# Married Couple, 3 kids, too much debt



## ddlo (15 Feb 2011)

Age:
44
Spouse’s/Partner's age:
50

Annual gross income from employment or profession:
E70,400
Annual gross income spouse:
Self Employed in Construction, erratic, no social welfare

Type of employment:
Self: private sector employee
Spouse: Self employed

Expenditure pattern:
Constantly struggling

Rough estimate of value of home
E400,000
Mortgage on home
E304,000 - 19 years left.
Mortgage provider:
Ulster Bank
Type of mortgage: Tracker, interest only, fixed rate
Tracker
Interest rate
2.5%

Other borrowings – car loans/personal loans etc
Self: Credit Union €54,000
Spouse: Credit Union €34,000
Spouse: Ulster Bank Overdraft €14,000
Credit Card: Halifax €6000 (this is now a loan and repaying €220 per month @ 10%)
Credit Card: MBNA €15000 (interest rate 12%)

Do you pay off your full credit card balance each month?
No

Savings and investments:
€4000 in credit union, about €3500 saved for kids communions, confirmations, emergencies

Do you have a pension scheme?
Yes, I pay E130pm into company pension scheme, topped up by 260 by employer.
Spouse froze his pension last year.


Do you own any investment or other property?
No.

Ages of children:
5, 7, 10

Life insurance:
Yes.

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

We went to MABS today and they agreed to write to our creditors.  Is there anyway we can get out of this ourselves?
We are not in arrears with utilities, or with our creditors, but feel there is no wriggle room in emergencies and the money does not seem to be there at the end of the month. 
Thanks.


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## gm88 (15 Feb 2011)

Just trying to get my head around your figures but how did you manage to get 88000 euro from a credit union with only 4000 euro in savings.


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## ontour (15 Feb 2011)

Are there any assets behind the €123,000 of personal debt?

Providing details of monthly outgoings might help in advising whether your current priorities are correct or there are any opportunities for savings.


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## ddlo (15 Feb 2011)

Don't know really.  We got it in 2007 as a consolidation of other loans but unfortunately we let the credit cards run up again.  But my spouses credit union loan of 30k would have been given on his savings at the time, which they have since taken in as payment off the loan.


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## ddlo (15 Feb 2011)

We are paying the principal and interest on the mortgage, its €1525 per month.  Monthly outgoings are as follows:
Food: €500
Petrol, me: €80
Diesel, spouse: €80
Credit Union, Spouse: €450 (Childrens allowance pays this)
Credit Union, Self: €540
Halifax: €225
MBNA: €300
All car, home insurance, nct, maintenance etc paid in full, not spread across year
Electricity: €80-€90
Oil: €130
Kids to Cinema: €50
Mortgage Protection and Life Assurance: €160
Telephone: €55, including broadband
Mobile: €60
thats about it i reckon. We used to give to charity etc but all that has been cancelled


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## niceoneted (15 Feb 2011)

What is the net take home pay?
Can you look to go interest only on the mortgage for 12/24 months? 
Start a spending diary? See where all money going?
Mobile phones can be cut and also there are cheaper deals on LL with broadband. ESB if the figure you give is per month ie 160/180 per bil monthly bill this can be seriously reduced. turn off all electric stuff not in use, lights, tvs things on standby. get LED or CFL bulbs in. 
Cut up the credit cards today? Have you requested MBNA to freeze the balance and commit to pay a specific amount a month?
Have you any childcare costs?


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## Bronte (16 Feb 2011)

Well done on going to mabs.  They are well used to helping people in your situation. What you can do is go through every penny of expenditure line by line and make cuts. As previous poster advised you need to do a spending diary.  Unless you list exactly all your outgoings it's hard to point out the savings that can be made.  

You need to cut out altogether things like trips to the cinema.  Would you not prefer to use the 3500 saved for communions etc to pay down your highest (by interest rate) debt.  

Why the costs of two cars when only one is working.  Would selling the most valuable car get you out of some debt.


