To think a lot of people must have a high amount of debt

[user495827]

I wouldn't dream of being nosey enough to ask people in real life. So thought I would ask on here. I'm asking more from people with average incomes rather than very high. When I say average I suppose I mean around £20000 to £35000
I'm from the North West which I think is relevant as the average house price /wage is lower than the South.
A lot of my friends and their partners are in this bracket. They seem to spend a lot of money. One friend, for example, got married last year a beautiful wedding easily £10000. A honeymoon to Dubai and also a mini moon to Paris. Beginning of this year they bought a house and are completely renovating it top to bottom. I happen to know her salary just through conversations is £25000. Her husbands job probably pays around £30000. Another friend again completely renovating a new house. Both have Audi's cars on finance.
AIBU to think a lot of people spend like this now and that it is normal to have very high debts/high mortgage?
I know it's not my business I certainly don't begrudge them and how they spend their money. I use to earn similar but im now part time and I suppose I'm abit of a saver.

I won't really be counting my student loans to be honest, if you earn under 25k on the new plan you don't lay anything, you only repay a tiny percentage over that and it will never actually be paid back so it is more like a graduate tax. Unlike other debts they don't still expect it to be paid if you lose your income.
A mortgage is secured against an asset, you'd have to pay similar or more in rent to live somewhere so it makes sense to take out a mortgage. If shit hits the fan you can sell up and settle the debt. So although it's debt it isn't a bad kind of debt
Not counting car finance as debt is a bit bonkers though.

I have my mortgage but no other debt.

I found out during divorce from my first husband that he had £30k of debts. I took them all on in exchange for keeping the house. It took almost ten years to pay it off.

Now in mid 30's and have zero unsecured debt, but a mortgage of £100k on a flat worth £180k.

I would rather go without than pay with debt.

My children see me with less material possessions but without money worries and their father with gadgets, holidays and stuff but he is frazzled with repayments. Only they can choose which path they will follow.

38 Yo me 51 Yo DH 7 Yo DS

No mortgage
No debt
Dead father

Totally no debt, am freaked out by it

£2k on a 0% credit card BUT;
£125k joint income
£25k savings
£280k mortgage interest house worth £400k
Definitely don't like being in debt and would rather go without than buy something I can't afford.

I know both lots of people up their eyeballs in debt and loads of sensible people like us. I don't think you can assume just because someone 'appears' to be living a certain way that they are in debt. We are soon extending our house and will be taking a loan to do so (but our mortgage is paid off) and we have 2 nice cars (but paid for outright). I do get the feeling that the neighbours round here like to chat (gossip) about people's finances and it makes me feel very uncomfortable as I'd hate someone to assume we were living out with our means when the opposite is true. Maybe it's better not to speculate so much about other people's lives and just concentrate on our own!?

I earn 32k and DP 21k. We live in a modest home with 300pm mortgage to the same budget as when I was earning 20k a few years back. 23k in savings for the next house so we can maintain small mortgage. Have bailed DP out of his overdraft countless times but no debt at all. I hate debt, would rather go without and sleep at night.

I earn £28,000 and my husband earns £30,000. We're 24 and 25 and have one child and two dogs. We got married when we were students and spent about £500. We travelled a lot before we had our son. We live in the London commuter belt in the south. We own a three-bedroom semi-detached house with a large garden that cost us around £250,000 and we did an extension and renovated it ourselves. Aside from our mortgage and our student loans, we have no debt.
The thing I've acknowledged most with our friends is that some people are better with their money. We have friends who will spent £300 on a weekend away in Bath - but we travelled in SE Asia for six weeks for only £1800 (including everything).

