[Closed] How much debt?

Really interesting thread, debts a big part of a lot of people's life's

debt is sold as freedom, exotic holidays, nice cars, etc etc. In reality it's exactly the opposite. Some time ago I read about how with the advent of production lines in USA they had trouble getting anyone to work on them (Henry Ford had to employ 10 people for each job as 9 would walk out)

The answer was, as a leading economist put it "to keep people greying in the harness" the answer was debt. What we know as marketing was invented at the same time

Myself, made some mistakes, less than 10 years ago had a 180k interest only mortgage plus 10k in cc etc. This year I will be completely debt free, including mortgaged (downsized). TBH i don't feel massively different, but I certainly sleep better. It is allowing for my mid life crisis mind, in a couple of years my daughter is off on a gap year, I'm also going to take a year out travelling, with the house rented I won't feel like I have to come back

[i] loads, but YOLO, no one says on their death bed "i wish id been more frugal"

I'm sure some do.
[/i]

I heard this yesterday;

"He died unexpectedly solvent"

Not sure if I want to die with massive debts, massive savings or a clean slate, really.

the only thing that stops me going with the last option is that I reckon my kids will never be able to afford a house in SE England unless I pop my clogs and leave them a big chunk of money.

Not sure if I want to die with massive debts, massive savings or a clean slate, really.

seeing what my family had to deal with when my gran died unexpectedly and young its not as simple as rack up debts and the debt dies with the person.....can make life very difficult for surviving partners ESP when they come a knocking for the assets back (ie house) to service the debts left behind...

So maybe it's not so bad after all! I might be worth something net!

You have children right? By the time you've paid their deposits for a house plus subsidised their poverty wages, you'll be back in debt again 😉

the only thing that stops me going with the last option is that I reckon my kids will never be able to afford a house in SE England unless I pop my clogs and leave them a big chunk of money.

Life & Critical Illness Insurance helps cover that eventuality.

Me being diagnosed with something terminal and then popping my clogs is probably the best outcome all round for my family 😯

Me being diagnosed with something terminal and then popping my clogs is probably the best outcome all round for my family

Aint that the truth. Mortgage done and £400k-500k in the bank for them.... it's all good.

Not ideal for me though I have to say.

wwaswas - Member

loads, but YOLO, no one says on their death bed "i wish id been more frugal"

I'm sure some do.

I heard this yesterday;

"He died unexpectedly solvent"

Not sure if I want to die with massive debts, massive savings or a clean slate, really.

the only thing that stops me going with the last option is that I reckon my kids will never be able to afford a house in SE England unless I pop my clogs and leave them a big chunk of money.

"I want the last cheque I write to bounce"

I also like the idea of passing something onto my kids, but I think times have changed - No I don't want them to have to pay for my funeral, but hopefully they'll be looking at retirement themselves before I shuffle off, rather than trying to buy a place or start a business or whatever.

In regards to the whole YOLO thing, it's absolutely true - some people refuse to admit they're going to die one day and are always looking towards the future and they'll be the richest guy in the Cemetery, but on the other hand, if you pick through the thinly veiled boast posts there's a fairly common theme of people who go a bit mad in their twenties, end up in a world of pain and then spend their 30s trying to fix it all - it's a shit place to be.

Personally, to be as happy as I can be, or perhaps a stress free as possible financially I'd like to have a place of our own with a mortgage, a months salary in savings and zero other debt - the last 6 years for me has been tough, starting a family, getting married and made redundant twice - it seems almost silly, but having a nice buffer of disposable income each month, makes me happy, happier than having lots of things and a credit card bill that sucks all my 'fun money' up - I'm not quite there yet, but with luck I will be soon.

I remember growing up in the 1980s with parents worried about mortgage interest rates of 15% and having a family kitchen table conversation about potentially having to move to a smaller house. I remember my parents "borrowing" from my 9-year-old savings and that when Birmingham Midshires (like many de-mutualised building societies) gave me a windfall, that I got £50 while the rest disappeared to presumably keep a roof over our heads.

That was all in quite a middle class household (my dad was a uni lecturer) and it really shaped my attitude to money and debt - as did typing thousands of case letters for 2 years about people's debts when I worked at a Citizens Advice Bureau as a student. Many people are just a short illness away from penury, stress and strife; often for much lower debts than you'd have thought would trouble them.

