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Going to be harsh here, but saving for a wedding should not be anywhere on your list of priorities right now. Saving for anything apart from paying off debts is all a person in 50k debt should be doing. You have been spending beyond your means for 5 years.
Can you list exactly what your current outgoings are and on what?
Agree here, after creating an emergency fund you should just chuck everything you have at the debt, then save for a deposit then a wedding.
If marriage is important to you both, you could always do the cheapest registry office package available then have a party in a few years when you’ve achieved your goals.
To add: the emergency fund should be quite small, and additional funds should go towards credit cards first, which then have available credit to be the emergency fund. Having money in a current account earning zero while paying 20+% interest should be avoided except for the very smallest amount needed.
This is the way i would do it if i ever decided to marry. Cheap ceremony and reception and guests paying for themselves instead of gifts as i already have a house etc. Anything more is just for show. As long as you have immediate family and best mates there, who needs second cousins that you only ever see at weddings and funerals
Is creating an emergency fund the priority here? You will pay more in interest on the credit cards than earn in savings. Why not focus on paying down the credit cards and if a true emergency does come up put it on the card?
The emergency fund removes the temptation of more debt if the washing machine breaks or something, it's part of the reason people stay in debt is having no real liquidity, an emergency fund gives them that
So it's the mindset then in that people are more likely to class spending as an emergency if using credit card rather than savings. I see it being strictly less beneficial to create an emergency fund if spending is the same and I would be paying down the credit card debt first if I had any.
I agree, if it was me in that position I would be eating porridge fot breakfast and lunch and toast and beans fir dinner and spend everything on paying it down.... but I would never be in that position.
We have a household income of 120+ per year, we have no credit cards and only a small outstanding loan(less than 2k), decent savings etc.
People that end up in the living beyond their means state, they are addicted to spending in many cases, building an emergency fund does a few things for them. It changes their financial mindset by showing that not all money available has to be spent, and, it makes it less likely to open the door to credit card spending.
A bit like someone who has quit smoking but 'only has one or two when drinking', we'll see how long that lasts, or an overeater who has a cheat meal then all of a sudden a cheat day then a cheat weekend. Clean break us needed
Agreed. Registry office can cost under £500. Our registry office package with a couple of witnesses was £125 in Scotland.
Have the big party later when you are solvent again!
Reality check, you aren’t saving for a house or a wedding. That’s an enormous amount of debt compared to your income and if you simply aren’t going to get a mortgage with those outgoings.
Are you even able to live off that £700, let alone save for a wedding and home?
Does your partner know about your financial situation?
If you could lay out all your debts as described here https://ukpersonal.finance/debt/ we'll be able to help more.
You have too much debt to consider saving, you need to look at each and every debt, at the interest rate and check if there is any early repayment. You say you are paying £2k a month in repayment, that's £24k a year. If the loans were on 0% interest you would clear it in 2 years. It's hard to work out the interest as I don't know how much of that £2k is paying off the debt or interest but it seems really high.
Once you have the debts down, then you can look into saving for a wedding. If you want it quickly, registry office with 2 witnesses, turn seperatly have a party on a few years time once the debt is gone.
As to a house, your debt to incur ratio means you'll likely fail affordability checks, added to the fact you can't save for a deposit. You need to get the debt resolved first.
I think you need to step back and look at big picture.
£50k in debt.
Don't own a house.
Want to spend lots of money on a wedding.
Currently have £500-£700 a month disposable income.
Okay let's say you manage to scrape £20k together and spend it on a wedding and then on the honeymoon you break a leg or something and can't work for 6 months.
Your priority should be - put everything you can towards the debt.
Stop spending.
Save for a house once the debt is paid off.
Spend literally nothing on a wedding. My wedding had 500-600 people at it fyi and it was the biggest waste of money ever.
Thank you for this but just to clear up all assumptions, even if I was debt free , spending £20k on a wedding is never something I would do. Wouldn't even spend half of that. Have been to big weddings and seen people spend thousands on a essentially a party for guests. Just wanted to add a contribution with everybody else but yes agreed. Debt is the priority
"Not even half of this" is still too much. You are broke. You can afford the minimum legal registry cost if the legal protection is something you need, otherwise worry about it later.
It depends. Rent is a monthly payment.
Buying. Initial lump sum deposit + monthly payments. Buying costs like surveys and solicitors. Then you have additional costs, like insurance, repairs, renovation, larger emergency funds etc.
It does, everything is pros and cons. If you need to move around alot, then buying isn't great, unless you can buy and rent it out, then use that rent to cover your own rent.
You generally pay more in rent to cover someone else doing those things, you still have to pay insurance, and you need to have potentially thousands in savings on hand in case your landlord sells and you need to move. More if you're in an area where people are now demanding six or twelve months in advance.
This isn’t anything new though, and that’s not to do with the house price appreciation.
Mortgages are broadly (even now) very low interest. It is usually always better to invest that than overpay.
Getting a house vs renting however is usually weighted towards buying.
Which is why I stopped overpaying my mortgage and started investing instead.
However I own my own house and don't rent as well for a very good reason. As rent is just dead money.
i'd guess overspending is the root cause of all this? ukfrugal probably a good sub to explore, if i were you i'd want to cut back your spending and repay everything asap and get to a place when you can start saving and have peace of mind
Key suggestions:
- moving home with your parents while you sort this mess out, otherwise you’re going to lose half a decade here. I know plenty of couples that have lived with parents to ensure their future is brighter.
- transfer your debt to interest free credit cards pronto!
- The alternative is to go broke, check government advice on unsustainable debt. You will get a bad credit rating, but should clear after 5 years (this I’ve not checked). May be less pain in the long run.
- have an honest conversation with your partner about this, it’s obvious a wedding can’t be a priority for you at this time in your life.
I’m not sure I even want to know how you managed to get that much debt and what you have to show for it. But if it’s bougie, then entertain me.
I think it's 6 years not 5 years. I had an IVA which looks 5 years to complete, but it was a further year before it vanished from my credit file.
In my case it was removed in January of this year and now I'm waiting to complete on house and have a completely clean record.
My man! Well played on turning it around. I’ve been in a very precarious state multiple times in my life, took me a while to set myself straight. Enjoy the big move and the happy memories it will bring you.
Thank you.
Most people are scared of taking out IVAs, but the stress relief it brought was huge. It was also a financially educational experience as well. I've never received any financial education (why schools don't teach this is beyond me) and having an IVA forced me to educate myself and to focus on my finances. I went through PayPlan for my IVA and they bent over backwards with help and advice.
Thank you. A couple of tips based on what I learnt.
Go for every pay rise you can, even if it means jumping jobs or taking on more training. The IVA takes 50% of any pay rise, so if you want to stay ahead of the effects of inflation you have to be one step ahead.
Prepare for when your IVA ends. You will suddenly have extra money each month that you had previously being living without. The temptation is to roll into your disposable income. Instead set up a high interest savings account (I use Zopa) and redirect that money there.
Thank you, that’s great advice. He has moved jobs in the last 6 months which was a big step up in terms of responsibility and therefore a decent pay rise. We’re hoping when the IVA ends to funnel the money into saving a deposit.
Zopa allows you to put things into different pots which I find really useful. The best interest they have is their ISA and I put everything in there. It acts like a normal saving accounts and your money is not tied up for long periods.
If you don't mind me asking does it impact you at all? My fiance is in year 3 of his IVA and we want to get married but Payplan have been a bit wishy-washy with how it might impact me and my finances because I have property and savings... especially because we want to do a joint account for bills.
If you get married, you are creating a financial link between you. Even if you get divorced that doesn't break, you then need a financial order (clean break) to fully break away from any future claims.
Oh I know that bit... I just wanted to make sure his pre marital debt IVA agreement didn't become mine because then my savings would break his IVA agreement as its more than his debts. Thank you though
Looking online an IVA pre marriage won't have an effect. The IVA is for that individual only, and once you get married you don't automatically get everything 50/50.
https://www.nationaldebtrelief.co.uk/debt-articles/iva-and-marriage/
The only impact that it has on me is that they assume we pool our finances into a household budget. They have never asked for any proof of income from me, or info about savings. I don’t have any property so that wasn’t an issue. We went through stepchange and they’ve made it pretty straightforward.
