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.

Admittedly some of that time (about 6 weeks) was getting the urgent stuff fixed - they'd broken the 2 bathrooms and the boiler and ripped out the kitchen so we had to get a working toilet and shower, kitchen sink and cooker in before we could move in. Took time to buy, get tradesmen in etc but after over a year a month seemed like very little time.

I’m guessing they weren’t paying rent to anyone either! Can you sue the tenants - but I guess they’d probably have no money if they acted like that.

God as if buying a house isn’t stressful enough!

No, they never paid us rent but in a lot of ways that was to our advantage.

Thankfully I actually work in the private rental section of the local authority so as soon as I found out they were tenants I got a gas and electrical safety certificate sorted and gave them the tenants rights booklet. Meant we could legally evict them. Otherwise we would never have got them out! I served a section 8 notice as soon as they were 2 months behind with the rent but it then took months to get to court for the eviction hearing and then to get the bailiffs to go round.

I do feel sorry for the tenants though, it was a genuine shock to them when they got home to find us wanting to move in, they had no idea they were being evicted.

I’d love to have £1657 a month disposable. It’s insane that you can’t see how that amount of money can be used to reduce your debt. People survive on much less and still afford school uniform and Christmas presents.

But how was the property marketed
Viewings ?
For sale sign outside ?
Surveyors access ?

Were they never around ?
Was there no for sale sign ?

So they knew it was for sale but had been assured by the vendor that it would be sold to another landlord.

They weren't there when we viewed - first was an open house and second time was just during the day. I didn't think anything of it as the 2 previous houses we bought we hadn't seen or spoken to the owners.

But my sympathy soon evaporated when we saw the damage they'd done!

It's worth getting to understand your energy bills. At the end of the day what matters (and what you will ultimately be charged for) is your annual consumption, but moving in when you did may well be influencing your DD right now. Audit your appliances and understand how much energy each one uses.

A couple of quick fixes in an old property without spending a lot at first. Your windows become big black anti~radiators as soon as it is dark and suck all the heat out of a room. Have nice big curtains you draw as soon as it is getting dark, with extra thermal linings (or you can pin cheap fleeces on or into them). If you're out all day leave them shut on the coldest days.

Seek out and fix draughts. Hang door curtains, place magnetic fridge magnets over keyholes, stuff bin bags full of crumpled newspaper up unused chimneys (don't forget they are there), use draught excluders under doors.

Don't always heat the whole house if you're not using it, but maintain a basic level of heat once you've warmed up the fabric of the building.

Good luck getting to know your new home. Knowledge is power. 😊

So I suppose the moral of the story for mumsnetters reading this if they’re buying with tenants whilst viewing
is to
delay completion until the tenants are out
Then Go back to view to ensure that’s the case

Agree @Zanzara
Also in an old property
we are single glazed with hay, mud and sheep’s wool walls

Our energy bills on 500m2 are not as high as OPs
So agree
Assuming Pps house is a more modern construction that bill is high

We have about 750 for food, clothes, petrol and all the things you’ve listed like birthdays etc

I’d be saying pay the minimum amounts by direct debit. Pop 1300 into a savings pot and at the end of the month put that onto the debt that ends first (assuming they’re all 0%). That’d leave you about 300 after everything you’ve listed which I would’ve thought would be plenty. Even if you miss a months payment for Christmas, you’re still covered.

Well, the moral of the story is to have the people living in the property present at some point before completion to ensure they aren't tenants. Because we weren't informed that the property was tenanted at all!

Oh wow !!
i thought you knew

thats even worse
What nasty people you bought off !

We move a lot and will be soon
think I’ll add a lot of questions for the owners to answer
and stake out a property we put an offer on 🕵️

2k a month at the debt. Debt free in 10 months.
recommend looking up some
Dave Ramsey books or you tube videos.
also address the reason for the debt given your good disposable income.

Sorry, how do you get the £2k figure? How am I making the savings?

@winter8090

op clearly outlined the reason for the debt in the first post, but you didn’t actually read the post - thus telling someone to address the reason for the debt 🤦‍♀️

Lots of people have given you great ideas on saving from your outgoings.

