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.

well, if the rents in your area are lower / equal to mortgage payments, it may be worth a go.

The only thing is, rental contracts in the UK are very biased in favour of the landord and I would try to avoid a private rental contract at all costs unless you can find someone who can recommend a good responsable landlord. I should know - I've rented several houses in the UK and was forced to leave twice because the landlord suddenly decided he wanted to sell (nothing you can do). I've also had landlords who simply failed to carry out repairs.

But if you can find a good landlord or housing association, then yes, this may be an option for you: just be warned! (here in Spain things are better - we have this house for 5 years guranteed)

By the way, when it comes to living in a better area, you're not necessarily being snobby! Feeling comfortable where you live is so important and in my experience, makes it much easier to live on a budget and still be happy!

Your debts are not the worst ever, Stonybrooke. There was a phone-in on Radio-5 about debts a few weeks ago. Some debt counsellor phoned up mentioning a client who had net income of around £1400/month and £200,000 of unsecured debt; the debt counsellor said this was not all that unusual in her business.

My gut feeling is against selling your house, Stonybrooke, because it won't improve your situation that much, anyway. But only you can decide, really. To decide things like this you might need to plan out budgets for various scenarios. How good are you with Excel?

Hi again stony. I had a chat with my dh over the phone and he has a few ideas for you.

Firstly, he says do not rush into anything. Consolidation loans sound like a good idea but you must shop around and make sure that you get a reasonable deal. The problem with the smaller repayments is that of course they lengthen the term of the debt and so you feel you will have it hanging over you forever. He says that the banks are more likely to give you a good deal than a debt company.

He says that if you can add any of the debt on to your mortgage that is usually a good idea. And he agrees about weighing up the exit penalty on your current mortgage against any savings you might gain over the next two years. He says that these penalties are often linked to the progress of the mortgage and may operate on a percentage basis.

Like me, he thinks that in general, credit cards are the most expensive way to have credit. He thinks the first thing you should do is try and transfer your credit card balances to cards offering zero interest for the first 6 or 9 months. You will still have big repayments every month but at least you will not pay interest and will be eroding debt, however gradually while you decide what to do next.

He says look in the money section of the Times on Saturdays, they list the top five deals you can get with loans and credit cards. He also recommends checking out financial websites where a lot of information is available.

Finally, he says, don't try to sort this out on your own. Get advice from an expert. He works in finance himself but still finds some of the information available is very hard to comprehend, so he thinks you need proper advice before getting a loan. No offence, but finance does not seem to be your strong point so I think this is good advice.

Forgot to say - we use 0% interest credit cards all the time - after the term of zero interest finishes we transfer our balances to new cards. At the moment we are using Marbles, so it may be worth checking that out.

Also some credit cards do fixed low rate for the life of a balance transfer - we have £5000 on a Morgan Stanley card at around 4%, can't remember exactly, cheaper than mortgage though so worth looking out for anyway. (Not as good as zero but you don't have to remember when it stops and organise another one.)

Hmm, this renting vs buying business is a tough one IMO. We've been renting for 3 years and as a result have been able to live in much nicer houses than we can afford to buy. So the way I see it we're paying the same amount as having a mortgage of about £100k on somewhere when it's worth about £300k. Another advantage is that repairs (roof etc) aren't your problem, plus you can be flexible and move whenever you want to (within reason - I mean it's easier than waiting to sell, exchange, that kind of thing). But it doesn't sound to me as if it'll make your position that much better - will it? OK, you will be able to clear your debts, true, but you will still have to find somewhere to live and will rent be any cheaper where you are? Maybe it will in which case it could be a viable option. I agree with Lucy, be careful about landlords, although we've been lucky with ours over the last 3 years. Also, if you've got a good HA deal wouldn't you do better to hang onto it? Wouldn't it be harder to get it again? I think in your position I'd stay put, try to decrease my costs and gradually pay off the debt. But I am fed up of renting so it's bound to colour my judgement.

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www - me too! I'm fed up with not being able to do whatever I like with the garden (well, its a yard in this case), replace the kitchen tiles, leave a big mess near the front door...but we do have air con! Does that help, Stonybroke?

