Money, money, money

[stonybroke]

Hi there - could really do with some advice, opinions, experience! I have changed my name (what a wimp!) as I am too embarrassed to use my normal name. I am even nervous as I type, as I know some will wonder how we got in this mess.

Anyway... the subject is AGGGHHHHHH MONEY! We are in a major, and I mean major, mess and we have worked all weekend on figures trying to work out the solution.

I don't have the exact figures with me but the situation is:

We owe £30,000 on credit cards, personal loans, car loan.
We own our house through a shared housing scheme, where we have a mortgage for half and rent half. The equity is only around £8,000. Property prices don't go up very much where we live approx. £2,000 per year. Our mortgage is £31,500

We need a new roof, we only have two bedrooms and now need additional one with dd's arrival. We could convert our room into two bedrooms for 2 kids and we move into ds room. Our garden needs major work done - it is a big old concrete jungle.

We earn about £26,000 between us. I work parttime, childcare is £75.00 per week.

Anyway there lays bear the facts of the situation - scarey eh? We do not live lavish lives - don't buy many clothes, have had one holiday in 10 years, etc. I stayed at home with my ds for 3 years and that is where the problem began. We also bought our first house in the sticks which turned into a major mistake.

The figures this weekend showed that we get into debt every month just paying for our household bills and loan repayments. That leaves nothing for clothes, going out, christmas, birthdays, etc. No extras of any shape.

The option we think my be the one to go with (even though I am a avid watcher of Alvin Hall and he says never to do this) is to consolidate over 25 years (if we would even be accepted for this?) In theory this would reduce our monthly repayments from approx £750 to aprox £260 or thereabout. That at least would mean we would have some cash for clothes, school fund, christmas, etc.

Anyway, I think that is the details. I am shaking as I type this. Please Please any sound financial advise would be very much appreciated! I am off to the ladies to have a cry.

This must be a big worry for you both. I don't think I would consolidate as I've heard that it is not really the best solution. First step, I think would be to chat to the CAB as I have heard that they are good at giving advice on debt and can help you work through a solution that keeps everyone happy without resorting to consolidation. Good luck.

Hi Stoneybroke
Sorry to hear you're having such a financial nightmare. Have you tried talking to the CAB - they have trained debt counsellors who can really help you.
All the best, and as Alvin would probably say to you - you have already taken the first step to sorting this out.
Scoobysnax
xxx

oh dear. try contacting the CAB they have info about debts.
how old is your ds and dd, would they be ok sharing a room even without converting it? do u have a dining room? if u do turn this into a bedroom when the kids are older (its what my parents did). the garden, tackle it as much as u can yourself, without spending too much to get it professionally done. cut the credit cards up, but first see if u can transfer the balence to abother credit card which offers 0% on balence transfers.
its awful being debt, it just takes over your life.

Poor you. It is tough to get by these days and no mistake.

In most every case credit cards will work out more expensive than other kinds of debt. Get some kind of consolidation loan. I don't know why Alvin Hall did not recommend this - was it because of the 25 year duration?

Another tool you can use is to transfer the balance of credit cards to one which is interest-free for a certain length of time. But you must not use the card any more. Just pay off as much as you can afford each month and when the interest-free period expires, transfer the balance again to another interest-free card. You might find you can get three cards - one in your name, one in dh's name and one in joint names.

However I think the consolidation loan is the best option. Do shop around for the best deal, but don't take long. Every day you put this off is digging you deeper in the mire.

My dh is very conversant with which loans are the best value currently, he makes it his business to read the FT and the finance section of other papers and checks the internet daily. I will ask him which companies are offering the best deals at the moment and post again this afternoon.

Gosh, thank you so much for your replies.

Janstar that info would very much appreciated.

beetroot - yes we are only paying minimum payments.
We are both civil servants - him for 12 years, okayish grade and income. Me just started in lowly grade and only partime. The area we live in this as good a job as I could get. I now get holidays paid, above minimum wage, etc.
No no mortgage protection (again civil servants, secure jobs). No endowments. ISA of £900 which has taken an age to save (first time anything saved - I know we should use it to pay off stuff but it really cheers me up to know its there - maybe I should let it go, silly I know).
Mortage we are stupidly tied in for 5 years - another two to run - bad bad interest rate.

