Our new financial life -how do we approach this.

[MazzSUB]

Morning guys,

Me and my dp have been together for 3 years. We are both mid 40's and divorced with 2 kids each. We have just moved into together and are in the process of sorting our finances. It's a bit messy.

We both left our previous relationships with substantial debts - 45K me and 62K him. This debt came from our previous relationships. Please no judgement on this. We have both structured the debts to make them as cheap as possible - 0% etc so we are doing what we can.

We are trying to work out our household finances, with a massive priority on paying off the debt. We do have the option of remortgaging, however I am not comfortable with turning unsecured debt into secured. I have done a budget to include all of our livings costs, but no debt payment. This shows how much we have left after all of the living costs are paid. I am struggling to work out how much we need to throw at the debt, and how much we should allow ourselves to 'live a little.

I take home £3019
dp takes home £3258
Total - £6277

Mortgage - £797
Gas/elec - £287 ( cheapest as I could get it)
Water - £42
Home ins - £31
Car ins x2 - £73
Council tax - £142
Phone/internet/sky- £69
Food - £400 ( trying to stick to this)
Kids activities/clubs - £200
Mobile phones X 4 - £127
Car - £198
Petrol/diesel - £280
Birthdays/Christmas/random stuff - £150
Pet insurance - £14
Boiler savings - £200

Total - £3010

money left for debts and 'life' - £3267
Our joint debt payments ( minimums) are around £1500 so this leaves £1767 for additional debt repayments/life

Please can I ask for no judgement on the debt. We have both dealt with the guilt and shame of it, but now we have accepted that we are where we are, and we just have to get on with sorting it.

How much of the £1767 would you allow yourself for fun, and how much for extra day payment?

Thanks in advance

I’d put 1250 on the debt. Have you thought about how this is divided? Please make sure half goes on each debt.

Id also reassess some of your expenses eg mobile phones and try to get better deals then put any money you save as extra on the debt.

Do you have any other emergency savings if things crop up? I know the advice generally is to pay off debt before saving but I think it's good to have a small buffer in place to prevent you needing to dip further back into debt if anything comes up.

No judgement here either. You both have decent salaries and it looks like your making a dent in the debt. Do you know how much you typically need for "fun/general" soending a month? Days out / clothes for the kids etc add up so I don't think it's unreasonable you need money to actually live on whilst throwing what's left at your debt.

With your 1700 left over I think I would maybe Chuck an extra 150-200 into an emergency savings at least for a few months for an extra buffer. I think I'd then maybe try and live off 100-150 a week for the "me money" which would leave you with just under a grand to throw at the debt

Thank you. I do have about 3 grand in an account that I keep as a back up. We are also saving £200 per month as we are convinced that our boiler is about to pack up!

We haven't really discussed how we will divide it, however I think that we will want it to be done equally and fairly.

It’s a lot of debt but you know that and you have a decent income. In your situation I’d want to find a balance so that you still have some fun money each month, as four kids between you means even one day out will be expensive, but you put as much as possible into the debt. So maybe £500 per month fun money and the rest goes to the debt.

With that much debt, and the very real possibility that zero or low interest options may well not be available for much longer I’d want to put pretty much every spare penny into the debt for the next year. No take-always, no meals out, no new clothes for the adults, no holiday away.

This will make a massive dent in what you owe, and you can then reappraise in a year.

And I agree, don’t exchange u secured debt for secured, that puts your home at risk.

Personally I wouldn't have days out etc (unless free) until the debt was cleared and I'd also get rid of sky and go sim only on phones - but I am very debt averse (with the exception of my mortgage).
It just doesn't seem right frittering money away if you owe other people/companies so much money.

With a bit already in savings and £1700 left over, I'd want to pay at least an extra £1000-1200 off the debt. That still leaves £500-700 for fun which is more than most.

Don't put it on your mortgage. It's the first rule of managing debt.

In your position I would be extremely frugal for at least a year- so maybe £100 a month fun money for each of you then everything else into the debt. It will be easier than you think.

It will pay off a good portion. Then you can ask yourself if you want more fun money, or do you want to carry on being frugal?

I would try to save a little from the £1747 - say £100/200 a month to start building a 'rainy day' fund, then if you are hit with an unexpected expense you won't have to increase your borrowing.

I would aim for no more than once a month to spend money on a 'treat' and keep that spending as low as possible .