Stonybroke, I just wanted to let you know that you're not alone and have my sympathy. There is a fantastic website - (hope its okay to post it here) www.fool.co.uk - that has a whole discussion board (dealing with debt) that you could learn heaps from. They have another board called living below your means too, which may help. You can post under a pseudonym but be warned - the other posters will ask for a full breakdown of where you owe money, how much you owe, and at what rate, so you really have to have all your facts sorted. Then they will post advice to tell you which debts to deal with first and how to "snowball" your debt. I have seen dozens of people on the board go from huge unmanageable debts to £0 using this advice. It costs nothing, but it would probably give you a boost to get their advice as well as what you have been given here. And they will certainly tell you not to go the consolidation route. Hope this helps.

Stoneybroke, it won't hurt your chances of getting another mortgage if you write to creditors to reschedule payments. What will count against you is a mountain of unsecured debt. The CAB does deal with ordinary debt. See the website and you will see what I mean. I really recommend their section on debt. Make an appointment - you've got nothing to lose. Have you found out your redemption value of your mortgage and a 0 per cent credit card yet??
Good luck.
BTW I wouldn't rush into selling your house personally, but it might be an option to discuss with the debt counsellor. Don't panic!
BTW Are you absolutely sure you need two cars? Have you timed the journey to work on public transport recently? If not, why not try. Two cars cost a hell of a lot - add up how much and it might suprise you with road tax, car loan, insurance, repairs etc. With things so very, very tight you do have to be realistic and if it means getting up a bit earlier to save hundred and hundreds of pounds a year, it might be worth it? We only have one, which is inconvenient sometimes but the cost of two is huge. My dh walks to work and back to save money - and that's over an hour and half of walking every day. Saves on gym membership! All things to think about anyway.
Good luck!

I agree with Aloha on the cars. Running 2 cars will add up to a huge chunk of your income when you include insurance, repairs, road tax, depreciation. Have a think about how you could ditch 1 or both cars. Could you rent a house in walking distance of dh's work? And could you then find a job in walking distance as well? This would of course be pretty radical, but worth thinking through before you dismiss it!
I also agree re picking up any extra work at evenings or weekends when you don't have to pay a babysitter.
These ideas are only worth putting into practice once you have an overall most efficient repayment schedule though. You owe enough money that it is important to identify the most efficient way of paying it back. You are showing a lot of courage and strength in dealing with this.

Thanks again everyone for all your comments and advice - really finding everything very helpful. I am up to my eyes with homeworks etc at moment, so haven't had chance to read through recent posts but will have a better look this evening.

I just wanted to let you know that I have rang the CAB and made an appointment for next Monday at 10am (first available) - I would never have thought to contact them, so thanks to everyone who suggested it!

my dh also uses the fool website janinlondon recommended.

Just a thought - do the government still give grants for stuff like having your roof fixed?

Further progress - have rung mortgage company for redemption figure, together with any penalties - they will send in next few days.

Looks like the old banger is going. We have had big talks this evening. Due MOT in 10 weeks, so will save on garage costs and renewal of insurance (big weight off our minds) - costs about £2,000 per year to keep on the road - bus would be half that amount and if we need extra transport sometimes, would still be cheaper to use taxis.

There has been loads of other brilliant advice posted and I will be working my way through it over the next few days.

Thank you everyone for all your advise - amazed at the kindness shown to a stranger! Good Samaritans or what!! If anyone has any further thoughts all would be gratefully received. I am motivated albeit stressed to the eyeballs, with bright red cheeks as I type.

Am moving fast - have persuade dh that we HAVE to cut up credit cards - we always counterattacked this one with 'but we should keep one for emergencies'. We have around £900 in an ISA and we were discussing who we should pay off with that money, but then I suggested that instead of keeping the temptation of a cc in the house, we keep this money as our emergency fund (car breaking down, etc). What do you think - is this sensible? btw We have already cut them up - a BIG, scarey moment for us!

Have looked up fool.co.uk - brilliant - can't get into chat rooms tonight, won't let me register but will try again tomorrow. Did the calculator, although didn't tell me anything I didn't know except made me look at interest rates - we are paying 24.5% on tv/video! Shocking. When we bought it we just looked at monthly amount, as we were replacing a rental and it was costing the same so we justified that we weren't paying any more and in 3 years would be ours. Thats the first debt we're going to tackle.

