Life before money and debt

[JW8280]

Happy New Years Eve. I am so glad to be seeing the end of this one

2024 has to be different for us. At the start of 2023 we decided to make a superhuman effort to clear as much of our debt as possible. We have a high level of unsecured debt. not going to disclose how much etc, as that's not the point of the thread however I will share that our current rate of repayment will see us clear by the end of 2025. The problem is that we are exhausted and burnt out by the extra work we have taken on. We both work full time in education. DH has been doing tuition each evening, marking exams and moderating coursework etc. He is totally burnt out and this is impacting on his physical health. I am also doing tuition but not as much as we agreed that one of us had to be available for the kids etc.

I want to us to stop, or drastically reduce the extra work in 2024, knowing that this will slow down our debt repayment. I have spent today looking over our budget and working out how much we would have spare to throw at debt if we just work out normal jobs. It's as follows -

My monthly take home - £1644
DH take home - £3913
Total- £5557

We have trimmed the fat off everything - basic mobile phone packages, no SKY TV etc. I have been through every single one of our essential outgoings ( not including food and car fuel) including minimum debt payments and in order to pay everything we need to pay out just shy of £3400.

I have been shopping and meal planning at Aldi and have found that I am averaging about £120 per week so I am going to budget £500 per month for food. We also spend about £200 per month on diesel.

This year I have put £250 per month into a monzo account to cover birthdays and christmas so I want to carry on with that. It worked really well last year as normally I'd get to December and have to use the credit card.

We had almost no fun last year and whilst I don't want to spend a loads of money on holidays etc, I do want us to be able to go for the odd drink or day out. £200 per month??

So using the figures above our total spend would be £4550 leaving just over 1K to overpay debts (don't forget I included the minimum debt payments in the essential outgoings category.

This doesn't seem too bad. It does mean that we will be paying the debt back a bit slower, but It seems doable whilst taking the pressure off us a bit. I can't bear the thought of another year of work work work. We are both grafters but we didn't get balance right a la 2023.

Do you think this is the right approach?

I think it depends on how much you owe and interest rates etc
1K plus minimum payments is quite a bit on debt but if your mortgage renews at a much higher rate next year for example it would be sensible to get rid of it .
How was the debt incurred?
if it was through overspending ( I think you had a previous thread) be careful it doesn't open the floodgates again.

Hi

No previous thread for us?

It was overspending, new kitchen, bathroom, general financial disorganisation - just banging stuff on cards without thinkng. No real excuses or sob story. We just want rid of it.

Our mortgage is fixed for 5 years thank god!

Are all of your unsecured debt repayments on standing orders ?

Make sure that you have a regular payment set up for each one and then do a budget for the year and have a think about what you miss the most
and set aside a little bit each month for that.

£200 a month is a very round figure. What would it comprise ?

Yes, everything is standng order/direct debit.

The £200 is an arbitrary figure for 'leisure/fun'. I suppose I see it more of a maximum amount that we could spend. I certainly wouldn't want to spend beyond that

There is a MASSIVE difference between standing order and direct debit.
On a credit card, moving from DD to SO drops the repayment term from
33 years to 3
PLEASE
make sure all cards and variable payments are moved to standing orders
it will do the work for you

Sounds sensible to me

Making yourselves ill will complicate your lives further

I think having some ‘fun’ money works really well. You can’t sustain having no treats ever for years! I think it makes you more likely to fall back on old habits. A bit of fun money means you can still have/do nice things without going over budget and still paying a chunk of the debt off.

That’s not strictly true! Over paying reduces the term not how you pay! You can have a set amount direct debit on some cards not just minimum payment direct debits.

@FawnFrenchieMum
I wrote my standing order spreadsheet all those years ago for a good reason.
If you pay by Standing Order
you
control how much is paid - and than thus minimise the bank's profit
If you pay by direct debit
they decide and those few pence each month snowball into their profits.

Ah OK
Similar Op
I think it depends on your individual circumstances then.
Stable jobs, everything on 0% and a manageable budget then seems OK.
Personally it would burn a hole in me and I would rather work extra to get rid ASAP.
But Im a bit all or nothing!

whats the difference in timeline if you relax a bit to going hell for leather at it?

