Dire finances - need to get a workable plan

[brokemitch]

morning everyone

TFIF

Just got to work early and office quiet and empty - so here goes.

We are in a dire financial hole at the moment. We are very very heavily in debt due to spiralling renovation costs, poor financial management and lack of communication between me and dh. We have had our 'lightbulb moment' and now is the time to get this shit sorted. At the moment a remortgage is not an option as dh has a CCJ ( unpaid parking fine) so our broker has advised us to knuckle down for 2 years and then try again. I have consolidated some of the debt and shuffled things around to minimise interest, but it's not all interest free/low interest so we need to prioritise those debts first.

So here is our horrendous budget.

we pay for all of our mortgage, house bills and essential direct debits out of our joint account and this comes to £2126 per month. This includes every single direct debit phone bills, insurances etc

We spend about £500 a month on food if I go to Lidl for 2 adults and 2 teens.

My car is electric and I get free charging at work. Dh spends about £200 per month on diesel.

Other life events- car maintenance, birthdays, christmas, school trips, school dinners, haircuts, prescriptions comes to about £250 per month.

We have a joint take home pay of £6754 so after all of this stuff has come out, we are left with £3678 per month

Sound good right????..... but.... I havent factored in the debt payments....

So out of the £3786 we have £1500 debt payments. It's a lot but I have structured it so that most of it is paid in 4 years. On top of this, I also have to pay my parents £300 as they supported us financially with an interest free loan.

This takes us down to £1986

So this feels like a lot of spare money but I don't want to look at it like that. We need to use this money strategically to get out of this hole.

I would welcome the views of others - WWYD. I know this is a very dire situation, so no judgement please - I am a little fragile right now

Lots of high earners have huge debts, I see it every day in my line of work
To make this work this has to truly be your light bulb moment and you need to have a complete change in both mindset and lifestyle
You need more detail in your budget
MSE website will give you so much advice on this
You seem to have your essential bills and DDs sorted
You need to then start setting aside this £250pm you refer to for Xmas etc to start building up this fund
Agree a realistic budget for food and fuel
Agree a realistic budget for fun
Agree a realistic budget for clothes etc you have teens so you need to allocate something to this
You also need an emergency pot. A decent amount each month to cover unexpected costs
Anything left is towards debt. Pay whichever debt that has the highest interest rate first then once that's repaid go to the next one
The good news is that you've got a lovely net income and once the debt is repaid you could set yourselves up nicely for the future. You have to keep the same mindset though once the debt is repaid
Good luck

It's a lot less dire than some but good that you are ready to address it.

You need to go through what you have spent for at least the past 6 months, if you can trace it through bank/ credit card accounts. Work out a more accurate budget. You need savings -ideally given your commitments this would be 10,000 but put 1000 away for emergencies now. What is the highest interest rate debt you have and how much is it in total? Paying that down as fast as you can will reduce your outgoings.

Dont assume all direct debits are fixed, check you are not overpaying using the moneysaving expert website.

If your teens are old enough for any sort of work encourage them to do something.

Sit down with a spread sheet and all your incomings/ outgoings.
Work out what you actually spend each month on food, bills, petrol etc.
Cancel any subscriptions you don't use or can do without.
Set a weekly budget for 'spends' for both you and DH
Put renovations on hold unless your roof is about to cave in you can live without it for now.

You have a lot of surplus money left at the end of the month so split half to savings and half to paying off debt you will be debt free in no time. Then will be able to sort the house when you can remortgage in a couple of years.

I know it sounds a huge debt but actually you are not in a big hole as you have the income to cover it all just make sure you can account for every penny.

I would echo the advice of getting on going support from either posting regularly on the money saving expert forum or joining a Dave Ramsey UK Facebook group.

Usually the advice is to get unsecured debt cleared as fast as possible and go through every expense and see if you can eliminate it and if not minimise it. Get a proper budget together and keep to it and then use the extra money to get clear of debt.

There are a lot of people on the MSE forum that started off in debt and cleared that and then become so used to a new way of living that they cleared their mortgages and built up savings. Use this as a springboard to being in a better financial place.

Echo looking at Ramsay. He's a bit extreme, but the method works.

"Dire situation"

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@onefinemess
Dire to be left with £2000pm 🤷🏼‍♀️
Debt due to renovations, not heating or feeding your family, the poor love.

That's not fair. We all have our own circumstances to deal with. I should still be allowed to seek advice surely?

Seek advice but not bleat that you're in a 'dire' situation, you have debt of choice not necessity.
To have £2000 pm left over is incredibly fortunate and I imagine you have the intelligence to have a week paid job yet you can't figure out how to pay off your debt or have the awareness to realise how fortunate you are.