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## horusd (16 Feb 2011)

Budget spreadhsheet might help too. Here's one I use from AAM.

http://www.askaboutmoney.com/showthread.php?t=145557&highlight=budget+spreadsheet


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## alaskaonline (16 Feb 2011)

> Electricity: €80-€90
> Oil: €130



considering you pay for heating extra, ESB should definetely be cut. Did you look at their competitors to maybe avail of a discount? Either way, ESB per month shouldn't be more than €50-€60.



> Kids to Cinema: €50


 scrap. As hard as it sounds but if the money is tight you can't go to the Cinema besides € 50 a month is a lot. The family ticket (two adults and three kids) cost €24 so going twice a month is not a necessity.



> Telephone: €55, including broadband


 is this just the standing charge or actual usage i.e. phone calls? As previous poster suggested look around for better offers. I pay € 50 for Phone, TV & Broadband a month.



> Mobile: €60


 again look for offers. Pretty much all phone operators offer good deals i.e. free texts to any network, free calls within x amount of time etc. That should help you reduce the € 60 a bit.

If you have savings try to pay of your loans. It looks difficult with your numbers but it's the loans that give you a headache not necessarily the mortgage. Could you guys maybe combine all loans (incl. and especially the CC one) into one loan and pay it off? That way one interest rate applies and spread over a couple of years might reduce the monthly repayments (even if in a long run you're paying longer off).

Not sure if Credit Union or a bank will go down the route with you because the loans are quite high but worth a shot.


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## ddlo (16 Feb 2011)

Thanks for your replies.  There is only one mobile and that is on contract til june, then we will go pay-as-you-go and limit to 20 per month.  The cinema for 2 ads 3 kids in our local cinema is €42.  I am with bord gais and do switch off appliances, cfl bulbs all that.  We need 2 cars as we have to get kids to and from school, we are not within walking distance and no buses.  we were thinking of putting both up for sale and see which one sells first and then buy a replacement for half what we get.  But we are worried we would be buying trouble with car repairs etc.  I have not seen cheaper for ll w broadband than what i am on with vodafone.  The combi phone,tv, broadband is not in area.  Someone asked last night if these loans were secured on anything and they are not. As for MABS, I thought they would have more experience of people in similar situation, as that was what I had been led to believe by similar threads.  But she actually looked appalled at our figures and made us feel really bad about things.  I got the impression she never came across anything like it before.  The net take home pay is €3800 as commuter ticket and pension is taken at source, my job pays our VHI which is great.  I don't think anyone will entertain us to consolidate the loans.  I want to do this myself, would anyone recommend clearing the halifax as quickly as possible, then move to MBNA, etc?


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## niceoneted (16 Feb 2011)

ddlo, I am with Vodafone for LL and BB and I pay 38 a month. Granted I get a small discount for having bill phone with them. 
Something is eating at the ESB so you need to pinpoint that.


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## truthseeker (16 Feb 2011)

Your house is worth 400000 and there is 304000 left on the mortgage and you have 123000 of unsecured personal debt. 

Would you not sell the house, pay off the mortgage, use whats left against the personal debt and then rent somewhere (nearer the schools or work to cut down commute) and get rid of the last of the personal debt at a managable rate?

On your salary plus childrens allowance you have enough to live well on while renting and clearing remaining debt for a year or two.

It takes you out of the immediate situation and gets you back to a position where you can manage your outgoings and save easily.

I think if you try to continue as you are you are just going to end up struggling for a long long time and to be honest - life is too short.


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## Sandals (16 Feb 2011)

ddlo said:


> Kids to Cinema: €50



Cinema in Galway city and oranmore for two adults and two kids, one infant €6 (kid €3 each, adult free). We bring own drinks, snacks etc. Fair enough its the cine 12.30 morning sat/sun.....

Why not do DVD night etc,


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## dereko1969 (16 Feb 2011)

The reason the MABS person looked amazed is because you have a *huge* amount of unsecured debt for which you have nothing to show and don't seem to realise how bad things are.

