What do you honestly think about this financial situation?

[somewhereinthemid]

My husband (full time) earns £55k, I (part time) earn £14k. We own our own home and have an outstanding mortgage of around £175k (but we do have help to buy loan of 20% to factor in in 3 years). We have a 3 year old who has just started receiving funded hours but have a newborn too. Our house is big enough to last us so we don’t need to worry about moving. We have a nice car but it is on PCP. We did have a good pot of savings which got absorbed between buying our house and our wedding and we now have only £3200 in savings and at the moment we aren’t putting anything into savings a month. We live comfortably in the sense that we don’t go without anything, our house/car are nice, warm enough, enough food, little luxuries etc but we don’t live lavishly. At the moment we can afford everything but we are living relatively pay check to pay check in the sense that we don’t really have much left over at the end of the month and aren’t paying into savings.

My husband keeps saying that he can’t believe we are back living pay check to pay check, he earns the best he ever has and feels like he has less money than ever before. I feel like he could look at it a bit more positively, we’ve been able to afford to buy a lovely house in a nice area, have a lovely wedding/honeymoon, have two kids, me go part time, keep luxuries such as nice car, sky, Netflix and afford to keep ourselves warm, clothed and fed. Yes we are looking at another 3 years before we can start rebuilding savings but at that point I can go back full time, or atleast an extra day or two and my salary that has been eaten up on nursery/maternity leave etc will be available, even with my PT hours that would be an extra £1200 a month we currently don’t factor in and even more if I go full time.

This isn’t a stealth boast before someone says I just get so anxious when he makes it sound like we are practically skint and living right to the wire and o don’t know whether he’s right and it’s a shit situation or whether I’m right and we are doing quite well considering it’s only short term?

You are in an expensive part of your life true, and people will say you will come out of it, which is also true. But from what you have written, it strikes that "lifestyle creep" as they call will definitely be a factor for you.

Start saving now, even its £50 a month. Do the text book thing of going through all your subscriptions etc.

My husband takes home around £3200 after tax, NI, pension etc. Definitely not £4538

sorry that was gross not net

Things don't sound bad OP, you have your house and what sounds like a pretty decent lifestyle. You're staying on top of debt, have a small amount of savings and both paying in to pensions to prepare for the future so that's good.

I can see why your husband worries though, living pay check to pay check isn't a great situation to be in. It would probably keep me up at night to be honest. I would try to start saving right now even if it's small amounts.

I don’t think you’re in a crazy precarious situation, and I think it’s worth recognising that some periods in life are more expensive than others.

But I’m with your husband… I’d also be lamenting a “regression” to pay cheque to pay cheque living. I’d feel less financially secure, but I’d also feel like I’d gone backwards, and was immature with my finances.

I wouldn’t have chosen that wedding, and that honeymoon, and that house, and that first child timing and that second child timing to end up in a position of debt.

Which you are: £3200 savings, £5000 credit card debt. At your age, I wouldn’t want to know that my balance sheet was -£1800, no matter how manageable the debt seemed, or how low risk. I would feel cross with myself that I’d fallen for the “oh but it’s 0%!” to buy things for the house that I bet could have waited.

What I find interesting is (unless I missed it!) is that you didn’t even mention the £5K debt in your OP! And right there is the difference between your personality and mine, and possibly your personality and his. You just gloss over it. I think you should have cut your cloth better in the first place.

OK, I’ve just re-read your OP to triple check.
And you definitely didn’t mention the £5K debt initially. That’s where my discomfort would be coming from, if I were him. That I was disappointed that I wasn’t saving anything, and was living to each pay cheque - whilst my partner didn’t see £5K as worth mentioning (yet £3209 savings was…) and then was very blasé about it only being interest free, going down, manageable… all of which might be true, but it’s attitude. In your mind, a whole £5K of debt wasn’t worth mentioning!

In your shoes I would aggressively pay off the debt and have a short term savings pot of a few months salary. If you need to cut some luxuries now to do it I would. Once you have no debt other than mortgage, a small fund to pay for an emergency like broken boiler etc, then in your situation as described I would say you are doing well. We used to be similar, a debt that was manageable but we just wanted rid of it so made that the priority and it was touch as all spare cash went on it. So glad we did, as you don't know what's round the corner (you may not get a new 0% balance transfer) and it's given so so much peace of mind to not feel any anxiety about anything going wrong. Good luck!

Is there a point aggressively paying off credit cards (more so than we already are at £300pm) as they are 0% interest and will be cleared before that ends? That's why I'm not really worried about them! If we can cut back in places and free up some money surely we're better off prioritising a small pot of savings than paying off a debt that isn't costing us anything? Genuine question!
We realised yesterday a few things we had on finance with John Lewis end this month, which frees up £180 a month that can be saved as we're used to living without it anyway so I'm feeling good about that.

“We realised yesterday a few things we had on finance with John Lewis end this month”

You just realised this yesterday?!
This is what I mean by attitude difference… there is no way I’d ever just realise that. I’d know it. If I took out 3 year credit in Dec 2019 I could tell you at the drop of a hat any time you asked that it ended in Dec 2022. In Jun 2022 I’d probably have a fair idea where my £180 was going come Jan 2023!

It’s also another example of using credit that you missed off the OP - just like the £5K credit card, the £x to JL didn’t register with you. It feels like you don’t see managed debt as debt, particularly. (and also: I can’t imagine any vital purchase that needed to be on credit from JL that wasn’t actually unnecessary or better value elsewhere)

Again, it’s just a different attitude and may be why your husband is feeling less comfortable than you.

