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  • FIRST POST
    • optimizm
    • By optimizm 27th Oct 18, 12:26 AM
    • 20Posts
    • 57Thanks
    optimizm
    high income high debt!
    • #1
    • 27th Oct 18, 12:26 AM
    high income high debt! 27th Oct 18 at 12:26 AM
    Hello!

    I chose my username as I do feel optimistic about tacking my debts.

    We owe around 49k unsecured debt on a net montly take home pay of £5050 ( joint). Thankfully mortgage and other monthly outgoing are relatively low so it's manageable, albet high.

    Why is it that so many people with decent incomes ( like us) end of with very high debt levels?

    Is our level of debt an unusually high amount?
Page 1
    • andydownes123
    • By andydownes123 27th Oct 18, 9:58 AM
    • 393 Posts
    • 491 Thanks
    andydownes123
    • #2
    • 27th Oct 18, 9:58 AM
    • #2
    • 27th Oct 18, 9:58 AM
    Compared to your debt, you haven't got a particularly high income so try not to think like that. You can't afford 49k of debt unless you are earning a six figure salary.
    • -taff
    • By -taff 27th Oct 18, 9:58 AM
    • 8,701 Posts
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    -taff
    • #3
    • 27th Oct 18, 9:58 AM
    • #3
    • 27th Oct 18, 9:58 AM
    You end up with high debt leels because you earn a good wage and when you take out credit, you don't think, oh, that's going to be 5000 we owe, you think, it'll only cost 50 pounds a month to pay back, we can easily afford that.
    Then you stop thinking about amounts you spend on credit cards because you think, it'll only be 50 minimum payment a month, we can easily afford that.
    Then you think, we earn quite a lot of money between us, we could buy a nice car/holiday/expensive food and it'll only be 50 quid a month to pay back, we can easily afford that.
    Then you think, well, we earn a good wage between us, we deserve this treat, or that treat, we work hard, we can play hard too, and it's only 50 quid a month and we can easily afford that.

    Then you forget how much you are actually paying out and before long, without any budgetary restraints, you're taking credit out all over the place because instead of thinking of the total amount you owe, you've broken it down monthly and decided you can afford the monthly repayments. You don't save any money because you think you earn a good wage and can afford to pay [and then pay back] for any emergency spends.

    And then you wake up one morning and it's smacking you in the face how much you owe. And that's how you get into debt if you earn a good wage.
    The 'you' I'm referring to is a general 'you' not a specific 'you'.
    • datlex
    • By datlex 27th Oct 18, 10:00 AM
    • 1,820 Posts
    • 1,724 Thanks
    datlex
    • #4
    • 27th Oct 18, 10:00 AM
    • #4
    • 27th Oct 18, 10:00 AM
    People tend to live to their means rather than within. This means you might for example be tempted to buy filter coffee from Waitrose rather than instant coffee from Tesco (I appreciate their are differences in tastes between filter and instant) if you have a higher income. The problem with living to your means is that you aren't putting aside money. Then you are "expected" to maintain a certain life style- newish and certain class of car (probably bought on a loan), certain standard of holidays.
    There's probably a lot more pressure on people like yourselves, at least one of whom is not a high income earner, to keep up with the Jones. For those of us on a more modest income, certain things are out of our reach financially so we don't even consider them.
    • andydownes123
    • By andydownes123 27th Oct 18, 10:10 AM
    • 393 Posts
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    andydownes123
    • #5
    • 27th Oct 18, 10:10 AM
    • #5
    • 27th Oct 18, 10:10 AM
    There's probably a lot more pressure on people like yourselves, at least one of whom is not a high income earner, to keep up with the Jones. For those of us on a more modest income, certain things are out of our reach financially so we don't even consider them.
    Originally posted by datlex

    OP has duped themselves into thinking they are high earners and have treated their finances the same way.


    Split down the middle 2.5k take home (I'm assuming). Considering the average wage in the UK is between 2.k and 2.5k...I'd consider your income very average indeed.


