Help me get out of debt

[Outwiththedebt]

So we have a very good household income - £7000 after tax.

We are in £20k of debt

We have £3k in the bank (that's every single penny we have between us currently)

The debt has built up over the last 2 years - we moved house which took most of our savings but when we moved in to the new house the tenants hadn't moved out and we ended up in a legal battle with the sellers. The court case was found in our favour and the sellers have to reimburse us but have declared bankruptcy and it's very unlikely we will ever see the money. The debt was accrued because we needed to store our belongings, rent somewhere to live (a hotel initially and then an air b&b) and then the tenants had done damage to the property when forced to move out and we had to put it right to make the house liveable (they did significant damage to the kitchen and bathrooms).

So anyway, we're now moved in and things are liveable but we're in £20k of debt and unlikely to see any recompense. So new year, new budget! Any help in how we can cut back or make savings would be really helpful.

So income £6998
Outgoings:

Mortgage: £1995
Childcare: £650
Food/ supermarket spends £600
Pets £150 (food and insurances for 1 dog and 2 cats)
Car £250 (petrol, insurance, tax, MOT - we own the car outright)
Commuting £80
Broadband £35
Gas and electric £319
Water £53
Home insurance (contents and building) £48
Mobile phones £31
Netflix £24
Prime £8
Swimming lessons £68 (2 kids, council pool)
Gymnastics £24
Music lessons £60
Haircuts (DH and DS) £25
Window cleaner £12
TV licence £13
Trade union subs £15
Professional registration £15
Student loan £68
School lunch £45
Life & critical illness insurance £95
Lottery £10
Council tax £200

Total £4893

Minimum payments on debt= £448

Total £5341

This leaves £1657

This is for day to day spends, Christmas, birthdays, school trips, clothes, household repairs, school uniform, shoes, days out, holidays etc.

I am very, very aware that our "remaining" spends are similar to some people's earnings - I am NOT pleasing poverty in the slightest, but we are in debt and we do need to clear it asap.

What I do want is a realistic plan as to what is reasonable to budget for Christmas, birthdays, other household expenses etc and what we can therefore pay off the debt.

What I don't want is to attribute all of that £1600 to payment of debt and then find us getting in to debt again to pay for school uniform etc.

As you can probably imagine it's been a really stressful time and I'm only just feeling we can get a grip on things now.

2 adults working full time, 2 children in primary school. No family support.

TIA.

I've also probably missed off some expenses!

Have you thought about contacting one of the debt charities. I found Step Change were very useful.

Sorry to hear about the circumstances re your debt. That must be incredibly frustrating.

I'd chuck as much as possible at the debt tbh.

How long until you no longer need as much childcare?
Edit - just seen they're in school... is this all for breakfast/after-school clubs?

You need to get into a going without mindset, its that simple. Go out of the house as little as possible and eat cheap food, accept it will be miserable.

I don't think it's even that bad. If you spend £1k a month on the debt you've still got loads left over and in two years you'll be rid of it.

I would throw a total of £1,000 a month at the debit. This would still leave you £1,100 and with careful spending very achievable but cut to minimum debt payment for October & November so you have money for Christmas expenditure. You could pay this off in two years which for £20k is great.

You could have 600 left for spends/pocket money and pay £1000 off the debt each month - be paid of in under 2 years

Breakfast club twice a week and after school club 3 times a week. Holiday clubs for the holidays we can't get annual leave for (about 9 weeks). DC1 won't need child care from July 2027 we'll need it for DC2 for a long while.

Are you paying interest on the debt?
if you can move it all to 0%, you then have a deadline and know how much you need to pay each month to clear it before incurring interest.
the positive is the debt has come from exceptional circumstance, rather than ongoing habits.
It’s also relatively low compared to your income.
Putting a plan in place is absolutely the right thing to do, but you also are in a fortunate position where you shouldn’t have to negatively impact your lifestyle to clear the debt.

How is your debt organised - low/zero interest rates? Can you transfer to better rates. Better to either pay off the highest interest or lowest balance first.

I use an app called snoop which lists all our money and debts so helps to show our net position to keep on track. That’s quite motivating.

I also use Monzo and starling to organise my finances into pots. For example I have a non monthly expense pot (car maintenance, house insurance, emergencies) - £400 a month into there. I have a groceries pot - £600 into there. £200 into a separate Xmas pot. £200 into a fun pot.

Looking at your expenses, they seem fairly normal except that your gas/electric is quite high. Mine is £204 in a 6 bed detached.

Are you using tax free childcare?

No, we've transferred it all to 0% cards already and we don't have a credit card we use currently (1 available for emergency use as we have no real savings) so we aren't actively accruing debt anymore which is good.

And thanks for pointing out the positives, it's genuinely nice to hear as it's all been so stressful it's been hard to see any positives.

We've not really been in debt before this (took out a loan once to redo the roof but that's it). We've had a bit of credit card debt very occasionally, Christmas or after we got stuck on holiday due to the Icelandic ash cloud etc but all paid off very quickly.

We aren't eligible due to DHs income being just over the threshold.

