To ask about debt?

[rosie1979]

Basically I feel like we have a lot of debt.

We have a mortgage that is probably about 175k with (hopefully) the house being worth say 240

I have about 8k on personal debt, dp probably about 12k. It feels like so much of our income goes to paying it off, switching to 0% cards all the time ect.

Is this normal to exist like this? Most of the time I dont worry about it but then I start feeling worried about never clearing it.

rent, that is.

Gosh, my debt feels really high now!

We have a 95% mortgage on a 2 bed northern terrace - about £140K. We also have combined personal debts of about £40K, which represents about half our combined annual income.

We didn't run the debts up on expensive luxuries - they are student debts/career loans (£15K), car loans for 2 cars, which are essential for work (£12K), an unsecured personal loan from when the roof started leaking and the boiler blew up (£7K) plus some remnant credit card debts from when I first graduated and my loan repayments, travel costs, rent and bills pretty much exceeded the income from my first professional job (£800pcm).

Most of my debts are career/qualification related and were absolutely borrowed against future earnings (a very good way of putting it). It is frustrating now as we have a very low standard of living compared to our incomes, but if we hadn't taken on the debt our incomes would be lower (although our standard of living about the same). I hope that the debt we have taken on will mean we are better off in the long term once it is paid off, but it is a bit grim at the moment!

If it is reasonable or not TOTALLY depends on whether you can affor it. If you earn 10K a year with that kind of debt it is unreasonable but if you salary covers it and you have enough years of working age to left to pay it off - it is reasonable.

I don't do debt any more, got in a right pickle in my 20's but what helps me to keep out of trouble is everytime I want to buy something on a credit card I ask am I prepared to pay triple the price for it, because that's what ended up happening to me last time, £60 for a top shop pair of jeans, I wished I'd saved up and had Levi's.

you have enough years of working age to left to pay it off - it is reasonable.

This always worries me though, what if you haven't at all, what if you got really ill and couldn't work, have you got mortgage protection insurance ? We didn't have it when DH was made redundant and it was the worse moment of my life when I discovered somebody hadn't ticked that box.

Pushmepullyou you sound like you're in the same situation as us. Except my hours have been reduced at work thanks to government cuts and so it's even more of a struggle now.

It may not be unusual but tbh it shocks the he'll out of me how casual so many people are about debt.
We have a mortgage which we pay down regularly on top of monthly payments and that is it. I don't own any credit cards, no car koans - nothing.
I am teaching my dcs that debt should be avoided if at all possible.
Obviously me circumstances make it easier now but I have been like this since I was 20. If I can't afford something then I save. We had a bed, a sofa and a table in our first house and that was all for about a year. We finally paid for our little dining table and chairs two days before our second Christmas together

Of course when you have children and bills it may become vital and unavoidable. But I think waaaay too many people buy stuff they want on credit cards rather than stuff they need. And why people are prepared to sacrifice some much future income to interest astonished me. So stupid.

I'm teaching my children the value of saving and to be careful, but I'm also putting them under no illusions of what it is like to be working poor, and to do everything in their power to avoid such a fate and giving them as many practical skills as possible.

It's all well and good, 'following your passions' and what have you, but don't be surprised if you wind up like me for making such choices.

Money means choice and options. It's sad but true.

Our loan wasn't for frivolity either. We have mo credit cards, store cards, have one sensible car bought outright, save for things etc. I'd say we were sensible.

Life throws things at people. It's all well and good, 'If I can't afford something I save,' but when that something is a cooker to make food for your kids and it's way more expensive to make food without one (also against your tenancy agreement to use a camp stove in the kitchen of your rented flat), there are times when it's unavoidable.

Most working poor I know have debts that come from buying essentials such as food or power when they were between jobs or went on moving costs (letting agent fees, van hires, first month's rent, etc) when their privately let home went on sale or they were forced to move for some other reason.

Working poor also don't usually get the best deals when it comes to credit and other things.

It's not something I want for my own children, and they know that.

Debt is debt, so I don't really understand any hesitation about putting it on your mortgage (provided enough equity in the house) but obviously would be better to try and clear some of it but being more frugal etc.

However if you do put it on the mortgage you have to be really careful not to incur more personal debt, as you probably don't have enough equity to do it again.

We rent so no mortgage debt but have £12k remaining of £35k of student debt (no grants when I went!).

DH has about £6k on a credit card which was a hangover from our wedding two years ago.

We have savings of about £4k. I would take this off the balance of the credit card if we were'nt expecting our first child in 3 months. I'm holding on to it and adding about £900 a month to the savings account for emergencies during that period.

We're going to try very very hard to use as little as possible though in order to take a lump sum off the credit card and loan when I go back to work in January 2012. Hoping to have everything cleared by mid to end of next year but know it will be a slog and we'll have to manage nursery fees too.

Will not think of mortgages until all debt is cleared and we have saved for a decent deposit.I'm fully aware that this could take a good 4 or 5 years in the current climate but I'm willing to wait.

We have a decent combined income of £85,000 though so in relaity, this debt should have been paid off by now. I wish we hadn't spent so much on our wedding 18 months ago!