    We earn similar and owe around 10k for the kitchen we did last year. We have savings and planning a large holiday - that's it. That's our money gone. We have a 7k car, eat out once a week and struggle sometimes with money at the end of the month. So that's our life, what are you spending in yours to rack up that amount of debt?
    • fatbelly
    • By fatbelly 27th Oct 18, 10:44 AM
    • 12,985 Posts
    • 10,054 Thanks
    fatbelly
    • #6
    • 27th Oct 18, 10:44 AM
    • #6
    • 27th Oct 18, 10:44 AM
    Hello!

    I chose my username as I do feel optimistic about tacking my debts.

    We owe around 49k unsecured debt on a net montly take home pay of £5050 ( joint). Thankfully mortgage and other monthly outgoing are relatively low so it's manageable, albet high.

    Why is it that so many people with decent incomes ( like us) end of with very high debt levels?

    Is our level of debt an unusually high amount?
    Originally posted by optimizm
    Yes, it's higher than average for non-priority debt.

    What are your plans for dealing with it?
    • optimizm
    • By optimizm 27th Oct 18, 11:22 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    • #7
    • 27th Oct 18, 11:22 AM
    • #7
    • 27th Oct 18, 11:22 AM
    I should stress that I want trying to appear like I was bragging about our income- I have nothing to brag about when it comes to finances.

    I do think our income is reasonably high though- around 78k joint, I think. Is that considered average?
    • optimizm
    • By optimizm 27th Oct 18, 11:23 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    • #8
    • 27th Oct 18, 11:23 AM
    • #8
    • 27th Oct 18, 11:23 AM
    We basically plan to chuck as much as possible at the debts each month. We would like it gone within 4 years
    • fatbelly
    • By fatbelly 27th Oct 18, 11:42 AM
    • 12,985 Posts
    • 10,054 Thanks
    fatbelly
    • #9
    • 27th Oct 18, 11:42 AM
    • #9
    • 27th Oct 18, 11:42 AM
    That's reducing your debt by £1000 a month. Do you want to discuss the detail?

    If so we will need a statement of affairs
    • GothicStirling
    • By GothicStirling 27th Oct 18, 11:58 AM
    • 1,112 Posts
    • 844 Thanks
    GothicStirling
    Someone once explained it to me like this, as our wages increase, instead of keeping our spending the same, and increasing our savings, we buy the higher priced car, a bigger house, holidays with a higher price tag, shopping at Marks & Spencers instead of Sainsbury's. Then there is the credit card . . .

    I work for the NHS, and I get sick of hearing Band 7+ complaining of being skint. One day I'll say, you want to try living on a Band 1 salary. Or go out of the NHS there's people raising a family on less that 10k!


    I watched a great video on Facebook yesterday, the basic gist of it is: "you are not your car, you are not your house, you are not your clothes etc. I'm going to remember that from now on in shops. For instance I saw a DVD of a film I would like to see but it cost £10, but thought "nah, give it a month of two, and it'll be £5 in the CeX store. I'm a book worm too, and never buy novels new now (unless its a gift), just bought 4 for £8 for a British Heart Foundation store instead. We need a new sofa, and I need a new bed we've been looking in BHF Furniture and Electrical stores for them too. I also have a rule for my credit card (just got it after 8 years of appalling credit history), it stays at home unless I need it for something (i.e. knew I had to buy new glasses from opticians) and gets paid off at the end of the month.


    Good luck.
    • GothicStirling
    • By GothicStirling 27th Oct 18, 12:02 PM
    • 1,112 Posts
    • 844 Thanks
    GothicStirling
    I should stress that I want trying to appear like I was bragging about our income- I have nothing to brag about when it comes to finances.

    I do think our income is reasonably high though- around 78k joint, I think. Is that considered average?
    Originally posted by optimizm
    I wouldn't fixate on whether your income is average. What matters is disposable income, and the quality of life you are after. I know high earners who have less than me once they've paid bills out.
    • -taff
    • By -taff 27th Oct 18, 12:14 PM
    • 8,701 Posts
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    -taff
    I should stress that I want trying to appear like I was bragging about our income
    Originally posted by optimizm

    I didn't think you were.