Stonybroke ... I wish I had some constructive advice for you ...
All I can say is ... I would not advise a consolidation load at all (Sorry Janstar) ... we got one of those when we panicked about all our debts. It was only after we got it and signed on the dotted line that we actually looked at it and saw that after 25 years we would have paid back 3 times the amount that we borrowed. If we had thought about it for longer and sought advice (like you are) we would have seen that extending our mortgage would have solved the problem ...
I can see that your equity will not help you in that respect but I still think that consolidation loans are dangerous ...
The only way out of our mess was to sell up and move to NZ (truly ... that was our main reason) ... but I wouldn't recommend that to everyone ...
I hope you come to some answers soon ... sympathies ...

God, I am finding this post really hard But thank you for your replies

Ghosty - I would gladly leave the country and start somewhere afresh, but dh would definitely not consider that. Well done you though. You took the bull by the horns - I admire you.

Although with our debt no other country would want us

Oh, stonybroke I really feel for you. We've been having a bit of mony trouble ourselves lately, but luckily only rented a house and so found it much easier to do something about it.

Anyway I think your first thing like others say is to get the interest down on those credit cards. Find a loan or even another credit card with lower interest and switch - it'll give you a bit of breathing space.

Other things that sprind to mind:

Could the children not share a room for a while? At least, your dd could share with you and later with your ds, although this does depend on how old he is.

Have you looked into perhaps getting a new house through the same housing association (so presumably fewer costs and easier transition)?

Have you done a full pound by pound budget? This can hurt, but really, really helps when things are tight. It's tedious, but you can save a lot by reusing stuff/turning lightbulbs off etc.

One place to really save money is the car. Is is a low insurance group/economical on petrol? If it has a huge loan I presume it is still worth a bit - how about trading it in for an older, smaller one?

But anyway all the best.

Stonybroke, please don't panic. Lots of people owe a much or more than you do. It's great you want to tackle this. For really excellent advice you can log onto the CAB's website, www.adviceguide.org.uk, which has lots of advice on dealing with debt, and also call the national debt line (www.nationaldebtline.co.uk) on 0808 8084000, which is a free and impartial charity to help people many of whom I am sure are in a worse position than you. After having read the advice I think you should make an appointment with either a specialist debt counsellor or the CAB - take along all the relevant figures and get it sorted. Don't rush into anything. All the debt agencies strongly recommend you don't take out more loans to pay off debt as this becomes a vicious circle. You may well be entitled to more benefits/tax credits than you are claiming as you have a low income and two children. One thing you can definitely do TODAY is to swap your credit cards to 0 per cent interest deals. Abbey National is offering 6 or 9 months interest free at the moment. Egg also do interest free deals. This way at least you can chip away instead of seeing your debt rise.I would definitely put any renovations on hold until you get your debt under control. The children can share a room for now, or your dd can stay in with you for the time being. If you want to divide the room, a curtain or simple screen will do the job well enough for now. Building work is expensive and you simply don't have any money right now. Ditto the garden. It's simply not a priority. If your roof is letting in lots of water, you will have to get it repaired, of course, but that doesn't necessarily mean a whole new roof. If it's not letting in water, I'd forget it for now. Your loans and credit card debts need tackling before you even think of spending more money, IMO. I do think you need help with this, but it is solveable. Read the advice online and make an appointment. Good luck!
Oh, and send in your application to Ground Force!

Do your really need the car? Could you sell it and pay off the car loan? Or buy a really cheap car instead?
Look into changing your mortgage to one with a lower rate of interest too.
But I wouldn't do anything except swap your credit cards until you've looked at the advice line and, even better, made an appointment with a debt specialist, as they will look at the whole picture.

Ghosty - why didn't you read the small print before you signed?

I am not saying that every consolidation loan is a good thing. You have to shop around. But have you ever worked out the interest you pay on credit cards? And that's compound interest - ie it's calculated as you go along so you pay interest on the interest on the interest.

Another point worth considering is that if your monthly outgoings can be reduced as stony says, it gives you a chance to catch up with things and as time goes by, you earn more, your kids go to school and your childcare costs disappear, and you can pay off more of your loan later. So a long term might be helpful.

Also agree with Beetroot about checking to see what the penalty is on coming out of your mortgage agreement. My dh changes our mortgage from company to company at the drop of a hat if it means we get it a bit cheaper.

Stonbroke - I just want to say well done for even facing up to it. They say that is the first step. I know I'm in quite a bit of debt and I can't even face totting up the figures..........

Oh, stonybroke, I really know how this feels, we have been there ourselves several times and each time we got out of it - by whatever means - we put ourselves back in it, mostly by not cutting up the cards.