My husband is much more like you, assuming everything will be fine. Like you saying you’ll make up the savings in 3 years time when you don’t have nursery fees and might increase your hours. That’s exactly what my husband would say. Whereas I would say - hang on, do we not actually have a plan about hours yet? And have we costed wraparound care? And what is one of our children has SEN and a full timetable isn’t appropriate and we can’t just up our working hours, and what if the rainy day emergency happens in the next 3 years? 🤣 We’re very different (and it’s not a problem 😀) but maybe that helps you to see why he might be more concerned than you?

I knew we had things on finance, and mentioned it in my posts. I said that we have £5k debt about £1k on finance and the rest on a 0% credit card. I just didn't realise they were ending already and thought it was next year. It was furniture from when we bought the house and was again on 0%.

But you didn’t mention it in your first post - that’s my point! You painted a picture of a family at an expensive time of life who had simply run down savings to a low level. Which made your husband possibly seem OTT. But the fact is, you also have £5K of debt. You didn’t have to mention it - I’m not complaining about a dripfeed! Just pointing out thar it’s a different attitude to debt.

Not thinking of it in your OP, not knowing when it ends…

And again, you push that it was 0%. That doesn’t really make a difference, to me. Of course it’s better than paying interest. But - did you pay upfront in a higher price which is where JL made their money? It doesn’t matter whether it’s 0% or 20%, if a surprise change in circumstances means you can’t pay it. It comes across like you don’t really see it as debt the same way if it’s 0%. I wouldn’t have bought furniture from JL that I couldn’t afford, at the same time as buying a house, a honeymoon, a wedding, 2 maternity leaves… Some furniture, people can’t give away! There was definitely no reason that you had to go into debt for it.

You chose to - and actually, it’ll be paid off next month, and in 5 years time you’ll post back, “there was no emergency and we have savings again and hey we got to enjoy our lovely new furniture too!” So retrospectively it will almost certainly not be the wrong decision for you personally.

But I think this is why you don’t care that your living pay cheque to pay cheque - lifestyle was more important to you than savings. Sounds like your husband isn’t so sure. Though, he is on the nice car!

Life is short, I’m not saying save every penny and use only second hand chairs… but you look like a family that’s in danger of lifestyle creep and having no safety net, and both those things are worth addressing.

You can decide whether you should pay off the credit card debt faster based on answers to these questions:

1. Is the value of your savings safe?
2. Do your savings earn you money?
3. Do you find it easy seeing your true financial situation when spread across multiple accounts?

If, for example, you have a 0% debt, your savings are cash protected by insurance or institutional schemes, you’re getting X% interest on your savings, and you know exactly your current financial state and will not be tempted to spend your savings, you’ll probably be OK paying down the debt more gradually. You’ll be making money on the interest on your savings.

If your savings are actually “value can go down” investments like stocks and shares, or you’re not getting a return on your savings, or you find it harder to see your financial position with multiple accounts, or you will be tempted to spend your savings, you’d be better served by reducing risk and paying off the debt faster.

In general if you have debt, you should pay off high interest debt first.

Your savings amount to £3000 and it's all in a S&S ISA? Whose idea was that?

We had our big savings £££££ that we used up between house deposit, stamp duty, solicitors costs and wedding and then we had £2.5k in a S&S ISA separately, we got through our general savings and just haven't touched the ISA in years. It's around £3200 atm. We don't touch it, it's just there

It's great that you have that but considering you have debt bigger than that & items on finance, it comes down to:

What would you do if something happened to one of you?

What if your DH couldn't work anymore. Or had an accident. Or if it was you?

Your isa would be wiped in to time and you'd be left with debt. I just don't understand why you wouldn't want more security?

You mention the wedding quite a lot. Maybe your DH is regretting spending on it? Not regretting being married obviously but I'd rather have a savings pot.

I think he's right to be concerned but both of you need to be onboard and he doesn't seem to want to cut back.

Personally I would be looking to clear the debt and get 6 months worth of savings and then start looking to invest/ put more into pensions/ clear the mortgage.

Im not sure there is such a thing a safe job anymore and I would be cushioning myself and family as much as possible in case of emergency, whether that was a new boiler or job loss or a mortgage rate increase when you come to remortgage.

So the £3,200 savings you do have are in equities…? You have no cash savings at all. And £5k of debt, with no free cash at the end of the month. No matter where you are in your life, I’m with your husband that’s not really a comfortable place to be, and I am sure he feels the pressure.

We can withdraw our savings whenever if we need them.

It’s not about speed of access to withdraw - but about the risk of the investment. You might easily have lost 10% of the value in the Covid /Russia /Truss runs…

Mind you, cash doesn’t exactly do brilliantly in periods of rampant inflation!

But that’s why it’s been commented on that you only have a S&S ISA for savings. What’s your Equities percentage within that?

I think the fact that there’s a reasonable number of people her saying that they’d not be comfortable to be living as close to the edge as you are, and trying to explain why it’d not be comfortable for them, means you should be able to see that your husband isn’t necessarily on the same page, and isn’t necessarily worrying unnecessarily.

You seem to have a very blasé view of debt, which is fine if the consequences of any change of circumstance fall on you. But if, as in this case, they don’t but they fall on the whole family, and one could argue fall disproportionately on your husband, then I think you should take that onboard.