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.

For starters OP there should be scope to trim at least £100 a month off your energy bills.

Edited to add I don't know where you live, but I say that as someone living in a 300m2 period house.

Can I ask where you get your energy from? I did a comparison on Uswitch and this was the cheapest BUT we didn't have a base to compare from so used an average consumption calculator. I guess after we've lived here a bit longer the provider might see we aren't using that much and reduce the DD?

Op, when is the end of your 0% deals and how much would you owe by that time?

Don’t trust them either - they sent ours too entirely incorrectly. If his taxable income - salary plus other income (inc savings interest) exceed £100k (even a penny over), you aren’t eligible. BUT a you deduct anything you pay into a pension to find taxable income. So if he’s only marginally over the £100k threshold it might be worthwhile to pay more into pension.

So the first one ends in April, I think I'll have to transfer that one to another 0% card as I'll still owe a fair bit on it (though if I throw all we've got at it and pay the minimum on the others it'll only be about £500, so actually I might not need to transfer it). The other 3 end in early and mid 2027 - I intend for them to be paid off by then now we're in the house.

I’d give a reading once a month for several months, that way you can hone in on exactly what you do use. A modern new build 4 bedroom seem a lot to be paying for utility

Sorry, re ready it says new house - not sure if that means a new build or new to you

It's a 4 bed old Victorian semi in a poor state of repair unfortunately! Yeah I've been giving readings for the time we've been in. Hopefully it'll soon show we aren't using the estimated amounts, especially as we're in the more expensive months now.

It is not a lot of debt comparing to the income, plus it was acquired because of circumstances beyond your control. The most obvious strategy is to pay minimal repayments and move the leftovers of money at the end of the month to a saving account, it will get some interest while just overpayment of 0% card doesn’t make any difference except psychological reassurance. When the 0% time for the first credit card is close, repay it using the savings.

Then just consider getting a loan for the rest of debt for a couple of years with similar repayments - this will allow you to have cash flow and some life enjoyment. It is not a lot of fun constantly thinking about how to repay the debt.

So pay the April one off. Then pay the minimum off the remainder but put the difference into savings for the next year + (cash ISAs or premium bonds).

Victorian semi explains why the bills are very high

it might be. Worth lagging the attic/lift for now, extra won’t hurt as long as there is room for air circulation

then after the debt is cleared and you decorate, look at internal wall insulation, often the rooms are big enough for no one to notice and it’ll make a big difference . Again not to much that it stops air circulation

Yeah we intended to secondary glaze and insulate just haven't got round to it yet.

If you double your repayment you still have a significant amount of money left. You can also trim that food budget and your utilities are very high (mine is £141 for a 4 bed) how is Netflix so high too, I’d cut your package down. You petrol seems high too, is there anything to be trimmed? Throw as much as you can at the debt and it will be gone in 2 years without too much pain, just try cooking at home more etc to save more

Wow. You can save 2000 a month and you get child benefit. I appreciate you are not doing anything wrong, but that’s pretty unreal.

The petrol is a tank a month which we use for DHs commute, school run and kids activities can't really cut that down.

I'm going to look at the Netflix.

The only time we've eaten out or had a take away since we moved out of the hotel was the day we moved in to the house and our wedding anniversary, which admittedly is twice more than the 8 months we were in the air b&b. But we very rarely don't eat at home. Occasional lunch in the office (misery sandwich) if we didn't have any leftovers or sandwich stuff in.

I’m based in Ireland. It’s not means tested here.

The one I’ve got my eye on is your supermarket spend. You’re clearly going about it in a very intentional way. But I wonder what meals you are planning and doing?

Something I stopped doing when my budget was low was buying liquids. It’s a surprisingly quick way to reduce spending, though it’s rarely fun. Bar shampoo, for example; cheap bar soap from the market not handwash; obviously no drinks. I still bought milk.

I also found we were spending a huge amount on yogurt. For us at that time, a yogurt maker was a good investment as it gave us a litre of yogurt for the price of a litre of UHT milk.

Id try and find 14 inexpensive main meals and just rotate them every two weeks for a year; pasta with tomato sauce, pasta with tomato/tuna sauce, rice with whatever cheap veg you can stir fry, baked potatoes with beans, curried eggs, egg and (real potato) wedges. It’s boring AF but could significantly shift your debt payment.

Thanks I'll look at this.

I suspect I do make "fancier" meals than necessary - lots of curries and stews which are quite ingredient heavy.

I’m struck by the car bill @Outwiththedebt

£600 is a lot for insurance isn't it? Mine is about £200, yes I have a lot of no claims; but DS2 who is 22 and has been driving for about 3 years pays about £700. So I would think you could get that lower. Or is it a huge car?

Also £1200 pa on maintenance and MoT test? your petrol costs are pretty low so I infer you only need one service a year. So why is this figure so high? I have a long car commute (about 12k per year) and while I spend more than you do on petrol, my servicing etc costs are lower tbh. £85 pm on petrol suggests a much lower mileage than me.

If the car bills are high bc you drive a Range Rover, I would sell it and buy a 2nd hand Yaris. That will save you a decent chunk.

I would ditch Netflix and Prime as non-essentials. Same with lottery.

Also, do you meal plan? Could you cut your grocery bill by ensuring you cut out wastage and maybe cut out or cut back on some non-essentials, or switch to a few cheaper brands?

Also ask for vouchers or bottles of wine for any presents, and either regift them if you get invited out (keep a record of who gave you what) or use the vouchers for food spending.

Dont buy clothes. Ask for hand me downs for the children. I got quite shameless about this, within the family at least.

This might be your biggest area of saving.

Earn just £1 over 100k, and you could immediately reduce your annual take home income by £7800 due to now having to pay childcare costs (maybe not this much depending on childcare hours not being all funded, but best case scenario).

He'd need to be earning over £120k to be making the equivalent, due to the added reduction in personal allowance.

This would knock considerable time off the repayment period. Additionally, he'd be contributing more towards his pension.

Please let us know what he took home OP!

What an awful thing to happen. Did you turn up with the removals and they were just still in the house?!

Netflix - get the one with ads. They only have ads on adult profiles not kids and there are barely any ads anyway! It’s not like ads on tv.

Gas and electric seems high I can’t imagine that will stay at that during the spring and summer so that could reduce by £150 in a couple of months.

I would also suggest putting £1k at the debt.

We have a skoda kodiaq. Do about 10,000 miles a year. My insurance last year was £568 for me and DH. We do have a lot of no claims (20years) and I used several comparison sites to get that quote. We live in a city though so that might be why. We have a big car as we go on camping holidays a lot (not currently obviously) so need the space.

Tax is £220 a year, annual full service is just shy of £300 and then the rest is "just in case" for tyres, stuff that might be picked up on the MOT etc - I guess it might be high but we've only ever owned old cars that cost a lot to keep running, so I might be over-egging it?

Of course you make ‘fancier’ meals - that’s very reasonable at your income level. This is temporary.

There are some really enjoyable cheaper meals out there - I genuinely do love curried eggs, which is a brilliantly 70s recipe I have using basic curry powder only. Old cookery books pre 1985 or so can be good sources, see what your parents or the internet can show you.

Think about buying the amounts you actually need to cook, not the amounts a supermarket wants to sell you.