Sorry for rabbiting on, I am finding this a real release just typing away. Hope you don't mind!

Am moving fast - have persuade dh that we HAVE to cut up credit cards - we always counterattacked this one with 'but we should keep one for emergencies'. We have around £900 in an ISA and we were discussing who we should pay off with that money, but then I suggested that instead of keeping the temptation of a cc in the house, we keep this money as our emergency fund (car breaking down, etc). What do you think - is this sensible? btw We have already cut them up - a BIG, scarey moment for us!

Have looked up fool.co.uk - brilliant - can't get into chat rooms tonight, won't let me register but will try again tomorrow. Did the calculator, although didn't tell me anything I didn't know except made me look at interest rates - we are paying 24.5% on tv/video! Shocking. When we bought it we just looked at monthly amount, as we were replacing a rental and it was costing the same so we justified that we weren't paying any more and in 3 years would be ours. Thats the first debt we're going to tackle.

Sorry for rabbiting on, I am finding this a real release just typing away. Hope you don't mind!

Am moving fast - have persuade dh that we HAVE to cut up credit cards - we always counterattacked this one with 'but we should keep one for emergencies'. We have around £900 in an ISA and we were discussing who we should pay off with that money, but then I suggested that instead of keeping the temptation of a cc in the house, we keep this money as our emergency fund (car breaking down, etc). What do you think - is this sensible? btw We have already cut them up - a BIG, scarey moment for us!

Have looked up fool.co.uk - brilliant - can't get into chat rooms tonight, won't let me register but will try again tomorrow. Did the calculator, although didn't tell me anything I didn't know except made me look at interest rates - we are paying 24.5% on tv/video! Shocking. When we bought it we just looked at monthly amount, as we were replacing a rental and it was costing the same so we justified that we weren't paying any more and in 3 years would be ours. Thats the first debt we're going to tackle.

Sorry for rabbiting on, I am finding this a real release just typing away. Hope you don't mind!

whoops!

Brilliant, brilliant news! I bet you feel less panicky now. Great idea to use your £900 as an emergency fund. Even though you've cut up your credit cards you can still transfer the debt to a 0per cent card - and cut that up when it arrives to save temptation. You really MUST do this. The interest on credit cards is a nightmre. Tackle that TV debt. That sounds like something you could spend some of your 'emergency' fund on, with a horrific rate of interest like that.
Good idea re the car. £2000 a year out of a post-tax income of around £21,000 is bonkers!
Keep going!

ok, its a not a big money plan, but sort out everything u own, anything u dont want/need/toys kids wont miss do a car boot, i used the money from my last one to pay for my dd2 birthday party. my parents made £100 doing a car boot, that would pay my gas and electric for over a quarter!!

About the car, stonybrooke -- DH did some sums a few years ago and realised that if he hired a car every other weekend it would be four years before the car hire would be more expensive than the car payments DH was then making. Car was soon sold. Ever since then we have lived without, but hired when we needed/wanted to. Definitely saved us a fortune.

Janstar ... we did read the small print and knew that the repayments in the end would be phonomenal BUT what we didn't do was shop around (as you suggest) and look at all our options ... we were a bit like rabbits caught in the headlights - DH panicked, found this loan, I thought it was our only option and that was that ...
Later, I told my dad about it and he was horrified ... "Why didn't you say something? There are so many better options" ... and then when he told us we realised how stupid we had been. Totally our fault and our own stupidity I admit (and am a bit embarrassed for telling the world about it ... but wanted Stonybroke to check it all out before she did something drastic like we had to).
Stony ... so many people have given you such good advice here ... I hope you find something to help you ... Thinking of you xxx

Stonybroke, just an idea re: evening jobs. We pay babysitters from an agency, between 5 - 6.50 perhour, basically to sit there and watch tv for most of the night. The advantage for us is that most of them are older, have their own children and/or have worked in childcare. This may be an idea for a less strenuous evening job.

Sorry to come into this so late Stony but have just prised ds from pc - re the renting v buying - we did it and it was a huge relief - the rent is so much cheaper and so is the insurance no longer require buiding insurance only contents and Housing assoc takes care of most repairs also this year alone we have had new central heating system, new boilers and new fitted kitchens on our estate - not something we would have been able to afford had we still been buying - Good Luck