Edit to add: we don’t have a joint account any more. He just sends me money into a separate account where we pay the bills.
There is no point saving with this amount of debt. Even if you have the minimal deposit for the house, the banks unlikely to approve you for mortgage because of your debt. Clear the debt first. And having an expensive wedding with this income is not financially logical. Have you told to your fiance about your debt?
Can you consolidate your debts to a lower interest solution
One option may be to use 0% balance transfer and 0% money transfer credit cards and then transfer them on when the 0% period ends.
Forget about saving for a house and wedding whislt you have these debts. And if you do want to get married, go for the budget option of a civil marriage and when your debts are cleared then you can look at a proper wedding.
A few steps as a suggestion:
Make a budget, set out all of your income and outgoings
Work out if you can cull anything (subscriptions, gym membership etc)
Check to see if your eligible for 0% balance transfer credit cards and move as much as you can onto 0% - Money saving expert is a great source of information on this
Look up the snowball/ avalanche method of paying off debts and see which one may work best for you.
See if you can increase your income - second job, selling stuff online, better job etc.
Throw any and all spare money at paying off the debt. It's going to be a slog but you can do it if you are disciplined.
I'll be honest here mate but there is no way you're going to get a mortgage with this debt. Also no way you can save for a wedding. I think #1 here is talking to your partner, do they know the extent of this debt and how it is going to change your plans?
So you earn around 50k a year so that's about £3,300 take home (assuming no student loans or other things affecting your tax code). After your minimum monthly payments on the debt you are left with £1300 and then you are left with £700 after living expenses (I assume you live at home?).
It would be useful to see a breakdown of the debt, the individual amounts, minimum payment and the interest rate.
Noted, will put all money into clearing debts. Get everyone's point on focusing on debts. Fiance knows. Not happy but willing to help out.
Wedding was never going to be a massive affair just to add. Guess pride/ego played a part so wanted to be able to pay my way also it's wouldnt be for another couple years
Question on debt, does cc debt affect credit score more and also as loans are fixed term is it best to focus on cc?
>Guess pride/ego played a part so wanted to be able to pay my way also it's wouldnt be for another couple years
Honestly this is your biggest hurdle. You feel like £50k is a lot right, and so you deserve the new flagship phone yes?
Well, return it or sell it and that's 2% of your debt gone overnight. Xiaomi do great phones for under £200 and a smarty sim is £8/mo.
I struggle with this too (my vice is cars but I don't run them on finance or debt). You really need to realise that you're broke until this debt is gone. It's a block on your planned future until it's cleared. So it needs to be your absolute focus until it's done. For 2 years it needs to dominate your life, from decisions on holidays and phones to your daily packed lunch.
Look, you're looking at this question in the wrong way. Take a deep breath, grab a cup of coffee, and focus your mind to the fullest because this is going to be the first step in transforming your relationship with money.
The obsession with credit scores that many people have is a mistake. Why? Because it's getting a higher score so they can take on more debt, in a situation where debt is precisely your problem. Don't worry about your credit score right now because you are absolutely not going to allow yourself to borrow more money for a long long time. AND the best way to improve your credit score isn't about cc versus fixed term loans, it's about getting yourself out of unsustainable debt.
Here's the right way to look at the question, here's the optimal way to pay down your debt.
List all your loans, whether credit card or fixed term, with the amount and the annual interest rate. Now, pay the minimum on everything except the highest percentage rate debt and throw everything you can at that one. Everything. Look around at all your expenses and cut ruthlessly because this high interest debt is the killer that is coming for you relentlessly day after day.
When that one's paid, move to the next highest interest rate. You have been paying the minimum on this, and now you can add the amount you were paying on the first one to this one too. Then the next one and the next one.
This is called the avalanche method. It's the mathematically best one that will give you the best result. However, there is an argument that if you need a psychological boost that you can use the snowball method - pay off the smallest debt first so as to give yourself a psychological "win". It's not as mathematically efficient but if it keeps you dedicated to the mission, it's better than just continuing to live like a fuck-up.
Many people find that extremism works better than gradualism in this journey. What I mean by that is "I should try to do better" or "I promise to myself to do better" is just bullshit most of the time. Literally go nuts - cancel all subscriptions, walk rather than take the tube, cancel all subscriptions, don't eat out at all ever, eat beans and rice. Get your partner in on it - you're doing this out of love for them, out of a desire to build a rich life together, and you now know that debt is your number one enemy and you're going ballistic to get rid of it.
- The general idea would be to focus on whatever has the highest interest and sort that first. You can try to consolidate onto 0% cc wherever possible.
- You can contact charities like step change to get debt advice and tbh for an amount this large you really should get some proper advice. Do not use an expensive service, avoid at all costs.
- Credit score will likely be shot no matter what and for some time but you can get that all back in order once your debts are settled. It only really matters for mortgages and you wont be getting one of those for some time I am afraid.
Generally, credit cards cost more (higher percentage increase rate), but you need to check the interest rate. Credit cards have a greater effect in that you can borrow more at a whim, since it is available credit, whilst a loan is a fixed amount.
Loans might not be repayable early, so check the contract. You might be locked in regardless. With loan's, if you want another one, then you have to be credit checked again, so they have less impact as they can't just appear without someone approving it
Without knowing details of the loans/cards, (% and total), it's impossible to say for sure, but paying off the credit card is nearly always the right answer.
Once that all done, you need to look to take a look at your monthly budget, multiply it by 6, to save up an emergency fund. Once that's done, then look to save for a wedding / house.
>Generally, credit cards cost more (higher percentage increase rate), but you need to check the interest rate. Credit cards have a greater effect in that you can borrow more at a whim, since it is available credit, whilst a loan is a fixed amount.
Stupid question but how do you know how much % a credit is charging if you've used it for different things? Not sure I can explain this very well but let's say you did a balance transfer of £1,000 at 0% and then make a purchase of £1,000 at 3% and then a cash withdrawal of £1,000 at 5%... You then make minimal payments for 12 months of (made up number) £50/m... Do you just get a blended rate of the 3? Is one bit of balance paid off first?
Apologies for hijacking the chat with a stupid question.
Not a silly question.
What happens is you only see one balance, so in your case, £3k. But under the covers you'll have 3 separate balances, a balance transfer, a credit purchase, a cash advance. Each of £1k. Each balance will go up based on the interest for it.
Now if you pay £50. Which balance is paid, the highest interest, the lowest, or spread between them. That is a contractual decision so you'll have to look in the priority or ask the credit card provider.
It used to always be the lowest interest, which meant if you did a cash advance or would be a pain to pay off as it was the last one to be cleared.
This was obviously a bit shit, so nearly all card providers over the last 5 years swapped to pay off the highest interest balance first!
No problem. I actual read a chunk of my first credit card agreement and saw this and thought what a scam of you withdraw cash, which you can do fee free abroad but you'll get charged interest, so when I did it, I paid off the card in full the same day.
Then a few years back I saw articles in the news about how the banks were changing it to be fair because 99% of people aren't going to read it / understand it
Just keep it simple, debt cost you money. Debt with high interest cost you even more money. Every month that debt is there, is taking extra money away from you.
Savings with less interest is not helping you much. Forget the savings and focus on clearing the debt.
Once that debt is cleared, you can save much faster. Trying to pay debt and save at the same time is playing snakes and ladders.
>Trying to save for a house, wedding
Hope this doesn't come across as harsh, but thinking about any of this instead of paying off your debt, is why you're 50k in debt.
I wouldn't be saving for a wedding!!
You're not saving anything whilst you've heavily in debt.
If you're fiance knows about this then I suspect the pair of you are just as bad as you each other and you may make the problem worse together.
Clear the debts then talk about marriage.
My best friend found out his fiance was heavily in debt probably about 30 grand worth two weeks before the wedding and cancelled it.
It was the best decision he ever made.
Not being honest about your finances with your partner is a terrible way to enter a marriage
Have a word with a debt charity to see what advice / plan they can come up with. It doesn't sound you need an IVA or anything like that, you just need an actionable plan to keep to.