£250 is a lot to spend on the car a week. Is there a way to cut that down a bit? You could get a cheaper Netflix subscription and cheaper mobile contracts. Lebara do sim card only contracts very cheap.
Tbh I would probably start off bunging £1000 plus the repayment into the debt at the beginning of the month and then seeing how you manage with the remaining money.
If you have bought clothes over the last year then you should be able to do a year only buying essential clothes, so just replacing things if they break and can't be repaired. Same with house repairs, you should only need to spend on something essential.
So saving pots should just be for gifts, holidays etc. If you get in the mindset that you can only spend money that you have saved, you will be fine.

What an awful situation. I'm surprised that you did not get any money from your vendor. I thought one of the remedies for failed completion (and indeed the whole point of the deposit) is they would have to return the 10% deposit you paid on exchange. Why wasn't that pursued?

How far over? I only ask because your household income isn’t far off ours. We just put more into his pension to be eligible.

The £250 is per month. It breaks down like this

Insurance £600 per year/ £50 per month
TAX £220 per year/ £20 per month
Petrol £85 per month (1 tank)
Rest (£95 is for MOT/ service/ running costs).

Unfortunately the house was bought as a fixer upper, this wasn't an issue when we originally bought it - we had savings to do the essentials and the rest could be done as we went along. As our savings were decimated and then the essential repairs increased due to the damage it does need some stuff doing asap to prevent further issues down the line (like repointing and the flat roof repairing).

Would recommend YNAB. you can have a free trial to see how it works for you. I’m saving 10x the annual fee, so cost is worth it for me.
when do your 0% deals expire? And across how many CC? If you can pay minimum on all, and more on the one which runs out of 0% first you can then ‘snowball’ everything to the next card you get great momentum.

I'll look in to this - he only went over the threshold last year so we've not really looked in to it, just got the letter from HMRC to say we were no longer eligible.

Going through everything

Mortgage: £1995
Childcare: £650
Food/ supermarket spends £600 - can this be reduced even by 50? Where do you shop?
Pets £150 (food and insurances for 1 dog and 2 cats)- again can this be reduced by getting cheaper food?
Car £250 (petrol, insurance, tax, MOT - we own the car outright)
Commuting £80 - why this cost and for the car??
Broadband £35
Gas and electric £319 - this seems very very high?!

Water £53
Home insurance (contents and building) £48
Mobile phones £31
Netflix £24 - how many screens is this for?
Prime £8- is this needed- get rid.
Swimming lessons £68 (2 kids, council pool)
Gymnastics £24
Music lessons £60
Haircuts (DH and DS) £25
Window cleaner £12 - get rid!?
TV licence £13
Trade union subs £15
Professional registration £15
Student loan £68
School lunch £45- would it be cheaper to make lunches
Life & critical illness insurance £95
Lottery £10 - get rid!
Council tax £200

you could be saving another 100 or so here.

i agree with others 1k minimum at the debt.

Legally, completion didn't fail. It just wasn't vacant possession (apparently they are 2 different things). We are now living it that house - which we've been paying the mortgage on the entire time!

Add the 448 plus 657 = 1015
20K ÷1105 = 18.9 months
You have a pretty good budget already so that leaves you 1K for everything else
Year and a half and its gone
Any bonuses etc and you could chuck that in.
Use apps like Jam doughnut for cashback, chuck that onto it .
You could potentially have it paid off in less than a year without compromising your lifestyle .

Your budget is fairly good but it needs to account for absolutely everything. As you say school uniform etc.
for example this is our budget monthly…maybe it will help. You to refine it a lot more and see what is actually available.
Me 3100
DP 4100
CB 280
Total 7480
Housing
Mortgage: 1900.
Insurances(life, house): 150
Property tax: 40
Total Housing: 2090
Utilities
Electricity 150
Waste collection: 30
Broadband & TV: 70
Mobile phones x3: 60
Total Utilities: 310
Food & Groceries
Groceries & household food: 500
Dining out / takeaways: 200
Total Food: 700
Transportation
Fuel: 250
Car insurance & tax: 150
Maintenance & NCT: 100
Public transport / Parking: 20
Total Transport: 520
Education & Kids
School books, uniforms, fees: 50
Activities, sports, clubs: 50
Pocket money/treats: 60
Total Kids & Education: 160
Entertainment & Lifestyle
Family outings, hobbies, gifts: 200
Subscriptions, books, etc.: 60
Miscellaneous expenses (haircuts,nails): 60
Personal spends: 200 x 2 = 400
Total Entertainment: 730
Savings & Miscellaneous
Emergency fund / Savings: 2,000
Holidays (monthly allocation): 500
Clothing: 200
Miscellaneous buffer: 260
Total Savings & Misc.: 2960
TOTAL MONTHLY SPENDING: 7,480

For as long as you can get 0%, I'd pay the debt off more slowly and get some savings behind you. I think this is a legitimate reason to extend the mortgage if you can.

Thanks.

Pet expenses are the cheapest I can get them, I recently changed insurance provider to reduce it but the cats are quite old.

I commute by train, DH takes the car. If it were the other way around we'd still have a commuting cost.

I shop at asda. I do it online so I'm not swayed by what I see in store and I stick to a meal plan better. I also use blue light card to buy asda vouchers which saves us 4%. I'm not sure if Aldi would be cheaper? It includes all household cleaning, laundry detergent, shampoo etc. Maybe I need to look at making cheaper meals.

Would making pack lunches be cheaper? I'm not sure? Genuinely interested in the breakdown of cost.

Yep I'll knock prime and the lottery on the head. And I'll look at a cheaper Netflix package.