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

[ShameSames]

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.

One of the best things we did last year was both put £20in a jar when we got paid (from our own spending money), it helped when our guttering broke during that major storm last year and at the end of the year we put the spare amount into our saving (we didn’t really miss it). This year we are doing £10 each and its for emergency situations only. We have had a few large bills lately so if we were short for a food shop we could use that.

Hope this helps this website will help you with a budget https://www.moneyhelper.org.uk/en/everyday-money/budgeting/budget-planner

DH and you need to be on board for a budget. Start at the top of a page (I prefer excel cos I love a spreadsheet and can play with numbers but pen and paper works too).
First things first - you need to secure your 4 walls that is to say your rent/mortgage, gas, electric, water, council tax, TV licence, building and contents insurance, food and transport to get to work. List them and when they fall due. To get your food budget, look back at the last 3 months bank statements and add up all food shops (not eating out) then divide by 3 and that should give you your budget for the month.
Then list your debts, the minimum payments each month and the total outstanding.
Then list everything else "extra" you pay for eg kids clubs, TV subscriptions, life insurance, fun money etc. give yourselves a fun money budget and stick to it - this includes eating out.
Now take the total of all of these away from your income - the surplus is what you are going to throw at the debt. Clear credit card first - it will make you work harder to get to clear the family debt. Once credit card clears put the payment you were making there onto the family debt to clear it faster
You are going to need to be strict on what you spend - no dipping into the credit card. If you can't afford to buy it outright with a debit card or cash, you cannot afford it. A few months pain for long term gain.
If your expenses exceed your income, slash and burn all extraneous subscriptions. Do you need prime, netflix and apple TV? Pick one ditch the rest. You and DH may also need to pick up a second job. Throw all extra funds from earnings at debt till it's clear. Once debt is clear, put the money you were paying into credit cards into your LISA and save for the house.
If you can maintain the pension as it's free additional money from your work.
Check out Dave Ramsay and the 7 baby steps - game changer. Good luck!

Transfer the credit card debt onto a 0% apr card and pay a set amount every month. Cut the card up and don’t use it anymore. If the 0% apr is for a set period, transfer again after that to another 0% apr card. Set up an affordable payment plan with the family member…..£50 a month?

I would write down all incomings and outgoings and do some planning. Try and cut down on areas where you can like coffees/meals out and supermarket choices. Tighten the belt and focus on paying off the card first followed by the debt to family. Do you have anything you can sell like unused jewelry.

Dont be worried or embarrassed, plenty of people have credit cards and a lot worse debt. Take some of the steps above and focus on clearing what you owe. Sign upto Martin Lewis and use guidance there for managing credit cards etc.

You asked for help in writing up a budget. You'll find many examples online, but in essence all boil down to 1/ Absolute Essentials: rent / rates/ utilities, work travel, food / household goods ( cleaning, loo paper,soap). 2/ Variables/ Non Essentials: Outings. Holidays. Clothes. Alcohol. Take aways/ restaurants. 3/ emergency fund as long as that does NOT mean drawing on credit. 4/ treats etc. 3 and 4 get nothing till 1 is dealt with. 2 gets funded only after 1 is dealt with.

Excellent advice

Get a spreadsheet & go to your bank accounts & credit cards & list everything you spent on in the last month.

then split it into categories of bills, essentials such as food, the rest into ‘what’s nice to have’. Then work out what you can cut & put towards paying down the debt.

how long does the £200 need to last? do similar to the above, work out what is needed till payday and see if you can be frugal till then

don’t touch your pension or IsA, the amount you owe, is minimal compared to the impact of touching those things

@ShameSames if you want help, please list your household income (after tax), and ALL monthly outgoings. Include EVERYTHING, such as takeaways, coffees, beer/wine etc...

We can then show you where cuts can be made to divert to paying off the debts.

I was just about to suggest OP looks at MSE.

But living within one’s means is a mindset, a commitment - a determined effort to accept temporary discomfort and not prioritise short term pleasure for long term shit.

There are lots of books that might help changing one’s approach to finance. The Millionaire Next Door was popular in my day but I’m sure there are probably more up to date ones.

There have been some unexpected bills but generally you are managing on your income and to save. Also you have pay rise coming.

Pay off credit card first, then family member then start saving again, perhaps try and have some accessible savings for next unexpected bill. Plan your food shop, most of my unintional spending is in Tesco.

Perhaps look for part time job for either of you if it is an option, i know people who pick up takeaway delivery jobs now and again.

Keep communicating with family member let them know your plan and that it is not forgotten it can be awkward if the start to worry you dont plan to pay back.

What's credit like? Would be simpler to get a loan to combine credit card and family member loan. Then you would have a fixed repayment amount

There is an ‘eat for £1 a day’ group on facebook that’s great for cheap food ideas.

