Look rich but very poor

[greyfoxy]

I live in a lovely house in a nice area, I wear nice clothes and I know people perceive me as being well off. The truth is I have absolutely no money. It's 2 weeks until pay day and I have £15 left. I will end up using credit cards to buy the essentials which is why I'm in this mess - my repayments are huge.

Anyone else relate to this?

People are making assumptions about OP and judging based on those. We don’t know if she is living beyond her means. All we know is she once was able to afford a house in a nice area and nice clothes. And now she has credit card debt to pay for her essentials. There may have been a dramatic change in her financial circumstances and income which has led to this change.

Thank you

It begs the question why are you so broke?

Is it a champagne lifestyle on a lemonade budget or is it genuine just increase in cost of living?

So much spending seems to be keeping up with others and social media pressures with influencers on holiday every month, the belief every weekend needs to be packed with paid activities etc.
Those saying well children only young once etc I'd think carefully what image you portray to them with your attitude to money and debt. I grew up with a single parent mum who was never in debt, budgeted carefully and we never went without. Beyond a 0% card, student loan or mortgage I've also never had any debt holidays are saved for and paid days out chosen carefully and balanced with a mix of free/cheap activities

Bonds are corporate or government debt. If the market collapses two things will happen.

1. Those debts are bondholders' assets, and will be worth a less. So bondholders - mostly pension funds, but many individual investors' portfolios have some bond exposure - will be a lot poorer. The value of a typical private pension will plummet and the fund will have to find ways of recovering the capital to be able to meet its future liabilities. When this happened in the early Noughties because of the Dotcom crash and Gordon Brown's £5bn a year tax raid on pension dividends the result was hugely increased pension contributions for workers, and the same for employers.

2. When the value of bonds crash the yield shoots up. That means that when the time comes to refinance the debt the interest the borrower has to pay its lenders shoots up. It's a bit like your mortgage fix at 1.8% ending and you have to remortgage at 6%. This is already happening with government debt, in the last week. Where do you think the government is going to find the extra money to pay its higher borrowing costs? You, via higher taxes. For corporate debt, higher yields means less free cash for staff pay, investment, or shareholders. If shareholder returns fall, the cost of capital increases again, and it becomes a vicious cycle. Employees pay for it with below-inflation pay rises, or with their jobs.

Do you have no common sense? I am sorry, but you come across as not very bright.

Just out of interest, why don't you use the savings to pay off your credit card debt? Surely that makes most financial sense?

Yes. I’ve got £31 until Wednesday.

We have someone like Jollygoodtime09 in our family. Big job/salary but also big lifestyle - gorgeous house, nice cars, live-in help, private schools, ski trips every year, big holidays (Asia/US/etc) every few years as well as summer spent at a second home in Cornwall and a sun holiday as well. They mix with very wealthy people too. We presumed the big job was sustaining it all. It isn't. The elderly father- small pension but some assets - is sustaining it all with one huge loan that will never be seen again and several smaller constant loans to pay small bills. He has other children who are not favoured like this. They are living on the edge and their nice kids have no clue but think they are wealthy people entitled to everything. I have no idea how they can relax and enjoy any of it - but they do. Hell will arrive once their father dies.

Living beyond your means by 10-15k a year doesn't seem much on a 6 figure salary. But over years it builds into a kind of debt that cripples you. The biggest thing I notice is people feel they are entitled to certain things if they earn X amount of money. You are only entitled to what you can afford.

@Ap42 Just out of interest, why don't you use the savings to pay off your credit card debt? Surely that makes most financial sense?

It's possible that the savings are growing faster than the credit card debt, which would mean that in strictly mathematical terms, it would be better to have savings than to pay off the debt. However, when factoring in human nature and risk, then what you are saying would make the most sense, and I believe the majority of people would agree with you.

Though I suspect that a family earning a colossal £120k salary with a £20k bonus that finds itself in debt doesn't have a lot of financial sense to begin with.

I hope things start to improve for you soon 🙏🏼. Not sure of your living situation but could you get a lodger or rent out your driveway for a little extra money? Obviously not knowing the details it’s difficult to see where you could save but hopefully some simple solutions will put you straight. It must be difficult to go from living comfortably to living pay check to pay check when you’re used to the more expensive way of life, I do think it’s trickier when you’re used to having more money.

@Fam23 but could you get a lodger

Excuse me madam, this is mumsnet. The correct term is "cock lodger."

Me. I own a lovely semi detached in London and wouldn't be seen dead in anything other than a pair of Jimmy Choos. I make a lot of mortgage and mortgage overpayments so I don't really have that much to spend lavishly.

@InveterateWineDrinker Thank you. Do those of us with private pensions need to think about switching to safer options? Cash funds etc?

This may be true, but it is exceptionally foolhardy.

I have a friend whose grandfather passed on more than £3m to my friend's mother just over twenty years ago. He thought that he stood a chance of having at least some of that come to him.

His mother has pissed the entire lot up the wall. Here was a woman who lived in a mortgage free £800k house (northern England, 2003 prices) who found it agreeable to open Mercier champagne at 10am for herself, never mind visitors. Cruises, holidays at the Burj al-Arab (flying first class, natch), two new Jags every three years. When she started asking my friend for £50 to 'see me through the weekend' he discovered that not only had she pissed the entire inheritance up the wall, she had also taken almost all of the equity out of her own house as well!

My friend is now having to financially support his mother.

@InveterateWineDrinker Agreed. People also need to be mindful that they may see very little, or none, of their boomer parents' money as they may end up having to use their money to pay for their own care. I work under the assumption that I will not inherit any money.

@RebelMoon I'm not qualified so cannot advise. It would really, I guess, depend on a whole range of circumstances, including what type of pension you have. Most company schemes wouldn't allow you to do much anyway. Speak to a professional if you're worried.

@RebelMoon Thank you. Do those of us with private pensions need to think about switching to safer options? Cash funds etc?

Wasn't that post just about government bonds? Many people will have their pension funds in stocks and shares instead, right?

@InveterateWineDrinker I wasn't until I read your post 😆.

Thanks for explaining.

What a fool! To waste 3 million in such a manner.

Most peopleare responding to the 7.5K a month poster with 20K debt not the Op
Op has given very few details

My mother has done pretty similar except that she hasn't touched the equity in her house. I am well aware she and step now have to budget carefully. Hell would freeze, however, before they tapped me up. 25 years ago they were also very cutting because we were living within our means and holidaying in Cornwall!

However MIL is the reverse and despite a million in the bank lives like scrooge on acid. Her children recall being hungry and it makes me very cross.

There is a middle way.

Apologies 😅. I don’t belong here!

This may be true, but it is exceptionally foolhardy.

I agree @InveterateWineDrinker , but it’s a real thing, at least in my circle. Just not openly talked about. I’m a more ‘school of hard knocks’ type, so, sad as it may sound, I know the only person I can rely on is me.

I thought the whole point of a cocklodger was that he didn’t pay in cash and in fact cost his girlfriend / wife money? Very different to an actual lodger.