Very tricky finances- need some advice/reassurance/anything really!!

[teaandbiscitz]

Morning,

I have been awake most of the night thinking about our financial position. It’s on my mind constantly.
We both work full time as teachers with senior roles. We are a family of 4 with 2 DC’s, both early teens. We live in a fairly modest house, but in a part of the country that isn’t cheap.

We have found ourselves in a very difficult set of financial circumstances and I feel that it is all I am thinking about. I can’t go into massive detail, however early last year we were involved in a legal dispute that ended up with us incurring massive legal fees. We are where we are with this and we have accepted the decision, however it left us with a massive amount of money to pay. It was money that we didn’t have.

At that point we were paying off some debt from house renovations, however our money situation was fine and we were doing ok.

I feel as though we are not in a situation where were are just working working working to get out of this situation. On top of our day jobs, we are both doing private tuition and exam marking. We have cancelled all non-essential spends such as our Sky Package, amazon etc. Mobile phones are on sim only and our only holiday has been a week in my in laws holiday home in Devon ( for free!!)
Re-mortgaging isn’t an option as we failed on affordability, and in reality, we don’t want to put our house at risk.

This situation will ease in 2.5 years when some of the debt will be paid off, but that feels like an age away.

Here is our current situation
My income (net) – 2819
DH income (net) – 4049
Income from tutoring/marking etc – 450 on average
Total net income - £7318

Mortgage- £1476 this is fixed for 3 more years
Council tax - £146
Gas and elec (dual) - £195
Water - £34
House insurance – 38
Life insurance - £48
TV licence - £14 ( I think?)
Internet and phone - £27
4 X sim only deals - £48
Food -£600 – this is something that I try to control as much as I can
Christmas/birthdays - £100 – this goes into a Monzo account. Not sure if we have got this right though
Petrol - £160. This is for my ‘old’ car. DH has salari sacrifice car.
Pet costs - £60. This includes insurance, food etc
Union fees - £65 – this is for both of us
National trust - £15 We use this A LOT
Clothes/uniform/haircuts/prescriptions - £100 – again this goes into Monzo. Might not be enough
Fun - £150 – we try to do a couple of ‘fun’ things each month. I think I would go mad if we didn’t
Total - £3291 – just to survive

Debts
We have tried to structure the debt to make it as cheap as possible. It is spread across loans and credit cards. We try to shift the cards to 0% when we need to, however this is becoming more and more difficult.
Our monthly debt payments come to £2400. This sickens me, however I have to remind myself that It’s only going to be for 3ish years.
So….
Total living costs + debts
3291 + 2400 = £5691. This feels like a scary amount of money to have to find each month.
I know that this means that we have surplus, but I am conscious that this is partly due to the extra work that we are doing. I also worry that things will continue to get more expensive for the next 3 years.

DH thinks that I am overthinking it all and we just need to get on with it and not think too much about the big numbers.

I guess I am just looking for people comments/suggestions/reassurance!!

This is a psychological issue as much as it is a purely financial issue.

You have enough money to cover the debt without needing to 'get rid of pets' or whatever nonsense a PP suggested. That is patently clear.

You need help to manage your distress over losing a legal case and being left with a large debt to pay. That should be your focus.

To be fair OP, if you’re not telling anyone you know then they may also think they don’t know anyone in this situation, even though they know you!

Forget other people, they are irrelevant.

i can hear how worried you are but I’m with your DH on this. You are managing the situation really well so forget the big picture and Just keep trudging on. You’ll get there. Eat well, take exercise, spend time in nature. Best wishes to you x

You don't seem to have any sense of perspective.

And whining about "only" getting a free stay in a relatives holiday home is mind bogglingly unaware

Agree with this.

Yes, I think you’re trying to deflect the feelings about the legal case on to the debt.

I understand you don’t want to discuss the specifics of the case, but can I ask if it was you, your husband or a joint case? Did you feel that it was the right decision to pursue this legal battle?

Why aren't you throwing more of your surplus at it?

I agree, it seems more about the case and having to pay that debt than not being in a good financial position.

You would be better off without this debt clearly, but you're doing well to be able to pay it and have surplus too. Instead of thinking, oh my god, this huge debt.... try and remember you are actually doing really well in life to be able to pay everything you do and still have plenty left over. Its more of an accomplishment than something to worry about- not the debt, the ability to pay it.

You could easily throw another 1k a month at the highest interest debt and still save over £500 a month. Or cancel the extra work, and still throw £500 at the debt. Your worry seems a bit irrational here. You have more spare cash than some people earn in a month.

With that much money spare each month, you don't have a financial issue. It is psychological. The weight of this debt must feel really oppressive and I get it.

So, no doubt you have some big spreadsheets outlining everything so could I just ask, which method are you using to pay stuff off?