My grandparents - and especially my grandad, who grew up in the Depression and walked from Sunderland to London in the 30s to find a job - always said that debt was a terrible thing and couldn't understand why my parents took a mortgage (which was very much the norm by the 1980s). They had seen people endure serious hardships and detested the "never never". They'd always rented houses and took great pleasure in occasionally buying nice things (new cars, clothes) from savings ... working class people who did well for themselves and proudly achieved independence in many senses of the word. They didn't have any property assets, just enough cash savings and pensions to live comfortably.

I'm now close to old money. I'm talking about people who are squillionaires, but drive around in diesel Golfs and whose soft furnishings and clothes are patched-up and rarely replaced - but when they are, it's with a quality item bought for cash. Money is vulgar; assets and markets are more of interest. Expenditure from savings is only for private schooling or houses: everything else is frivolous.

I've learned to consider that if today's debt-led consumer society works for some people, then that's great. But do be sure to know who's in control and to prepare adequately for the downsides.

48 with a £200k mortgage on a £600k house, £4k on an interest free credit card and £189 a month for another 18 months paying back an overpayment to HMRC (interest free so no need to pay off any quicker) + a few thousand in savings right now, but will be using some for house improvements over the next year.

Next year when the credit card and HMRC debts are paid off in full I will divert all that money into mortgage overpayments and aim to pay off by the time I am 55 - then continue to pay the same amount into additional retirement savings.

When I finally retire I then plan to downsize and buy two houses - one for my wife & I, the other as a rental income for our retirement.

When we both kark it, we then have a house each for our two daughters.

Or, as said above, I go now and use the insurance policies to set my wife and kids up instead....

Interesting to read the answers, surprised how open and honest some people are. Also surprised there aren't more answers of huge debt - perhaps these people have chosen not to answer?

The thing about the numbers being mentioned above is it is only part of the picture. A single person living in a shared flat earning £250k per year with £10k of debt is very different to a single parent of 4 working part time on £12k per year with the same amount of debt.

"He died unexpectedly solvent"

Sniffing glue?

I left uni in 2004 with about £15k worth of student loan, a maxed out overdraft and credit card and a few loans/finance agreements, so maybe £20k+.

Managed to buy my first house with my GF in 2011 after I got made redundant in 2010 with my redundancey money, having been lucky enough to find a new job pretty quickly.

Over the next 5 years or so, our house went up in value and we managed to clear most of our debt off, as well as getting married along the way.

We've just sold our first house for £105k (paid £78k) and brought a new build for £253k plus about £6k in extras using the help to buy scheme.

I'm now 33, and we are debt free minus the mortgage and my student loan. So currently owe £190k in mortgage and 20% equity to the government, currently about £50k. we've also got about £13k left over from the house move in the bank.

Hoping that in 5 years time we'll owe between £180-£190k on the mortgage, but will have paid the h2b loan off and my student loan.

Currently don't really have a pension, but am planning on investing a decent percentage once my company pension scheme starts next month.

I also like the idea of passing something onto my kids

I know one of them is mortgage free, and the other has a bigger mortgage than i do. (not to mention less savings and a smaller income)

I have two mortgages: one on the books with the bank, and one off the books with the inlaws. Oh and a PCP on a car.

But PCPs on cars don't count if the rate is cheap enough - you pay for the depreciation on every car*, so PCP is a means of managing cashflow of the same at an acceptable interest rate.

*Obviously not true for a number of classics and not so classics given the recent pensions-driven car boom.

"But PCPs on cars don't count if the rate is cheap enough "

who makes up these justifications for debt ? Is there a copy in print ? i'd like to see what i can acceptably have debt on.

[i]what i can acceptably have debt on. [/i]

bicycles?

excellent im off to fill my boots at the bike shop.

Highball 29er here i come 😀

I'm adding money to my mortgage in order to put money into a couple of 123 a/cs, will cost me 1% and will get 3% and it's all tax free 🙂

In what way is the 3% tax free?

I think when I was younger I wanted everything, and genuinely got a bit of high from owning something cool that no one else I knew had, but I've now realised that the novelty/high wears off fast!

I traded in loads of nice motorbikes in my 20s and "upgraded" to faster and nicer bikes every year or 9 months, loosing loads each time. I now know that any half-decent mid+ engine bike gives you the same pleasure and does the same job as a £12k BMW 1300cc super tourer!

I hate to think what I would have owed if I was into cars rather than bikes and did the same thing...

I've never got the holiday thing though, I like stuff, rather than experiences (that's probably a whole other type of issue I have!), so wouldn't borrow for holidays.

