# Thinking of consolidating our debts



## Annabell (9 Apr 2008)

*Age: *35*
Spouse’s/Partner's age:* 33*

Annual gross income from employment or profession: *€49,560
*Annual gross income of spouse: *€63k basic + c. €12k bonus*

Type of employment: *Private sector* 

In general are you spending more than you earn or are you saving? *
*Spending more than saving*
*Rough estimate of value of home: *€460,000*
Amount outstanding on your mortgage: *€348,000
*What interest rate are you paying? 4.6%

Other borrowings – *Aloan of 40,000 at 365 per month
*Do you pay off your full credit card balance each month?* No*
Savings: *€20,000 in  shares (cannot be cashed in for 2 years)*

Do you have a pension scheme? *Yes

*Do you own any investment or other property? *Yes

*Ages of children: *2 (3yrs, and 9.5mths)

*Life insurance: *Dec term on mortgage

*What specific question do you have or what issues are of concern to you? *

Between paying childcare, mortgage, visa cards and loans we have nothing left at the end of the month and I mean nothing.
Last year we moved house and kept our old house as an investment. We also had a new baby. We dont have a lavish lifestyle but still and all we ran up 2 credit cards to 9000 euro(between them) and have a overdraft of 7000. On top of this we have a credit union loan of around 13,000. All in all we pay out about 800 euros to finance this every month. As there is a shortfall between the rental property and what we rent we take in, we pay about 200 euro a month into the rental property. Therefore we are up to 1000 a month.
At the moment we are thinking of consolidating our debts and getting a personal loan to cover everything it could cost up to 700 a month depending on what we borrow 20,000-40,000. This would free up a bit of cash every month. BUT what I am afraid of is that we would fall into the same trap again run up the credit cards etc and then we would be worse off than ever.
Any advice would be greatly received. Has anyone being in a similar situation? Does anyone find with 2 kids in childcare that it is hard to get by or are we just doing something very wrong?
Thanks


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## Mr DT (10 Apr 2008)

*Re: Help*

You need to understand where all your money is going and budget so that you stay within you means. When you still down and think about it you will be amazed how much money goes on particular things each month.

You are not alone, I know many friends that earn simular amounts and are struggling so don't panic, just do the sums and stick with a budget each month. At least you have pulled you head out of the sand and realised you need to do something.

Would selling your other property not make life easier? Why have the worry with money if by selling this you would have more cash? You have pension schemes so you are planing for the future which is great, but if you want to live life now why burdon yourself with a rental property that doesn't pay its way? 

Sale the property, pay the capital gains tax, pay off your loan. (Assuming the selling price you get would enable you to do this). You could always get back in to property at a diffrent stage of life.


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## michaelm (10 Apr 2008)

*Re: Help*



Mr DT said:


> Sale the property, pay the capital gains tax, pay off your loan. (Assuming the selling price you get would enable you to do this).


This is what I would do also - simplify my situation.


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## creme egg (10 Apr 2008)

Hi Annabell.

I was in a similar situation as you are now,  as in my partner and I earn decent money, but never seemed to have anything left at the end of the month.  I read over a lot of old posts here, and one person gave advise that was great for me, and now I am in a much better situation.

They firstly said to keep a diary of everything you spend in a week, and I mean everything, from food shopping, to the paper. Everything needs to be written down.    This will probably surprise you with how much impulse buying you actually do.  Second is to work out a daily budget and stick to this.

My budget was €15 per day (after all bills / mortgage etc were taken out).  So the day I got paid I would take out  €465 in 10's and 5's, this had to do me for the month. I also had a few coin bags (I got really into the swing of it), so anything I did not spend that day would go into those bags, and I would start fresh the following day with my €15.  Of course there are times when you need to spend more than this, and this is where the coin bags / saved notes come in handy, so every month you should be always within budget.

For me this worked, and now I am in a much better position.  I still like to use this model, but have allowed myself €20 per day, which when I bring in my lunch to work, I don't even touch, and within a week or two I have a hundred quid sitting in my drawer.

Like you say, I would be afraid that if you consolidated all of your loans, you might be in a worse situation in a years time.

Maybe try the above, and see how you get on, and hopefully you will be able to start with the loans with the highest interest rate and pay them off and work through the rest.

Best of luck with the budgeting.

creme egg


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## Complainer (19 Apr 2008)

If you can sell the second property within 12 months of the date it was first rented, you will have no capital gains tax liability. If you go beyond 12 months, you will have a CGT liability.


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## MortgageGuy (28 Apr 2008)

buy a small notebook, every time you spend money write it down, to the penny, then look at your notebook and your spouses notebook.

observing what you earn and your mortgage etc. I think its clear, even to you that you may be living beyond your means or spending more than required, either way, one of those statements is likely true. 

If you consolidate your debt you may have to break a fixed rate (in your post it wasn't mentioned) and rates are on the rise so it may not make sense, you have a second property, is it rented out or a holiday home? you need to stack up the benefit of that versus what it is costing. 

I suggest you make a comprehensive expenditure spreadsheet and get rid of the things you don't need to do and then look at what you do need to have/do. then find a way to make your money meet that lifestyle. a financial advisor or accountant would be able to help, if you don't have one it would be worthwhile getting one and then meeting up from time to time to make sure you stay on track.


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