Not in arrears yet but struggling

I know that I am not the worst case scenario from reading other case studies but, from my calculations, maintaining the current mortgage will become unsustainable in a few years. We can struggle on the few years, or ideally, see how we can improve our situation. The main balancing act is trading off worktime with childcare (see below). I am, by nature a worrier and this is bothering me greatly.

Income details
Net monthly (i.e. after tax) Income self: Public Service €2,200 pm
Income history: I am on a 4 day week, my spouse on a 3 day week. This allows us to afford the childcare costs by only requiring it for 2 days a week. There is no chance of being moved back to FT in the near future anyway.

Net monthly income partner/spouse: Public Service €2,000 pm spouse
Amount of child benefit received: €390

Personal circumstances
Two adult family
Do you need a car for work or do you use public transport? Car (2), live in rural area and commute to nearest train/bus station
Number of children 0- 2 years old:1
Number of 4 - 11 years old: 2
Monthly childcare costs: €750
Petrol/Diesel costs: €300


Home loan
Lender: AIB
Amount outstanding: €320,000
Value of home: €250,000
Interest rate: SVR
Monthly repayment: €1,790
Amount in arrears: none, we had our first year as interest only. We are 4 years into a 27 year mortgage (maximum term available)


Credit Union
Amount of shares: €5,000
Amount of loan outstanding: €4,000
Monthly repayment: €200
Term left: 3 years


Other loans and creditors - delete those which don't apply to you
Credit Card - €1,600
Credit Card - 10% of balance (started that this month)

Car Loan: HP arrangement €115 pm for next two years followed by option to pay off balance €4,000 or get another car etc

Healthcare: €130 pm

Other savings and investments: €2,000

Do you expect any lump sums in the medium term future?
No

How important is retaining the family home to you?
Which of the following best describes your situation?
I really want to keep the family home even if it means having a large mortgage and negative equity for years to come.


Any other relevant information

What is your preferred realistic outcome?
Find a way of cutting down mortgage repayments as they are eating into our savings, which I calculate will be gone in the next three years at current rate of spending. We have cut our spending to a minimum, no going out, hols only with relatives down the country etc. At present we are overspending per month by approx €200

At a glance, clear the CU load with the shares, that leaves you a balance of 1000, and frees up 200 per month for a loan payment that you no longer need to make.

Personally I would take the 1000 left over and throw it at the credit card, this will leave you with a balance of 600 approx and 360 per month to play around with. 2 months and the credit card is clear and you can start saving say 200 per month and gives you 160 approx to put elsewhere

Agree with G7979. You do need to at leaast get rid of the CC debt and the CU loan. No logic in having 5K in shares and struggling to pay a 4K loan. This has to be your starting off point. You will still have a 2K rainy day fund and now you have extra net income also. If you want to keep the house, you will need to sustain the mortgage payments. There is no point in looking for a payment reduction, unless your net income position is likely to increase in the short term.

Thanks G7979 much appreciated, I have an issue with having 'money' available in case of emergency but what you says makes perfect sense.

Thanks also 44Brendan, are there no options available to release the pressure of the mortgage? If we could stretch to making an one extra payment a year off the mortgage principal would that affect our monthly payments or just the length of the loan (apologies if dumb question!) As each year goes on the expense for the kids increases and that's what is worrying me.

Re kids expenses. You are in the "good times" now. Wait until 3rd level and then be prepared for some major shocks!!
I'm not sure why you would want to pay extra off the mortgage. This might well reduce the term, but you would be far better off putting these funds aside to meet contingencies. You are perfectly entitled to make any extra payments, but why would you want to stretch yourself further to reduce the mortgage term by a year or 2?

I completely agree with you about the rainy day fund, I was in the same situation myself about 18 months ago, a good friend sat me down and said do you realise you can clear X debts in 4 months and free up all your extra cash?? Not to mention the interest saved, its much better in my pocket than the banks!

In your case you have the means to clear 2 debts in 8 weeks, and seeing the account empty will give you the kick up the butt to save and not squander the savings each month.

It was about 4 months for me and I was a little tense fearing some unexpected expense but it was worth it in the end.