Are you snowballing so the smaller debts get cleared first and then that money goes toward accelerating the clearing of the next one (and so on)?

I realised that overdraft fees are some of the highest around so am clearing that first, which will give me an extra £100 per month to snowball into the next thing. My approach is to clear the biggest debt last and clear the most expensive (in terms of interest) first.

If you're worried about having some emergency money you could save save your excess for 6 months and then divert it to getting the debt down faster.

You're repaying a lot but that means your debt will look smaller in no time.

You need help to manage your distress over losing a legal case and being left with a large debt to pay. That should be your focus.

Agree with PP. Sounds like you're hyper-sensitive to insecurity which is not surprising given that you have been through expensive legal proceedings and have a big debt hanging over you.

In your shoes I would set up all your payments to happen automatically to reduce the cognitive load around it all. Of your £1600 extra, put £1k into the debt and £600 into a buffer fund. Then head down and KBO.

Talk to someone - husband, friend or people on here- about the stress of it. Ignore the "tone deaf" brigade- this board is for everyone, not just people on the breadline.

I honestly don't know whether to feel sympathetic as for meit really depends on the subject of the legal case that has got you this much in debt and whether you kept pursuing it beyond reason. Some things I can think of, I might feel more sympathetic towards than others, where I might feel you only have yourself to blame.

You're not on the breadline though. Make a plan and deal with it.

I would think deep down there is residual anger at losing the court case. Maybe it was something bought against you so you had to fight your corner or maybe it was an issue that yourself and your DH decided to pursue. If the latter there is probably a huge amount of regret that you haven’t dealt with.

You could pay that debt more quickly but need advice.

Your situation is fine and it will be really good in a couple of years. I’d ditch the evening work, do don’t actually ‘need’ to do it.

I'm surprised you aren't making more towards debt repayments and dropping the tuition given your surplus income is larger than some people's total income.

I can see this both ways. I do think debt that large would be worrisome for most people. I have much less debt (and also a much smaller income but approx the same costs as you) and I have similar sleepless nights lately. If you're anything like me you probably cataztrophise a lot (the snowball of doom)... "what if x loses his job, then we couldn't service the debt/ afford the mortgage, debt spiral yada yada... "

You will have a very nice asset (house) and probably some equity which could b3 realised if things got very desperate so there is also that.

Yes of course many (probably most) people are much worse off but it isn't a race to the bottom.

I agree that paying down the debt should be priority number one. After that's done, you will be freer.

And there are always ways to save money if push comes to shove.

The food budget could come way down with very careful planning. Lots of pulses, eggs, beans and you'll probably all be healthier too.

I presume you need two cars in order to get to work? Could one go and one of you go by bike? Are you somewhere urban? If so I highly recommend rental e bikes for communing. Cheap as chips and everywhere.

The pet suggestion is ridiculous. Everyone needs some pleasures in life otherwise really, what is the point??

Plus please don't feel you have to explain the court issue and legal fees. Families can be absolutely brutal over inheritances and the whole thing can be so upsetting.

So many useful and supporttive comments, thank you. It has helped me to get some sense of perspective.

Dh has a very different attitude to me. Like me, he wants to debt to be paid down, but he is happy to enjoy life in the meantime, and have a few treats. He wanted us to go to Spain for a week this summer! ( we aren't). He doesn't like away worrying, tapping figures into his iPhone calculator!!

I just wish that we could fast forward to a time when the debt is gone, and I can relax a little.

She could maybe sell off one of her kids too.

Clearly not with that level of debt.

What was it spent on? Anything you can sell?

How much interest are you paying each month? It may work out better to put your surplus in as high an interest savings account as you can and keep it there, rather than pay back the debt if its interest free. Then you have your buffer just in case, your monzo accounts are not enough. And pay the debt when needed, or when the 0% ends.

Also too late now, but for anyone else, avoid lawyers like the plague, they are the only winners in that game.

Are you saying that you have zero savings at this point in time? It doesn't make sense to save £1.6k pcm if you are keen to get rid of debt incurring presumeably significant interest.
In your shoes, I would hasten to pay it off sooner rather than later and would aim to pay it off in 2 yrs instead of 3yrs. Utilise the £1.2K from your "spare" £1.6k pcm and just get rid of the debt faster. You still have a "spare" £400 pcm which isn't an insignificant amount for emergencies.

Did you not read the OP?

There may be interest incurred on the debt the longer it is outstanding. I suppose consider stopping all pension contributions even though teachers' pensions can be good ones. Could one of you do a better paid job than teaching or go for more teaching promotions - headships etc

Op, I do agree, though about savings. They are a luxury that at least half the population cannot even contemplate. If you put your spare monthly cash into your debt then that's a good use of your money.