We have tried consolidation, would heave a big sigh of relief at lower monthly outgoings, and then carry on spending the extra until we were back in the same mess. (I should have changed my name for this - we have been really stupid lots of times!) We have had a few strokes of luck though, like getting shares from Norwich Union when they went public, which stopped us from going right under.

Go to the CAB first - definitely the best place to start - I believe they can arrange for the outstanding debt to be frozen and for you to make small fixed monthly payments, agreed between you and lenders, until the debts are paid. If not them, they can point you to the people who do it. I think the interest is frozen at that point so you don't have to pay back any more than you owe already. And get rid of all the cards and just deal in cash/debit card. (Or maybe get one new cheap one - if you can - and keep it for EMERGENCIES!)

I'm sure I've seen an article on this situation in the Guardian, I'll try to find it for you.

Best of luck, loads of sympathy, but it will be OK!

Have a look at these three (can't find all the info in a single piece):

here , here and here

I would love to be an IFA. I am seriously thinking to get the GCSE & A-level qualifications when they come out. Work for the CAB for a few years as a volunteer & then see if I could set up my own business. I'd love to help people deal with debt or just make the most of their savings.

So I would love to sit down and help, but I know I can't without knowing all the gritty gritty, and even then I'm not an expert (yet!). So I wouldn't want to give bad advice.

Can only repeat what others have said.

• Figure out which of your credit cards/debts have the highest interest rates & transfer the balances to zero-percenters; there's a website where you can look up zero-percent credit cards.
• Apply for 6 zero-percent cards simultenously to get the most credit. DO NOT use any of these cards for new purchases or you will make the debt far worse.
• Decide how much money you can afford to spend paying off debts each month and spend it paying off the debts; do not yield to temptation to buy new DVD player, etc.
• How bad would the penalties be if you re-mortgaged? Also, if it was me I would look at transferring some of the debt (whatever you can't get onto zero-percenters) into my mortgage; but that runs its own risks, which you need to talk over and think about.
• Doesn't First-Direct offer a £500 zero-percent overdraft? And £25 if you get the account into credit before December 31 this year? Those kinds of deals could free up little bits of cash to help you out.
• Things like Internet shopping with free delivery or £5 off coupons might help you avoid some car journeys each week and cut down on petrol costs.

DH is barely earning anything; we are on a very strict budget. It stresses me out to keep such tight purse-strings, but amazingly I do know exactly where our money goes, nowadays, and we are living on far less than I thought possible.

Well done stoneybroke, its never easy to take debt by the hands and sort it out. Go girl!

Great advice from aloha et al about cards - getting them down is really going to make the most difference IME. We were here about 2 years ago and its horrible. Also worth talking to utility suppliers - a couple of ours let us reduce or freeze payments, even £10/month a the few times over can help. Take a day off and sit down with the phone and talk talk talk. They are all humans and will respect you for being grown up about it, and trying to find a way through. Be as business like and detatched as you can - like others have said in their business terms this is not a great deal of debt.

Also great advice beetroot about increasing income. That was the best way for us to change the balance of income/debt; I set up my own part time business but there are less formal things you can do - like beetroots suggestions.

I now help other people develop second incomes, and the first thing I do is sit down and go through with them the hours they have available, or that could be made available, then work out what time of day that is and try to find the best way for them to get the amount they need. I'll happily help you via email if you want to set up a dummy email and get in touch via MN.

The most important thing to remember is that this does not reflect on you as a mum. When your kids grow up they won't remember the things that seem so important now, like sharing rooms and hopefully like us you'll come through in time to give them a great childhood. We've gone from baked potatoes every night to a completely different lifestyle, so ordinary people can do it! Your doing just the right thing - and tackling it one step at a time. It really is worth doing it just to know that the worry free days are getting closer with each phone call.

Remember anything you have to give up or do extra right now is only a short term thing - it doesn't mean you will never have lots of time with the kids or fancy clothes etc. Don't be ashamed of it - people will respect you for tackling things head on- we all do!

Try really hard to enjoy some of the free things in life, like the last of the summer weather, - there is nothing wrong with having fun while you are working through this.
Good luck, get in touch if you like.

Stonybroke, sympathies, I know the feeling and it's horrible isn't it? Lots of good ideas here but here are mine too fwiw:

Firstly don't panic! I really do* know this is easier said than done but I go through periodic panics about money too (really over the top - shouting at dp for buying mange tout, that kind of thing) and it's rarely productive.