I don't think there's anything wrong with borrowing, but it seems some can live with it and others cant. After feeling trapped at a crap job because it paid well, and I needed the cash to make monthly payments, I don't want it again personally.

clearing mortgages is one option, but there are better returns for the same money - like your pension. The tax advantages are pretty good. Just keep an open mind on return on capital. You may think your doing well as your pension and retirement slip away

In what way is the 3% tax free?

From April, up to £1000 interest pa is tax free, if you pay std rate tax.

I don't think there's anything wrong with borrowing,

There isn't necessarily. It's when you do it to the scale we have (and now the Chinese appear to be too) that it becomes the systemic problem that it now has become.

It also depends what you get into debt for - something which is an investment for the future which provides a firm financial return (e.g. a student loan which allows you to get a better paid job and increases your lifetime earnings is a productive use of that debt. Companies will use debt to fund investments in machinery and people to drive future growth, revenue and profits)

However, our consumer debt appears to have mainly been run up spanking cash on shiny things and general consumerism (mainly depreciating assets), and BTL property (making heroic assumptions about ever-increasing house prices) or just normal property (boosting it to such a level in London and the SE that the repayments dominate our disposable incomes and leave nothing left for the real economy and therefore leave us with constricted economic growth over the long term).

The scale of our debt is the real problem - it'll be a burden for a very long time and hold back economic growth and living standards whilst we pay it back. Assuming it doesn't take us under again in the meantime. The nature of what we've spent the money on is also a problem as it largely will produce no longer term economic benefit.

We've been really quite stupid...

there's a fairly common theme of people who go a bit mad in their twenties, end up in a world of pain and then spend their 30s trying to fix it all - it's a shit place to be.

I've got £1200 left of my early/mid 20's debt and I'm 35, its in an interest free repayment plan with Cabot, i could pay it off tomorrow, but id notice the £1200 gone, i barely notice the £50 DD that comes out a lot was wasted (shit car, high insurance) some paid to fund a 7 month sabbatical from work playing on boards and bikes in the Alps, i had a good time, but not a great time as one eye was on the ever increasing pile of full credit cards with zero income to pay them, ended up back in my old job, single, but i think it changed me for the better, i like to think it did, however there were dark days but I'm quite the optimist 😆

I'm at the other end of most people's situation.

From 20 to about 55, raised a family of three with my wife, never had much spare cash or savings, wife stayed home to raise the children.

Even had a spell of four years without a car as we didn't want any more debt.

Now 61, retired, no debt at all.
My savings, pension fund our modest lifestyle. No work, got back cycling in the last year, went a bit daft buying and selling some bikes which didn't suit.
As a result, realised that having time to just enjoy riding, no debt, and a future of no more borrowing or working is very good.

Can't believe how much some of the forum members owe on a mortgage though, would have worried me to death.
Always worked all my life, but very few people are in control of their work and employment security.
I was made redundant twice.

£560k on Mortgage

Thank you, whoever that was, a few pages back. Feel better now.

35, sole income, self-employed oil & gas contractor, three little kids, £420k debt. Sleep? Hair? Time to ride? Not so much.

House going on market tomorrow.

We have our mortgage, and 2 years left on a car loan. My plan is to keep the car for at least 8 more years, saving all the time so the next car is bought cash!

I was terrible with money, and have a problem with always thinking the next new bike/thing will make everything better! Eg If I have a Santa Cruz/orange etc then I will be a proper mountain biker....people will look and think I am great! Thankfully I am slowing coming to realise that it is all a pile of crap! I still have days where I find myself obsessing about how to buy the latest xyz, but at least now I realise it!

Current obsession is HT vs FS to replace my perfectly good Boardman FS which I have decided is too small for my 6'3" size! Then onto Cotic (I like the brand) vs Bird...local to me and much better value....It is never bloody ending, but at least now I am not just caving in and getting anything on credit to satisfy the urge! I just come on here and ask random questions and procrastinate....

who makes up these justifications for debt ? Is there a copy in print ? i'd like to see what i can acceptably have debt on.

Debt isn't inherently bad. Its usefulness is down to circumstances.

A PCP on a car [i]at the right rate[/i] is fine. Say you decide to spend 25k on a car and, over the period of your ownership, its value depreciates by 10k, the only upside to buying outright is the interest saving. But if the rate is low (say under 3%) then, yes, you have the cost of money but equally you don't tie up the net 15k while you own the car. You can use that 15k for other purposes (even just sitting in the bank as part of your emergency fund). Cash is, as the old maxim goes, king.

How many people here think having any sort of mortgage is a bad idea?

