Single mother needs to clear loans

Personal details

Age: 42
Spouse's age: N/A on my own
Number and age of children: 2 children 3 and 6


Income and expenditure
Annual gross income from employment or profession: 102k
Annual gross income of spouse/partner: N/A not paying any maintenance

Monthly take-home pay: 5k (take 1 day unpaid parental leave weekly - try use annual leave instead but running out of A/L)

Type of employment - e.g. Employee or self-employed. Employee in private company


In general are you:
Spending more than I earn by about 1.5-2k per month.


Summary of Assets and Liabilities
Family home value: 550k
Mortgage on family home: 195k
Net equity: 355k

Cash:
Defined Contribution pension fund: current value: 26,500 - I contribute E425 per month and my employer contributes E680pm
Company shares : about 2k worth (stock very low at the moment at risk of being delisted from market)
Buy to Let Property value: N/A
Buy to let Mortgage: N/A


Family home mortgage information
Lender: Permanent TSB (ex UB customer)
Interest rate: 2.35% fixed till Sept 2027

Remaining term: 23 years
Monthly repayment: E918

Other borrowings – car loans/personal loans etc

Do you pay off your full credit card balance each month? yes (x2 credit cards)

x2 loans:
Avant money: 22,890 left to pay - E607 per month
AIB: 3, 300 left to pay - E570 per month


Pension information

Value of pension fund: 26,500

Buy to let properties - none
Other savings and investments - none


Other information which might be relevant

Outgoings summary:
1k childcare after subsidies
2k mortgage + loans
1k food and utilities
1k insurances, taxes, kids classes, clothes, car expenses, health and everything else needed for day to day living (really not living in luxury here)


What specific question do you have or what issues are of concern to you?
I want to clear loans as quickly as I can but as is I don't have enough to do that. I am paying E425 per month into a pension fund and my employer pays 8% = E680. Would it make sense to stop this temporarily to help pay off the loans?


Thank you in advance!

Check out Dave Ramsey 'snowball' strategy.

Childcare is a major fixed expense at this stage; but it will reduce over time.

As well as the pension, what else can you slice out of your budget?

Your AIB loan has only 6 or so more payments so that will ease up as bit. You really need to break down your last 2 spendings on the list to see where you could save a few bob. You get tax relief on your pension so stopping it only gives you and extra 200 euro or so a month (425 - 50% tax). Ask the bank to go interest only on the mortgage for a year perhaps but be disciplined with the surplus and pay it off the loans.

Parazard2 said:

x2 loans:
Avant money: 22,890 left to pay - E607 per month
AIB: 3, 300 left to pay - E570 per month

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By October the AIB will be paid back.

What's the interest rate on those loans?

The Avant one has 3 years left.

I don't understand how you are spending 2K a month over your salary. Can you explain that?

DannyBoyD said:

Check out Dave Ramsey 'snowball' strategy.

Childcare is a major fixed expense at this stage; but it will reduce over time.

As well as the pension, what else can you slice out of your budget?

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I can't see anything I can realistically slice out. I plan on using up stuff we have for a month or two before buying more (e.g. pantry, toiletries etc) but beyond that every penny and more is going to necessities mostly. I could cut out all kids classes and all my takeaway coffees and just never get out of bed again I guess

elcato said:

Your AIB loan has only 6 or so more payments so that will ease up as bit. You really need to break down your last 2 spendings on the list to see where you could save a few bob. You get tax relief on your pension so stopping it only gives you and extra 200 euro or so a month (425 - 50% tax). Ask the bank to go interest only on the mortgage for a year perhaps but be disciplined with the surplus and pay it off the loans.

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Yes exactly I'm thinking that cutting the pension may not make much of a dent in the short term but lose me a lot in the long term. I like the idea of the interest only actually as that is the cheapest loan and yes I would be disciplined paying the other loans off. Would this impact on my credit score or anything like that though?

Parazard2 said:

Would this impact on my credit score or anything like that though?

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No. You may need to convince the bank you're really struggling so lay it on when asking, wits end etc.

Bronte said:

By October the AIB will be paid back.

What's the interest rate on those loans?

