Worried about debt / pension contributions

[newname2668]

I run my own business and absolutely love what I do, but I am concerned about my personal debt / pension situation.

I have 2 preschool aged children. Since the birth of my first child, I have taken quite a big step back in my business and I now only go in 2 days a week. I do all childcare on the other days. I love that I am able to spend so much time with the kids so I don’t plan to return to work full-time until they are both in school. However my personal earnings have reduced as a result. My official salary is £1k per month but I can take dividends on top of this. I used to be able to take reasonable dividends but now I work fewer hours, I’m having to pay higher staff costs. This means that there are some months that I don’t take a salary because cash flow can be tight. I do have months where I can take a few thousand out as a dividend and that will tide me over for several months, but I feel like I don’t have a predictable, reliable wage.

My husband earns 70K but works very long inflexible hours. He pays the mortgage and all big bills plus our socialising and holidays. I pay for half the food shops, running my own car/phone and kids clothes and activities. However I was irresponsible when I was younger and have over £25k in credit card debt that I keep bouncing from one 0% card to another. I am really making an effort to get rid of it this year and that’s where most of my wages go.

I have £19k in a pension plan from my old career and have only recently started paying into a pension through my business. However it’s only £36 per month because my base salary is so low. I have no idea what level of contribution I should be aiming for in order to provide enough for retirement but I’m fairly certain £36 a month is insufficient. My husband does have a more substantial pension pot and he pays in at least 10% but I don’t know that it will be enough for the both of us to live off come retirement age?

I’m worried that I need to increase my pension payments, but if I do so, my debt repayments will reduce. I feel like I’m stuck in an endless cycle of credit card debt that I can’t seem to shift! I have looked at debt charities but most of the options available will have an effect on my credit status so I don’t want to go down that route.

I have seen people talk about their husbands paying into their pension on MN before. How does this work? Would there be any benefit tax wise for the husband in doing this?

I don’t really know what my question is, and I know that really, the only way to improve my finances is to put the children in to childcare and work more hours. But if anyone has any other sage advice, it would be gratefully received!

Please learn the difference between lawful tax avoidance and unlawful tax evasion.

In your shoes I would:
Concentrate on getting your debt down
Focus on pension once the Dc are in school / nursery place , when you can up your hours and earning
And (sorry!) not have another Dc.

Another Dc will add another 4 / 5 years to your non-earning years now, and add another extended liability for the Uni years just as you are thinking of retirement planning.

OR, just enjoy your kids and reconcile yourselves to cheerful poverty and downsizing. Two in one household can manage on one state pension. If you divorce, running a home with sole responsibility for overheads on a single state pension is very very tight.

@newname2668 only you and your DH can decide whether to have a 3rd baby.

WRT your finances and pension provision, from what you have said you are already doing a lot of the right things. Creating a business with £600k turn over and providing employment for others is amazing.

This link takes you to the finance flow chart https://ukpersonal.finance/flowchart/. This helps you prioritise the order in which you do things.

I also agree Rebel Finance School (RFS) is good and follows a lot of the flow chart. What I would say is the RFS 10 week programme on YouTube does break it down well but each programme is far too long because of interaction with the live audience when it was originally filmed. You can fast forward and stop at the key parts.

My advice is sit down with your husband and go through everything from day to day expenditure to retirement plans. Work out where you want to be at 80+, 60, 65 and this will help you plan not just your pension but your family too. For example having a baby at 41 means you will be 62 ish when they finish uni and may become financially independent of your parental support.

One key thing to bear in mind is the impact of compounding. With 0% interest your debt is not increasing but any money invested in your pension is likely to be growing and compounding, the longer it’s invested the more it grows. Targeting your pension over debt repayment may make sense for you.

fess up to your husband how much debt you actually have. the zero percentage is a red herring because there is generally a fee to pay each time you switch so it does still cost. youve sacrificed your earning potential to care for his kids so he should throw you a bone here.

after the debts sorted then think about more kids. so as age is ever increasing that should be done quickly. double down on contraception til then lol. another child wirh that size debt and you not earning much isn’t helpful.

are you mortgaged? on a deal not the variable rate (ss that’s unnecessarily dear)? you could take money out of your house by remortgaging? (ie your mortgage is currently £350k on say a £600k house so remortgage for £375k) it’s dearer in the long run but would solve a problem in the short term. possibly without dh noticing if you do the paperwork and he just signs it. however thats not nice.

the other sneaky option would be to take cash out at the till at tesco or waitrose or whatever so it looks like you spent £100 there not just £50 and use this to put into your debt repayments. once a week is £2600 a year. however it would take ten years to pay off your £25k debt like that. again sneaky and not nice.

i think you need to spell out the full debt position. or sell the business. or get a part time job elsewhere too if you can get someone to look after dc. or put dc into nursery and return to work a bit more.