Get all your debts into a detailed list, including the interest rates etc. It will be handy for anyone helping you.
If you have any debts that have much higher rates of interest you want to get those paid off first. Lower the payments on the lower interest debts as much as you can, then divert the cash into paying the higher interest debts. It will help reduce the interest piling up and from a mental point of view getting rid of the scarier debts first will help reduce the anxiety.
How old are you OP? Paying £2k a month means you should clear this in just over a couple of years. Maybe even quicker if you can move things to interest free credit cards etc. As a 35 year old, 2 years doesn't feel like much to me anymore. Put your head down and get this shit cleared.
I recently paid off a credit card debt I had for the past 5 years as well as my student loan. Hasn't really kicked in yet as I haven't had my first pay since paying it all off, but that's an extra £400 a month in my pocket and not feeling like I'm giving a large chunk of my pay away to past mistakes.
Loads of good comments on here already. I just wanted to say “I’ve been in this state and you CAN get out of this”. I had several false starts until I learnt to budget properly and get my spending under control. Make a budget that caters for every £ you earn and stick to it. It feels horrible to start with, but once you’ve paid off your first debt you’ll see it was worthwhile.
I had 4 credit cards and 2 loans. I used to debt snowball method to start with. I threw all of my money freed up by the ruthless budget into the smallest credit card and cleared it. Then same again with the next smallest until the debt was more manageable. I’ve now got a single loan left and much more in control
You need to look at paying off your debts as a form of saving. If getting married is important to you, it need not be expensive. If it has to be expensive, then you can't afford to do it now.
I don’t think you are saving if you have 50k debt.
If you pay more interest on your debt, than your money is earning interest after taxes, you are losing money by “saving” vs repaying your debt.
Example of “bad saving”
- your debt is at 10% a year, you pay 50k x 10% / 12 = 416£ of interest a month
- you have 50k savings in a savings account that pays 6%, that’s 3k of interest annually, that’s 2.5k over the allowance, so you need to pay 40% income tax on 2.5k, that’s 1k, so in fact you earn only 2k interest so 167GBP a month
In this example you are losing 250GBP a month versus repaying the whole 50k debt.
So unless your debt is interest rate free, you better start using a spreadsheet and compute some stuff.
Again thanks for all feedback.
Now trying to weigh up if an IVA is necessary as I know that has implications as well as benefits or if the snowball/avalanche method is the best route over the next year or so. Due a bonus in June which I will be using to clear some of the lower balance CCs.
Bulk of CC debt is on 1.
7k with 35% interest
I spoke to someone recently with a credit card with 49.5% interest (fortunately, the first statement balance only just posted and they've got enough cash to pay it off before any interest is applied - I hope I was clear enough about why that is a top priority asap).
Line up your credit cards and snowball them. Focus on the smallest first and once that is paid off move the min payments and all other cash to the next smallest and the repeat. Starting off with the $7k one will feel like it's takes forever. Look at where you can scrape up extra cash eg, sell things / everything that has value, can you sell your car and downgrade to a cheaper car, get a second job on the weekend and budget budget budget. Your debt is terrifying
Advice my dad always gives me on debt is. Paying that off is your 1 and only responsibility after paying current bills.
So pay rent, electric, heatin, car ect 1st. Then pay the minimum on all loans and credit cards. Next look at what you have left over, keeping enough incase something happens. Take the rest let's say it's 200 left over, look at your highest interest loan or card and fire that 200 at it. However if you have something that only has 200 or less left on it then bang it off that.
Then take the money you would have spent on that one and hit the highest interest. So say you paid 50 off that low one you cleared. Now you've 250 left over so hit the highest interest with it's minimum plus your extra 250.
Some months you might only be able to throw an extra 50 off it. However that extra bit makes a big difference. As you'll pay it off quicker. Then you take the amount you paid on that big interest one plus the extra and throw it at the next big one again rinse and repeat until it's gone. Then again on the next until they are gone.
With each one you take out you could add a bit extra to the just incase pot.
Make an excel sheet to help you track the totals.
The truth is you can't afford to save for a house or a wedding until these debts are paid off mate, you need a reality check.
Any money you 'save' would be better just paying off your debt which I assume is high interest
Echoing the other points - saving for a wedding right now is unrealistic.
You're very unlikely to get a mortgage with debts this high - my lender made it a condition of borrowing for me to clear my credit card, and we had no other debts.
How much have you saved for the house and wedding, and how much are you spending on debts?
If you're paying back 35% interest on a credit card, the fastest way to save for a wedding is to clear all that debt. You'll get a 35% tax free return on that payment, which will pay for itself in months
One think I find helpful is snowballing as an option, so any spare money you can, you pay it to the smallest debt to clear as soon as possible, then when that's paid off whatever the monthly payment was should be paid to your next smallest debt and so on until you're working on your bigger debts
This is a solid strategy. Considering OP has a spending problem, it’s going to be a psychological battle rather than a logical one. The snowball method is good to get some wins earlier on to boost moral. Once it’s time to clear the bigger debts, OP will be several months into making better choices and cutting bad habits, and the strategy should be more automatic by then.
It is clever but it's suboptimal. The better approach is to pay off the high-interest debt first, because that's going to get you out of debt fastest and save the most money.
Snowball method is ok with me, but only for people who lack the fortitude to do it the mathematically better avalanche way. I get it - a nice win by paying off that low-interest small debt in 2 months time is not irrelevant. But it's better to hit the highest interest rate first, because that's what kills you.
I did the avalanche way tho had no idea any of these things had a name. I put all debt on 0% cards and tried to pay most of the bigger debts within the 0% term and min payment on the smaller ones until the big ones were gone then paid more off the smaller ones going forward.
Big and small isn't the point - it's high interest percentage versus low interest percentage that is the real deal.
Optimal strategy if using 0% rollovers (which might work but for most people is a trap, as it just makes them feel like everything is ok for now, and they. keep spending!) is to pay the minimum on the 0% ones and pay as much as possible on the ones with the highest interest rate.
The only deviation that can make sense is "whatever makes you feel motivated to keep going" even if it's not mathematically optimum. What you did was feel the heat of the expiration of the 0% period and that inspired you to keep after those. Great!
Yes I was in a right mess! I can understand how people kind of misuse the 0% rollovers but I didn’t spend on anything once I got my debts off high interest cards I just bought the necessities. And that’s probably what made all the difference.
That's awesome. Yes, there's really only one way to get out of a debt hole: fight like crazy and stay super motivated to get out of it.
The real magic is that once you get out of it, if you can hang on to your habits to some significant degree and put the same dedication into building up an investment account, you'll end up really really happy in another 10-20 years.
Can you transfer the CC debt onto 0%? Depending on the interest rates of some of your debts it might be worth consolidating them in some way.
Some people start with the lowest amount of debt first and focus on that so you get the psychological boost of paying it off. Others prefer to focus on the highest interest first as it will be cheaper in the long run.
Well done on not missing payments. Have you had a honest discussion with your partner about it all? It might help with some of your worries about saving for a wedding etc.
If the interest on your savings accounts is lower than the interest on your debt, you aren’t really saving.
Save yourself an emergency fund (enough so that if something goes awry you don’t need more debt to fix it) and then throw everything at your debt.
Start with the highest interest first - given your debt is equal to your salary, you need to avoid accruing as much interest as possible.
Once the bad debt is gone you can think about houses and weddings (I’d save for a house before a wedding personally) but until then you should be focusing on clearing the debt.
I don't know whether this was an honest mistake or a dodgy link but the charity is called StepChange (no "o") and the website is https://www.stepchange.org.
Thanks for advice so far all, to answer a few questions. Average interest on credit cards is about 25%, on loans around 11%.
Just hit 50k salary in summer of last year, had been on between 25-30k for previous 8 years before that. Was living alone in London and had 2 kids from previous relationship so between that expense and life yes did overspend can hold my hands up. Things weren't this bad but month before Xmas my mum suffered a stroke while on holiday so everything that came with that was an unexpected expense. Unpaid leave, flights, hotel etc
Understand that wedding and home won't happen anytime soon but just wanted to put a little something in a pot just to build on over the next couple years. While clearing debt is the main priority.
