sickening debts - need to sort this out urgently

[dollarwallow]

Hi,

Long time poster on here but I have NC’d for this one. I have finally summoned the courage to post.

DH and I are in an enormous amount of debt. It consumes me and it’s the first thing I think about in the morning. The debt is all credit cards, loans and an overdrafts. This is on top of our mortgage, which is in itself, quite hefty.

We both carried some personal debt at the start of our relationship but nothing that caused any issue. I unexpectedly fell pregnant with twins. We were delighted but we weren’t really financially ready for a family at that point. I took two years off work and during that time accumulated more debt.
In December 2019 DH was made redundant. He struggled to get a job for 6 months and this again led to the accumulation of more debt. He eventually got a new role that paid slightly more than his previous role, so things were looking up.
At the end of 2020 we found out that we were expecting another DC. This meant another period of maternity and more debt.
In the midst of all of this we were in the middle of a legal dispute linked to a business that we previously ran. I won’t go into any more details on that, however this led to a huge amount of debt for us.
So here we are, in 2024 not quite knowing where to turn. I feel disappointed in myself that I let this happen. Other people will have dealt with similar circumstances to us, without having this amount of debt.
DH has just had a significant promotion, so this provides some light at the end of the tunnel, however it overwhelms me when I think about the scale of what we are tackling.
DH’s new job pay a salary of 90K. He actually starts on 26th Feb, but we have worked out that he will be taking home about £4400.
I have also returned to full time teaching with a salary of 46K. My parents have picked up before and after school childcare for us, which is a massive help. I am currently taking home just shy of £2800. I also do exam marking and tuition which brings in an average of an extra £300 per month.
I have spent most of last week ( half term) reviewing our finances and going over every number. I am just so sickened and overwhelmed.

So our income combined is a few pounds over £7500 take home. I have already cancelled all of the things that we paying for that we didn’t need – Netflix etc. Our fixed costs are…..
Mortgage 1344
Gas/elec 212
C tax 124
Insurances 87
Mobile phones x2 52
Tv licence 13.25
Pet costs 72
Diesel 220
Internet 28
Gym 28 (dh has a spinal condition and exercise is essential)
Kids activities 180
Groceries 500 approx
Union subs X2 58
Birthdays/days out/Christmas/school trips 250
Haircuts 20
Kids savings 150 ( 50 each for each kid)
Clothes 30
So out essential/regular spending is approx. £3370

Our debts are absolutely huge above £90k. This doesn’t include the 10k that owe my parents. We are no longer eligible for 0% balance transfers so some of the debts are interest bearing. Our minimum debt payments are approx. £2280 per month. This makes me sick.
We have reached out to step change and payplan. Both charities have advised against any debt management/IVA etc as we are not in the position where we can’t afford the payments. I have also met with an intendent debt adviser who explained that we need to budget and tackle the debts using the snowball method. We did look into a remortgage but this was declined. We now think that this was a good thing as it would have jeopardised our house security if we fell behind.
We have also considered selling our house and using the equity to pay off the debts, however we would then have to pay high rents and I fear that we would never get on the ladder again, therefore paying rent for the rest of our lives. I think that we have both agreed to forget the remortgage/sell the house options.

To just stay afloat, out total expenditure is £5650. We need to make sure that we use DH’s new income wisely. We will have about £1850 to overpay the debts or to save. We absolutely have to do this otherwise I am scared that we are going to lose everything.
Not really sure what my question is – it just feels good being

This. You have a massive income compared to many, you should pay back what you owe. It just needs some careful budgeting and as others have said as long as the debt isn't increasing and you are paying it down it will be ok. If I had this much debt and was on a low income it would keep me awake at night but you have a very decent income.

I’ve been where you are op.

how I tackled it was the complete opposite to the advice usually given.

I listed all my debts - highest to lowest, ( & we had 10 debts ). and paid off the debt with the lowest balance first. Didn’t even think about interest rates.
then, once debt 10 was paid off I put that money towards debt 9 etc etc, and slowly but surely made my way through the list.

mentally, that system worked for us because we could see progress. After about a 18 months we only had 4 debts left ( albeit biggish ones ) these took about another 2 years to clear.

we did it in about 4 years.
it’s hard, but we did it. And you will to.

all the best.

Don't keep saving money every month for your kids - this is insane in your position.

If you can withdraw the money you've already saved for them and use it to pay towards your debts, then you should do that.

Compare the interest rate that the kids' savings accounts are earning, versus the interest rates you are paying on your various loans. I'm willing to bet that the interest rate they're earning is less than the interest rate you're paying. And that is crazy.

too

With the amount you've listed as essential (birthdays, Christmas, kids activities) you're maintaining a reasonable standard of living. Use the snowball method which you've been advised to do and your debt will be cleared in 3 years.

Put a chart on the fridge or something with 36 boxes each representing a months repayment. Tick them off. Once they're all ticked off you're debt free. Seeing those boxes ticked might make you feel you're dealing with it well and stop you panicking.

Its simple.

£90k debt / £1850 is 48 months.

Don't consolidate.

Get your heads down, overpay as much as you can on the most expensive debt. Then the next one and the next one. FOR FOUR YEARS. Then you will be free and your credit score will be much better.

Forget saving, forget any extras, forget expensive holidays or anything, just grind it down.

Discipline and purpose is the only way.

With the new jobs you can afford the repayments. The tough bit is earning good money and not living the highlife you perhaps feel you deserve.

I would focus on the habits that have got you to this point. Not having DC and mat leave, but outspending your salaries for a long time. Breaking those habits is your way forward. Oh, and I hope you are using contraception now .

A final thought. And I'm asking because I see it frequently. I wonder if you or DH have ADHD? A need for dopamine combined with reduced executive function means debt is by no means unusual if so. A diagnosis won't magic the debt away but it can help to understand how you built it up.

