Is this a common situation

[laurelrolls]

Hi,

I know that every family is different but how uncommon would this scenario be in the curren financial climate -

Family of 4 - me, dh and 2 dc's aged 8 and 12.
Both working full time with a net monthly income of £5000
Mortgage of £850 ( fixed thank god for 3 more years)

BUT

unsecured debts of 40k......

It's credit cards/loans. We are on top of it now and the balances are reducing thanks to us being able to overpay a bit.

I would ask for no judgement if possible. The debt is here and I can't change that.

Just wondering if we are unusual to be in this predicament at this stage of our lives ( we are early/mid 40's)

Currently we have no unsecured debt but will be starting a small extension, getting a new kitchen and maybe tiling the bathrooms. We will be getting a sizeable loan for that and hope to pay it off in 3-4 years. This will be the biggest loan we've ever had and we hope to pay as before our 1.9% mortgage rate runs out in late 2026.
As long as you're able to finance it and your wages are relative and you're not blowing it on holidays or clothes, I don't see a problem.

Some level of debt is fairly normal, it's when it becomes unmanageable, that's the problem.

No idea whether it's unusual, sounds like you're in a good position to pay it off.

I had a few small loans in my early 20s to set up with car, a move, clothes for work etc. But then it got paid off and we've no debt other than mortgage.

I'm quite surprised when my colleagues mention taking credit for a car or debt repayments, we're of an age and income where I wouldn't be expecting it but maybe they have large savings pots they'd rather not dip into.

I'm not sure if it's normal. I don't have any debt other than mortgage and car finance, but my mortgage payment is twice as much as yours.

I'd definitely try and get rid of that debt as quickly as possible. Do you know how it got to that stage? As no point allowing it to build up again.

I don't think it's that uncommon. We have some debt from necessary and boring home improvements. We've only this year finished paying for cars and won't be getting another for a while.

Once I knew I was finished with maternity leaves, my focus has become paying down debts as quickly as possible and saving towards our goals which in the more immediate future is family holidays.

Have become much more savvy this year about balance transferring to 0% cards and saving for the balance in a high interest savings account. Any overtime goes into the emergency fund so that we hopefully never need to spend on credit for unexpected costs.

MSE forums were very helpful and inspiring.

I don't think that there is a definitive answer as there are so many factors that have to be considered.

40K to someone earning minimum wage would probably need some sort of insolvency to fix, whereas someone earning 7K a month would probably not even blink at it.

I also think it depends on other factors such as your other outgoings etc. For example, my mortgage is tiny with only about 15k left to pay, so whilst I wouldn't want 40K of unsecured debt, my total debt burden would still be well below the average mortgage

I do think that there are a lot of people on higher incomes who carry large amounts of debt. We were in this position a few years ago. At one point we must've owed 50K between us in car loans, credit cards, other finance etc. However at that point we were both earning a lot of money - around 150K a year combines, so it was all perfectly manageable.

We had a big life change a few years ago, downsized and bought a house in a cheaper part of the country. This allowed us to pay off the debt but we also have a much lower income now, so carrying that sort of debt would no longer work.

I think my point is that there is no 'common' or 'normal'. Everyone is different. There are some MN'ers who will also choke at the idea of any debt, and then others would have laisse faire regarding it. I am somewhere in the middle.

The OP says that they earn 5K a month so I would expect that 40K debt is manageable and probably fairly common on that sort of income.

Yes, but your debt seems to be for things that were not discretionary! I'd do exactly the same.
The same amount spent on holidays or clothes might make me feel judgy, tbh.

I think that people don’t really talk about debt so it’s difficult to know what others owe.

Why do you want to know how common it is? All that matters is how you and your family feel about it and taking action based on that.

Me and DH have the mindset that we need to save up for something before we can afford it and we avoid any debt other than mortgage. We use credit cards for the protection but pay off in full each month and only buy via credit card if we have the money to pay off.

It's so easy to get into a debt spiral and banks offer you loads of credit as it's how they make money. But if you buy something via debt then it will only cost you more overall as you need to pay off the interest (unless you can be sure of 0% interest until it's paid off). So if you can't afford to buy outright in the first place via saving up then you can't afford to buy it on credit either.

If you want to change your mindset then posting on MSE forums is great - they can help assess where you can cut back and it's good to see others going through the same thing. I've found Meaningful money podcast useful too - there's a recent one on debt here. Good luck
meaningfulmoney.tv/2023/06/14/finance-os-paying-off-expensive-debts/

I know a few people in same sort of situation, they tend to bang it on the mortgage in the end as the thought of paying out several thousand a month is to much.

Don't leave it till you are 40-60 to look into your pension! Prioritise that as early as you can (or it will cost you far more later).