You need to really re-examine your spending habits and grasp the fact that you are in serious financial trouble. Saving for communion is stupid with your level of debt - you are not in the space where you can have frivolous things like this eating up money when you are so much in debt.

You don't need 2 cars if you have a commuter ticket for work you just need to arrange your life better, at the very least you have to sell one of the cars and buy a cheaper one.

You also need to cut up your credit cards immediately.

You need to see what you have in the house that can be sold to give you some extra money. 

How certain are you of the "value" of your house? What's your evidence for this?


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## niceoneted (16 Feb 2011)

A lot of people say clear the debt with the highest interest first but depending on the various balances this may not always be the best or easiest as you might neglect other debts. 
I would say for the  time being use 2500/3000 of the saved emergency fund to pay towards the halifax loan, but before you do write to MBNA and try get them to freeze the balance. 
If you can commute to work and sell a car do so. 
The idea of selling the house and clearing all debt is wise. 
I am thinking do you want to be clearing all this debt for the next number of years. 
You could rent and save aggressively and end up buying somewhere with large amount of cash. 
Your kids are young and they may want to go to college and you are in the older category of parent for young kids ( phrasing this badly but don't want to offend you).


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## Greta (17 Feb 2011)

niceoneted said:


> The idea of selling the house and clearing all debt is wise.
> I am thinking do you want to be clearing all this debt for the next number of years.
> You could rent and save aggressively and end up buying somewhere with large amount of cash.



I don't think the kind of person who runs up debts, takes out a consolidation loan, then runs up more debts again with nothing to show for it and no clear idea where the money went is the kind to "save aggressively". 

My fear is that if OP sells their house and pays off debt, they will then run up more debt, but they won't have a house anymore and might never buy a house again. It might be more motivating to solve the debt problems for the sake of keeping the family home. Once that is gone, the motivation may be gone too.

Moving with three children is stressful, not to mention that the house may not be worth as much as OP thinks and the rent is likely to be higher than the interest element of the mortgage payments.

I personally think that OP's best chance is to keep the house, get a grip on their spending and work hard at paying down personal debt.


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## Bronte (17 Feb 2011)

ddlo said:


> . Someone asked last night if these loans were secured on anything and they are not.
> 
> As for MABS, I thought they would have more experience of people in similar situation,
> 
> ...


 
It doesn't matter if the loans are secured or not.  Particularly as you have a job, and equity in your house so banks are less likely to negotiate with you.  

In what way did you not find Mabs to be of use as you mentioned trying to 'do it yourself.'

As you already consolidated once it's not to be recommended a second time as it didn't work.  In any case as you rightly point out no banking institution is likely to allow consolidation now.  

Can you tell us what loans are being sorted by Mabs, what the interest rate is exactly on each loan and the term, and whether there are penalties to repay early before answering which loan to pay back first.  I would always pay back the highest cost loan first.  

Why do you have a commuter ticket and two cars.


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## nacho_libre (17 Feb 2011)

Greta said:


> I personally think that OP's best chance is to keep the house, get a grip on their spending and work hard at paying down personal debt.



I think we would all prefer this Greta, but HOW would you go about doing 
it?

I would not rule out any options, a house is not much good to you if you 
can't sleep at night. It's this attitude towards houses which has caused a 
lot of grief for a lot of people and will continue to do so.

To the OP, can you use your house/assets to generate any extra income?
Maybe rent a room, (not ideal with kids but maybe a relative who is 
currently renting might be an option to move in and help out.).

Is there any part of your property that you could let out as studio/office 
space? 

Are there any assets you can sell to help clear the crippling credit card debts?

Would it be an option to rent out your house and move into cheaper 
rented accommodation and save the difference?

Is it an option for your partner to look for work outside of Ireland, 
possibly the UK and return home at weekends (temporarily of course)?

I'm just making suggestions here, some might seem outrageous but once you start making headway on these debts you will feel a lot better.