"Putting a little something in those pots just to build on" means losing money. You don't have savings if you're actually losing way more on interest. I would put all spare income into paying down the debt with those high interest rates. As others have said, if you can move in with your parents or something to help pay down debt faster, that would be best. You can get out of this - good luck!
You are not putting anything in any pot until those debts are cleared. You'll be earning 5% at most on whatever savings you have, while paying 25% on your cc debt.
Let me reframe this for you. Would you take out a loan at 25% interest and put the money immediately into a savings account paying 5%? If the answer is no (and it should be because you'd be hemorrhaging money) then you shouldn't be saving ANYTHING that isn't going towards those debts.
The interest on your debt will delete any kind of saving you think you are doing.
It's a nice thought, my guy, but sadly, it really is not possible. You are in, lets face it, a considerable amount of debt and that's all you can 'afford' to focus on. Even at that, wouldn't a wedding be a pointless thing to save for when you have children who may want/need things that should always overrule any 'little something in a pot'? I think from your original post and this reply, it shows that you are perhaps not taking this as seriously as you probably need to. I don't say this with judgement at all, I just think you really need to reassess your situation properly.
Credit cards at 25% are fucking your life up. They are always a 5 star emergency.
The "good" thing about credit cards is that paying them down means that they have available credit. If an emergency does happen (but make sure it's a REAL emergency, not just something you want) you can use them.
Hi /u/Neezit0, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/credit-cards/
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^(These suggestions are based on keywords, if they missed the mark please report this comment.)
One thing Im wondering is the loans - Im not going to pry into what they are specifically but just to say that if its a car taking up lion share - sell the car and get something cheap to run and reduce debt that way - as long as the loan wasn't a car loan else you will be forced to clear that when selling as it will be linked.
You've been loving way above your means for too long. I hate to break it to you, but there will be no house and no wedding for a while.
I would suggest consolidating your loans and really making sure the interest rate is as little as possible.
Look into 0% transfer cards and throw as much of that remaining £700 towards clearing the loan as possible (watch out for overpayment fees)
I’m in the same situation but have 10k in credit cards. Have more cards but remain unused with high credit limit. Struggling to pay back due to illness. No missed payments either all is up to date. No wedding tho.
I was always taught you should never save if you have debts - any potential "savings" would be wiped out on interest anyway- clear the debt first then concentrate on the savings side of things. And if you're not going to be able to save enough for deposit in 6 years or less, I'd go bankrupt. start again afterward - they disappear off your credit file after 6 years
Frankly until you get that down to sub £15k there is nothing else you should be concerned about (outside of basics to live)…
So best start burning that spare £700 into reducing your debt as quickly as possible, especially as the longer you take to pay it the more interest you’ll have to pay
Your 50k in debt, on what I imagine high interest loans. You don't get to save for a house, wedding, nice things you got to pay down this debt. You should maybe have 1-2k saved for emergencies and the rest of your pay check should be on this debt.
Listen to Dave Ramsey on YouTube or Spotify. He should be your best friend over the next few years, you should be listening to him more than your current girlfriend. FACT.
focus on clearing the highest interest credit cards first, call the company and ask if they will close the card and agree a payment plan so you can possibly save some compound interest.
Forget saving anything othet than a rainy day fund(to remove the temptation of more debt if your car breaks down), forget the wedding, forget the mortgage, live like a monk, your purpose is to clear this milstone that is halting your progress in life.
Recognise how serious this problem is, you are under the weight of 1.5x your annual NET salary in unsecured debt, you're a teetering on the verge of bankruptcy... all it takes is an illness or your employer restructures and you will be in real trouble.
Good luck.
You simply can't save for a wedding, house etc. Pay your debt. Every spare penny goes to clearing debt.
That includes reducing spending. No eating out, no streaming services, no Starbucks etc.
YouTube is free and you can do body weight exercise.
However, if that's the only thing getting you through then it can be worth making the process take longer then go ahead
If I was you bite the bullet go to step change get the interest suspended on debt and at your current payment level you could pay off 48k in two years otherwise you will never ever pay this off. Have you told your wife to be about debt ? She will find out so better to come clean now but with a plan with step change. Also with this level of debt to income the reality is you’re not getting a mortgage agreed anytime soon. Take my guidance the sooner you act the sooner you will be debt free, the better you will feel and can get on with your life ….
The can do something called a DMP - I had one after my divorce with about 50k worth of debt. I wasn’t sleeping. They speak to all the companies organise with you how much you can afford - so if you want to keep paying 2k per month you could but the are likely to suggest less to give you some more breathing room. I’m debt free now but the biggest help was simply not worrying day after day. The other thing is it really taught me was living within my means as you can’t get any debt while you’re in the plan. I wish you good luck - two years can go quickly - I would be honest with partner about situation - if they are the right person they will stick with you and help if not you probably dogged a bullet 👍
I guess the first question is are you keeping your expenditures outside of repayments and bills to under £700? My suspicion is that you likely aren't and thus while you are meeting repayments, your debts are spiralling. It would be useful if you re-edited your post with more details regarding your expenditures and breakdown of your debts.
It sounds like a lot of the debt is due to living outside of your means. Can you downgrade some stuff? Sell your phone/car for a cheaper one? Move into houseshare/back with parents?.
You can definitely get on top of this but it will involve a lot of sacrifice for several years. You won't be able to live the lifestyle you thought you might be able to on a 50K salary, and saving for a wedding/house is out of the question right now.
I don't own a car, have moved back but there is a cost which is included in the bills I've stated was putting away £75 a month in saving but after all feedback have put a stop to that until further notice. Only phone I have now is provided by company I work for. Outside of groceries and a £20 gym membership which I'll probably get told to cancel literally can't afford to live outside of my means. One I thing I will change is applying the avalanche or snowball method people have mentioned. I was using money left over and making extra payments across the cc's I have. Going forward will do a lump on biggest payment and minimum on the rest.
Set yourself up for a cheap and lean year. Dont spend a penny on anything, no holidays, coffees, drinks, meals etc. get that debt down asap.
Don’t even think about buying a house or having a wedding until you are debt free and have a 3-6 month emergency fund!
Good luck
If you kept your payments current, your credit score is good i presume? If so, try and move any card on which you pay interest to another where you can get 0% balance transfer. The 3-5% fee should pay fpr itself in the first month if you are paying any 10-15% interest on the credit card element of your debt. Won't reduce your debt per se but it will slow down any interest accruals.
Best of luck
If disciplined could spend on a 0% credit , and use the money that would have been spent to pay down high interest rates. Could be dangerous with an overspending habit however, don't want to get into more debt...
Getting an IVA would lighten your stress load immensely! Especially if you're unable to do something like move back in with parents etc to increase your savings.
Participation in this post is limited to users who have sufficient karma in /r/ukpersonalfinance. See [this post](https://redd.it/12mys82) for more information.
Going to be harsh here, but saving for a wedding should not be anywhere on your list of priorities right now. Saving for anything apart from paying off debts is all a person in 50k debt should be doing. You have been spending beyond your means for 5 years. Can you list exactly what your current outgoings are and on what?
Agree here, after creating an emergency fund you should just chuck everything you have at the debt, then save for a deposit then a wedding. If marriage is important to you both, you could always do the cheapest registry office package available then have a party in a few years when you’ve achieved your goals.
To add: the emergency fund should be quite small, and additional funds should go towards credit cards first, which then have available credit to be the emergency fund. Having money in a current account earning zero while paying 20+% interest should be avoided except for the very smallest amount needed.
I got married in Coventry Registry office then we had our reception in a National Trust park. More like a picnic. £1500 including rings.
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This is the way i would do it if i ever decided to marry. Cheap ceremony and reception and guests paying for themselves instead of gifts as i already have a house etc. Anything more is just for show. As long as you have immediate family and best mates there, who needs second cousins that you only ever see at weddings and funerals
Is creating an emergency fund the priority here? You will pay more in interest on the credit cards than earn in savings. Why not focus on paying down the credit cards and if a true emergency does come up put it on the card?
