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

I'm assuming that you have cut up you credit cards. I would definitely hang on to your house. The only way out is to change your lifestyle for the next few years and concentrate on paying off the debts. Stop saving for the children and treats. Thus would immediately free up £400 towards your debt. Pay off the smallest first, psychologically it's a boost if you get to see quick results. Then work your way up the chain. You will then be in a great position to enjoy your life, but you both need determination.

This is not a big deal, OP.

Yes, you have debt, but you have a large surplus income. You need to do what is rational and moderate, because you won't be able to live with wild swings. If you cut every single pleasure in your life, you'll be tempted to say "fuck it: I want one treat" and blow £600 on something you can't afford. Basically, don't crash save, because you'll binge.

But, instead, be reasonable. Yes, you don't need to prioritizing saving £50/month/child right now. It's not enough to actually rack up into much (certainly not enough for much -- even with a high savings rate, you're looking at saving £12k over 15 years). Yes, you could probably set aside £125 for treats not £250.

But you also don't need to be cutting your TV license or buying budget food. Because it's not sustainable.

Instead, stick to that budget, and then just pay the debt off, every single month. If you have any very small debts, clear them immediately. If you have any debts with high interest rates, target those. Very shortly, you'll be down to something that feels manageable. If you put £3500/month towards the debt, you'll be clear so fast.

This isn't something to panic over. Just do it, and feel in control about it, and it'll be over quite soon. It's just what happens when you don't work for years (not a judgment, just a reality)/have multiple children in a short period of time. A huge crunch now, and then it'll be over.

It's a drop in the ocean but you are spending far too much on your mobile phones. I pay £5 a month for 5GB data and unlimited minutes/texts on a rolling 30 day SIM only contract (I own my phone). If you are in contract you probably can't do much but once you are out I would switch. Moneysaving expert has a good phone deals finder.

Also agree re spending on your kids/their savings. Always service debt before savings unless the interest rate on the savings is higher than on the debt. If you get rid of the debt sooner you'll pay less overall and will then be in a better position to start saving for the kids again.

I would go all out to clear the debt as soon as I could. Cut down on everything possible including holidays and savings. make extra income and sell items you no longer use or want. Throw as much money into repayments as you can.

Most houses have more in them than you realise so before you buy anything, do you really need it, do you have an alternative at home, in the loft/ back of the wardrobe etc? Do you have change jars or gift cards or loyalty points to use?

It’s going to be a long journey so I would look at getting some support. There are Facebook groups and forums like money saving expert where people run challenges (make £10 a day, no spend day challenges, grocery spend challenge etc) and have debt diaries to document their journey and receive support

A lot of people (myself included) went from a debt free wannabe on MSE to a mortgage free wannabe to looking at early retirement planning and building wealth, so turning debt into a positive

Agree with others snowball effect works and you need to throw what you can at the debt; savings for the kids and the activities need to stop. That's over £300 a month to a debt.
Whilst I understand saving for birthdays and Christmas look for things that are preloved so you can save money there.
Look at your food shop, there will be ways to cut that down.
Get your priorities in order and follow the advice you have been given

First OP I recommend a mindset shift. When you experience hardship in the future, the first thing to do is form a new budget so you live within your means during the period of hardship and not incur further debts.

I am used to being poor having lived my earlier life that way and honestly, you're "essentials" aren't.

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

This would be my budget if I was you:

Mortgage 1344
Gas/elec heating would be rationed to bring that down a bit, more jumpers worn, duvet on the sofa, scarf. 190
C-tax 124
Insurance car x2 and building insurance only, take your chances with contents. £50
Mobile x2 sim only plan £10 each. £20
TV licence cancelled £0
Pet costs £72 (shave off any optional extras if there are any)
Diesel £220
Internet £28
Kids activities £50
Groceries £500 (assuming you've already got it as low as you can)
Union subs X2 £58
Days out/birthday/school trips/Christmas etc. It's either/or, not all in one month, you have debt to pay and they already have an activity budget too. £50
Haircuts, go less not every month. £5
Kids savings, use any already accumulated to pay down debt. £0
Clothes £30

Total £2741.
You forgot water rates though unless you included in gas/electric

£600 saved x12 = £7200 extra off debt in year one.

Hey. I left my hubby about 7 years ago. Ended up in a crap position with about 35k of debt. I approached Christians Against Poverty. Worked with them and my creditors and got my debt all cleared. No IVA/ bankruptcy or anything like that. Paid back every last penny that was owed. Tough couple of years and took about 4 years in total to get it cleared (on one wage and no benefits). It was tough but I went without and the kids had very little just for the short time it took to get sorted.
I know it's very daunting. I didn't save whilst I was paying off my debt, I just threw all I had to get it cleared. I just saw it as short term pain, long term gain. It takes a bit of a new mindset to make it work, and yes you both need to adapt that mindset and keep moving forward with it.
The biggest thing was acknowledging a problem and once I had spoken out loud to someone about it, it felt like a weight was lifted off my shoulders. Each time I got an individual debt cleared, it felt amazing to have it gone.
I wish you both all the best with getting sorted out. You have taken the hardest step in acknowledging the problem and asking for help.
Take it a month at a time and re-assess every couple of months to see how the debt is reducing. The feeling is the best in the world.
Look after yourselves and keep communicating to eachother about it.
Take care. You can do it!!!

