Time to dig ourselves out of this hole - can we do this?

[framedingold]

Good Morning,

Up on this very hot morning looking over my budget spreadsheets yet again! We are just setting off on a journey to sort out what has been/is a truly awful financial situation. We are married, early 40's with two teen DC's. We own our house with a mortgage.

Money has been an issue all through our marriage. We are both to blame. We accumulated lots of debt in our thirties through house renovations, holidays, funding gaps in income etc. Looking back we were deluded and reckless, however we had a decent joint income, payments were made and life ticked along fairly nicely.

18 months ago DH was taken ill quite suddenly and as a result his income plummeted to almost nothing. He was self employed at this point and didn't have any income protection ( I know!) so things immediately became a struggle. With a mortgage, bills and huge unsecured debts, we really struggled. We managed to avoid having to enter a debt management plan, or IVA by speaking to our creditors and setting up reduced payments etc - this has obvously impacted our credit scores however do not have any defaults or CCJ's and I am pleased about that.

Recently DH was able to return to work and has taken a post with a company rather than returning to full time employment. This has made all the difference. This means that we now have a combined income of £112K gross. We are determinted to turn things around. My question is, am I being deluded that we can do this without a debt management plan or IVA?

out joint take home pay will be around £6500. Our mortgage and essential household bills/spending come to £2100 and we spend about £500 per month on food. Our minimum debt payments are an awful £1800 so this means a total spend of £4400. This leaves £2100 'spare' and we plan to use as much of this as possible to clear the debts. The total debts are a shameful £79k Some if it is low interest so we will focus on the highest interest first. our current credit scores won't allow any consolidation or 0% offers.

Is this doable?

If you pay the whole of the £2000 spare a month towards debt, that’s still 40 months to pay off £80K. Not allowing for anything else, like a huge dentists bill or a broken fence etc. I think that’s a few difficult years ahead.

Yes, it's doable. It sounds like you have a good handle on your outgoings and debts. Log every success - each debt/card paid off, every 5k reduction, and identify the next goal. It will feel amazing when you are debt free!

It is doable.

I'm in a similar situation and am planning to tackle my debts in exactly the same way. I'd rather have a difficult few years ahead then do nothing about it and still be in the same situation. Also, a DMP or IVA can severely affect your mortgage and it doesn't make sense when you have so much 'spare' cash to throw at your debts right now.

You will have some unexpected expenses along the way, such as the boiler breaking or the car has an issue but don't think about it and when it does happen, just get it fixed and don't pay as much towards your debts that month.

Good luck with it all. You'll be debt free before you know it.

Yes it’s totally doable- have you heard about the Dave Ramsey method? Do you have any savings/ emergency fund?

Yes it’s doable. Have a look at the Dave Ramsey stuff and the Ramsey network. That’s what we used.

What is the equity in your house?

OP, you definitely can do this. You know your spending, and you have spare income.

Set yourselves a sensible budget to live, and ringfence, say £1500, per month on top of normal minimum debt payments, to pay down hard. Importantly it gives you money for some life as well as if you make it too hard, you will struggle.

Work on the highest interest debt first, then the next and the next.

You will get there and each milestone is a real achievement. Have a review every single month to track progress and reinforce your goals and after a while you will see positivity.

Good luck.

It can be done - I would get advice from specialists first though as they might help with a way that keeps interest down more.

It is very doable. Dave Ramsey’s material is good, even if a little American in style.

i recommend setting aside a small amount, about £1000, as an emergency fund. That way you can handle small emergencies without going back into debt.

Then you tighten down, focus for a couple of years, and dig yourself out. You can do it!

Yes you can do it.

Just focus on good budgeting. You can afford the repayments so you just have to plod along for a few years.

Focus on paying off the highest interest rate debt first and once or twice a year apply for 0% balance transfer offers because as your finances improve you may get accepted especially if you can access existing customer offers as you may be offered these without a credit check.

OP I would post this on the debt free wannabe forum on the money saving expert website. You really will get expert advice on there. Good luck

Totally doable (albeit painful).
We have a similar income and cleared £40k in a year a couple of years back.

I rate Dave Ramsey stuff (just ignore the american vibe), he’s got books and podcasts. He encourages the babysteps, the first few are:

1. Save a £1k emergency fund (because you can’t use credit cards at all now).
2. Pay debts off - he recommends smallest to largest for quick wins. But I personally prioritised higher percentage rates first.
3. save 3-6 months of expenses and so on.

To do this, you also have to live a basic lifestyle - no holidays, no eating out, cancel subscriptions, no clothes (unless essential)
We sold both our cars and bought just one old one with the cash left over.

It completely changed how we manage our money, we no save £1500 a month and can afford holidays etc again. We don’t use credit at all.

I also rate MSE, there’s a debt forum on there.

Good luck 😊

Another vote here for Dave Ramsay.

Debt Free Wannabe boards on Money Saving Expert are excellent and very supportive. They can provide very specific UK advice including advice on budgeting and how to best tackle your debts. The guides there are also really useful.

You can definitely do this. It will be hard but after the first six months it will get easier because your minimum payments will have reduced, you’ll be paying more debt and less interest, and your credit score will begin to improve.

I agree with pp to make sure you have a small amount of savings first and that you’ve cut up the credit cards so you aren’t tempted to increase the debt.

In addition to paying down the debt look at maximising your income by doing overtime, checking your benefits entitlements and getting good deals on your utilities etc.

With nearly £4k pm theoretically available to pay towards £79k in debt, you don't even need to live such a basic lifestyle. Obviously reduce costs where you can, including the interest you pay and be mindful with your spending, but you could be out of debt in well under 5 years and once you get the higher interest debt out of the way, it won't even be costing you that much so there's no need to live on beans or go without any fun whatsoever.

Plus being able to afford the minimum payments and then some means that you don't need (and won't be accepted for) any arrangements to pay or more formal solutions.

Phone up all of your credit cards and ask them for a six month payment holiday. That’s the first thing they will freeze the minimum payment and they will freeze the interest which stops it getting worse.
It will stuff your credit up for about two years. You won’t be able to get any more credit, but that doesn’t necessarily sound like a bad idea.
And then staircase at least some of the Debt.
Once you’ve been able to make a decent chunk of savings off the debt to an income ratio, you’ll start seeing the 0% deals coming through again.