I work within the debt industry (insolvency) and can tell you that we see all sorts. Very young people who as soon as they can borrow, go mental and then get into trouble when they realise they cannot afford to pay it back, people who take out debt with it being affordable and then unfortunately are made redundant/relationships breakdown etc or get ill.
My husband and I have a combined wage of £70k, £180k mortgage and a £5k car debt. I’m careful with money but not to the point of being tight (probably because of what I see in my work). I’ve made sure we have sufficient savings to last us 6 months should both of us lose our jobs.
We go on holidays, make sure our kids get new clothes when they grow out of them etc. I think a majority of people are sensible and live within their means. A lot of the time it’s life that gives a blow and causes the money issues

Yes, lots of people have high debt. If you're a decent earner and/or have low living expenses, it's often obtainable at low interest rates. Bear in mind housing in the north west is mostly cheap, and people tend to get long mortgages out now. A couple with say a 150k mortgage over 30 years at a couple of percent, which would've been accessible on your friends salaries pre-pandemic, might only be paying £500 a month. That gives a lot of money leftover from nearly four grand combined take home.

Debt isn't the only explanation though. People have help from families, inheritances, windfalls. My friend's mum just got ten grand on a PPI claim yesterday. I've no idea if she wants to do anything to the house but that would cover a new bathroom and kitchen if she fancied it. Or wanted to give/loan it to one of her kids for theirs.

Plus some of the things you mention aren't great indicators of the money someone has access to. Travel can often be done very cheaply, perhaps not Dubai but you could do Paris on a shoestring if you wanted. Renovating a house can mean all kinds of things. It might mean the sort of work that requires substantial professional involvement and is well into the five figures or more, or it might mean the sort of project where the couple and perhaps their loved ones could do a lot of the work themselves.

No debt in our house, live in London Zone 2. DH has a well paid job, but average by London standards, I don't earn very much. We bought our car outright but it was second hand and own the house outright too, mortgage paid off last year. We have had no help from family. However, we do have two children in private schools. We are quite frugal. Dh also has a flat which he owns outright, but spent 30k renovating a year ago. We are lucky.

i find these threads really interesting, im a single parent on one income and universal credit to top up my wage i have 120 pound debt to my gas and electricity company, thats about it, i work part time rent my house (throwing money away i know cant actually save enough for a morgage atm) i have about 500 in savings, own my own car, and doing not to bad tbh, i dont really see the point of debt as you pay back more than you actually borrow so always tried to save for what i want/ need

Myself and DH are in this income bracket. We are in our late 30’s (I think this is relevant as people often have less debt when they get older). We got married almost 7 years ago, we were going to keep it very modest but we were lucky enough to be given money from family. Even then we kept it within what we could afford. We are the same way with cars. I bought my first house very soon after finishing university so have spent a lot of years paying off a mortgage. We are actually in between buying houses, we have sold ours and the purchase of our new house is going through. Currently our bank balance is very healthy! When we buy our new house we will only have a £65K mortgage and this will be our only debt. It means I am in the lucky enough position to give up work and focus on our 2 young children for a couple of years. Then I can reassess what I want to do career wise and will likely work part time around our 2 DD’s school. I never understand people who get themselves in so much debt that they are constantly trying to pay it off. I actually think having things that are more expensive than you can actually afford doesn’t improve your quality of life. My friends husband for example has to work all hours on his business in order to afford their lavish lifestyle. Meanwhile she is having to act almost like a single parent for their 4 children. Both look frazzled all the time. Yes they got married in a castle, have an expensive house, expensive cars etc, but I wouldn’t swap with them. I would much prefer quality time with my family.

Although if you ask my Mum she will say I’m frivolous with money!

I have £30,000 left on my mortgage (low value house) and no other debt.

We don't have a lot of debt, around 60k on the mortgage and I buy everything on my credit card and pay it off monthly, we have monthly payments on our sofa and my husband's motorbike but we could pay them off if needed. We don't have huge savings though or a big house. We need to move into a bigger house really but are not massively well paid, not all jobs in the south pay well enough to match the more expensive house prices. I was brought up that a mortgage is really the only acceptable debt and try to live within our means. I am fairly frugal, we do most things ourselves, haircuts, repairs around the house, buy second hand where we can, don't really go to pubs etc, low budget self catering holidays. However, I think we might be in a minority. I also think the level of debt that a lot of families have will skyrocket over the next few months, with job losses, bills to pay but people expecting to continue the same standard of living.

