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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 3
    • DrEskimo
    • By DrEskimo 28th Oct 18, 12:41 PM
    • 290 Posts
    • 210 Thanks
    DrEskimo
    As above, I think it's worth doing the SOA based on your actual spend, as this first draft looks more like what you hope the future budget to be.

    By doing one based on your actual previous months expenditure you can see where you have been over spending, and whats a realistic budget to maintain.

    On a cursory glance, there are some aspects of the SOA that I just think are not realistic. The main one being the 100 per month entertainment fund. Are you really only going to spend 25 between you, your partner and your child a week? Look back at what you are spent in the last few months and compare to decide whether that is feasible. Same with the food budget and car maintenance.

    It goes without saying that if you could easily stick to the above budget, then you would have had >3k surplus income each month before you took on these debts. So clearly you were spending a lot more than the SOA to be in a position of having 49k worth of unsecured debt...

    What was these debts on? Was it just bad spending habits that accumulated over many years, or was it large items that you had to take on credit due to not having any emergency savings? Debt is the symptom, and you need to identify why you got into this position to ensure you don't continue or end back up in the position again in the future.

    If you can reduce your spending to the above SOA amount and actually stick to it, you could clear all your debt in just 2yrs....
    • worriedDan
    • By worriedDan 29th Oct 18, 8:26 AM
    • 231 Posts
    • 723 Thanks
    worriedDan
    Well done for taking the plunge. Try to be as realistic as you can in your SOA. Don't worry if it takes a few attempts. I am still tweaking mine and we are 18mnths into our debt free journey.
    • natlie
    • By natlie 29th Oct 18, 9:26 AM
    • 1,200 Posts
    • 5,195 Thanks
    natlie
    Hi

    Make a notes list of all your direct debits and the dates that they go out of your account - keep in on your phone, update it whenever payments change - keep a tabs on the total thats going out

    Cancel all unnecessary things, unless you can afford them - gym, sky tv, etc

    Make an excel list of all your debts and the amounts you owe, keep tracking this for motivation

    Is your income high? YES, We take home 38,000 owe 26,668 and we meed all our monthly repayments with extras to pay it off faster, we live quite a frugal lifestyle

    Nat
    27328 26,728 26,668 26475.20
    • LoulaBelle
    • By LoulaBelle 29th Oct 18, 11:42 AM
    • 90 Posts
    • 116 Thanks
    LoulaBelle
    One thing I've noticed - you don't have anything for Contents Insurance is that because your buildings and contents insurance are combined in the Buildings Insurance figure?
    • AstroTurtle
    • By AstroTurtle 29th Oct 18, 11:43 AM
    • 247 Posts
    • 678 Thanks
    AstroTurtle
    Hang on, Hang on.

    You can rejoice in the fact you have 2,000 per month to throw at your debt.

    But let's all be realistic here. Your lightbulb moment isn't that you can afford to pay off your debt.

    Your lightbulb moment needs to be how on earth with 2,000 per month spare now (Which would have been 3,200 before debt commitments) How on earth have you ended up spending the 3,200 PER MONTH spare money and then Spending 50,000 on top of that in debt. Figure out that problem at it's root cause and fix that and then the debt should fix itself.
    • LoulaBelle
    • By LoulaBelle 29th Oct 18, 7:43 PM
    • 90 Posts
    • 116 Thanks
    LoulaBelle
    I can see where you are going wrong - you sound like my husband 'but we earn a lot of money - we can afford it'...… no - you need to look at where you spent the money that got you into this mess in the first place and deal with it from there ……… I'm frugal - I can go into town and do what I need in under 30 minutes to save paying for parking ……. he will go into a coffee shop and pay 7 for a coffee
    • FTBuyerGlasgow
    • By FTBuyerGlasgow 29th Oct 18, 7:52 PM
    • 46 Posts
    • 31 Thanks
    FTBuyerGlasgow
    Optimizm, you are very fortunate to have such a good income, it is a reasonably good income in comparison to the average, despite what may be said in other replies.

    I don't usually review SOA's but I couldn't help notice your mortgage repayments, your LTV appears to be 25% but your monthly payments seem a bit high, is your mortgage term ending in the next 5 years or so?