My plan would be not to spend on anything other than work commute and food until you have cleared the debt. Food-wise, buy potatoes, frozen sausages, bags of oatmeal and cheap value brand biscuits. Yellow sticker bread and veggies to make a lovely soup meal. you can eat for very cheap if you put your mind to it.

Download the Fiancielle app. It will help you loads with your mindset. You need an emergency savings account and then need to tackle your debt as others have suggested.

This is excellent advice. Dont forget to include all of those annual payments, eg house insurance. I totalled up all of those, and have a savings account where I put a set amount each month for those, and don’t touch it otherwise. I find having different savings accounts for different ‘pots’ helpful (all through the one bank so easy to see all together on the banking app), so one for holidays, one for annual payments, one for gifts, one for emergencies etc.

Call all suppliers and ask for a better deal. I rang our house alarm company & wheelie bin provider, both knocked off 20%. I switched house insurance provider and saved 40% (for a better policy!!) And saving about 25% by switching gas & electricity. So all in all we are saving a fair bit each month so do that first along with drawing up a budget.
I also did frugal Jan & Feb where I didnt get any nails/hair/eyebrows etc done
Best of luck OP

Dave Ramsey and his debt snowball is AMAZING. I wish I’d known about it when I was struggling with debt. Please look him up.

The main thing is a mindset change. Dave says you have to be sick and tired of being sick and tired. Only then will you make the changes needed. In my experience he’s right. I had to hit rock bottom and then I could
come back up. He teaches you how to have a man emergency fund so you stop
dipping into savings - this has really helped me.

I’ve got out of 20k of debt and now own my own home. It is possible, even when things are tight - and they are right now - but I have the right tools to deal with it.

Don’t give up hope. Knowledge is power. Understand where your money is going and give it direction.

Talk to stepchange debt charity they can help you budget etc

Ignore the ISA for the time being, debts are important to clear. After paying back your loan to family, It's really hard but try to use the CC less and less, until it's settled. The interest rates on those things is ouchy and I presume not paying it off in full each month. You'll be paying so much extra when you don't have much wiggle room. You're not alone though, read the other day that loads of people are only surviving because of credit cards.

I'd try everything to cut back too until those debts are paid off. Then do your best to stick a little into a savings account as a cushion for the future. A 2-3 grand (not ISA) can really help if hit with a big bill.

Can you increase your income? It looks like you are only part time.

You're only penalised the amount you got as a bonus, so you haven't really lost anything.

Take £3k out and pay off the credit card. Then pay off family member once you get your pay rise. Then start saving again.

That's for the Lifetime ISA. If you actually have the old-style Help To Buy ISA as you said in your original post, there's no point in having more than £12K in it, because the maximum bonus is £3K. You wouldn't lose anything withdrawing from that.

Rebel Finance School advice is very helpful. I was told about this recently by a very money-savvy friend and Id definitely recommend following this. Good luck OP as another has said, you're not the first and many of us have been there, but it isn't insurmountable. Well done for owning it now.

I'm confused about the 'penalised' bit here.
Is it a help to buy or a lifetime ISA?
The help to buy government bonus is 25% but capped on a balance of £12,000, so the max bonus is £3,000. If you're factoring that bonus into your total - don't! Because you don't actually receive the bonus - it goes to your solicitor/conveyancer- I think it therefore can cover fees etc. but you can't actually put the bonus towards your deposit.

I get that you've been topping up your ISA for the deposit, but if I were you, I'd take the 5 grand from the ISA & pay off the debt. At least that way you won't be paying credit card interest, & it should help your credit rating a bit. It'll lessen the mental burden that debt brings, too.

Once cleared, I would consider reducing your credit card limit so you're less able to go into the same degree of debt. It can be a bit counterproductive, for if your limit is say, £1,000 & you spend that every month, it looks like you're using 100% of your credit, whereas if your limit is £2,000 & you spend £1,000 every month, it looks like you're only using 50% of your credit - which reflects more favourably on you & your debt management.
If I got that last bit wrong, I'm happy to stand corrected, but I would still be inclined to reduce my limit.
You can't spend what you haven't got, & with all the budgeting tips covered by PP, you can work on building a rainy day pot, and eventually get back to topping up your ISA.

I'd suggest you tough it out for a few months. Pension isn't accessible.

£5k of debt is basically a small loan, take one out, pay stuff off and pay your loan off.

You may be able to get a low interest rate credit card versus a loan. Check out the costs.

Leave the Lisa as is.

I absolutely recommend looking at free debt consolidation advice such as step change or call up citizen's advice. They're expert or can signpost for you exact circumstances and needs

Not really. OP already stated they can’t get a 0% card so whilst in principle some good ideas. In reality, useless for OP.