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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 2
    • optimizm
    • By optimizm 27th Oct 18, 1:30 PM
    • 20 Posts
    • 57 Thanks
    optimizm
    Just looked and apparently the average uk salary is 27.6k
    • optimizm
    • By optimizm 27th Oct 18, 1:32 PM
    • 20 Posts
    • 57 Thanks
    optimizm
    Just looked and the average is £27.6k so we’re quite a bit above this thankfully- we need to be with our level of debts
    • CakeCrusader
    • By CakeCrusader 27th Oct 18, 1:38 PM
    • 615 Posts
    • 323 Thanks
    CakeCrusader
    Yes, but people earning the average salary won't have 40+k's of debt, they probably won't have half or a quarter of this. My unsecured debt is 7% of my income for example (and I think this is high).
    • optimizm
    • By optimizm 27th Oct 18, 1:42 PM
    • 20 Posts
    • 57 Thanks
    optimizm
    Minimum cc payments are 1kish. Most are on n low or 0% but not all. We’re spending about £250 on interest which isn’t great and we are keen to lower this if/when possible.

    The 1400 includes a loan payment.

    I’m trying to take a practical approach towards tackling the debt and trying not to catastrophise things or become too stressed. It won’t help me deal with things
    • Mumoffourkids
    • By Mumoffourkids 27th Oct 18, 2:08 PM
    • 701 Posts
    • 3,644 Thanks
    Mumoffourkids
    From your basic figures, it looks as though you have around £2000 a month 'spare'. I would split this and give yourselves a little bit of fun money, put some into an emergency fund and then chuck the rest at the debts. Work out which one has the highest interest or has the 0% ending the quickest and pay that one off first.

    It is doable especially as your bills seem low. But you will need an emergency fund to stop you from having to use credit again in the future.

    I managed to pay off around £10k of debt in 9 months and that was with us still going on holiday to Cornwall for a week. I got lucky in that two of my debts have made the commercial decision not to chase and one seems to have disappeared completely. So that £10k doesn't include these other debts.
    Total debt Dec 2017 £23090.83
    SEP 2018 £0 100% paid
    Emergency fund £257.38/£600
    Total Savings £1672.07
    • andydownes123
    • By andydownes123 27th Oct 18, 4:41 PM
    • 387 Posts
    • 484 Thanks
    andydownes123
    Just looked and the average is £27.6k so we’re quite a bit above this thankfully- we need to be with our level of debts
    Originally posted by optimizm

    But there are two of you...
    • Lauralou79
    • By Lauralou79 27th Oct 18, 4:52 PM
    • 251 Posts
    • 270 Thanks
    Lauralou79
    Welcome OP, if you stick around and listen to advice on here you can get some great tips from people in the know. I've seen similar posts with similar incomes so I'm sure some posters will come along and help.

    It really makes no difference wether it's an average income or not. You've realised your mistakes in spending and want to sort it out which most people here have done at some point. Advice on a SOA will be valuable when going forward and adjusting your lifestyle so you can get the debt reduced. Good luck
    • optimizm
    • By optimizm 27th Oct 18, 5:08 PM
    • 20 Posts
    • 57 Thanks
    optimizm
    Hi

    Yes there are two of us, but there are two of us earning 78K per year, not 55K..
    • buythedip
    • By buythedip 27th Oct 18, 7:36 PM
    • 33 Posts
    • 52 Thanks
    buythedip
    Discount your take home for the 1.4k you pay towards debts per month and you’re painfully average.

    Best of luck with the next 5+ years paying it back.
    • buythedip
    • By buythedip 27th Oct 18, 7:40 PM
    • 33 Posts
    • 52 Thanks
    buythedip
    And yes, that ratio is very high, you’re basically knackered should one of you lose your job etc.
    • optimizm
    • By optimizm 28th Oct 18, 5:46 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    Discount your take home for the 1.4k you pay towards debts per month and you’re painfully average.

    Best of luck with the next 5+ years paying it back.
    Originally posted by buythedip
    You;re right, in fact if we discount the £1400 then we are probably are just about average as this leaves us with about 3600 per month. Thankfully out other bills/mortgage are reasonable, so we are still left with some surplus income that we can use to make additional debt payments.

    We are going to pay it off within four years.
    • optimizm
    • By optimizm 28th Oct 18, 5:48 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    And yes, that ratio is very high, you’re basically knackered should one of you lose your job etc.
    Originally posted by buythedip
    If I lost my job then we wouldn't be able to manage. If my wife lost her job then we could pay everything but there wouldn't be much surplus.

