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

She has said that step change is no good because their income is high enough to pay the debts.

Please make sure you have better contraception sorted, OP.
Having any more children would be the biggest threat to you sorting your debt.

@AnotherEmma I’m actually managing the debt really well. I’ve managed a high level of debt (not mine) for a number of years and find professional advice very basic.
what was it you found weird?

It was this:

"with the extra income. I would put a third into instant access savings and I would put the rest onto your debt. Targeting highest interest one first. I would use the money you’re putting into savings as a safety net not to add to your debt. If you put £600 a month to savings and after 12 months have £7,200 I would put a third of that towards your debts."

Completely crazy to put £600/month into savings instead of using it to pay off debts.
OP is paying interest, and the debt interest is very likely to be higher than any interest she could get through saving, so saving up £7,200 to pay it off after a year (instead of just paying £600/month towards debts) is crazy.

If you've budgeted properly (that means making it realistic ie not overly frugal) and stick to you budget, you shouldn't need that £600/month as a 'safety net', you should keep a small amount of savings for emergencies but no more.

I disagree, because very few things are necessary so if they're stolen or break you do without.

@AnotherEmma two years ago I would agree with you. I have put every spare penny into debts and nothing into savings. But with the COL and having big unexpected expenditure this year - broken down car and boiler - I know how soul destroying it is to have to add money to debt. Having no buffer is dangerous.

I don’t know what your situation is in regards to debt/ earnings but the OP is actually in a very good financial position regarding income and assest. If they’re sensible they will be able to pay off in 3 years. No need to downsize or make any major changes. I think building up a reserve and redistributing that based on current environment/situation is sensible

A safety net is at least 3 month of necessary expenditure . That’s 16.5k for OP

Savings for the kids when you have so much debt is just bonkers. £50 a month will be worth so much less by the time they are adults anyway?

Why do you both have top of the range phone contracts? Sell your phones and get cheaper ones. I pay £10 a month for unlimited data on Sim Only.

What on earth activities are you doing with the kids for so much? My kids do gymnastics, football, Brownies, Woodcraft, Spanish, art and also free school activities (book club, choir, netball, photography) and the total is approx £50 a month for all 3.

TV licence is more expensive than Netflix/YouTube/Freeview TV apps.

It looks to me like you could easily get your outgoings down by £500 per month to pay off the debts much more quickly. Choose cheaper phones, extra curricular, rehome your pet.
Your mortgage is crazy, but it doesn't seem like you are willing to move to a cheaper area.

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

You're talking about a DMP. Which is absolutely unnecessary for someone in op's situation. No reputable debt advisory service would facilitate a DMP for someone in ops kind of situation.

DMP's are an absolute last resort for when you cannot afford to pay down debt - and they put your credit score in the bin for 6 years. That's not the case with the op - she can afford to pay ALL of the debt with relative ease in a reasonably small period of time.

I cleared a lot of debt in my thirties.

Basically I used the snowball method. But with a couple of changes.

First off I saved a small emergency fund. This gave me a feeling of security that help me weather the changes I made to my lifestyle.

A couple of times as some debts got smaller I would totally pay off a debt on a slightly lower APR to get the feeling of having cleared/finished something. On one occasion this led to something that really helped. The card I paid off in full offered me a very low lifetime rate on balance transfers and I was able to transfer the debt on a higher rate card to it and close that account instead.

The other thing I would say actually is don’t push too too hard. If you can pay it all off in 3.5 years then set a timetable
of 4 years. Because unexpected things will happen (boiler fails, death in the family meaning you need to travel to a funeral etc) and you don’t want to feel like you are failing because you don’t use everything to pay down debt that month.

However, whatever monthly money is the difference between the fastest schedule and the slightly slower one, use that to augment your emergency fund (to be honest I’d also do this with at least some of the money you currently allocate to kids’ saving and Christmas/birthday savings). Every now and then use that to pay down things in chunks but keep an emergency fund. At the end of the time you can allocate some of that money to kids saving a or you could use it to “cross the finish line” early.