    I'm more worried that you don't seem to know how you've ended up with this debt.
    Go through your bank statements and credit card statements from the last three or six months to see where you are spending it. If you want some help with budgeting, post your SOA. Be warned, you may hear things you don't want to listen to if you do this, but no-one does this to annoy or upset you, they see it bald and call it bald.
    • optimizm
    • By optimizm 27th Oct 18, 12:21 PM
    • 20 Posts
    • 57 Thanks
    optimizm
    Hi Taff
    I havenít posted anything that suggests I donít know how the debt has accrued. I am acutely aware that our debts have mounted through years of over spending on things we donít need. It hasnít crept up in us, or taken us by surprise. Weíve allowed It to happen through poor choices. Weíre accountable so now itís time to get it sorted.
    • CakeCrusader
    • By CakeCrusader 27th Oct 18, 12:25 PM
    • 619 Posts
    • 328 Thanks
    CakeCrusader
    It depends on where you're spending and what you're buying. If you're replacing your wardrobe every season, like to keep up with the latest gadgets, like to eat out a lot, like those holidays or new cars, the debt is bound to increase (this has nothing to do with income by the way, a lot of very rich people don't live very frugally). Credit cards are useful, but the tendency to whack a few weeks of groceries onto one and to spend a few hundred on bits and bobs (it all mounts up), thinking you'll pay it off in a month or two is strong. That 'I'll pay it off in a month or two' rarely happens though, as there's not much left after the bills have been paid and after you've eaten out a few times and gone shopping and not everyone has the ability to pay it off in full at the end of the month (my highest card's limit is 3 times my monthly salary, I'd never let it get that high though). The following month a little more is put onto the credit card, thinking 'I'll pay it all off in a month or two', and that doesn't happen either. Before you know it you owe thousands on a card. People on lower incomes can't do this as they don't usually have access to the same funds, or maybe they are just spend savvy.



    It would be wise to take a look at exactly where your money's going, and see how much you can pay off. 49k in unsecured debt would really worry me to be honest, it doesn't matter what my income is, if I had an accident, if I became unwell or if my hours/pay fell I wouldn't be able to pay this off. Your debt to income ratio's really not good.
    • Mermaid89
    • By Mermaid89 27th Oct 18, 12:25 PM
    • 84 Posts
    • 35 Thanks
    Mermaid89
    I think its all relative really. I work for an insolvency firm and its not unusual at all for people with higher incomes to have higher debt as the % of lending is nearly always the same as someone with a lower income and a lower amount of debt - hope that makes sense!
    • optimizm
    • By optimizm 27th Oct 18, 12:26 PM
    • 20 Posts
    • 57 Thanks
    optimizm
    Iíll do the SOA over next day or so. Some general figures-

    Take home 5050
    Mortgage and all other bills and direct debits 1200
    Minimum debt payments 1400
    Food/ fuel 400

    This highlights just how badly weíve been overspending as we have spent the spare hours become, and then some!

    So whilst things are bad, I donít necessarily feel that the wolf is at the door, providing we take action now
    • CakeCrusader
    • By CakeCrusader 27th Oct 18, 12:30 PM
    • 619 Posts
    • 328 Thanks
    CakeCrusader
    1400 a month is a lot to spend on minimum debt payments. Are you paying interest on these too? Any chance that you can balance shift some of this onto a 0% or lower interest rate card? It will free up some cash so you can put this towards clearing some of your debt.
    • -taff
    • By -taff 27th Oct 18, 12:32 PM
    • 8,701 Posts
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    -taff
    Look to see if you can move some of the debts to 0% if they aren't already.
    • andydownes123
    • By andydownes123 27th Oct 18, 1:08 PM
    • 393 Posts
    • 491 Thanks
    andydownes123
    I should stress that I want trying to appear like I was bragging about our income- I have nothing to brag about when it comes to finances.

    I do think our income is reasonably high though- around 78k joint, I think. Is that considered average?
    Originally posted by optimizm
    Not massively north of average really
    • tlc678910
    • By tlc678910 27th Oct 18, 1:12 PM
    • 730 Posts
    • 1,143 Thanks
    tlc678910
    If you have cards that are no longer on 0% I think the interest will shock you. If you keep paying the minimum on those you will be paying them for decades and pay thousands in interest.

    It will also worry you I expect if you work out how much your debt will cost if all your 0% offers end.

    You need this knowledge to drive you to act and get those cards overpaid.

    Tlc
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