Please remember that you are each responsible for your own debt. Don’t fall into the trap of paying his off first. If the relationship ends, you would be solely responsible for your debt still. Don’t make yourself vulnerable.

How much of the £1767 would you allow yourself for fun, and how much for extra day payment?

Before you can answer this, you need to figure out how much you spend on other things that aren’t necessarily ‘fun’ but will crop up.

Birthdays/Christmas/random stuff - £150

What are you expecting ‘random stuff’ to cover?

Clothes for the family?
Allowances/pocket money for kids?
Days out?
Household goods e.g, trip to B&Q for lightbulbs and batteries?
Coffee in a cafe?
Haircuts?

Does your £400 spend on groceries cover all pet food, toiletries etc? That is (I think) unrealistic with teens. Track it for 2 months and see do you really only spend £100 a week (which is £433 a month…)

I’d look at it more like, there’s £1000 to go to debt repayments, split £500 each.

Then there’s £750 to go to all the above stuff.

You and your DP need a bit of money each that’s your own to spend as you please - treating your own kids, or a hobby or whatever.

I’m forever recommending YNAB on here but I think it would be perfect for your situation.

Looking at your budget, I'd suggest there is money to be saved on the gas/elec and on phones.

I would also consider birthdays/Christmas/random stuff in a different way to the rest as this is not "essential" as such but more discretionary spending and should go in your "live a little" bucket. £150 a month is also a lot to put in here! Restrict present buying as just for the DC.

I'd think about what your "live a little" budget looks like. If your DC are fairly young, you can do cheap or inexpensive days out. Is there something that is important to you that would really improve your wellbeing (and doesn't cost too much?)

I think you need to relook at your budget first.
Haircuts, dentist ?
Clothes?
The £150 isn't much for x 4 DC for birthdays, Xmas, random stuff
School uniforms, shoes
£400 a month for food for 6 is very tight.
Prescriptions
Car maintenance

Can you identify how the debt came about ( not judging,just asking)
Sometimes it's underestimating a budget, sometimes overspending even marginally.
It's really important to do this particularly as both of you have significant debt.
The 3K buffer is great so should be kept for emergencies.
Are all cards cut up?

Personally I avoid the emphasis on treats and just decide on what we can reasonably afford.
As you currently have 107K debt then the emphasis should be on chucking everything at it.
So monthly takeaway becomes a monthly supermarket meal deal instead which is budgeted for.
Reading this has made me very anxious tbh I don't think I would combine finances with someone also has serious debts.

I won't. It will definitely be allocated fairly

the thing is, the debt is just one aspect of our relationship. We are very happy and want to live together/enjoy our lives together. I can't allow the debt to hold back our happiness

With regards to the food budget. there are ony actually 4 of us in the house as the other 2 are grown up. I shop at Aldi and cook from scratch so £400 seems to work ok for us right now

I agree with having a year focusing on the debt, maybe one activity/day out a month so you have something fun to focus on. That should make slip ups less likely. If you go too strict it's harder to sustain and at the end of the day life is for living.

I'd agree with a previous poster about using at least £1250 of the "spare" money to go against debts.

In the mid-longer term, don't replace the phones, at the end of the contracts, keep them and transfer them to much cheaper call/test/internet only packages which may only be £15-£20 per month. You really don't need new phones every 2/3 years.

Likewise with the £198 car payment (presumably lease). Keep the car at the end of the contract and don't be tempted to carry on paying a similar amount for a "newer" model. Used cars last an average 13 years at present, so just keep cars for longer and save the monthly payments.

I’d pay as much as I could to get rid of the debt. It’s a huge amount and would make me very uncomfortable. Perhaps have one or two treat days a month, but otherwise cut right back & get rid of it ASAP.

How old are the kids

Life’s for living. So I’d personally go:

£1,000 - fun money inc holidays
£767 - into the best interest rate easy access savings account I can find.

At the point your 0% debt product is about to end, I’d then look at how much of the savings can be set off against the debt/reevaluate the what %the debt will cost vs interest on savings. And similarly look at whether it would be better value to pay down the mortgage.

I have admiration for you, not judgement.
I would pay back as much as possible as quickly as possible even considering taking on extra work - in doing this I would also be mindful of the children's needs, and not letting it become a joyless trudge.
Good luck!

Hi, They are 8 and 13 ( the ones that live with us)

When is your current mortgage deal ending? Don't overpay on the debt to extent that you can't manage an increased interest rate.