Please help me sort my finances!!!! AIBU to withdraw money from private pension to pay off credit card.

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I’d really appreciate no judgement here, but help to get back on our feet. DH and I have had a string of bad luck resulting in multiple unexpected bills which have led to the situation we are now in and I would really appreciate some advice on getting out of it… finances listed below:

Help to buy ISA: £28,000
Current account: £200
Credit card: -£2500
Loan from family member: -£2,500

I have a private pension that I have paid £4,000 into, which now has a value of just over £5,000. Should I take the money out of this and pay off some debt?

Im 38 years old and feel embarrassed by the mess we are in. Please help.

DH and I both get paid at the end of the month, but are essentially living off the credit card, in case we end up needing cash. Family member is very understanding and isn’t in a huge rush for the money back, but we would like to clear the debt asap.

You can't take money out of your pension until you are 57.

The Lifetime ISA amount includes the 20% government bonus we have earned, and is our house deposit savings. We will be penalised if we take from here.

Oh!!! 🙈🙈

That sounds like manageable debt. Time to divert the ISA savings into the debt. Most people could clear it in a year or so. Unlikely to be worth taking from the ISA.

You can’t normally just draw down your pension until a certain point.

Can you focus on the cc debt, do not use it to survive, you are living beyond your means and need to get a grip on that. I know times a difficult believe me, we earn under £60k combined salary and I have been in debt before. I will use my cc this week as I have to see the dentist. I can claim it bank via my work insurance though so i am happy to put it on my card as I know I can pay it back off straight away. My cc is currently £0.00. This is the kind of thinking you need, ‘will this add to my debt’. Have you done a budget to see where your money goes?

I know it sounds manageable, but I’m very stressed because we have only £200 available cash. Im living off a credit card which isn’t 0% (long story but can’t apply for one right now, so we’re stuck with that).

I need to do a budget. Do you have any idea where to start? I’ve never done one. I do keep outgoings to a minimum and am generally frugal, but appreciate this might highlight some areas for improvement.

As PP have said, you can't just withdraw from your pension as & when you like, it isn't a savings account.

No. Start paying both off at 500 per month. 250 each, if family member is okay with this. Cut up the credit card.

That's a manageable debt. Pause paying into the ISA and pay off the CC and loan instead.

You need to be minimum pension age to access the money in your pension. That's the whole point of a pension.

Do not touch your pension.
I dont think you can anyway.

You need a budget,
What can you reduce? Can you bin reflux for 6 months? Hold off holidays for a year or so and ditto cut down socialising and find ways to do it cheaper.
I dont buy coffee out almost ever. Maybe once for 2 months at a push and thst onpy because of the kids. Pre kids I just brought it from home.

Separately up your income through additional work - i made about £500 on vinted (thsts 10% of the debt)

5k is manageable. You need a clear plan though (reduced outgoings and increased income)

https://www.moneyhelper.org.uk/en/everyday-money/budgeting/budget-planner

What’s your monthly income after tax?

What we did was get a spreadsheet and put our take home pay on it then went into our bank account and added every bill, added a food a fuel budget. Then we knew where we stood. We know how much we had spare and from that how much we could pay towards debt. I have found doing an online shop saved me a packet as I dint just pick up things randomly and if I do go to the supermarket I use the scan and go gun. Quicker check out and I can see if we are getting out of hand. I have less than you in the bank until next week payday but i’ll make it work.

Wehave twice a week ‘poor dinner’ where we have beans on toast, omelette, baked spuds, sausage and mash etc. I am happy with that a couple of times a week as it means we can have nicer meals the rest of the time. What does your £200 have to cover?

Sit down together when you-are not tired and write down every outgoing and I mean everything don’t guess.Then look at your income you will see why you are in debt.Is there anything that is obvious ? Stop spending on anything that is not essential make a budget for food and stick to it no takeaways until the debt is cleared.Can you pick up extra work sell stuff do whatever you can.You have savings well done but until the debt is cleared you can’t save.Good luck.

We have also had a couple of months in the past where the week before payday we bought a bag of spuds and some cheap pies for the freezer as we were on the bones of our arse. Pie and chips, pie and mash, baked spuds, chips and egg…never been so glad to get paid lol. We avoid our credit cards unless we can pay them off, they are used for points and purchase protection only.

A pension isn’t a saving account. Just stop directing money to the isa and use it to pay the debts instead surely?

We haven’t added to the ISA for a number of months now, due to the unexpected bills. I have just had a pay rise of £300 per month, which will be a huge help. But I won’t start being paid at the higher rate until end of March. DH’s pay is variable, dependent on volume of work. My take home pay is currently £1,500 per month.

You can stop pension payments but you can’t just take it out at any age. I’d keep the payments going. Can one of you get a second job? Write up a budget and stick with it.

First of all, don't be embarrassed, it's easily done, loads of people do it. I was one of them years ago.

Secondly, it's not insurmountable at all and you're panicking so try to stop that, it's fixable.

If I've understood correctly, the issue is that you don't have any cash right now and some debt, is that right?

You have £28k in an ISA
£200 in your current account
Owe £2.5k on a card
Owe £2.5k to a family member

Focus on the first thing, which is when will you get paid and how much will it be? Can you afford to eat between now and then?

Then focus on your income and your outgoings and the difference.

So income £xxx

Then list all your outgoings, include rent, electricity, gas, water, council tax, car payments, petrol, transport, insurance, mobile phone, Netflix, subscriptions, gym membership, card payments. You should be able to see all your direct debits in your bank account.

What is the difference? And what is the amount you're paying on the credit card?
What are the terms of repayment to the family member?

You need to attack this on two fronts:

• reduce what you're spending
• pay off your existing debts

I'd recommend using the Money Saving Expert Budget Planner to see where your money is going:
https://www.moneysavingexpert.com/banking/budget-planning/
You need to list every single thing that you buy/spend money on - check all standing orders and direct debits.
Make sure you include EVERYTHING, holidays etc. that you don't spend on every month.

Then move onto the MSE Money Makeover to see if there are any suggestions there that will help you save money so that you can start reducing your debt:
https://www.moneysavingexpert.com/family/money-help/

You've got to be honest with yourselves and give up (even temporarily) things that cost money and AREN'T essential.

Good luck!

I haven’t actually done it myself, but I see lots of praise for the Rebel Finance school. I should make time to do the course when you’ve got this debt issue sorted.

As others have said - You can only access 25% of your pension, tax free when you are 10yrs below retirement age, so 57yrs at the moment, but that is almost certain to rise higher.
I think there are separate rules if you are diagnosed with a terminal illness.

I would stop the ISA payments, and get the debt sorted. This is perhaps the nasty shock you needed before you got yourself in deeper water - it’s not unusual for people to own 10’s of thousands before they realise they’re in trouble. Good luck!

Money Saving Expert is a good place to start. I’ve heard You Need A Budget is helpful but I’m not familiar with it.

That debt sounds quite manageable with your pay rise, get the credit card paid off as quickly as possible but don’t start breaking Lifetime ISAs is you really don’t have to.

Do you jointly share finances with your DH/DP?
So the savings and debts listed are joint?

If so, what is your joint monthly income after tax?

Just trying to work out if this is a two week problem or a longer term issue.