Expat.
Yes I said " if I can't afford something I save"
I also said " when you have children and bills it may become vital and unavoidable"

I was not talking about when people need to use credit. Having no means of cooking would be a need in my book.
I am talking about a friend of mine who had £27,000 worth of store credit and talked sadly and with great frustration about that with me while our girls had tea. She then cheered herself up by showing me the £120 plus worth of next clothes she had bought using her store card for her 6 year old DD.
She genuinely thought that that constituted ' need'.

I am not Marie antionette. I understand need. But many people in debt are above average income people who regard high credit card debt as par for the course. It is crazy

I agree with pagwatch if you need a stove then you need a stove and of course you should charge it if you need to.

She must earn loads to even service that debt, Pag!

Store cards are usurious, too.

Servicing our debt costs a lot.

But no way I'd ever go into the whole for a wedding. Why?

That's the real problem . Many people seem to believe that being able to make the minimum payments is enough. It isn't. The level of debt just keeps quietly rising until it reaches a crisis point. If you get used to having that money to spend it is tempting not to make such an effort to live within your means and take control.

20k of non-mortgage debt is excessive and people have chosen to go bankrupt for less. A lot depends on your ability to pay it back though I guess.

Its hard to tell if its normal to have this kind of debt because people hide it so well. You cant spot those who are struggling till the baliffs appear. I suspect there are a lot of 'all fur coat no knickers' lifestyles going on out there though.

Visit moneysavingexpert, stick it on the mortgage if you cant walk away from it, then cut the cards up.

Expat
She was earning loads then lost her job and her dhs salary couldn't cover it. They had to sell the house before they lost everything.
They moved out of the area. Last I heard she was still out of work and her dh had been told he was being made redundant.
Terrible. She assumed two good incomes made them fire-proof.

A lot of their spending in the last year seemed a mixture of denial, defiance and a refusal to believe that they could be vulnerable.
I know another family in almost the same position. They have just sold their house, had let their 10 year old do the entry exams for local independent school then had to tell him they couldn't cover the fees.
Everytime I see her in town she is buying stuff in whistles.

It is very odd. Some people just seem to think debt, eviction etc happens to working class people iyswim.
I was evicted at 14. I would do anything to avoid that. Hideous

Most people I know have some personal debt, generally from being a student or from running up debt on credit cards.

I did have about £30k debt from being a student but I've paid it off. I rarely use a credit card so nothing on that. We've got a mortgage of £165k on a flat worth about £260k. DH has a couple of hundred on his credit card.

We had more debt than that on credit cards for various reasons.
We were paying the minimum payments each month which left very little to live on after paying mortgage and bills.
We have finally remortgaged to pay off the debts and are considerably better off each month, we will still be better off even if mortgage rate rises and we are finally paying off the debt. It will be paid in 13 years - if we had kept making minimum payments on credit cards it would have taken aprox 60 years to pay off.
It is very depressing thinking about the amount we have paid to credit card companies over the last 4 years and I wish we had remortgaged sooner.

Expat - totally agree that money means choice and options.

I got into 30k of debt training to be a lawyer. Fortunately I've now paid it off and I'm earning great salary. My parents were really really hard up and I'm determined that my kids learn about money from an early age, including the risks of debt.

'It is very odd. Some people just seem to think debt, eviction etc happens to working class people iyswim.
I was evicted at 14. I would do anything to avoid that. Hideous'

I think a lot of people do sadly still have that belief.

I know my dad grew up so so poor, as in everyone in teh family took some sort of paid employment (like paper rounds or as milk float boys or coal boy) or helped the parents in paid employment (his sisters helped their mother who was a maid and also took in laundry and ironing) and turned over a lot if not all of the money to the family pot in order to eat and have clothing.

Imagine a teenager turning over their wage packet to their mother these days and taking whatever she gave them out of it with no qualms! :o

Although he became a successful petroleum engineer (all by studying at university on top of a full-time job and his family commitments), he always lived way below his means and, rather than be made redundant during the oil crash of the late 70s-early 80s, went to work abroad.

Even now, in retirement, they live frugally, as in the country where they live, state support is limited and poor quality and he wants to make sure they always have a healthy cushion in case they need care.

They've even purchased their entire funerals - plots, caskets and all - in order to lock in the price.

If you can only pay the minimum payments you are effectively bankrupt because you will never pay the debt off.
Especially since the min is around 3% on some cards.
I was saved in my 20's by my grandmother leaving me £3k in her will, 10% her and my grandfathers life's savings and it went to House of Frazer, I was so upset.

Regarding having to buy a cooker, surely all rented flats come with cooking facilities? I have always rented and have never moved into a flat without a cooker and usually washing machine etc too. I've never had to buy a cooker yet.

'Regarding having to buy a cooker, surely all rented flats come with cooking facilities?'

Many HA or council flats come with nothing. And I mean, nothing. No shelves at all, no pegs or rods to hang up a thing, no white goods of any sort, no window coverings, no floor coverings (bare wood). Nada. If you're coming from privately rented accommodation yourself, you'll usually need to purchase all of these types of things, and possibly furniture like beds if your last place was furnished or partially furnished or if you had to flee with next to nothing (as in domestic violence occassions).

So no, not all rented flats come with cooking facilities.

People will say, 'Oh, buy it second hand'. But you need cash up front to do that. Some get community grants, but not everyone is eligible for them and they take time to come through - whilst you have no bed or cooker.

In larger cities, there was usually some charities who help with this, but outside that, best of luck!