My first post, so first this...we are a family of four, sometimes six (husband and his two kids and myself with my two kids) and we live in Europe. I discovered MMM in January this year and from that moment on our life has changed for the better. We have a lot of debt, mostly because of divorce (both mine and his) and stupid decisions in our past (before our marriage). But we have made changes and are progressing: we started this year with a total amount of € 49.876,66 in debt and will end this year with € 37.370,03.
The reason why I’m posting our case is this: as of January 1st, 2015 my husband will lose his job which will change our financial situation significantly. In our country if you lose your job you are entitled to unemployment-benefit depending on your work history. My husband will receive 70% of his income for the duration of 19 months. Of course husband’s first priority is to find a new job ASAP! However, where we live jobs are really hard to find right now and we think it will take some time before husband will find a job (but hope he will do so within these 19 months).
I will give an overview of our income and expenses as from January 1st as my question concerns our new financial situation.
Monthly income
My take home pay (net) € 2218,00
Husband’s income: € 1.150,00
Monthly tax return due to mortgage € 246,00
Total: € 3.614,00
Other income:
Annually in December, a 13th month: € 1.800,00
Annually in May: € 1.500
Our monthly expenses
Internet & TV: € 47,00
Mortgage: € 953,80
Taxes: € 65
Gas/electricity: € 200,00
Car insurance 1: € 35,00
Car insurance 2: 14,81
Car taxes 1: € 21
Car taxes 2: € 15,00
Gasoline for car: € 170,00
Groceries: € 485,00
House insurance: € 35,05
Water: € 28,00
Health insurance: € 259,14 (for husband, my kids and myself)
My cellphone: € 47,00 (unlimited texts, internet and calls)
Life insurance: € 6,04
Dog insurance: € 19,00
Sport daughter: € 15,00
Soccer son: € 15,50
Saving for annual expenses (Christmas, costs dentist/doctor, birthdays kids, car & house maintenance, taxes, etc): € 282,50
Savings: € 50,00
Cellphone: husband € 35,00
Savings plan daughter husband: € 22,50
Contribution sports son husband: € 23,00
Life insurance: € 13,31
Debt 1: € 200,00
Debt 2: € 300,00
Debt 3: € 100,00
TOTAL: € 3.511,82
Assets:
Emergency fund: € 2.000,00
One time only, severance pay husband: € 8.000,00 (net)
All Debts, current status:
My loan: € 8.839,58 (will be paid of end of January 2015)
His loans:
Debt 1: € 10.009,72 (sold a house under water, 0% interest, will be paid off end of August 2017)
Debt 2: € 12.520,40 (11,1% interest, will be paid off Oct 2026)
Debt 3: € 8.705,20 (0% interest payment plan for lawyer, will be paid off July 2020)
Important to know…
As you can see I have mentioned my debt, but haven’t included this in our expenses for our new situation. Since January this year I have been paying off this loan with € 300,00/month (minimum payments are € 187,50). Now I am paying it off with € 630,00/month. In December this debt will be
€ 7.713,96 and we will be able to pay this debt off in full at the end of January 2015 with my husband’s severance pay.
The reasons for this decision:
- When this debt is paid off it won’t leave us with extra money as my husband’s income will decrease with exactly this amount (approx. € 600,00), but at least we will break even and won’t have the burden of having to pay off another loan.
- I will be debt free and therefore will be able to put the mortgage in my (of our) name. That way we will be able to get a full tax return on the interest I have to pay for the mortgage. Now I can only get half back, as the house is also on my ex-husband name.
- My husband sees this as a chance to make up for the fact that he hasn’t been able to contribute equally in our house-hold (he got paid less than I) and now due to the loss of his job he will contribute even less. So this is his way to ‘make things even’.
The debt to lawyer is accumulated due to ex-wife’s habit of starting fights involving lawyers. Officially this debt will be paid off in July 2020, but only if there won’t be any other costs added. So far we have paid off chunks of this debt only to see it increase again due to ex-wife’s tendencies. Besides that, we expect that the law firm will want to increase the monthly payments to at least € 200,00. They haven’t said this specifically, but we know that the administrator of this firm is not all too happy with the repayment plan my husband made with his lawyer. **Edit: today (Nov. 25th) we received an e-mail from the law firm stating that they would like husband to raise his monthly payment or pay € 5.000,00 February 1st, 2015. Exactly as I expected...**
The debt of 11,1% is a debt husband agreed to take upon him during the divorce settlement. However his ex-wife’s name is still on that debt so officially they both are still responsible for this debt. It would be best to pay off this loan as soon as possible as this is the highest interest loan husband has but….the plain truth is that as soon as his ex-wife thinks that husband has money, she will sue him for whatever reason again, even though she makes way more than he does, which will leave us with an even larger debt to lawyer.
Another problem we have is that my husband doesn’t have any official qualifications (diploma’s whatever). He never went to college (which he regrets immensely now) nor has he attended any other courses that will enlarge his chances for a job. He always wanted to finish this degree in teaching (Elementary School) , but due to his working hours in his current job he couldn’t do the internships needed to get a degree. It would enhance his chances for a job tremendously if he could go back to school again. Where we live there’s a shortage in male teachers so that’s an advantage. The most sensible thing to do would be to pay off debt first, but husband is 37 years old. If everything goes according to plan our first debt will be paid off in August 2017. He will then be 40. Getting his degree will take 4 years, so he will be 44 when he finishes. He feels like that is a very long time to wait and would rather start his study immediately. He could start in January, cost for 1 year college incl. books will be € 2.500,00. The other 3 years we will see later how to pay as we assume husband will have a job by then.
Our questions:
- Are our plans to pay off my debt with husband’s severance pay wise? Or is there something smarter we could do with his severance pay? We only get one amount of severance pay and I am very afraid to make the wrong choice with this.
- What can we do to cut costs so we can pay off our debts?
- Do you have ANY advice whatsoever incurring our financial situation?
Husband and I have made some really bad decisions in our past and this has left me with a fear of trusting my decisions concerning financial matters. I REALLY want to do ‘the right thing’ and I feel that this situation is above our level of financial knowledge, hence my request for help in this matter. I thank you for your trouble and am VERY grateful for every bit of insight you can provide!