A couple of things I do now that mean things are much easier

I get paid weekly and every week I put 10 euro into the gas and electricity (I set up a SO with my online banking) I havent had a bill in about 18 months, I let it run over the summer and have the credit built up for the winter months when usage is a little higher.

I put 25 euro of petrol each week into the car, its never full but its never empty, again no stress wondering if you will make it to payday with the light on! I also needed my car to get to work each day and this was a problem for me.

I also start saving for Christmas each year, there is a popular savings plan, I think its just called the 52 week plan, week 1 you save 1 euro, week 2 save 2 euro etc, only I do it backwards - week 1 save 52 euro etc, less money to find each week and it gets easier rather than harder - might help you save for Christmas with small kids to think about.

These few little things make it easier.

You should start putting a little aside for the balloon payment for the car, is there anyway to overpay this and kill another debt quicker? HP doesnt usually allow for this, but check your contract. I am guessing the new car situation will involve monthly payments again - I wouldnt do this - own the car outright and drive it until it is no longer economical to do so (repairs maintenance etc)

My friend said it very well when she said to me my situation was manageable, but I was just fatigued from managing it all - I couldnt see the wood for the trees.

I should also say that adding up the income and expenditure you have listed here you have 1145 per month unaccounted for - if you dont know what you are spending this on you need to find out and fast. The old ways are the best - keep a spending diary both of you for a couple of months you might be surprised at what it reveals

As others have said, get rid of the CC debt and CU loan out of the way, they are small anyway.
Net income ( after all taxes and pension contributions etc) is €4,200 a month. ( €50,400 a year ). Mortgage is €1,790 per month. Obviously childcare is a big expense @ 750 a month. That still leaves €1,660 per month for everything else eg food, transportation etc. Should be possible to survive on that? Maybe have a look around to see if there is a cheaper childminder / neighbour / relative you can share childminding duties with? One of you works a 4 day week and the other works a 3 day week. That leaves a lot of days "free". I know someone who works nights and they share childminding etc - works well for both parties. Maybe sell one car? I know a few families who done this and they survive using public transport, cycling etc instead of the 2nd car. One 2nd earner I know uses a moped instead of a car. G7979's idea of a spending diary or spreadsheet is a good one. Best of luck anyway.

Thanks to you all, its put a bit of perspective on it tbh. I will take up the idea of a spending diary, I have been doing my best ostrich impression and avoiding looking at the bank account as I have a mini panic attack every time I do.

The €1,660 sounds like a ridiculous amount - I will revisit with the spending diary and see what I am spending this on and whatelse we can shave off (phone/mobile bills etc). We have recently moved away from oil to cut down the costs of heating the house so am hoping that makes a difference.

Selling one car isnt an option unfortunately as our nearest public transport is a 15 min drive away and we work in different directions so we cant even share.

Again, your replies are much appreciated.

Gar72 said:

I am, by nature a worrier and this is bothering me greatly.

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I agree with all the advice on what to do in relation to your debts.

In relation to the worry problem, you need to relax a bit, you both have permanent jobs, that is like gold in your hands. Currently your youngest must be the biggest childcare cost, that will only be for another couple of years. Once all 3 kids are in full time education the costs of childcare will come down. Your incomes will increase, and will further increase as you both will be able to go back working more hours.

You look in fine shape, and very quickly, if you take the advice on here, you will be on the right path, not paying any interest, have cut your spending, and started saving. 3 young kids, 2 jobs, a mortgage, that's the worst part, but steadliy it will get easier.

Gar72 said:

We can struggle on the few years, or ideally, see how we can improve our situation.

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Gar72 said:

I am, by nature a worrier and this is bothering me greatly.

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Do not worry, as others have said. As someone else said, you are in fine shape. Perhaps if you want more disposable income you could look in to one of you working a 5 day week, instead of both of you working shorter weeks ( 3 + 4 days at present) ? You should not really be struggling on a joint take home income of over fifty grand a year, after taxation and pension contributions. You and your spouse have permanent public sector jobs as well so do not need to worry about budgeting for a rainy day as much as some other people. You either need to budget your available income better ( get a spending diary / spreadsheet as suggested already ) or else increase your income somehow ( work longer hours, change career, or perhaps take in student lodger / rent a room ).