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

Thankfully we are fixed for another 5 years

Is it worth looking at it another way - how soon would you like to clear the debt?
Might be worth playing around with calculators to see how increasing the repayments brings down the length of the debt until you get it to a point where you are comfortable with both.

But yes, as PP says, I'd worry that 0%/cheap deals won't be around for too much longer!

No judgement from me about the debt, it happens, I've been there.
You are already saving for the boiler, great, once you have enough just get the boiler sorted and that's one less thing on your mind.
You already have a few K in savings, that's a great buffer for emergencies.
Agree with previous comment about looking again at mobile costs. I'm with Virgin for £7 per month with loads of mobile data (can't remember how much but I never run out).
Try not to think of minimums for debt repayments, but instead think of maximums - the most you can manage to repay to clear it - and set yourself a target.
You have 107,000K in debt.
Do you want to be debt-free in 3 years? That's a repayment of £2972 every month for three years. Could you commit to that? It leaves you £295 spare/life money per month.
The more frugally you could live, the more you can bring the debt-free target forward. Are either you or DH able to get over-time, or a side hustle, or do you have any assets to sell? It can all go towards bringing the debt-free target forward.

I'd personally have a really frugal couple of years and focus on debt repayments.

But that's just my view...

Some very different opinions on the debts here! It's surprising!

It's a version of the spender/saver mentality. I suspect the "pay the debt off as quickly as possible" folks are savers, and the "more relaxed about it" people are spenders.

I'd be in the "pay off asap" camp, but DH would want to keep some money back for "stuff". We'd probably end up compromising somewhere in the middle.

I guess it's also worth noting the ages at the two at home children. If you want to help them with things like driving lessons/laptop at home/extra tuition if needed/university/car - getting the debt paid off sooner rather than later would definitely be a good plan before they hits the potentially very older teenage expensive years!

To add to my comment -
You say at the beginning you have been savvy and got the debts onto 0% offers which is great, it really makes a difference in clearing it as fast as possible.
If any of it is not on 0% and is accruing interest, prioritise paying that balance as quickly as possible, prioritise it more than the life/social activities. The accruing interest will only set you back further.

I think unless the kids activities are swimming lessons (not clubs), they can go. Look to reduce subscriptions, phones etc as much as possible.

Throw as much of the extra money as possible at the debt, and actually aim to have the remainder of your mortgage fixed deal as frugal as possible so when you come to remortgage the debts are much lower.

Have you prioritised which debts get paid off first? So aim to oay off those with the highest interest while meeting minimum payments on those with 0%. Once the interest loans are paid off, throw everything at the 0% debts.

I would not combine incomes entirely at all. I would work out your joint costs and put that into one bank account and pay bills from that. I would pay each debt off separately. That way you pay yours, he pays his. If anyone defaults it does not affect the other person. You can also keep one person with good credit record, hopefully both. I would not tie myself to a man with £62k debts even if he were brilliant and even if I had debts myself, not economically anyway. There are reasons people get into debt, I've done it myself, but one reason is poor money management and I wouldn't hitch my kids future to that right now. You can still aim asa a couple to pay off debts as a priority and talk openly about it. See where you are in 2 years time.

Advice on paying high interest debt and priority debts first spot on.

I'd agree on a year of being really frugal where fun is concerned in terms of days out, meals out and holidays. I'd want to make as big a dent in that debt as possible so that you can see it coming down and it will weigh less upon you.

I'd look at your mobile phone spend. Are you all paying off the cost of the handset as part of that? I'm paying £7 for as much data etc. as I want.

It's a version of the spender/saver mentality. I suspect the "pay the debt off as quickly as possible" folks are savers, and the "more relaxed about it" people are spenders.

Yeah I'm defo a saver so I think "pay off asap" seems obvious to me.

I do think keep some money back for a date night or a day out would be good though, provided its within reason.

Hi op I compared your list of costs to ours - a bit different as we have petrol/diesel and gifts from our own accounts not joint.
Do you have life insurance? I couldn't see that on your list.

we don't but it's on our to do list to sort out. My previous policy was for me and exdh

In our house, we divide the surplus by 3, a third each and a third for “joint” spend (so days out, house purchases etc).

We have no debt though. In your circumstance I’d probably put £500 each additional towards debt and our c £250 per
month in each of the three pots I refer to above.

I haven't RTFT but I would ask a financial adviser or mortgage broker to help with potential remortgage options. The interest on unsecured debt is almost always higher than secured debt, so even if the mortgage interest goes up you could still be better off securing it against the house, providing you're able to model repayments even with interest at 6-7%. Bank rates are likely to be higher and credit card rates are totally mad unless you're amazingly good at arbitraging onto 0% balances, but those will dry up over the next 12 months or so.
I don't think you should overpay too much as you do still need enough liquidity to be able to manage without taking out new loans.