    I appreciate you posting, however I am nor sure that telling someone that they will be ;'knackered' is particularly useful or supportive.
    • optimizm
    • By optimizm 28th Oct 18, 6:03 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    Here is our SOA. Our minimum payments are a little less than £1400 on here as I have included the actual minimum amounts, and not the slightly higher amounts that I have been paying. This is the first SOA that I have done, so I may need to change some bits.

    supportive/constructive comments please

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 1
    Number of cars owned.................... 2

    Monthly Income Details

    Monthly income after tax................ 3470
    Partners monthly income after tax....... 1535
    Benefits................................ 0
    Other income............................ 0
    Total monthly income.................... 5005


    Monthly Expense Details

    Mortgage................................ 518
    Secured/HP loan repayments.............. 0
    Rent.................................... 0
    Management charge (leasehold property).. 518
    Council tax............................. 115
    Electricity............................. 30
    Gas..................................... 41
    Oil..................................... 0
    Water rates............................. 30
    Telephone (land line)................... 15
    Mobile phone............................ 40
    TV Licence.............................. 12.56
    Satellite/Cable TV...................... 0
    Internet Services....................... 25
    Groceries etc. ......................... 300
    Clothing................................ 50
    Petrol/diesel........................... 150
    Road tax................................ 10
    Car Insurance........................... 75
    Car maintenance (including MOT)......... 30
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 200
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 0
    Pet insurance/vet bills................. 10
    Buildings insurance..................... 22
    Contents insurance...................... 0
    Life assurance ......................... 26
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 0
    Haircuts................................ 10
    Entertainment........................... 100
    Holiday................................. 0
    Emergency fund.......................... 50
    Total monthly expenses.................. 2377.56



    Assets

    Cash.................................... 0
    House value (Gross)..................... 210000
    Shares and bonds........................ 0
    Car(s).................................. 6000
    Other assets............................ 0
    Total Assets............................ 216000



    Secured & HP Debts

    Description....................Debt......Monthly.. .APR
    Mortgage...................... 59000....(518)......1.46
    Total secured & HP debts...... 59000.....-.........-


    Unsecured Debts
    Description....................Debt......Monthly.. .APR
    personal loan..................14500.....338.9.....3.7
    barclaycard....................9850......208...... .6.9
    barclaycard 2..................4700......100.......6.9
    HSBC...........................6000......180...... .0
    Halifax........................8500......220...... .18.9
    mbna...........................6000......180...... .19.9
    Total unsecured debts..........49550.....1226.9....-



    Monthly Budget Summary

    Total monthly income.................... 5,005
    Expenses (including HP & secured debts). 2,377.56
    Available for debt repayments........... 2,627.44
    Monthly UNsecured debt repayments....... 1,226.9
    Amount left after debt repayments....... 1,400.54


    Personal Balance Sheet Summary
    Total assets (things you own)........... 216,000
    Total HP & Secured debt................. -59,000
    Total Unsecured debt.................... -49,550
    Net Assets.............................. 107,450
    • fatbelly
    • By fatbelly 28th Oct 18, 6:17 AM
    • 12,950 Posts
    • 10,023 Thanks
    fatbelly
    Looks good. I think your aim of paying your debt down by £1000 a month is achievable.

    If you can lower the interest on your debts that would be more efficient. It's worth looking to balance transfer those 2 credit cards to 0%. Use a pre-eligibility checker first.

    https://www.moneysavingexpert.com/credit-cards/best-0-credit-cards/
    • Skint yet Again
    • By Skint yet Again 28th Oct 18, 7:04 AM
    • 3,388 Posts
    • 19,040 Thanks
    Skint yet Again
    Is your management charge exactly the same amount as your mortgage ? Nothing spent on birthdays or Christmas ?
    Balance 0% credit card to pay £1360 £1310 £1210 £1160 £1110 £1060
    • optimizm
    • By optimizm 28th Oct 18, 8:20 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    Is your management charge exactly the same amount as your mortgage ? Nothing spent on birthdays or Christmas ?
    Originally posted by Skint yet Again
    Well spotted! I don't pay a management charge so that's an error. Will update!

    I have just found £518 that I can spend on Christmas and birthdays - only kidding, I agree that we need to factor those costs in too. For us, Christmas and birthdays have been areas of huge overspending so we need to have a discussion about that.
    • NeverendingDMP
    • By NeverendingDMP 28th Oct 18, 8:57 AM
    • 126 Posts
    • 539 Thanks
    NeverendingDMP
    Hiya. As said by others I would check for better credit cards etc. Also I would up some areas of your budget with a view to then cutting up or hiding your c cards in the freezer to not spend anymore. That way the numbers will only ever go down. It all depends on how strict you want to be. Are you going all out to pay the debt or going to still have treats along the way.
    Christmas and birthday you have identified. I would also up your emergency fund and I would budget for a holiday as well maybe as four years is a long time.
    50 a month for emergency would mean it would be at least 4 months before you could have a small emergency eg washing machine breaks before you could tackle it without using a card.
    10 pounds for pet costs would only cover food or insurance. Depending on what kind of pet you may need more for annual jabs. Worm flea stuff etc and enough for insurance excess etc.
    Ultimately it's whatever works for you but currently your SOA allows for debt repayment and other things as well. A spending diary going forwards and mini targets will help you along the way.
    Good luck x
    35,213 in Jan 2018, 30000 remaining.
    Mortgage 77230 in Jan 2018
    75112 remaining.
    Emergency fund 416.
    • optimizm
    • By optimizm 28th Oct 18, 10:30 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    Hi all,

    I taken the error out of my SOA - I accidentally listed both my mortgage and a management charge. I don't pay a management charge so my SOA was £518 out.

