Financial priorities

[ComradeJing]

What should our financial priorities be?

We live in a rented house in Asia but back home we have a mortgage on our home and a smaller mortgage on the SDCs home which will be sold in 7 years when youngest is 18 and we will get 1/3rd of the money from the sale which will cover the mortgage.

Living overseas we don't have a company or state pension but pay in 13% of net sallery per month to a private pension plus we make just under double mortgage repayments to the mortgage on our home. DH is in his early 40s so maybe the pension contribution should be higher?

We're not saving anything and have two credit cards worth of debt of around $20,000 total plus a car loan.

If DH was fired or made redendent we would get about 6 months salary.

I feel like we're making financial mistakes but I can't see what we should be doing. any advice would be appreciated.

Could you rent out your UK house to at least cover your mortgage payments?
£20k is a large credit card balance, I would be trying to reduce that over saving more for a pension as credit card interest mounts up quickly.
Why do you only get 1/3 of the SDCs house sale if you're paying the mortgage?
Do you have any Easy access savings you could access if e.g. You needed to get back to the UK quickly to the SDCs or if the house needed urgent repairs?

Wowser. You're carrying a lot of debt. I think paying that down has to be your priority so that you're on an even keel.

What position would you be in if your DH became ill? How protected is his income in those circumstances / what would your medical bills look like?

How likely is it really that the house sale in 7 years actually will recoup as much as you expect? House prices are crazy at the moment - what would you do if it didn't?

You certainly need to have savings, and savings that aren't tied up in a pension. It would be interesting for you to consider how those debts accrued - my guess is the usual kind of emergency or extra that hits us all now and then and, with a decent wage, the feeling that it'd be easy enough to pay it down in a couple of months.

I'm a big fan of the budgeting method You Need a Budget (YNAB) but there are other methods and techniques out there which I think you might like to read up on as well. Have a look at The Motley Fool, for example.

Thank you both for replying.

Property and debt is in Australia so debt is $20,000 not £. It equally roughly £13000 which I know is still a huge amount. We do rent out our house and I use that money to chip away at the credit card.

We get a 1/3rd of the value of the SDCs house as part of the divorce agreement. We (well, DH) still own a 1/3rd of it but have the whole of the mortgage. Again, that was the divorce agreement which, as aside point, the judge initially threw back because she felt dh was too generous and leaving himself with nothing. The mortgage is approximately 1/6th of the property value and the values have remained largely the same in this area so unless there is a major catastrophe we should be able to cover the mortgage with the sale of the property. We havent discussed what would happen if it didn't tbh but that's obviously a chat we need to have.

Debt accrued because DH has REFUSED to get a debit card as, before we met, he only ever had a credit card that he paid off entirely each month. Then, when we could no longer do that due to some unexpected bills, the dc getting older and me losing my work visa due to a change in rules we couldnt pay it off monthly any more and DH still Didnt really see the need. I've finally chipped away at him over this and for the past year we've been using a debit card.

I know that makes him sound like a money ogre who makes all the decisions. He doesn't. We make them jointly but he just had a stupid blind spot over this and completely agrees with how wrong he has been and how it has got us further into trouble.

We do have a budget for big things but not the little day to day stuff. So I think our priority is budget, credit cards, car loan, savings, pension, mortgage?

Again, many thanks for the advice.

YNAB looks great btw!

Glad you like the look of it, ComradeJing. You can have a look at all of their online training, attend a live class (they do try to schedule them for people outside the US) and have a good old poke about in the method without committing to anything at all. And one of the key things is to be able to cope with unexpected bills of the type you describe above. So you need put 'emergency fund' into your list of priorities, along with questioning whether these really were unexpected bills (of course they may have been) or annual bills you hadn't anticipated (I do this - TV licence for example).

Btw there's nothing wrong with using a credit card for daily expenses provided it is paid off monthly, but this obviously does mean only using it for those things which you can pay off at the end of the month. As soon as that ceases to be true it becomes a loan that you're effectively adding to every time you put daily spend on it.

I take it there was no way for you to apply for a debit card in your own name?

Getting on the same page as your spouse financially can be difficult but it sounds like you've had a breakthrough with your DH, which means having a good, sensible money chat soon would be a good idea.

Getting a reasonable budget down on paper would be a good start.

The obvious one that sticks out for me is "we make just under double mortgage repayments" Cards typically cost 18%+ interest and I doubt you're paying anything like that on your mortgage. Pay the normal mortgage amount and use the extra to clear the cards. Once cleared, then split the extra money three ways between overpaying the mortgage, choosing some long-term savings/investments, and beefing up private pension plans.

Girlie, can you stop bumping old threads, just keep bumping your advert.