It does sound a bit counterintuitive but you do need to make paying down debt as quickly as possible about 85-90% of your goal and keeping yourselves in a good place emotionally whilst doing it about 10-15%. IME you don’t do this by buying “treats” or gifts, but by also building a cash buffer. It gives you something positive to look at and sometimes use as extra firepower.

Hi op . It may seem daunting but you can do this .
I would stop saving for your children, you can pick this back up in a few years. Also look at going sim only on your phones once you're out of contract. Maybe trim some of Christmas, birthdays and activities.

I would contact all the credit card companies and see what they can do to help .they may help with reducing interest or a payment plan.

I would then pay as much off the one that has the highest interest rate . Once this is cleared move onto the next . Having said that If I had a particular small amount to pay off one card i would be tempted to pay this off first just for the satisfaction of one less dept. Have a set payment on all payments not just the minimum.

Look at the end date for your 0 interest so you're prepared for that .

Look on money savings expert there is lots of good advice.

You now have the income and the mindset to clear your depts , good luck.

It is not crazy to build up a small emergency fund before tackling debt. The emergency fund only needs to be between £1000 and 1 month of fixed costs (not Christmas, eating out, Netflix etc) particularly if they are in secure employment.

The idea of an emergency fund is a safeguard against further debt. If something unexpected, essential and urgent crops up, then you have a modest buffer sitting there and don't need to immediately reach for the credit card.

I personally wouldn't consider car repairs as an emergency because I think they are foreseeable. I would include a sinking fund in my budget for MOTs, servicing and repair.

One thing I will add is that my husband and I been using YNAB as a budgeting tool since October and we have never been more clued in and in control of our money. While it does have a monthly cost, for us it has more than paid for itself because we are budgeting, making better decisions and not wasting money.

We're also paying down debt that will be gone by the end of this year, and this makes me feel like we can do it, no problem at all.

Not in any way a marketing post, but I first heard of it on this board and it's been the best thing we've done for our finances.

Building up an emergency fund is the mindset of someone who has gotten into debt, it’s madness due to the money it’s costing in interest payments for something that hasn’t happened.

If you look at ops accounts they could afford to be paying the debts back at over £2000 more than the minimum payment each month.

if and only if there is an emergency they could hold back the £2000 extra debt payment and use that money if needed at the end of the month

@MikeRafone the only certainty is that something will happen that you have not foreseen. That is precisely how I got into some debt because, little bit by little bit, I reached for a credit card to cover an expense of £150 here, £300 there. It was so easy.

Had I had an emergency fund of even just £1000, I would have paid cash for those things and then repaid myself. It would not have been stressful at all.

OP could save that money in one single
month. It will not set her back at all, but it may well help her ride out stumbling blocks and ensure the credit cards never get touched.

This is excellent advice. I found this to be my experience too - I kept carefully budgeting for all the known costs but never had anything spare for 'emergencies', had to use the budgeted money, meaning I didn't have that for essentials - it's an awful feeling.

To be clear, I'm not saying that OP (or anyone with debt) shouldn't have a safety net of emergency savings. I think people might have different amounts they're comfortable with; personally I'd be ok with 1-2 months of essential outgoings (especially with 2 people in full time employment; it's very unlikely both would lose their income at the same time) but would understand people wanting 3 months worth. I guess it also depends how much interest you're paying on your debts, too.

However, I think it's unwise to advise OP to save £600/month without knowing whether or not they already have any easy access savings; they might do. I also disagree that the essential outgoings are £5.5k/month. If you suddenly lost your income you wouldn't be spending £180 on kids activities, £250 on "birthdays/days out/Christmas/school trips", or £150 on savings for the kids. That's £580 less already.

I can see how this feels overwhelming OP. Reading your post it does sound like there's a good opportunity to repay the debts given your combined salaries and family support.