@brokemitch I probably be inclined to keep at least three to six months of monthly costs in a high interest savings account or premium bonds which can be quite beneficial, depending on your tax situation. Use anything over to pay off the highest interest debts first. 🤷‍♂️

But this is a forum for people to post about their money worries etc? of course there are people who are less fortunate than me - I know that and I am grateful to not be on the breadline, however It's still ok for me to feel worried about my situation. It's not a race to the bottom

Yes but you could moderate your language to not be so dramatic about a situation that is in fact not dire. It's clickbait to get people to respond and you know it.

There’s also a health forum where people post around their health issues and worries.

What you’ve done here is rather like going there and posting about a dire health issue when what you have is a sprained ankle.

You can get 3.5% on cash savings now. Day after payday, put £2500 into debt repayments (i.e. £1000 more than you need to) and another £900 into savings.

Nobody disagrees that you need and should be able to ask for advice.

Asking for advice is different from language such as “dire” situation, and appearing to have absolutely no idea what to do. THAT is what people are quite rightly taking issue with.

please don’t act like you somehow been told not to seek advice on a forum. Anybody can seek advice on any forum. It’s the extra stuff about how Dyer things are and how awful things out and how you absolutely don’t know what to do with numbers like this, that’s massively of putting and disingenuous.

The health forum comparison above from PP is a good one:m.

Its okay to say “argh have got a broken leg - any advice on X Y Z please?”

it’s quite another things to say “I am in dire straits, just don’t know what to do about this really awful health issue. By the way I’ve broken my leg.”

Sorry but I do think that my situation is dire. I agree that it's a situation of my own doing, but It's still dire to me.

Have you posted this before Op?
Debts about 100K ?
If so most people were fairly balanced that you needed to budget realistically but you wanted to " live" at the same time?
I would just throw everything bar what's needed for essentials at it and get rid.
That level of debt is "manageable" now but a job loss or illness and you would be stuffed.

I don't think this is a circle you're going to find useful to go round here OP - no one is going to benefit from it.

It is clearly a serious situation and it's important and really great that you've realised the situation you're in and are going to make changes.

And the positive thing is, you're in a situation where you have enough money coming in that you don't need to look at second jobs or anything in order to put yourself in a financially sound position within a couple of years.

I can absolutely see it's really scary - we had very little money when I was growing up and I have always been paranoid as an adult to never any non-mortgage debt (to the point my lack of debt negatively impacts my credit rating). If I had a really bad few years and then took my head out the sand to discover I had what I presume must be 10s of thousands of pounds worth of debt, I would be totally horrified. I'd also, ultimately, still be in a much better situation than someone with a similar or even smaller amount of debt and a much tighter budget. It's a lot easier to tighten your belt when you use a few notches already.

The Money saving expert debt forum is a really good place for this sort of thing because everyone is there for the same reason, pretty much everyone there is really keen to get rid of debts etc, but you also have quite a good acceptance of the variety of financial situations. They are harsh but fair.

How much are these debts? I mean, 2 grand a month chucked at them will surely shift them in no time.

Thank you, I appreciate that

Just under 70k now so very very high, but you're right, we can make a debt in it quite quickly

Are you generally such a catastrophist? Your situation is not dire. You own money due to a renovation you chose to do on a property you own.

Certainly, the CCJ suggests poor financial management, but you’re in a relatively good situation.

(And, before anyone accuses me of jealousy, I have a lot more money than you. Even if it was vastly reduced and I only had £1,900/month in disposable income after finding a renovation, I wouldn’t describe my situation as dire because I know that would be ridiculous, dramatic, and goady).

£2k in debt repayment per month (I think you could do more if you really really tried) and you would have it paid off in 35 months.

don’t add to it under any circumstances. Contact a debt charity for support. They also help high earners.

no holidays, extravagant birthday presents for kids (none for you and DH) no eating out and no ‘if’ about going to Lidl. If they don’t sell it, you aren’t having it.

£70 would be terrifying to me as I warn far less than you however you have the means to get out of this hole and you both need to take this extremely seriously

Ah it is the same poster.
As previously you are going to have to change your lifestyle to pay back the money and pay back the debt.
While that is a big drop now if you gave yourself £2.5K on repayments it would still leave you £1.5 K for spending and it will be gone in just over 2 years.

I agree with the "about" comments.
The first thing is to do a realistic budget.
An awful lot of people get into debt with drip drip overspending and nothing exciting at all.
You have the ability and wherewithal to tackle this now and quickly, don't leave it until its even worse.
Lots of people are simplifying and cutting back, it's the norm now