    I'd never usually advocate this but because you have such good equity in your house you could consider lengthening your mortgage term to reduce monthly mortgage repayments and throw the money at your unsecured debts. You could shave a year off your debt repayments and then make mortgage overpayments once you are debt free. Only a suggestion though, I appreciate some people would rather be mortgage free with unsecured debts so may not be the way to go.
    Started out with nothing, still got most of it left.
    • optimizm
    • By optimizm 30th Oct 18, 10:15 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    Hang on, Hang on.

    You can rejoice in the fact you have 2,000 per month to throw at your debt.

    But let's all be realistic here. Your lightbulb moment isn't that you can afford to pay off your debt.

    Your lightbulb moment needs to be how on earth with 2,000 per month spare now (Which would have been 3,200 before debt commitments) How on earth have you ended up spending the 3,200 PER MONTH spare money and then Spending 50,000 on top of that in debt. Figure out that problem at it's root cause and fix that and then the debt should fix itself.
    Originally posted by AstroTurtle

    I totally agree. The reality is tat we have been overspending to for almost 2 decades.

    We have made shockingly poor choices, going on very expensive holidays, buying expensive cars ( they have gone now), weekends aware, clothes, things for the house - our kitchen cost 10K when actually we could have spent a third of that etc etc.

    We don't have a sob story - we haven;t been the victims of circumstances out of control, we have just spent loads too much money! I am big on accountability and I would hate it if I came across as lacking responsibility for the situation we are in.

    In terms of our 'spare income'. UP until 10 months ago I was smoking 30-40 cigarettes per day. A health scare forced me to make some lifestyle changes and as a result I have not smoked since February. Looking back, I was spending at least 600 per month on cigarettes. We were also paying out in excess of 700 for childcare, This has reduced now to roughly 200 per month, so there is an additional 800 straight away!

    We have both also had some success at work in the last 12 months. My take home pay is 350 more than it was 12 months ago and my wife's has increased by 150,I have also stopped financially supporting my 23 year old son as he has a full time now, having finished his studies. He is living with his girlfriend so I stopped the 300 per month that he was receiving.

    We had this level of debt a year ago, however as you can see from above, our 'spare' income was much reduced. We both feel that we are at a stage where we have to sort out this debt. We absolutely cannot be in this same situation when we are 50 ( early 40's now).
    • optimizm
    • By optimizm 30th Oct 18, 10:17 AM
    • 20 Posts
    • 57 Thanks
    optimizm
    Optimizm, you are very fortunate to have such a good income, it is a reasonably good income in comparison to the average, despite what may be said in other replies.

    I don't usually review SOA's but I couldn't help notice your mortgage repayments, your LTV appears to be 25% but your monthly payments seem a bit high, is your mortgage term ending in the next 5 years or so?

    I'd never usually advocate this but because you have such good equity in your house you could consider lengthening your mortgage term to reduce monthly mortgage repayments and throw the money at your unsecured debts. You could shave a year off your debt repayments and then make mortgage overpayments once you are debt free. Only a suggestion though, I appreciate some people would rather be mortgage free with unsecured debts so may not be the way to go.
    Originally posted by FTBuyerGlasgow
    Mortgage has 11 years left to run. We switched to a fixed rate recently, our payments before were 479 but we felt vulnerable with it being a variable rate.

    Not sure if we would qualify for a new mortgage at the moment due to our debt levels.
    • bmthmark
    • By bmthmark 30th Oct 18, 2:21 PM
    • 254 Posts
    • 244 Thanks
    bmthmark
    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.
    Originally posted by optimizm
    I agree not exactly helpful. I'm sure most people would be 'knackered' if anyone were to be out of a job
    • dano17439
    • By dano17439 30th Oct 18, 5:07 PM
    • 267 Posts
    • 229 Thanks
    dano17439
    Yes to echo the comments here, your income is above average, but the amount of debt is far too high in relation


    Still you've seen the problem before it get totally out of control. You now need a few years of being ultra sensible and no luxuries to get this debt down. Unfortunately as you've been living the lavish lifestyle for years and totally above your means, these cutbacks may be more difficult.


