep beating the same drum (and am pleased to see you say you'll look at the car cost) but £600 a month to run two vehicles is still a lot of money. You haven't budgeted for car maintenance/MOTs, either. ToPMs point about getting rid of the car and getting a cheaper runaround is a very good one.

    You've had good advice below and I agree that budgeting accurately and realistically is going to be crucial for you. As enthusiastic says, if you can get stabilised and live on a realistic budget for a few months it would give you confidence going in to a DMP, where you won't have access to any more credit. You've identified that you have been ignoring things that you do need to spend money on (no judgement here, it's just a fact!) and you need to get in to the mindset of not hiding from those expenses. You are in this for the long haul - you *will* need a hair cut and a filling and the odd night out.

    You don't need to answer this question here unless you want to but you do need to know how you got in this situation. Not so you can spend all your time looking backwards and wishing you had made different decisions, but so you can make sure you don't make the same mistakes again. Is your OH on board with all this? Is all the debt joint?

    I think you've had some great advice from other posters and I think you can dig yourself out of this, but it will be tough and you are going to have to make some tough decisions in amongst all the smaller ones.
  • enthusiasticsaver, this card
    That £3000 on 26% interest is £60 a month but the repayment is £40 so the debt on that one must be rising.
    was cleared and we have just used it in the past month or so, so that repayment figure was based on what we pay currently but after the next statement that min. payment will rise. I think that's why the payment/interest ratio looks so odd. Not that this makes it any better, obviously.
    I have just seen your last post saying you added £2000 to the cards for vet bills. I cannot say this loudly enough and I said it back in July YOU NEED AN EMERGENCY FUND. You should be adding nothing on the cards. Cut them up. Otherwise you are going one step forward and two steps back.
    I know!! I think one of our problems is we're a bit all or nothing. Having a few months of £50 aside, which we started but it always got used for something, would still not have covered the vets fees. So we would still have to have borrowed. And I know it sounds silly and is the wrong attitude, but when you're in so much debt you just think well what's some more going to hurt!!!
    How do we get around the problem of not having a substantial emergency fund for a while (long time)? What do we do when an unexpected cost occurs and we don't have the cash?

    I will check out those diaries you mentioned thank you. And we need brutal, that's why I'm back!
    1. Does that mean you are knocking £1,360 off your debt every month? In which case, brilliant. If you stop spending on CCs and manage to juggle your budget so real costs are accounted for, you will pay off thousands and thousands even in the 6 months before the baby comes. If that's not the case, look at what is actually coming off the debt if you stopped spending on CCs today.
    2. Presumably you are still spending on CCs as if you weren't even the pet surgery wouldn't have cancelled out the payments made since last year (if that £1,360 figure is correct). Is that right? What are you using them for?
    3. Linked to the point above - you need to save for things that actually you can't cut out completely. For me this includes an expensive Christmas (much to the horror of my diary readers ), a reasonable sum on car maintenance as we have high mileage, a budget for clothes etc etc.
    4. Do do the research on the HP car. It seems impossible to contemplate when you're in it, but a big win like changing your car can make a massive massive difference, more than any amount of shopping in Aldi over Sainsburys (although don't underestimate those costs!).
    5. I think you are entirely right on the baby expenses - we spent very little in the early years thanks to generous grandparents. More thoughts on the downside of this in a separate paragraph below...
    6. Save that extra £300 somewhere you can't fritter it away, or it will get used for everyday expenses. Or, conversely, consider putting it (or even part of it) towards debt repayments if you feel there is the tiniest risk of it being spent over the coming 6 months. Do the sum of how much you could reduce your debt repayments by if you used it towards debt now - you may find the reduction in your outgoings in 12 months if you do that will make up for not having that money there. I understand the wanting of the cushion, I am exactly the same, but also be realistic about the chances of it being spent and therefore neither reducing debt nor being available at the end of mat leave.

    TOPM...
    1. We would be, if we could stop having to use the CCs for poor budgeting/overspending. I think this is the first thing to tackle.
    2. Yep. I first posted in July last year and we stopped using them, probably until Nov. Then 'morning' sickness struck and I was pretty much bed bound for two months. I lost control of what was coming in and out and we massively overspent at christmas, new year and my 30th. I'm now feeling better and ready to get back on track.
    3. Will be working on this tomorrow with a bit of budget jiggling.
    4. Unfortunately the HP car is until Aug 2020 :( I had in the back of mind it was this Aug but I was very very wrong. It was a rush purchase following mine being written off, needing a car to be able to work and not having any money to buy anything with.
    6. This is a good point. I had thought about using it towards debt now and whether that would benefit us in the long run - I will look into this tomorrow and do the sums. If we decide to save it I think I will transfer it to a family member to look after or you're right, it'll be gone.

    And thank you for your point on spending after the baby stage. I'll be honest, I haven't thought further ahead than the next 18-24 months. I would really hate for our child (children?) to miss out on anything because of the mistakes we've made. I feel like this is a more motivating reason to get things sorted.
    I know it all seems ridiculous and enormous and insurmountable to make any changes just now, but just focus on changing what you can and, importantly, continuously looking for the next change you can make. We are in such a different place to where we were 12 months ago. Still a long long long way from perfect in MSE terms (if you read my diary you will see the regular despair from the MSE heroes! ), but we are starting to really get to grips with our spending/lifestyle priorities and learning from the mistakes made in our first year of debt repayment.
    Thank you for this.

    Magpie,
    are you able to claim petrol/mileage back? Do your OH's rates cover the cost of his travel appropriately? Can he increase his hourly rate?
    Yes, and we do. Yes. And no. I completely understand what you are saying but I don't think there's anything to be done on the car front unfortunately. (See point above about HP).
    You don't need to answer this question here unless you want to but you do need to know how you got in this situation. Not so you can spend all your time looking backwards and wishing you had made different decisions, but so you can make sure you don't make the same mistakes again. Is your OH on board with all this? Is all the debt joint?
    It's just ten plus years of spending more than we earn. Never saving so never having money when we needed it. And never saying no. Now we finally earn a decent wage, we're spending it all on debt, so we still don't have enough.
    About to sit down with OH and go through it all so he fully understands the situation and we tackle it as a team. It is all debt we have accumulated whilst being together.
    You're right we've got a lot of tough decisions ahead of us. And I think the first thing that will help is running everything past the MSEs!!

    Thank you again everyone.
  • Living within your income and not using cards is the first thing you need to tackle. Having the attitude of we are already in debt, so we might as well add more is common. I have heard TOPM also use it although not recently so she might have seen the light. The thing is though if you dont put the brakes on your overspending this debt will hang over you for many many years affecting your ability to do things like move house, go on holidays, buy a new car etc etc. You need a change of mind set. Saving instead of spending and thinking what you spend your money on. Dont make impulse or rushed purchases without working out how you are going to pay for it rather than reaching for a card.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
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