Nearly having my first house repossessed in the early 90's scared the crap out of me.
We have a mortgage which is 6% of the property value, some savings and two paid-for cars. Much to my wife's dissapointment I'll not borrow money to buy anything - if we want something the money has to be in the bank first (I'll not touch the savings as I'm self-employed and you never know what the future holds).

But you have a £25K car which is certainly more than I would dream of spending if I had a big mortgage. You could buy the same car second hand for half that.

How many people here think having any sort of mortgage is a bad idea?

(As long as it's affordable)

About 130k on mortgage, and a couple of grand student loan.
Got about 20k in savings and pay off cc every month.
I did the whole get myself into debt and Bury head at uni. Am well out of that and making damn sure i don't get in that situation again

Just found out I have the opportunity to earn a fat pile of overtime at work, unusually. That should help.

And if you give up your pcp tomorrow what are the penalties ?

People up here are being billed for the rest of their agreement when they are handing back due to job loss.

One of the pitfalls i guess.

Mortgages are acceptable as you have to live somewhere , not really any alternatives unless you live in a caravan or a tent ...

Calling pcp acceptable debt is an odd one, one could - use public transport , drive a car not worth 25k , cycle , walk , hire cars when needed etc etc .... Its not a neceesary evil to have a pcp car.

And if you give up your pcp tomorrow what are the penalties ?

People up here are being billed for the rest of their agreement when they are handing back due to job loss.

One of the pitfalls i guess.

There are rules about what you can and can't do - including handing back once 50% is paid (different if it's a straight lease as there's no exit options). Not sure if the same rules also apply in Scotland.

But if you've kept the 15k in a bank (indeed the whole 25k and funded thed depreciation out of income, say) then you have cashflow choices if you lose your job without necessarily having to sell your car.

But if you haven't got an emergency fund to manage exactly these sort of scenarios, then any sort of debt (including a mortgage) is never acceptable as you're right - someone will always want to be repaid.

Debt isn't bad. But over leveraging and not having a rainy day plan is.

Continuing references to PCP are now giving me Mercedes C Class adverts..!

I don't. You have to pay to live somewhere, you may as well use that money towards buying where you live rather than funding someone else's investment/retirement plan.

I've always held that you have to pay to live somewhere. There are two choices: rent or buy. In both cases you need to decide how to fund it (your money or someone else's).

Because of the intertwined relationship between propoerty ownership and personal debt in the UK, we've got to the point where very few people who choose to buy are doing so with cash.

And so a whole finance industry is built around ever increasing amounts of secured personal debt: you need to pay to live and have to borrow to do it. As house prices continue to inflate, then we have to borrow more and more to stand stil....

My glib remark is that we've convinced ourselves that personal debt is OK, and that mortgage debt - damaging though it can be if you lose your job and can't pay - is the most acceptable of all, almost to the point where people don't see it as debt but as the only reasonable method of paying to put a roof over one's head.

And really that's only because we view renting as lining the pockets of an individual (for their investment/retirement) but don't (won't?) see mortgage interest as doing the same thing but on an industrial scale.

Hence I'm happy to draw my own lines on what levels and types of debt I think is acceptable to me....

(As long as it's affordable)

Damn right. I've been to the unaffordable place and I'm not going back.

Why are some people not including mortgages in their debt burden BTW?

I get the responses pointing out that you have to pay to live somewhere and you might as well get something out of it at the end.

But I do think there is a bit of a society Jedi mind trick at work when it comes to houses and money. Like cars, people have been conditioned not to think about them the same way they do other things.

Isn't there a boatload of interest on your mortgage debt too? You don't hear people talking about that much.

EDIT: should have read ourmaninthenorth's post better!

Mortgages are acceptable as you have to live somewhere , not really any alternatives unless you live in a caravan or a tent ...

Who was the chap on here who did that for a year to save money for a deposit?

@ MrSalmon - rather more succinctly put than my post..!

Isn't there a boatload of interest on your mortgage debt too?

Not currently - it's barely over inflation. Which may of course change.

Not currently - it's barely over inflation. Which may of course change.

I think he means in the absolute amount payable over the lifetime of the loan.

Over the lifetime of the loan.. has anyone ever experienced a case where a house did not appreciate significantly in value over 25 years?

The total amount of interest paid is nothing compared to the appreciation of the asset *over the lifetime of the loan*.

And anyway - it's academic, because as said you have to live somewhere. Buying cash isn't an option for most people. And of the two alternatives, one results in a huge asset (almost always) and one does not.

Absolute amount isn't a problem assuming cash flow ok for monthly payments. If house price growth is greater than interest rate then you win.