Your outgoing are not much different to our own but you earn over twice what we do. Personally I'd be putting every penny to paying off the debt. I wouldn't be buying anything new and most things for the kids would need to be second hand until the debt is cleared. To put it in perspective if you pay £1500 off each month you are going to take 6 years to clear this debt. 6 years is a long time so every penny that can be cleared will make a difference. If you are both serious about the debt see if any of it can be cleared by the companies directly. Ensure no interest is being added if you can help it. You could look in to debt consolidation but sometimes you end up paying a lot and not clearing much debt so ensure you read the fine print.

I'd say things like £150 a month for birthdays are to much when you are in your position. That is £1,800 a year.

You need to look at things like kids clubs and £200 a month is a lot of money

If you shop sensibly you might be able to do less than £400 a month on food. If you bulk cook and buy yellow sticker meat and freeze.

Sky needs to go you could almost half that a month by changing to Wi-Fi only. If you all have mobiles there is not need for a home phone.

£127 a month on phones could be less so when you are each due for a upgrade you switch to a sim only. That could half that figure. Invest in a bump proof case for each phone and it could last for years.

Saving for a boiler isn't a bad plan but if you have £3k for emergency I'd get that to 5k and then put the £200 towards the debt.

I've read about listing the debt pay the minimum on each debt except the lowest debt. Then use all the money you can to clear the smallest debt one at a time until they are all gone. This is what I did when I cleared debt and it works really well. It gives you such a boost being able to cut up that card and know it is cleared and gone.

I'm not sure how old your kids are but if you think this is something they can understand I would sit them down and explain to them what is going on. There are going to have to be lots of 'no' in the coming years and it might be easier if you explain it to them. You don't have to go in to details about how much but just say there are going to be some changes.

The bigger the lifestyle change the quicker you will pay the debt off. I hope things go well for you and you mange to get the debt cleared.

This

My work colleague moved in with her new partner and it was all love and flowers. They both went super frugal to sort out the debts they had - but his was 'more expensive' so they decided to clear that first.

Six weeks after the last payment was made he told her he no longer loved her and moved out.

She was understandably devastated - Four wasted years of really hard saving and none of her own debt was paid off outside of the min payments.

Luckily she came into an unexpected sum of money and actually cleared the debt and the side hustle she set up after he left took off so she was back on her feet quite quickly.

Yes, he did come sniffing back around when she had money and no she didn't give him the time of day.

Have you looked at the diaries on Martin Lewis Money saving expert site, there's lots of people on there with big debts that have got it down. Is it all on 0% cards ? What dates are these due to end ? You need to put them in order and hit those first (but doing both debts not just one of you as can leave you very very vulnerable)

I would personally be looking to pay off a minimum of £2k a month off the debts and ideally £2.5k. That will still leave you monies to spend on life. You mention 0% interest etc, if any of the debt does have interest payable that needs to be prioritised or at least taken account of.

In addition, I would be looking to see if I could cut back on some of the day to day expenses such as energy costs (which are above average), mobiles and general spending. I would then use that for the rainy day/unexpected expense fund. Do either of you have any contingency for either of you loosing your jobs? I note someone else has mentioned life assurance.

I hope between you, that you can find a fair and equitable way forward.

I would put half of the full amount towards the two debts, paying off both equally. Have a quarter to spend and enjoy and the other quarter to build up personal savings for bigger things as and when you need or desire them. I would also have a “set it and forget it” mentality and get on with your lives. Set up the standing orders and check in once a year to see how the numbers are coming down.

1. agree with ensuring paying off each debt equally, and in order of interest accrued (though not if all his debts are in this category and yours aren't..)
2. it may be that the pattern of save/treats changes, I find it easier to save in the winter since film nights, homemade popcorn, autumn walks with homemade hot chocolate, are cheap but "treaty". Summer brings more spendy opportunities. Going hard on saving and putting more into debt repayments over this winter would be a strong start and you can look back in a few months and really see the impact on your balances
3. I kept a table when repaying debts, which i found really motivating. I see not everyone is the same (PP on set it and regret it) - work out which you are. Paying off debt is a bit "passive" (not browsing, not buying, not thinking of trips..it can leave you feeling quite down over a long period), whereas having a table you fill out each month is something you are actively doing.

I would suggest talking to CAB about your debts.

I'd committed to paying off as much debt as i could for at least a year and do away with 'fun things'. Yes, life is for living but that's a lot of debt and would scare the bejeebies out of me.

£200 each for ‘fun’. Life is for living so i support that. But clear the debt as quickly as possible.