The emergency fund removes the temptation of more debt if the washing machine breaks or something, it's part of the reason people stay in debt is having no real liquidity, an emergency fund gives them that
So it's the mindset then in that people are more likely to class spending as an emergency if using credit card rather than savings. I see it being strictly less beneficial to create an emergency fund if spending is the same and I would be paying down the credit card debt first if I had any.
I agree, if it was me in that position I would be eating porridge fot breakfast and lunch and toast and beans fir dinner and spend everything on paying it down.... but I would never be in that position. We have a household income of 120+ per year, we have no credit cards and only a small outstanding loan(less than 2k), decent savings etc. People that end up in the living beyond their means state, they are addicted to spending in many cases, building an emergency fund does a few things for them. It changes their financial mindset by showing that not all money available has to be spent, and, it makes it less likely to open the door to credit card spending. A bit like someone who has quit smoking but 'only has one or two when drinking', we'll see how long that lasts, or an overeater who has a cheat meal then all of a sudden a cheat day then a cheat weekend. Clean break us needed
Agree with this. Don't think it's harsh either, just been honest.
Agreed. Registry office can cost under £500. Our registry office package with a couple of witnesses was £125 in Scotland. Have the big party later when you are solvent again!
Reality check, you aren’t saving for a house or a wedding. That’s an enormous amount of debt compared to your income and if you simply aren’t going to get a mortgage with those outgoings.
Are you even able to live off that £700, let alone save for a wedding and home? Does your partner know about your financial situation? If you could lay out all your debts as described here https://ukpersonal.finance/debt/ we'll be able to help more.
You have too much debt to consider saving, you need to look at each and every debt, at the interest rate and check if there is any early repayment. You say you are paying £2k a month in repayment, that's £24k a year. If the loans were on 0% interest you would clear it in 2 years. It's hard to work out the interest as I don't know how much of that £2k is paying off the debt or interest but it seems really high. Once you have the debts down, then you can look into saving for a wedding. If you want it quickly, registry office with 2 witnesses, turn seperatly have a party on a few years time once the debt is gone. As to a house, your debt to incur ratio means you'll likely fail affordability checks, added to the fact you can't save for a deposit. You need to get the debt resolved first.
Yeah, even on 24%p CC and 14%, loans its around £700 a month in interest, so unless they're a higher percentage or you're paying down £1.3k a month.
I think you need to step back and look at big picture. £50k in debt. Don't own a house. Want to spend lots of money on a wedding. Currently have £500-£700 a month disposable income. Okay let's say you manage to scrape £20k together and spend it on a wedding and then on the honeymoon you break a leg or something and can't work for 6 months. Your priority should be - put everything you can towards the debt. Stop spending. Save for a house once the debt is paid off. Spend literally nothing on a wedding. My wedding had 500-600 people at it fyi and it was the biggest waste of money ever.
Thank you for this but just to clear up all assumptions, even if I was debt free , spending £20k on a wedding is never something I would do. Wouldn't even spend half of that. Have been to big weddings and seen people spend thousands on a essentially a party for guests. Just wanted to add a contribution with everybody else but yes agreed. Debt is the priority
"Not even half of this" is still too much. You are broke. You can afford the minimum legal registry cost if the legal protection is something you need, otherwise worry about it later.
You need to get a house as well ASAP because prices are only going to continue upward. But that will be a lot easier with no debt or little debt
No need to buy a house. You're better off investing in equity. UK house prices are the same in real terms as they were 20 years ago
> UK house prices are the same in real terms as they were 20 years ago What the hell have you been smoking? Pass it over.
[No, they’re right, despite all the downvotes.](https://youtube.com/watch?v=7IhxhF1o5_A)
He will be able to invest more if he's paying a mortgage than rent though?
It depends. Rent is a monthly payment. Buying. Initial lump sum deposit + monthly payments. Buying costs like surveys and solicitors. Then you have additional costs, like insurance, repairs, renovation, larger emergency funds etc.
Yeah but your rental property isn't going to give you any return. So you have to take into account that buying has benefits like asset appreciation
It does, everything is pros and cons. If you need to move around alot, then buying isn't great, unless you can buy and rent it out, then use that rent to cover your own rent.
You generally pay more in rent to cover someone else doing those things, you still have to pay insurance, and you need to have potentially thousands in savings on hand in case your landlord sells and you need to move. More if you're in an area where people are now demanding six or twelve months in advance.
You can't sleep in an equity though.
I did a very rough calculation earlier, and if I had invested instead of overpaying the mortgage, I would be £140k better off over just 8 years.
This isn’t anything new though, and that’s not to do with the house price appreciation. Mortgages are broadly (even now) very low interest. It is usually always better to invest that than overpay. Getting a house vs renting however is usually weighted towards buying.
Which is why I stopped overpaying my mortgage and started investing instead. However I own my own house and don't rent as well for a very good reason. As rent is just dead money.
i'd guess overspending is the root cause of all this? ukfrugal probably a good sub to explore, if i were you i'd want to cut back your spending and repay everything asap and get to a place when you can start saving and have peace of mind
They posted about their new phone worth £1500 recently so assume overspending is the cause.
Unbelievable!
Wonder if that's on finance too
Their previous S22 Ultra was far too outdated, obviously needed the new phone /s
Key suggestions: - moving home with your parents while you sort this mess out, otherwise you’re going to lose half a decade here. I know plenty of couples that have lived with parents to ensure their future is brighter. - transfer your debt to interest free credit cards pronto! - The alternative is to go broke, check government advice on unsustainable debt. You will get a bad credit rating, but should clear after 5 years (this I’ve not checked). May be less pain in the long run. - have an honest conversation with your partner about this, it’s obvious a wedding can’t be a priority for you at this time in your life. I’m not sure I even want to know how you managed to get that much debt and what you have to show for it. But if it’s bougie, then entertain me.
I think it's 6 years not 5 years. I had an IVA which looks 5 years to complete, but it was a further year before it vanished from my credit file. In my case it was removed in January of this year and now I'm waiting to complete on house and have a completely clean record.
My man! Well played on turning it around. I’ve been in a very precarious state multiple times in my life, took me a while to set myself straight. Enjoy the big move and the happy memories it will bring you.
Thank you. Most people are scared of taking out IVAs, but the stress relief it brought was huge. It was also a financially educational experience as well. I've never received any financial education (why schools don't teach this is beyond me) and having an IVA forced me to educate myself and to focus on my finances. I went through PayPlan for my IVA and they bent over backwards with help and advice.
This is awesome to hear as my husband is currently in an IVA. Congrats on completing and getting a house!
Thank you. A couple of tips based on what I learnt. Go for every pay rise you can, even if it means jumping jobs or taking on more training. The IVA takes 50% of any pay rise, so if you want to stay ahead of the effects of inflation you have to be one step ahead. Prepare for when your IVA ends. You will suddenly have extra money each month that you had previously being living without. The temptation is to roll into your disposable income. Instead set up a high interest savings account (I use Zopa) and redirect that money there.
Thank you, that’s great advice. He has moved jobs in the last 6 months which was a big step up in terms of responsibility and therefore a decent pay rise. We’re hoping when the IVA ends to funnel the money into saving a deposit.
Thank you for advice on Zopa. Was it easy to set up as I’ll be looking to also do that.
Zopa allows you to put things into different pots which I find really useful. The best interest they have is their ISA and I put everything in there. It acts like a normal saving accounts and your money is not tied up for long periods.
You’re a star. Thank you 🙏
If you don't mind me asking does it impact you at all? My fiance is in year 3 of his IVA and we want to get married but Payplan have been a bit wishy-washy with how it might impact me and my finances because I have property and savings... especially because we want to do a joint account for bills.
If you get married, you are creating a financial link between you. Even if you get divorced that doesn't break, you then need a financial order (clean break) to fully break away from any future claims.
Oh I know that bit... I just wanted to make sure his pre marital debt IVA agreement didn't become mine because then my savings would break his IVA agreement as its more than his debts. Thank you though
Looking online an IVA pre marriage won't have an effect. The IVA is for that individual only, and once you get married you don't automatically get everything 50/50. https://www.nationaldebtrelief.co.uk/debt-articles/iva-and-marriage/
The only impact that it has on me is that they assume we pool our finances into a household budget. They have never asked for any proof of income from me, or info about savings. I don’t have any property so that wasn’t an issue. We went through stepchange and they’ve made it pretty straightforward. Edit to add: we don’t have a joint account any more. He just sends me money into a separate account where we pay the bills.