• The only way to be better off is to increase your income or decrease your expenditure. Incredibly obvious I know, but sometimes it's easy to forget the basics amid the panic.
• With that in mind, there was a great thread called any money saving tips? have just come to the conclusion we're broke and there was some fantastic advice there which really will save you some money, it did me anyway. You could print it off and highlight the things you think will help. There's a link to the rapid debt repayment plan on that thread too which looks good to me and I've been doing my best to follow.
• I agree with everyone who says sit down and realistically work out what your income and outgoings are every month. Look at what the biggest amounts are (I'd guess your cc repayments) and think about whether you can reduce them. I agree, get as many as you can on 0% and at least that way you are actually making inroads into the debt when you make payments.
• Then be realistic and honest with your creditors (if there are any you need to discuss this with). Suggest a revised repayment schedule and stick to it. They'll rarely turn down a reasonable offer.
• DON'T add any new debt, you'll just have to leave the garden and roof (unless it is leaking) and make do with 2 beds until things are better.
• Try to let yourself have something nice each week, even if it's just a £2 allowance for chocolate or something. Someone here gave me this advice and I think it's good. Otherwise there's a danger of becoming so bogged down in the misery of poverty and repayment that you'll be even unhappier.

If you need any more help (I'm good on writing letters to creditors etc, spreadsheets, that kind of thing) feel free to contact me by email too and I'll help if I can. Good luck!

Thanks again so much - I knew Mumsnetters would have good advise!

lucy123 - re rented house - I had wondered whether we should go back to this option? What does anyone think? We wouldn't have to fork out for renovations? Anyway I do think the renovations have to be put on hold, reading all the advice here.

Re the car I had suggested this to dh and we 'debated' this. We have two cars - one 'good' car (which I use on daily basis) and banger (which dh uses) I defo need a car, dh uses car for trip to work, if he didn't have it it would be an extra hour commuting everyday.

beetroot - I had never thought to check what the redemption penalty would amount to - I think I just presumed it would be an extortionate amount, as people always talk as if a complete no no. Will look into this.
I know evening work should probably be an option. But I just don't know if I could keep going physically doing this (I know, how lazy). Will have a think about it.

Aloha - I honestly thought that our figures were as bad as they could get. Yes we have never defaulted on any payment of any sort, but I thought that most people end up having loads of equity in their houses and thats what saves them.
We are getting all benefits due to us - although some money could be withdrawn soon as I am now working. So the situation could get even worse. I have included these in my overall income figure.

I will contact CAB though - I thought they just helped people who defaulted on payments. I do worry that if we admit to creditors that we are having problems that we will never in a position to get a mortgage for the other half of our property?

Janstar - your opinion on consolidation is exactly where we were coming from - release more money monthly, so that we do not continue this cycle of borrowing when the car needs service, ds needs new shoes, etc. Will have to look at this option again after all the advise here though.

Janh - thanks for the Guardian articles will have a proper look tonight.

Zebra - the 0% credit cards good idea

waterbaby - I do try really hard not to be ashamed and I suppose I just don't tell anyone and carry on as before.

Whave always lived beyond our means, although I don't believe we live in any way extravagantly. I am trying to tackle things head on and sort this mess out once and for all.

Thank you so so much for all your postings. It is much appreciated. Please keep any further thoughts coming - I am going to sit down with dh (I have just rung him and told him not to call into builder on his way home - there's proactive for you!) and print out all this and see where we go from here.

Oh God I have a headache!!

stoneybroke - admitting you have problems and finding a responsible way to get over them before you start defaulting will look far better to creditors than actually defaulting and won't count against you.

If you only own half the property, doesn't the housing association have some responsibility for repairs such as the roof?

Re the consolidating - it depends how you do it. Don't, whatever you do go to one of those companies that advertise on TV. But if you can add som of your debt onto your mortgage, or get a loan from a reputable bank at a lower rate than you are paying on your credit cards, it does make sense. You simply have to be very disciplined about paying money back and not getting into more debt. And if possible get something that is flexible enough to allow overpayments.

thanks for that link www - had a quick glance at it and will definitely print it off tonight at home and have a better look.

I have been thinking since I last posted (yep - getting loads of work done today!!) - I mentioned it last time briefly. What does anyone think about selling up and renting instead? It would mean that we wouldn't have to worry about renovations, also the house is old and things keep going wrong. We would have some cash to pay off some of the debt. We could also move to a better area (snobby I know - can't afford to be) but just from a security issue and kids growing up. We had thought of this previously but decided against, but just wondering again?

So sorry you're so fed up. What about extending your mortgage and using that money to pay off your loans? And if you switched mortgages, would you be penalised (not all do that)