Mentally, what's harder right now, carrying on as you are but being debt free next year?

Or taking a slower approach to debt repayments and servicing them for another 12-24 months?

Apologies Op
Just saw you were on track to pay off by end 2025 so presuming around 2K per month payments debt is around 50K?
So would be about 4 years?

That's 2 years of very hard graft and as you say your DH is breaking down?
It would be disastrous if he then was unable to work as a result .
If you have it on 0% or some then prioritise any debt with interest first then start on the 0%

I agree with @FawnFrenchieMum. This just isn't true.

I've had my credit card on DD for 20 years. I pay it off every month. It is the amount you pay, not the method.

@eurochick
If you can pay it off every month - as I do - you are not in debt.

Millions of people pay the minimum every month
and think they are managing their debt
because they do not realise that the repayment term on minimum direct debit is >20 years

Huh? A direct debit is a payment instigated by a bank or financial institution. Hence why you set up a direct debit mandate and they can change it if they want. A standing order is instigated by the payer. They need to sweet it up themselves and can amend or stop at any time. Both are just methods of payment. You could also set up a one-off payment. Again, a method of payment. It really frustrates me when people post incorrect information relating to finances on here.

What did I write that was incorrect ?
Your definition of SO and DD are identical to mine.

My point - as now supported by the FSCS
is that clearing unsecured debt by standing order
is better for the borrower

If the dd or so is for £200 pm it makes zero difference. Only if you are comparing minimum dd to so does it make any difference to interest charged.

I think the issue is that if you use the DD that the bank sets up it just takes the minimum amount. This loads of profit for the bank and a very long repay time including loads of interest.

if you set up a standing order, you choose the amount each month, presumably more than the minimum payment - the maximum you can afford, and you pay back much less in total and much quicker.

Presumably you can set up the DD to be for more than the minimum payment though? In which case with the same amount repaid each month I don’t think the final outcome would be different?

Well done so far!
How big is your family that you need £2500 yearly for gifts? I would rather trim the gifts down to just immediate family and have at least a week holiday per year .

The issue isn't DD v SO. The issue is the v high interest rates charged on credit card balances - and that these are calculated on the full amount each month, regardless of your payment.

There is nothing to stop someone having a higher DD which clears the balance each month, or paying an additional amount on top of the DD each month.

You're making it confusing by focusing on the payment method.

£250 per month on gifts is a luxury level of spending not the level required for a family in significant debt. £100 budget per child for bday and Xmas should be sufficient. £25 if you buy for elderly parents. No other adults need to be bought for including yourselves. Children in the wider family can have a £10-15 limit or secret Santa for Xmas if it’s a large family. We’ve just come through Xmas and ours have way too much and to be honest I wish they didn’t get as much from friends and family as it’s overwhelming and they don’t need it. £10 towards a day out or a membership or whatever is plenty, or if they’re older they can have £10 Amazon voucher.

I think back in the day banks would only allow a DD of minimum payment or paying the whole bill.
You had to contact them to request a SO of a different amount because the bank made loads of money if you just paid the minimum.
That's what TiP is referring to.

Things have changed massively and most now allow payments of any amount between MP and the whole bill.
Sorry for the derail OP

@EarringsandLipstick
no, I am not.
The spreadsheet I wrote managed to get dozens of people out of tens of thousands of pounds of debt.

For those paying the minimum on too many cards
the change from DD to SO
means they are debt free in 3 years rather than 30

which is rather a game changer IMHO

If you are on DD - THEY decide
If you are on SO - YOU decide

Those able to have a much higher DD are NOT those for whom the sheet was written

@Infusedwithchamomileandmint
Yes, they do allow a variety of DDs now
but my own card allows a 1% minimum repayment
on a card with a 25% APR
so the repayment for the month will be LESS than the interest
that is VILE
as it traps people who least understand.

MN let me back in to the site primarily because I promised to bang on about debt and I will not stop
xx TiP

Could your DH cut back on the work which pays the least, that would probably be better for him than allocating fun money