OP as others have pointed out, you have the means between you and DH to get the debt gone and really improve things. The maths works.

However, you are still going to be you, regardless of the maths. And you don’t seem to have ‘done the work’ to understand what you need to change about yourself and your spending.

Are you expecting to send your DCs to private schooling? Have a nice car now DH has a good job? I bet you are. And you’ll be back here but this time with DC who have been brought up with the stress/entitlement loop of chronic overspenders.

This. You've got this OP. Just KOKO. You'll be debt free before you know it. Make sure you pay off as much of the highest interest debts first.

Clear & useful advice.
I can absolutely get why this is stressful but think of it as positive that you have the means to clear it, so many people cannot see a way through their debt.

Be Inspired - Watch these Debt Free Screams: https://www.youtube.com/playlist?list=PLN4yoAI6teRO_vPRzFxsaEYrx9f1-nE6i

Have a plan and follow it. The Ramsey plan is good (see the Debt Free Screams video link).
Baby Step 1 - £1000 starter emergency fund.
Baby Step 2 - Pay off consumer debts smallest to largest.
Baby Step 3 - Increase the emergency fund to between 3 and 6 months of household expenses.

Meaningful Academy Financial Foundations is a UK based online course, which follows the Ramsey plan framework. It is provided by a UK based financial adviser who has a YouTube channel, Podcast and a book.

It is free: https://meaningfulacademy.com/financialfoundations

I would start with tracking every penny being spent. Your list of expenditure is a good start but there may be things that are missing. Track everything you spend for several months and you may find some things you missed from your list. Cake sale at school, other school fundraising, car maintenance & road tax, dentist, opticians, other medical things. Some things may occur once a year, others more regularly. Look back through your bank statements to hunt out those yearly expenses.

I am a debt counsellor.

You obviously have already done some of this but in case anyone else reads I'll go through the plan I do with people.

4 Columns:

First is fixed costs that are exactly the same every month
Second is variable monthly costs eg food, days out
Third is income
Fourth are debts balance with minimum payment

Once you have the total income available for repayment you first allocate the minimum payment to each debt, I then get people to look at the interest rates and pay off higher interest debts first, though if you have some very small amounts, completely clearing one or two can be very good for morale!

£90k is a lot but you can do it, remember once the debts reduce options like consolidation may be an option, plus balance transfer to zero interest. That's a lot of overpayment to get it down. You ca. do this!

Four years ago I was in trouble with debt due to hideous divorce. One disabled child and one starting uni. No cms from useless ex husband who walked away leaving debt and more behind him.
I talked to an debt advisor. Cut my cloth to my just over £19000 a year to live on and agreed a payment pay to pay off just under 10k over four years. I’m just about to finish paying it off, have taken on no more debt and have no credit card/electric/gas debt. I literally cut everything to the wire and I have done it.
I know it seems overwhelming but you have no option and you can do it but you need to cut down on everything you can. £250 for trips/parties should be first thing to go. Tv license- don’t watch live tv and cut it. You have to be ruthless now so that your kids benefit in the long run.

Stop saving for the children. They don't need it and you'd be better off throwing that money at paying off your debt more quickly.

Haircuts 20
Clothes 30
Food 500

I'm wondering if this is conservative?

£20 on hair between a family of 5 seems astonishingly cheap. Does it include everything?
Does food include top up shops and takeaways?
Do you really only spend £30 on clothes between you each month?

It's great that you've made a list, but I would be concerned that you can't build a realistic plan if some of your figures are optimistic.

£200K equity and £70K debt. I think the answer is staring you in the face @dollarwallow !

You had great advice which I won't repeat just wanted to say that I'm staggered at the amount you pay in union subs... do you get your moneys worth? If not, I'd stop that too

you’re spending almost £600 a month on kids/scrivities/savings/ birthdays…..if you count this in with essential spending I can see EXACTLY why you have £90000 debt.

You need to reprioritise how you spend

I know right. How old are the kids OP? I couldn't scrimp on a TV licence leave that. OP has 3 kids to entertain and £100 a year saving isn't much help. £150 for kids saving is a small amount given your whopping income just put that on the debts.

Minor suggestion, but if your DH is at home in the evenings, can you do babysitting a couple of evenings a week?

If the kids you're babysitting are in bed asleep, you could do your marking/exam marking while they sleep. So earning double for the time, and it's not like that's time you'd be spending with your own kids anyway if you've got the marking to do.

Round here, babysitters earn £12-18 ph.

Tighten your belts. Tackle highest interest debt first. Then next highest, and so on. You'll be fine given you can afford it I don't understand the problem. Just don't get into any more debt. Cut up credit cards.

Cake sale at school, other school fundraising, car maintenance & road tax, dentist, opticians, other medical things. Some things may occur once a year, others more regularly.

Good advice. This is exactly what's problematic for me - the 'known unknowns' as it were. I don't specifically know what they are, but know they will arise & I am always struggling to pay. (Single parent, limited support, ok salary but not stretching to the needs of 3 teens).

No real need to stop saving or cut back on anything you listed. You can still pay £4K each month towards debt as long as you don’t go over those budgets (and have a tiny bit extra to play with too).

Realistically doing that you would clear the amount you owe in around 2.5 years - remember the more you pay it didn’t the less interest you pay each month and the more goes to the balance.

Im not really seeing the drama, or the financial crisis here. You just need to do the paying bit?

Another thought ... could the £150 savings be used to pay into your DH's pension to offset the tax? That way you still save, but it costs less.

I'm thinking his take home sounds quite low for that salary, so I would check this out too.

@dollarwallow look up Dave Ramsey and follow his advice to the absolute letter. You can do this!