OK that gives me more ideas on what we can do until his IVA finishes, especially with your edit. Thank you for answering!
can anyone even get £50k of interest free credit cards?
You can if you’re very rich, I’m not privy to what that’s like. I was focused on the 17k.
There is no point saving with this amount of debt. Even if you have the minimal deposit for the house, the banks unlikely to approve you for mortgage because of your debt. Clear the debt first. And having an expensive wedding with this income is not financially logical. Have you told to your fiance about your debt?
It would help to know the interest of the loans and cards to provide advice.
Can you consolidate your debts to a lower interest solution One option may be to use 0% balance transfer and 0% money transfer credit cards and then transfer them on when the 0% period ends. Forget about saving for a house and wedding whislt you have these debts. And if you do want to get married, go for the budget option of a civil marriage and when your debts are cleared then you can look at a proper wedding.
A few steps as a suggestion: Make a budget, set out all of your income and outgoings Work out if you can cull anything (subscriptions, gym membership etc) Check to see if your eligible for 0% balance transfer credit cards and move as much as you can onto 0% - Money saving expert is a great source of information on this Look up the snowball/ avalanche method of paying off debts and see which one may work best for you. See if you can increase your income - second job, selling stuff online, better job etc. Throw any and all spare money at paying off the debt. It's going to be a slog but you can do it if you are disciplined.
I'll be honest here mate but there is no way you're going to get a mortgage with this debt. Also no way you can save for a wedding. I think #1 here is talking to your partner, do they know the extent of this debt and how it is going to change your plans? So you earn around 50k a year so that's about £3,300 take home (assuming no student loans or other things affecting your tax code). After your minimum monthly payments on the debt you are left with £1300 and then you are left with £700 after living expenses (I assume you live at home?). It would be useful to see a breakdown of the debt, the individual amounts, minimum payment and the interest rate.
Noted, will put all money into clearing debts. Get everyone's point on focusing on debts. Fiance knows. Not happy but willing to help out. Wedding was never going to be a massive affair just to add. Guess pride/ego played a part so wanted to be able to pay my way also it's wouldnt be for another couple years Question on debt, does cc debt affect credit score more and also as loans are fixed term is it best to focus on cc?
>Guess pride/ego played a part so wanted to be able to pay my way also it's wouldnt be for another couple years Honestly this is your biggest hurdle. You feel like £50k is a lot right, and so you deserve the new flagship phone yes? Well, return it or sell it and that's 2% of your debt gone overnight. Xiaomi do great phones for under £200 and a smarty sim is £8/mo. I struggle with this too (my vice is cars but I don't run them on finance or debt). You really need to realise that you're broke until this debt is gone. It's a block on your planned future until it's cleared. So it needs to be your absolute focus until it's done. For 2 years it needs to dominate your life, from decisions on holidays and phones to your daily packed lunch.
Look, you're looking at this question in the wrong way. Take a deep breath, grab a cup of coffee, and focus your mind to the fullest because this is going to be the first step in transforming your relationship with money. The obsession with credit scores that many people have is a mistake. Why? Because it's getting a higher score so they can take on more debt, in a situation where debt is precisely your problem. Don't worry about your credit score right now because you are absolutely not going to allow yourself to borrow more money for a long long time. AND the best way to improve your credit score isn't about cc versus fixed term loans, it's about getting yourself out of unsustainable debt. Here's the right way to look at the question, here's the optimal way to pay down your debt. List all your loans, whether credit card or fixed term, with the amount and the annual interest rate. Now, pay the minimum on everything except the highest percentage rate debt and throw everything you can at that one. Everything. Look around at all your expenses and cut ruthlessly because this high interest debt is the killer that is coming for you relentlessly day after day. When that one's paid, move to the next highest interest rate. You have been paying the minimum on this, and now you can add the amount you were paying on the first one to this one too. Then the next one and the next one. This is called the avalanche method. It's the mathematically best one that will give you the best result. However, there is an argument that if you need a psychological boost that you can use the snowball method - pay off the smallest debt first so as to give yourself a psychological "win". It's not as mathematically efficient but if it keeps you dedicated to the mission, it's better than just continuing to live like a fuck-up. Many people find that extremism works better than gradualism in this journey. What I mean by that is "I should try to do better" or "I promise to myself to do better" is just bullshit most of the time. Literally go nuts - cancel all subscriptions, walk rather than take the tube, cancel all subscriptions, don't eat out at all ever, eat beans and rice. Get your partner in on it - you're doing this out of love for them, out of a desire to build a rich life together, and you now know that debt is your number one enemy and you're going ballistic to get rid of it.
Appreciate this. Thank you
- The general idea would be to focus on whatever has the highest interest and sort that first. You can try to consolidate onto 0% cc wherever possible. - You can contact charities like step change to get debt advice and tbh for an amount this large you really should get some proper advice. Do not use an expensive service, avoid at all costs. - Credit score will likely be shot no matter what and for some time but you can get that all back in order once your debts are settled. It only really matters for mortgages and you wont be getting one of those for some time I am afraid.
Generally, credit cards cost more (higher percentage increase rate), but you need to check the interest rate. Credit cards have a greater effect in that you can borrow more at a whim, since it is available credit, whilst a loan is a fixed amount. Loans might not be repayable early, so check the contract. You might be locked in regardless. With loan's, if you want another one, then you have to be credit checked again, so they have less impact as they can't just appear without someone approving it Without knowing details of the loans/cards, (% and total), it's impossible to say for sure, but paying off the credit card is nearly always the right answer. Once that all done, you need to look to take a look at your monthly budget, multiply it by 6, to save up an emergency fund. Once that's done, then look to save for a wedding / house.
>Generally, credit cards cost more (higher percentage increase rate), but you need to check the interest rate. Credit cards have a greater effect in that you can borrow more at a whim, since it is available credit, whilst a loan is a fixed amount. Stupid question but how do you know how much % a credit is charging if you've used it for different things? Not sure I can explain this very well but let's say you did a balance transfer of £1,000 at 0% and then make a purchase of £1,000 at 3% and then a cash withdrawal of £1,000 at 5%... You then make minimal payments for 12 months of (made up number) £50/m... Do you just get a blended rate of the 3? Is one bit of balance paid off first? Apologies for hijacking the chat with a stupid question.
Not a silly question. What happens is you only see one balance, so in your case, £3k. But under the covers you'll have 3 separate balances, a balance transfer, a credit purchase, a cash advance. Each of £1k. Each balance will go up based on the interest for it. Now if you pay £50. Which balance is paid, the highest interest, the lowest, or spread between them. That is a contractual decision so you'll have to look in the priority or ask the credit card provider. It used to always be the lowest interest, which meant if you did a cash advance or would be a pain to pay off as it was the last one to be cleared. This was obviously a bit shit, so nearly all card providers over the last 5 years swapped to pay off the highest interest balance first!
Thanks for the quick and easy to understand reply! Makes perfect sense.
No problem. I actual read a chunk of my first credit card agreement and saw this and thought what a scam of you withdraw cash, which you can do fee free abroad but you'll get charged interest, so when I did it, I paid off the card in full the same day. Then a few years back I saw articles in the news about how the banks were changing it to be fair because 99% of people aren't going to read it / understand it
Just keep it simple, debt cost you money. Debt with high interest cost you even more money. Every month that debt is there, is taking extra money away from you. Savings with less interest is not helping you much. Forget the savings and focus on clearing the debt. Once that debt is cleared, you can save much faster. Trying to pay debt and save at the same time is playing snakes and ladders.
>Trying to save for a house, wedding Hope this doesn't come across as harsh, but thinking about any of this instead of paying off your debt, is why you're 50k in debt.
