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

Sorry avoid further debt

Fuuuuuuuuuckkkkk. That’s a lot.

Ok, plan of action. Set up direct debits to all of the 0% ones for the minimum payment, then chuck every single penny you can at the others, starting with the highest interest. Once they are paid off, move onto the next highest interest ones. Throw every single penny you have at it. No non essential spends at all. Get obsessed, make spreadsheets, be single minded about it. Think before you buy anything, it’s only going to be two years if you work at it, then you’ll be debt free. Imagine that, it’s the best feeling in the world and totally worth it.

I would agree with others as mentioned

1. Dave Ramsey. Pay off asap, no holidays basic food, no eating out etc.
2. ynab (you need a budget) honestly it is amazing, it will totally sort you out! We have a lot of categories probably more than necessary but it if something comes up we've already budgeted for it. Love it soooo much!

Sounds like a temporary cash flow problem. Certainly nowhere near ‘dire’ with your current income, although I would personally be nervous of such a large debt in case of illness/redundancy etc etc. In that respect you are vulnerable with such high outgoings.
Presumably all these renovations have increased the value of your property? Therefore it’s a transfer of funds to long term assets, rather than a case of blowing the lot with nothing to show for it? The faster you pay it off and the less interest you pay, the better off you will be

The long and short of it is you need to knuckle down and just stop absolutely all non essential spending if this debt feels scary to you. Short term pain for longer term peace of mind