Something I did want to reflect is it sounds like maybe you and DH have struggled with managing money, both together and separately? The phrase "living within your means" springs to mind. To me it sounds like a really poor choice to be in the level of debt you find yourself but still spending £3000 a year on Christmases/birthdays and extra curricular activities and also "saving" money that isn't yours to begin with given the debts owed.

Mine and DH's combined income is just over half of yours pre-tax. We have two children and quite a large mortgage given the rates increase. For us it's simple maths, we spend approximately £800 total across their birthdays and Christmas, haven't had a holiday and regular clubs are not currently a viable option for us. We would love to save money for our children but right now that's not an option. We accept that spending more is not a position we can adopt without getting into debt.

I'd be looking at your numbers again and asking yourself what means more to you- the short term spending or getting rid of the debt? No judgement either way but your OP makes it sound like you want to prioritise getting the debt paid off. Whereas some of your spending/ saving patterns don't back this.

I'd join Moneysaving expert and start a diary, there's lots of people on there with the same starting debt that are reducing it every month.

I have a friend who had no contents insurance. House fire took literally everything except the clothes on her and her kids back. Saving £20/30 a month isn’t going to pay off 90k and might cause massive problems

I have a friend who had no contents insurance. House fire took literally everything except the clothes on her and her kids back. Saving £20/30 a month isn’t going to pay off 90k and might cause massive problems

That's truly awful. A friend had a fire, it started next door. They were all ok. Friends was well I sure so got everything sorted.

Next door didn't even have building cover and the house was then derelict.

I would not skimp on insurance in your position OP, not when you have a few areas that you can already cut back on.

Hi sorry for not posting, I have been struggling with the flu and spent most of yesterday and today in bed! Thank you again for all of the posts it’s been great reading to everyone’s comments.

there are a few common themes that have cropped up that I will try to address here-

I agree that in hindsight saving for the kids is not a priority right now so this will stop immediately. We do hope to be able to save for the children in the future though when the debts are paid off

we have spoken to debt charities and a debt advisor who all said that we didn’t need to enter any sort of plan so for now we are just going to focus on paying off what we owe. I guess that this would change if one of us were to lose our jobs, or if our income was to drop for any unforeseen reason

we definitely won’t be cancelling any of our insurances, especially the house insurance. The thought of that terrifies me.

I am going to have another look at the £250 that we budgeted for Christmas birthdays et cetera, to see if we can whittle that down. One of the reasons that is quite high it’s because between us we have seven siblings and a whole army of nieces and nephews however I am going to suggest that we stop buying for everyone from this Christmas. I’m hoping that this will also be a sigh of relief to other members of the family as well

this morning I had a chat to my sister about the situation that we are in. She knew that we were dealing with some money issues but not necessarily to the extent of it. I still haven’t shared the actual numbers with her as my husband wouldn’t like that

I have looked on the MSE board and we are definitely going to use this for guidance advice. It’s reassuring to see that there are other people who are dealing with large debts like ours.

There are lots of savings you could make on your budget. Saving is pointless if you are paying interest on debts. Arguably you could save for emergencies to stop you using cards but as you earn a lot it is not essential.

I would set a strict budget and pay a fixed amount to the debt each month and stop using cards. Do not consolidate or remortgage. Yes the debt is high but you have high incomes so it is possible for you to get on top of it. It will take time and it won't be fun but taking on debt as you have is like borrowing from your future selves so now you need to rein in spending to pay it off. Eventually you will get to a better place in learning to manage money.

I have a large family.. we moved to ‘secret Santa’ years ago for the adults. Name in hat and an agreed price. Means you get one well thought out present chosen with love and care and everyone saves money. We still buy the kids but once they hit 18 their names go into hat too. Friends wise we agreed a couple of years ago that we wouldn’t buy birthdays presents- we go out for lunch/afternoon tea instead and everyone clubs together for birthday persons costs. Spending precious time together has become more important to us than Actual gifts.
I’m glad you aren’t cutting insurance.
Have a look at small things- I was given a velvetiser as a gift so no longer buy hot chocs/coffee- it’s amazing how they add up… same for subscriptions etc..