The Avant one has 3 years left.

I don't understand how you are spending 2K a month over your salary. Can you explain that?

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Thank you. I meant to add that info. AIB is the cheapest loan as it was a green loan at around 6%. The expensive one is the Avant one at around 8%. I'd like to tackle that asap and have thrown all cash I was able to reduce it so far (originally a 30k loan in Feb it's already down to 23k).

The budget is just quite tight and I realize it seems crazy but being on my own with 2 kids I am struggling to find where to cut. It is also a very depressing prospect to lose all play money when I should be doing ok given my salary and given I do not get to catch my breath between working full time and having the kids on my own the rest of the time.

Rough breakdown of expenses beyond loans and mortage of 1k:

Is there any chance of getting money off the children's father? Even when the loans are paid off, it's going to be expensive to bring up the three kids and other things will come up.

I'd cut down on eating out etc and reduce your contingency bill and stop your pension contribution until you have the Avant loan cleared.

Have you done the sums on reducing parental leave and increasing childcare? It may make little difference like the pension but it is something that you could look at again. Just knowing how much part time childcare costs v full time it almost never made sense for us financially to take parental leave....so if we were in a tight space (and there were plenty of those!) we didn't take it. Appreciate that as a single parent it may be the only thing that allows you to keep head over water mental health wise and spending quality time with your kids wise. Or are there any supports you could call in to cover your existing leave time so that you could work, do you have family that could help?

Kids classes do add up and honestly at a young age it is not really a necessity. If I had to choose, I would cut those out and use the money for the loans. If you are concerned about them missing out, I found the older they get the quicker they pick everything up...eg a weekly public swim where they splashed about was way more productive than them sitting on the edge of a pool with loads of other kids waiting for their turn. And at the age they are at now they are unlikely to be asking to go to anything. Some activities like GAA can be very cheap or even free at that young age.

I agree Dave ramsay is worth looking but be prepared to not like what he has to say. If you really, really want to pay of the debt you will need to be really really disciplined. So it will be goodbye to those coffees, toys, beauty, holidays etc but not forever. Just until the debt is reduced significantly or cleared.

Also have you considered changing roles? Very hard to focus on this with young kids and to engage in a new role/co and you pause the ability to take PL but you might be able to get a better paid role? Is your role at any risk of redundancy if your company is due to be delisted?

And while you have what may look like a large salary, it obviously can't cover all the normal expenses of a family of three where childcare has to be paid to earn this salary...have you ever looked at any supports that might be available to you? Maybe by increasing your PL you might fall under some thresholds? You don't mention child benefit, is this wrapped up in your monthly income/expenditure?

Echo what others have said.

Interest only for mortgage and if possible (cut the holiday amount) extra 2,400 a year towards loan repayment.

Throw everything at the loans for a year. You will have cleared the smaller one and then attack the other one.

Finally sounds like you are doing a fantastic job and you are already seeing light at the end of the tunnel.

Imagine when your loans are paid and kids are older and no longer require costly childcare you will be a in a great place.

Best of luck

Parazard2 said:

could cut out all kids classes and all my takeaway coffees

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Yes you could.

Your children are 3 and 6. They don't need classes - take them to the playground instead.

And make your own coffee.

Parazard2 said:

Thank you. I meant to add that info. AIB is the cheapest loan as it was a green loan at around 6%. The expensive one is the Avant one at around 8%. I'd like to tackle that asap and have thrown all cash I was able to reduce it so far (originally a 30k loan in Feb it's already down to 23k).

The budget is just quite tight and I realize it seems crazy but being on my own with 2 kids I am struggling to find where to cut. It is also a very depressing prospect to lose all play money when I should be doing ok given my salary and given I do not get to catch my breath between working full time and having the kids on my own the rest of the time.

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What did you borrow the Avant loan for? Do you mean February last year? How do you pay the 2K extra every month? Is it on the credit cards?

You have 3 years to getting out of the short term debt. You can reduce that further by having a hell of a life now. So no to anything that costs money. Only necessities.