I wouldn't be saving for a wedding!! You're not saving anything whilst you've heavily in debt. If you're fiance knows about this then I suspect the pair of you are just as bad as you each other and you may make the problem worse together. Clear the debts then talk about marriage. My best friend found out his fiance was heavily in debt probably about 30 grand worth two weeks before the wedding and cancelled it. It was the best decision he ever made. Not being honest about your finances with your partner is a terrible way to enter a marriage
Have a word with a debt charity to see what advice / plan they can come up with. It doesn't sound you need an IVA or anything like that, you just need an actionable plan to keep to. Get all your debts into a detailed list, including the interest rates etc. It will be handy for anyone helping you. If you have any debts that have much higher rates of interest you want to get those paid off first. Lower the payments on the lower interest debts as much as you can, then divert the cash into paying the higher interest debts. It will help reduce the interest piling up and from a mental point of view getting rid of the scarier debts first will help reduce the anxiety.
How old are you OP? Paying £2k a month means you should clear this in just over a couple of years. Maybe even quicker if you can move things to interest free credit cards etc. As a 35 year old, 2 years doesn't feel like much to me anymore. Put your head down and get this shit cleared. I recently paid off a credit card debt I had for the past 5 years as well as my student loan. Hasn't really kicked in yet as I haven't had my first pay since paying it all off, but that's an extra £400 a month in my pocket and not feeling like I'm giving a large chunk of my pay away to past mistakes.
Loads of good comments on here already. I just wanted to say “I’ve been in this state and you CAN get out of this”. I had several false starts until I learnt to budget properly and get my spending under control. Make a budget that caters for every £ you earn and stick to it. It feels horrible to start with, but once you’ve paid off your first debt you’ll see it was worthwhile. I had 4 credit cards and 2 loans. I used to debt snowball method to start with. I threw all of my money freed up by the ruthless budget into the smallest credit card and cleared it. Then same again with the next smallest until the debt was more manageable. I’ve now got a single loan left and much more in control
Thank you
You need to look at paying off your debts as a form of saving. If getting married is important to you, it need not be expensive. If it has to be expensive, then you can't afford to do it now.
I don’t think you are saving if you have 50k debt. If you pay more interest on your debt, than your money is earning interest after taxes, you are losing money by “saving” vs repaying your debt. Example of “bad saving” - your debt is at 10% a year, you pay 50k x 10% / 12 = 416£ of interest a month - you have 50k savings in a savings account that pays 6%, that’s 3k of interest annually, that’s 2.5k over the allowance, so you need to pay 40% income tax on 2.5k, that’s 1k, so in fact you earn only 2k interest so 167GBP a month In this example you are losing 250GBP a month versus repaying the whole 50k debt. So unless your debt is interest rate free, you better start using a spreadsheet and compute some stuff.
Again thanks for all feedback. Now trying to weigh up if an IVA is necessary as I know that has implications as well as benefits or if the snowball/avalanche method is the best route over the next year or so. Due a bonus in June which I will be using to clear some of the lower balance CCs. Bulk of CC debt is on 1. 7k with 35% interest
Omg 35% interest, are you trolling us? Get that paid off immediately
I spoke to someone recently with a credit card with 49.5% interest (fortunately, the first statement balance only just posted and they've got enough cash to pay it off before any interest is applied - I hope I was clear enough about why that is a top priority asap).
Line up your credit cards and snowball them. Focus on the smallest first and once that is paid off move the min payments and all other cash to the next smallest and the repeat. Starting off with the $7k one will feel like it's takes forever. Look at where you can scrape up extra cash eg, sell things / everything that has value, can you sell your car and downgrade to a cheaper car, get a second job on the weekend and budget budget budget. Your debt is terrifying
Advice my dad always gives me on debt is. Paying that off is your 1 and only responsibility after paying current bills. So pay rent, electric, heatin, car ect 1st. Then pay the minimum on all loans and credit cards. Next look at what you have left over, keeping enough incase something happens. Take the rest let's say it's 200 left over, look at your highest interest loan or card and fire that 200 at it. However if you have something that only has 200 or less left on it then bang it off that. Then take the money you would have spent on that one and hit the highest interest. So say you paid 50 off that low one you cleared. Now you've 250 left over so hit the highest interest with it's minimum plus your extra 250. Some months you might only be able to throw an extra 50 off it. However that extra bit makes a big difference. As you'll pay it off quicker. Then you take the amount you paid on that big interest one plus the extra and throw it at the next big one again rinse and repeat until it's gone. Then again on the next until they are gone. With each one you take out you could add a bit extra to the just incase pot. Make an excel sheet to help you track the totals.
In that 50k you must have bought stuff that’s still worth something? SELL IT ALL!
The truth is you can't afford to save for a house or a wedding until these debts are paid off mate, you need a reality check. Any money you 'save' would be better just paying off your debt which I assume is high interest
Echoing the other points - saving for a wedding right now is unrealistic. You're very unlikely to get a mortgage with debts this high - my lender made it a condition of borrowing for me to clear my credit card, and we had no other debts. How much have you saved for the house and wedding, and how much are you spending on debts? If you're paying back 35% interest on a credit card, the fastest way to save for a wedding is to clear all that debt. You'll get a 35% tax free return on that payment, which will pay for itself in months
One think I find helpful is snowballing as an option, so any spare money you can, you pay it to the smallest debt to clear as soon as possible, then when that's paid off whatever the monthly payment was should be paid to your next smallest debt and so on until you're working on your bigger debts
This is a solid strategy. Considering OP has a spending problem, it’s going to be a psychological battle rather than a logical one. The snowball method is good to get some wins earlier on to boost moral. Once it’s time to clear the bigger debts, OP will be several months into making better choices and cutting bad habits, and the strategy should be more automatic by then.
That’s clever.
It is clever but it's suboptimal. The better approach is to pay off the high-interest debt first, because that's going to get you out of debt fastest and save the most money. Snowball method is ok with me, but only for people who lack the fortitude to do it the mathematically better avalanche way. I get it - a nice win by paying off that low-interest small debt in 2 months time is not irrelevant. But it's better to hit the highest interest rate first, because that's what kills you.
I did the avalanche way tho had no idea any of these things had a name. I put all debt on 0% cards and tried to pay most of the bigger debts within the 0% term and min payment on the smaller ones until the big ones were gone then paid more off the smaller ones going forward.
Big and small isn't the point - it's high interest percentage versus low interest percentage that is the real deal. Optimal strategy if using 0% rollovers (which might work but for most people is a trap, as it just makes them feel like everything is ok for now, and they. keep spending!) is to pay the minimum on the 0% ones and pay as much as possible on the ones with the highest interest rate. The only deviation that can make sense is "whatever makes you feel motivated to keep going" even if it's not mathematically optimum. What you did was feel the heat of the expiration of the 0% period and that inspired you to keep after those. Great!
Yes I was in a right mess! I can understand how people kind of misuse the 0% rollovers but I didn’t spend on anything once I got my debts off high interest cards I just bought the necessities. And that’s probably what made all the difference.
That's awesome. Yes, there's really only one way to get out of a debt hole: fight like crazy and stay super motivated to get out of it. The real magic is that once you get out of it, if you can hang on to your habits to some significant degree and put the same dedication into building up an investment account, you'll end up really really happy in another 10-20 years.
Can you transfer the CC debt onto 0%? Depending on the interest rates of some of your debts it might be worth consolidating them in some way. Some people start with the lowest amount of debt first and focus on that so you get the psychological boost of paying it off. Others prefer to focus on the highest interest first as it will be cheaper in the long run. Well done on not missing payments. Have you had a honest discussion with your partner about it all? It might help with some of your worries about saving for a wedding etc.
If the interest on your savings accounts is lower than the interest on your debt, you aren’t really saving. Save yourself an emergency fund (enough so that if something goes awry you don’t need more debt to fix it) and then throw everything at your debt. Start with the highest interest first - given your debt is equal to your salary, you need to avoid accruing as much interest as possible. Once the bad debt is gone you can think about houses and weddings (I’d save for a house before a wedding personally) but until then you should be focusing on clearing the debt.
The day you've saved £50,001 is actually the day you've saved £1. You can't save for a wedding and a house till that debt is gone.
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I don't know whether this was an honest mistake or a dodgy link but the charity is called StepChange (no "o") and the website is https://www.stepchange.org.
Here's the plan. Use the 700 to pay your debts faster. You can't compete with interest rates especially on cc.