DH income plus my ill health pension and disability makes income of 35K, we have 80k mortgage on a property worth 200k. DH has finance on a van for work totalling 10,000. DH has student loan that will be written off next year (after 25 years), as his earnings have never been over the amount required to pay it back.

We have no other debt.

We have my partners wage of 25k as I'm currently a sahm with an 8 month old and 2 year old.
We have a mortgage of 79k, property only worth 105k.
£300 on a credit card.
Only £1200 savings.

I wonder this a lot as well not down to envy at all as has been suggested but because I’m pretty certain we earn the same if not more than quite a few of the parents I am friends with at school but they have £10k holidays and new Mercedes on the drive and are constantly buying whatever they want brand new from the first shop they see it in.
We earn £70k have a £500k house (bigger than many of them) with £170k mortgage and no other debt. We have a £10k car and a £2k car paid for outright. We will have around £10k savings after upgrading the oldest car. I often buy second hand things like bikes, furniture etc and always hunt down the best deal on anything new. We spend £2k a year on a nice hol and a few weekends away.
Also worth mentioning we only have 15 yrs left on our mortgage. We could all have whatever we wanted if we debt ourselves up to the eyeballs into our retirement.
I like knowing we will be paid off before retirement and don’t have to worry about money every month. It’s like they say a lot of people are only 2 pay packets away from being homeless. You really should have a back up plan if you have high levels of debt

It doesn’t really matter how much debt you have so long as your net worth is in the black. For example, if you are £500k in debt, it’s nothing to worry about if your net worth is positive.

I agree many many people are taking on debt because it is cheaper than it had been in at least half a century. If the interest rates were 8% or higher like they were a few decades ago, more people would be saving and fewer in debt. It’s the cheap credit/debt that is keeping many economies afloat right now. Which is why governments are setting interest rates at historic lows- to encourage spending on credit and discourage saving.

PlanDeRaccordement It doesn’t really matter how much debt you have so long as your net worth is in the black. For example, if you are £500k in debt, it’s nothing to worry about if your net worth is positive

Could you explain that a bit more please, I’m a bit dense! Isn’t debt a worry if you lose your job or become too ill to work even if your net worth is positive? For Joe Bloggs does net worth refer to the equity in their home?

I have no debt not a penny and earn well under £20000 my OH has around £3000 credit card debt, 0% interest , his pension is around £15000 just retired was earning a lot more, but car is owned outright mortgage free live up north so costs cheaper to live

Net worth = sum of your assets minus sum of your debts

Job income, because it’s in the future and not guaranteed is not an asset. You don’t count it. It’s only relevant in determining if you have enough money to maintain your assets and service your debts.

Assets are cash in hand, sum of bank accounts, sum of investments, sum of pension accounts, value of real estate you own, value of personal property you own (car, jewelry, antiques,) If your pension is a final salary annuity you calculate the present cash value for its value as an asset.

Debts are self-explanatory. Any all loans (mortgage, car, student, personal), credit cards, past due taxes, etc.

So simple example. Jacques owns a house valued at £450k, with a mortgage of £320k. He has a student loan of £45k. He has a car with resale value of £10k, but still owes £3k on the car finance. He has £0 in savings and £15k in credit card debt.

Assets: home £450k + car £10k= £460k
Debts: home £320k, + car £3k + student loan £45k + £15k credit cards= £383k

Net worth= £460k - £383k= £77k

So if Jacques died tonight, after funeral expenses, is heirs would inherit around £50k or so. Not very much. But at least if he died, he would not cost his family anything.

It’s a useful way to gauge how well you are doing. You want to always be able to pay off all your debts in full if disaster strikes. You know you may be in real trouble if you ever end up upside down on your home- where you owe more than it is worth. Which does happen now and then.

Now we have example of how low debt doesn’t always mean high net worth or doing better than someone with more debt.

Jacques twin brother Louis

Louis owns a home valued at £200k, but owes £180k. He has no student loans, no credit card debt, no car loan. His debt is less than half the debt his brother has...but....

His net value is only £20k. If he dies, after funeral costs, his heirs will get around zero.