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## nediaaa (17 Feb 2011)

what cars do you have type/year/value.
Yuo are in an emergency situation.
NO cinema
You have a lot put by for confirmations/communion but you are in a situation now.
What was all the borrowing for?
I would sell the house and rent.


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## ontour (17 Feb 2011)

€125k in personal debt is huge, it is three times your total net income.  Assuming an interest rate averaging about 10%, it is costing you €1,000 a month to service the interest on your personal loans.  Add this to the mortgage payment, which is likely to rise, and you are left with €1200.  This need to cover the household expenditure for a family of 5 before you start paying off the principal on the personal loans.  While it is very important to ensure that you eradicate any unnecessary spending, that alone will not solve your problems.

The most practical way to address the situation is to increase earnings whether it be in the construction sector or another area.  It is unlikely that your partner will find a job doing what they want to be doing but all additional income to offset against the debt will bring you closer to getting control of your finances again.


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## Greta (17 Feb 2011)

nacho_libre said:


> I think we would all prefer this Greta, but HOW would you go about doing
> it?



I would start keeping a spending diary as a priority to track down all expenditure, then cut down to the bone, looking for ways to enjoy life that are free or very low cost - like walks in the park, rather than cinema trips etc. Would also look for ways to make extra money, rent a room that you suggested is a good idea, or taking in foreign students over the summer. I would concentrate on paying down debts, starting with the highest interest rate, possibly putting the mortgage on interest only for a while, to generate extra cash towards clearing unsecured debt.

I thinks it's more viable for OP to (eventually) sort out their finances than selling the house, because some people just don't seem able to SAVE (for themselves). It's one thing to make DEBT repayments, as this has got to be done, but, once debt is repaid, they'll start running it up again, rather than saving for themselves.

To me the sale of their house to pay off the loans seems rather like consolidating the loans, which didn't work for them - they consolidated, then run up more debts, finding themselves in the present situation. If they sell the house and pay off debts, my worry is, rather than saving hard, they'll start spending hard and maybe even run up more debts 

I think OP's most serious problem is their financial attitude and that has got to change NOW, not relying on quick fix solutions like selling the house or consolidating again.

Besides, OP's estimate of the value of their house may well be too optimistic, so the solution of sell the house and pay off all debts may simply not be available to them.


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## cairn (17 Feb 2011)

I think we're being a bit negative here, the first thing to say is congratulations for your current budgeting, to be up to date on all of the bills AND paying off the mortgage including the principal is very impressive. OK ye have over borrowed in the past but you can only deal with now and you're doing well. 

The cinema trip seems to be your only social expenditure and under no circumstances shoud you cut it out. Simialrly the emergency money you have put aside is necessary and prudent, those yearly bills will come around again soonish. 

You have a very good salary with pension and benefits, certianly enough for a family to live on comfortably. The issue is the debt. I'd work on the MBNA and get that cleared, if you get that done you'll free up €300 per month which you can then put towards the other debts. You'll start a type of snowball effect where every month the situation gets a little better and you get a bit more relaxed. 

Maybe your spouse could replace his car with an older van, useful for whatever work he gets and much cheaper to run. If there are a few K to be got from the sale of the van put this towards MBNA and you're up and running. 

Your spouse probably needs to review their own goals / career be it working in the home, part time work or career change, trying to make construciton pay is probably only going to lead to frustration. 

You do have a lot of debt but there's a good salary there and the situation is manageable and you're clearly quite disciplined (now).


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## wbbs (17 Feb 2011)

OP, just wondering what caused the unsecured debt.  A lot of people seem to be suggesting that it was just overspending which maybe it was, or was it due to the downturn in your husbands business.   Were the loans and credit cards used to subsidise the business or were they other reasons.   It doesnt really matter now as you have the debt anyway but it might clarify if this is a result of a lack of money management skills which needs to be fixed or is it a one off as a result of the economy position, it might change the advice you are getting.


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