See a debt consolidation agent. They often contact places, to renegotiate great repayment plans. My advice to you is, cut up all your credit cards. Don't go out, stay in and try not to buy anything unnecessary. No holidays/new clothes (unless they're too small). You might find you repay everything back.in 2 years.

Ok so the first thing you’ve done is great by writing everything down. Get everything on a spreadsheet and here’s a couple of things I’d like to raise:

-I’d put kids savings on the back burner for the next 12 months. It’s a sacrifice to make now but you can resume this a bit later.
-Commit to no new finance agreements for the next few years, no new cars, mobile phones, klarna etc.
-tackle your smallest debts first and continue making minimum on the larger debts. Also maybe contribute a set amount to the parents to repay this.
-things like holidays and breaks will have to be forgotten about.

You're actually in a fortunate position even though it’s scary. I’d set a 12 month goal and reevaluate in a years time. Try and do free things in the half terms etc and switch to picnics for the summer instead of food out.

Start with the small ones first. It is also worth mentioning the creditors of older debts in particular are often willing to negotiate the amount down if you agree to a settlement and pay in full.
Phone call example: I've just received an inheritance of £4k, whilst my debt with you is £5,800 I simply can't afford to pay anymore than what I have recently received, would you settle at £4k now otherwise you won't see anything for a significant time.
You would be surprised at how many creditors are happy to just take the sum rather than chasing you for a pittance each month over the course of years and years. Have any charges been made against your property?

As a pp said, please please sort your contraception out as well.

I don't really understand. If your take home is over £7k and you need 5650 to stay afloat, including debt repayment , you've got what you need to pay off and more?

Are ALL of the cards on fixed monthly repayments - rather than a direct debit that drops a bit each month ?
If not, do it now.
If you can, round the fixed payment on each card up to the nearest fiver.

We weren’t in as much debt as you, but I’d pick the priority debt and over pay on that. Live off your husbands wages and throw yours at debt. It’s all about bringing it down. You’ve got a good opportunity and it sounds like you’ve got your head screwed on and ready to tackle it all head on. It won’t last forever OP. You won’t miss the extra money when you’re paying off debt because you’ve not seen it. The hardest step is putting your first foot forward, you’ve done that by calculating the total + your out going’s. You’ll get there!

I ment to say at the start - but I do understand that heavy worry. I was so tearful about it everyday! I hope once the ball is rolling you start to feel better Op.

This. The OP just needs to knuckle down for a few years.

With the best will in the world, this isn’t a huge problem because of your high monthly income. You don’t even need to make substantial cuts to your quality of life - just put the extra £1800 into paying your debts every month, concentrating on the ones with the highest APR first.

Honestly, there are many many people whose total monthly income is less than £1800. Get some perspective, and start being a bit more disciplined with your repayments.

You could post on the MSE forum under the debt free wannabe section.

Don't remortgage to pay off unsecured debt.

The main thing is to get a workable budget and a plan together.

In your position you would be better to go to a a charity or agency that help with debts eg CAP. They would help by contacting everyone you owe and arranging an achievable pay back arrangement. You then pay what you agree to them and they pay what they have arranged with the companies you owe. It can take about 3 years but as long as you stick to it the relief is unbelievable when the debts are repaid.

Also, if you do decide to make cuts, the kids’ savings are the last thing I’d cut from your discretionary spending, because that money is compounding away for them every month. Cut the gym - DH can go jogging. Cut the phones to sim only. Cut the birthday/xmas money to £125 per month. Cut Netflix. Cut down on the kids activities.

After you receive your salary, and any bills or monthly debt repayments have been made, you should always ‘pay yourself’ (ie put money into your/your kids’ savings accounts). Then you can easily manage on what’s left, because your monthly take home is very high in comparison to the vast majority.

Don’t do what a previous poster suggested and raid your children’s savings to pay your debt. That might be excusable if you were on your uppers but you’re not.

Thinking exactly the same!

Kids activities £180
Birthdays, days out etc £250
Haircuts £20

That little lot costs you £450 a month. That's £5,400 a year. You cannot afford to spend that much, and something has to give. These things are largely optional.

£60 a month for each child on activities is way too much.

Birthdays and Christmas - well you will just have to buy them fewer toys. Days out can be free if you choose wisely. How much do school trips cost?

Haircuts every month? Buy some scissors and do it yourself! I did DH's all through lockdown and you wouldn't have known the difference.

Lots of good advice here @dollarwallow

This stands out for me from your "essentials" list:

Mobile phones x2 52
Kids activities 180
Birthdays/days out/Christmas/school trips 250
Kids savings 150 ( 50 each for each kid)
Clothes 30

OK this could be:
Phones 2 x £8 SIM only (after spending say £60 each on a cheap smart phone)
Kids activities – cut this to £30 pm each, £90 total for (say) swimming lessons – what are they doing that costs £60 pm each? I infer the younger one is only 4. They don’t need gymnastics clubs and karate when their parents are in debt.
Birthdays etc - £50 – plenty over the course of a year – kids don’t need a lot
Kids savings £0 – this is mad if you are paying interest on debt

That’s saved you more than £500 extra a month.

Ok snowballing technique would be best, look up Dave Ramsey can google/ on IG he has a 7 steps for getting out of debt- he’s American so some advice is extreme and not relevant but the getting out of debts steps 1-4 are helpful xx