    Household Information[/b]
    Number of adults in household........... 2
    Number of children in household......... 1
    Number of cars owned.................... 2

    Monthly Income Details
    Monthly income after tax................ 3470
    Partners monthly income after tax....... 1535
    Benefits................................ 0
    Other income............................ 0
    Total monthly income.................... 5005

    Monthly Expense Details
    Mortgage................................ 518
    Secured/HP loan repayments.............. 0
    Rent.................................... 0
    Management charge (leasehold property).. 0
    Council tax............................. 115
    Electricity............................. 30
    Gas..................................... 41
    Oil..................................... 0
    Water rates............................. 30
    Telephone (land line)................... 15
    Mobile phone............................ 40
    TV Licence.............................. 12.56
    Satellite/Cable TV...................... 0
    Internet Services....................... 25
    Groceries etc. ......................... 300
    Clothing................................ 50
    Petrol/diesel........................... 150
    Road tax................................ 10
    Car Insurance........................... 75
    Car maintenance (including MOT)......... 30
    Car parking............................. 0
    Other travel............................ 0
    Childcare/nursery....................... 200
    Other child related expenses............ 0
    Medical (prescriptions, dentist etc).... 0
    Pet insurance/vet bills................. 10
    Buildings insurance..................... 22
    Contents insurance...................... 0
    Life assurance ......................... 26
    Other insurance......................... 0
    Presents (birthday, christmas etc)...... 0
    Haircuts................................ 10
    Entertainment........................... 100
    Holiday................................. 0
    Emergency fund.......................... 50
    Total monthly expenses.................. 1859.56


    Assets
    Cash.................................... 0
    House value (Gross)..................... 210000
    Shares and bonds........................ 0
    Car(s).................................. 6000
    Other assets............................ 0
    Total Assets............................ 216000


    Secured & HP Debts
    Description....................Debt......Monthly.. .APR
    Mortgage...................... 59000....(518)......1.46
    Total secured & HP debts...... 59000.....-.........-
    54
    Unsecured Debts
    Description....................Debt......Monthly.. .APR
    personal loan..................14500.....338.9.....3.7
    barclaycard....................9850......208...... .6.9
    barclaycard 2..................4700......100.......6.9
    HSBC...........................6000......180...... .0
    Halifax........................8500......220...... .18.9
    mbna...........................6000......180...... .19.9
    Total unsecured debts..........49550.....1226.9....-


    Monthly Budget Summary
    Total monthly income.................... 5,005
    Expenses (including HP & secured debts). 1859.56
    Available for debt repayments........... 2,627.44
    Monthly UNsecured debt repayments....... 1,226.9
    Amount left after debt repayments....... 1,918.54

    Personal Balance Sheet Summary
    Total assets (things you own)........... 216,000
    Total HP & Secured debt................. -59,000
    Total Unsecured debt.................... -49,550
    Net Assets.............................. 107,450
    • -taff
    • By -taff 28th Oct 18, 10:39 AM
    • 8,665 Posts
    • 7,882 Thanks
    -taff
    This is probably not going to be something i would normally say but you have a mortgage and are the one earning the most. You only have life cover. I would start considering whether you would be better having life and critical illness, or income protection. This is because you have the spare income to afford that and to ensure that if you did lose your job or were too ill to work, your plans would not be thown in the bin.
    • Dobbibill
    • By Dobbibill 28th Oct 18, 11:48 AM
    • 3,396 Posts
    • 4,367 Thanks
    Dobbibill
    Hi optimizm - welcome to the forum.

    Well done on completing the SOA. A SOA is rarely accurate the first time and often needs a few tweaks to get it spot on. It also requires reviewing on a regular basis but you've certainly done well to get 2 done already.

    A few things from me to give you food for thought.
    You have 2x cars but only £30 pcm in the maintenance budget for them, I would consider upping that - a puncture would wipe that out instantly without wipers, oil etc.

    You need to add something into the Christmas/birthday presents - take what you spent previously and divide by 12. This will give you a realistic figure and unless you are planning on cutting back will be right amount going forward.

    You have nothing in the 'cash' entry which I understand as you are just starting your emergency fund but I would consider using the spare funds in the first month to get that set up - £1k as an EF for a homeowner is standard. Then add the £50pcm to maintain it.

    Budget for a holiday too - you won't want to go for 4yrs without one, it will make you resentful and annoyed.

    It is do-able but you will need to focus and self disciplined.
    If it helps, set up different account for each purpose.

    All the best.
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