    I wish you both luck anyway!
    • determined new ms
    • By determined new ms 30th Oct 18, 8:02 PM
    • 7,037 Posts
    • 41,516 Thanks
    determined new ms
    I agree not exactly helpful. I'm sure most people would be 'knackered' if anyone were to be out of a job
    Originally posted by bmthmark
    I was out of work for 18 months, well I actually did do some part time shifts in a pub towards the end of that period. We cut our cloth, reduced spending to the minimum and we got through it using our savings. But we had been learning to be frugal for some years by then.

    op I would say keep plugging at it. It won't be perfect to start with but the more you do it, practice, try something out and are happy with that change so you try something else then the better you get. With your disposable income you could easily chuck an extra 1000/1500 at the debts and get it done in less than 2 years and still have a good amount of disposable income for day to day life
    DF as at 30/12/16
    Wombling 2017 3016.55/Roadkill 8.73
    Wombling 2018 145.73/RK 0.04
    • zippygeorgeandben
    • By zippygeorgeandben 30th Oct 18, 8:16 PM
    • 945 Posts
    • 1,289 Thanks
    zippygeorgeandben
    and after you've wiped out the debt, you need to build a 3-6 month emergency fund!
    Savings End October 2018 2240.13
    September 2018 986.09
    October 2018 1254.04
    November 2018
    December 2018
    January 2019
    • Potbellypig
    • By Potbellypig 30th Oct 18, 8:28 PM
    • 285 Posts
    • 151 Thanks
    Potbellypig
    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....-



    Reading between the lines, I'd say the reason why you've had your 'lightbulb' moment is that you've maxed your credit cards. The fact is that unless you actually get to the root cause, then overpaying your debt is only going to lead you back to overspending eventually.
    • optimizm
    • By optimizm 30th Oct 18, 9:41 PM
    • 20 Posts
    • 57 Thanks
    optimizm
    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....-



    Reading between the lines, I'd say the reason why you've had your 'lightbulb' moment is that you've maxed your credit cards. The fact is that unless you actually get to the root cause, then overpaying your debt is only going to lead you back to overspending eventually.
    Originally posted by Potbellypig
    Hi, We actually have about 20K of available creidt between us, which is terrifying. I dread to think the mess we could be in if we had not had our realization

    You're right about the overspending though. We have actually been working on this for the last few months, before we posted on here. . We are being super frugal at the moment, possible too frugal. We need to set a realistic long term budget that we can stick to
    • enthusiasticsaver
    • By enthusiasticsaver 30th Oct 18, 11:56 PM
    • 7,280 Posts
    • 15,959 Thanks
    enthusiasticsaver
    There is a danger with families of above average incomes for them to become complacent about debt levels. The thing is though none of us know what is around the corner so living as if things will never change is naive and risky. On the soa it shows you as having spare income and you obviously don't as you have no savings and almost a whole years salary worth of unsecured debt. You know where you have gone wrong so that is a start but I would urge you to start a spending diary and become a lot more financially disciplined.
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • Pixie5740
    • By Pixie5740 31st Oct 18, 8:47 AM
    • 13,266 Posts
    • 19,092 Thanks
    Pixie5740
    Hi, We actually have about 20K of available creidt between us, which is terrifying. I dread to think the mess we could be in if we had not had our realization

    You're right about the overspending though. We have actually been working on this for the last few months, before we posted on here. . We are being super frugal at the moment, possible too frugal. We need to set a realistic long term budget that we can stick to
    Originally posted by optimizm
    That's a good point about not going too far the other way. Your budget going forward has to be realistic and maintainable.
    • LoulaBelle
    • By LoulaBelle 31st Oct 18, 9:56 AM
    • 90 Posts
    • 116 Thanks
    LoulaBelle
    do you not claim child benefit - its available to everyone regardless of income, I think its 20 a week for the first child
    • ReadingTim
    • By ReadingTim 31st Oct 18, 12:22 PM
    • 3,101 Posts
    • 4,580 Thanks
    ReadingTim
    I agree not exactly helpful. I'm sure most people would be 'knackered' if anyone were to be out of a job
    Originally posted by bmthmark
    Sometimes you need the carrot, sometimes you need the stick.

    Yes, most people would be knackered if they were out of work, but being out of work can happen to most people, so it's not an unreasonable comment to make, nor eventuality to consider & plan for.
    • Pixie5740
    • By Pixie5740 31st Oct 18, 12:26 PM
    • 13,266 Posts
    • 19,092 Thanks
    Pixie5740
    do you not claim child benefit - its available to everyone regardless of income, I think its 20 a week for the first child
    Originally posted by LoulaBelle
    It might be available regardless of income but if you earn over 50k a year like the OP does you and claim child benefit you are then hit with the High Income Child Benefit Tax Charge.
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