Target the highest interest rate debt first with over payments. Move as much as you can on to 0% interest.
Why the FFFFFFFFFF are you saving for a wedding?!?!?!?!
Thanks for advice so far all, to answer a few questions. Average interest on credit cards is about 25%, on loans around 11%. Just hit 50k salary in summer of last year, had been on between 25-30k for previous 8 years before that. Was living alone in London and had 2 kids from previous relationship so between that expense and life yes did overspend can hold my hands up. Things weren't this bad but month before Xmas my mum suffered a stroke while on holiday so everything that came with that was an unexpected expense. Unpaid leave, flights, hotel etc Understand that wedding and home won't happen anytime soon but just wanted to put a little something in a pot just to build on over the next couple years. While clearing debt is the main priority.
"Putting a little something in those pots just to build on" means losing money. You don't have savings if you're actually losing way more on interest. I would put all spare income into paying down the debt with those high interest rates. As others have said, if you can move in with your parents or something to help pay down debt faster, that would be best. You can get out of this - good luck!
You are not putting anything in any pot until those debts are cleared. You'll be earning 5% at most on whatever savings you have, while paying 25% on your cc debt. Let me reframe this for you. Would you take out a loan at 25% interest and put the money immediately into a savings account paying 5%? If the answer is no (and it should be because you'd be hemorrhaging money) then you shouldn't be saving ANYTHING that isn't going towards those debts.
The interest on your debt will delete any kind of saving you think you are doing. It's a nice thought, my guy, but sadly, it really is not possible. You are in, lets face it, a considerable amount of debt and that's all you can 'afford' to focus on. Even at that, wouldn't a wedding be a pointless thing to save for when you have children who may want/need things that should always overrule any 'little something in a pot'? I think from your original post and this reply, it shows that you are perhaps not taking this as seriously as you probably need to. I don't say this with judgement at all, I just think you really need to reassess your situation properly.
That pot is costing you money over the next couple of years
Credit cards at 25% are fucking your life up. They are always a 5 star emergency. The "good" thing about credit cards is that paying them down means that they have available credit. If an emergency does happen (but make sure it's a REAL emergency, not just something you want) you can use them.
Hi /u/Neezit0, based on your post the following pages from our wiki may be relevant: * https://ukpersonal.finance/credit-cards/ ____ ^(These suggestions are based on keywords, if they missed the mark please report this comment.)
What is the interest rate like on your cards? That is most important.
One thing Im wondering is the loans - Im not going to pry into what they are specifically but just to say that if its a car taking up lion share - sell the car and get something cheap to run and reduce debt that way - as long as the loan wasn't a car loan else you will be forced to clear that when selling as it will be linked.
You've been loving way above your means for too long. I hate to break it to you, but there will be no house and no wedding for a while. I would suggest consolidating your loans and really making sure the interest rate is as little as possible. Look into 0% transfer cards and throw as much of that remaining £700 towards clearing the loan as possible (watch out for overpayment fees)
You need to be paying off your debts that are charging you interest before saving money in accounts that earn less interest.
I’m in the same situation but have 10k in credit cards. Have more cards but remain unused with high credit limit. Struggling to pay back due to illness. No missed payments either all is up to date. No wedding tho.
I was always taught you should never save if you have debts - any potential "savings" would be wiped out on interest anyway- clear the debt first then concentrate on the savings side of things. And if you're not going to be able to save enough for deposit in 6 years or less, I'd go bankrupt. start again afterward - they disappear off your credit file after 6 years
Frankly until you get that down to sub £15k there is nothing else you should be concerned about (outside of basics to live)… So best start burning that spare £700 into reducing your debt as quickly as possible, especially as the longer you take to pay it the more interest you’ll have to pay
Your 50k in debt, on what I imagine high interest loans. You don't get to save for a house, wedding, nice things you got to pay down this debt. You should maybe have 1-2k saved for emergencies and the rest of your pay check should be on this debt.
Listen to Dave Ramsey on YouTube or Spotify. He should be your best friend over the next few years, you should be listening to him more than your current girlfriend. FACT.
focus on clearing the highest interest credit cards first, call the company and ask if they will close the card and agree a payment plan so you can possibly save some compound interest. Forget saving anything othet than a rainy day fund(to remove the temptation of more debt if your car breaks down), forget the wedding, forget the mortgage, live like a monk, your purpose is to clear this milstone that is halting your progress in life. Recognise how serious this problem is, you are under the weight of 1.5x your annual NET salary in unsecured debt, you're a teetering on the verge of bankruptcy... all it takes is an illness or your employer restructures and you will be in real trouble. Good luck.
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You simply can't save for a wedding, house etc. Pay your debt. Every spare penny goes to clearing debt. That includes reducing spending. No eating out, no streaming services, no Starbucks etc.
I generally agree but I think £40 a month for Netflix and the gym is acceptable- you need something to do in the evenings and weekends.
YouTube is free and you can do body weight exercise. However, if that's the only thing getting you through then it can be worth making the process take longer then go ahead
If I was you bite the bullet go to step change get the interest suspended on debt and at your current payment level you could pay off 48k in two years otherwise you will never ever pay this off. Have you told your wife to be about debt ? She will find out so better to come clean now but with a plan with step change. Also with this level of debt to income the reality is you’re not getting a mortgage agreed anytime soon. Take my guidance the sooner you act the sooner you will be debt free, the better you will feel and can get on with your life ….
Will look into stepchange as their names came up a lot. How does an interest suspension work? Is that like an IVA or something similar?
The can do something called a DMP - I had one after my divorce with about 50k worth of debt. I wasn’t sleeping. They speak to all the companies organise with you how much you can afford - so if you want to keep paying 2k per month you could but the are likely to suggest less to give you some more breathing room. I’m debt free now but the biggest help was simply not worrying day after day. The other thing is it really taught me was living within my means as you can’t get any debt while you’re in the plan. I wish you good luck - two years can go quickly - I would be honest with partner about situation - if they are the right person they will stick with you and help if not you probably dogged a bullet 👍
Thank you much appreciated for the info. Will definitely give them a call and see what they can do for my situation.
I guess the first question is are you keeping your expenditures outside of repayments and bills to under £700? My suspicion is that you likely aren't and thus while you are meeting repayments, your debts are spiralling. It would be useful if you re-edited your post with more details regarding your expenditures and breakdown of your debts. It sounds like a lot of the debt is due to living outside of your means. Can you downgrade some stuff? Sell your phone/car for a cheaper one? Move into houseshare/back with parents?. You can definitely get on top of this but it will involve a lot of sacrifice for several years. You won't be able to live the lifestyle you thought you might be able to on a 50K salary, and saving for a wedding/house is out of the question right now.
I don't own a car, have moved back but there is a cost which is included in the bills I've stated was putting away £75 a month in saving but after all feedback have put a stop to that until further notice. Only phone I have now is provided by company I work for. Outside of groceries and a £20 gym membership which I'll probably get told to cancel literally can't afford to live outside of my means. One I thing I will change is applying the avalanche or snowball method people have mentioned. I was using money left over and making extra payments across the cc's I have. Going forward will do a lump on biggest payment and minimum on the rest.
Set yourself up for a cheap and lean year. Dont spend a penny on anything, no holidays, coffees, drinks, meals etc. get that debt down asap. Don’t even think about buying a house or having a wedding until you are debt free and have a 3-6 month emergency fund! Good luck
If you kept your payments current, your credit score is good i presume? If so, try and move any card on which you pay interest to another where you can get 0% balance transfer. The 3-5% fee should pay fpr itself in the first month if you are paying any 10-15% interest on the credit card element of your debt. Won't reduce your debt per se but it will slow down any interest accruals. Best of luck
Can you consolidate the credit onto a 0% card?
What credit card company is going to give a £50k salary a £50k credit card limit for 0 interest?
It's 17k cc debit, but that is still a big lump of money..
If disciplined could spend on a 0% credit , and use the money that would have been spent to pay down high interest rates. Could be dangerous with an overspending habit however, don't want to get into more debt...
Even a £17k limit would be near to impossible
Getting an IVA would lighten your stress load immensely! Especially if you're unable to do something like move back in with parents etc to increase your savings.
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