You did ask in your OP about how much to save for birthdays, Christmas etc. I needed to get more of a handle on my spending recently and got a Monzo account. I take out a set amount from my pay when it comes in and put it into pots, I save £100 a month to cover Christmas and birthdays for my DC, DM and Dsis, £100 for the car, £100 for oil/wood and £50 for house and I take put £600 for groceries. All the rest of monthly DD’s just come out of my bank account. The day before payday I move anything I haven’t spent into a savings account, this includes anything I have saved on groceries.

House and oil money is an on going pot, car I am aiming to get to a fixed amount and then top it up once I have spent on MOT/service. Does that make sense?

You could have a pot for uniform/holidays and clothes as well

While I would pay off as much as possible l also think that you should build up your savings - 2 months or so cash for an emergency. At least save £200 pcm in an ISA or high interest account. I'd also say you are in a good position to get back on track in the medium term. You've been derailed but it's not a disaster.

Look at each option you've listed and see if you can make it cheaper. Haircuts, lottery, window cleaner and school lunches are not essential. You can clean your windows yourself and make cheaper packed lunches for your children. My husband and I have phone contracts that are both under £10 each. We haven't bothered with pet insurance, our cat doesn't go out and we got her annual jabs on a lifetime deal. Look to see of you can get a cheaper tv subs we are on the cheapest netflix option and we cancelled prime. I am seeing a lot if extra curricular activities, far be it from me to stop a child doing an activity they love but do they really need to do them all, if your kids are old enough to understand debt, explain it to them and ask them to choose 2 activities to keep and stop the rest, they can always go back when you have the money. Where on earth are you spending £600 groceries? You must be able to cut that down. My husband and I spend between £40 and £60 depending on where we shop including occasional treats and essentials that we don't buy every week. We chop and change which shops we go to to find the best quality and the best deals.

You have 1667 disposable income after the minimum payments? Together that makes over 2k?

it’s tough but it gets it done.

This leaves £1657
This is for day to day spends, Christmas, birthdays, school trips, clothes, household repairs, school uniform, shoes, days out, holidays etc.

Where some of that is essential, some
of it is not.

It really depends how much you want to be out of debt? A holiday would be low on my list if I was carrying £20k of debt.

You can easily turn this around. Even if it takes 12/18/24 months. Set a target you are comfortable with and stick to it.

I'm normally very much in the "cut back, suck it up, get it done" bucket for this sort of thing. But that's usually because people have ended up in debt through not budgeting etc and a period of concentrating hard on budgeting then gives you more capability once you're done.

But you guys are in debt because of an entirely unforeseeable and extremely unusual set of circumstances. So while it will be worth doing a few bits like cutting the netflix down and checking the internet costs etc, I think really it's probably a case of accepting you won't have more than a single, inexpensive, holiday for the next few years and not allowing Christmas out of hand. If it's on 0% for two years, I'd probably go with:

£1000pcm on the debt. Drop it down to £500 in the month you pay for your holiday and the month you buy Christmas presents. Save anything extra for a holiday and Christmas throughout the year so they aren't coming out of emergency funds. Chuck £200-£250 into your emergency fund because that needs building back up.

That leaves £900 ish per month which even if you take an extra £50 a month for each of Christmas, birthdays and a holiday, still leaves £750. Chuck on £150 "pocket money" for you guys each of you guys, and £50 for the kids then you've got £400 left which feels like it should be okay for some DIY, the odd lunch out and the odd day out.

I'm asking for help on what is reasonable to budget out of that for necessary spending. If I use it all to pay off debt and my kids then need new shoes, that adds back to the debt,.which I don't want.

I want to be able to have pots to dip in to for each necessary expenditure. Obviously a holiday is very low on the priority list, but we do need to budget for visits to family and friends, even if it's just the extra petrol and a bottle of wine for the hosts!

Previously we haven't really had to budget hard for any of this - we had plenty left each month and it got split between long and short term savings. But for the last almost 2 months that's not happened and I'm a bit lost, especially given the new expenses for the new house etc.

The home insurance would be cheaper if you paid it annually instead of monthly. Paying monthly means you are paying interest. Same with the car insurance. I have a separate savings account which I pay into monthly to cover the three bills I pay annually.