Do you have anything you can sell? Can you take in a lodger for a year or two?

misemoi said:

Also have you considered changing roles? Very hard to focus on this with young kids and to engage in a new role/co and you pause the ability to take PL but you might be able to get a better paid role? Is your role at any risk of redundancy if your company is due to be delisted?

And while you have what may look like a large salary, it obviously can't cover all the normal expenses of a family of three where childcare has to be paid to earn this salary...have you ever looked at any supports that might be available to you? Maybe by increasing your PL you might fall under some thresholds? You don't mention child benefit, is this wrapped up in your monthly income/expenditure?

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I have asked for a salary increase as technically I should be on 8-10k more tbh. It won't solve the issue but it would help.
I would expect a redundancy could be on the cards. I almost hope it may come my way in ways but also beyond the lump sum payment (I have been with the company 8+ years)I would not expect to find it easy to find a new role with the same salary.

Steven Barrett said:

Is there any chance of getting money off the children's father? Even when the loans are paid off, it's going to be expensive to bring up the three kids and other things will come up.

I'd cut down on eating out etc and reduce your contingency bill and stop your pension contribution until you have the Avant loan cleared.

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Yes you are right I do need to increase income there. I have tried asking before but got nowhere. I've been trying to prioritize establishing access so at least I get a little breathing room to myself. They don't earn much and are saying they can't afford anything given they now have to pay for rent etc. I know...

Bronte said:

What did you borrow the Avant loan for? Do you mean February last year? How do you pay the 2K extra every month? Is it on the credit cards?

You have 3 years to getting out of the short term debt. You can reduce that further by having a hell of a life now. So no to anything that costs money. Only necessities.

Do you have anything you can sell? Can you take in a lodger for a year or two?

Click to expand...

I took the Avant loan out to repay my ex as they had loaned me 30k towards house improvements. As we separated and they moved out they asked for the money back. I decided to get a loan while I could (in case I did lose my job) and have things more clearcut with them that way.

I am exploring options to bring in some easy cash. Open to more suggestions to put the house to work here!

A big thank you for everyone who took the time to read my post and made such thoughtful and empathic suggestions. I will consider all of them and if you think of anything else to throw my way please do.

I can fully understand how things can seem tight at the minute but you should be clear that you don't have a problem with debt, you have a short term cash flow problem. At 42, you are earning €102k and your total debt is €221k so it is very manageable

- You mention that your take-home is ~5k, is this based on full salary with you taking AL. If you start taking more parental leave you will reduce this further
- Children's allowance: You don't mention it but you should have another €280 coming in every month for this. You are not in a position to 'save' this for the kids so it should be used to overpay your debt. If you have been 'saving' this for the past 6 years and have a lump sum in a savings account, it should be used to clear your short term debt
- Health Insurance: It seems like you are paying this yourself and not getting it through work. Make sure you are getting your tax relief
-Utilities: These seem very high, can you break it down further?
- Kids activities: Kids really don't need expensive activities, what they want is to spend time with you. My own 4 year old girl loves cycling (free), playgrounds (free), playdates (generally free), the library (free) and swimming (~€16 once, maybe twice a month).
- Loans: Can you refinance the Avant loan to longer term? While it obviously costs a little more in interest, it is worth paying to reduce your monthly commitment. You can still overpay as much as you want to.

A few simple things that you can also do are:
- NCS: make sure you are claiming the maximium here. With your parental leave, your reckonable income may entitle you to a higher subsidy
- myAccount: Make sure that you have claimed for all available allowances and credits for the last four years with Revenue. It's amazing how many people don't do this and are due a hefty refund
- DPS: Until recently I assumed (incorrectly) that the Drug Payment Scheme was means tested. It's not and is available to everyone. It will cap some of your expenses to €80/month if you have prescriptions etc for the family. You may not always reach the €80 but as a family of four, we go through phases of antibiotics and other regular prescription stuff that puts us over that limit
- Review all your utilities, subscriptions and insurance and start shopping around, it will save you a lot
- Maintenance Order: Despite what your ex may say, you should go through the process and get something from them. They have a duty of care to their children to provide financially for them. Even if that is only €200-300/month, it'll give you a lot more breathing space