How should I feel about our financial situation?

A question about : How should I feel about our financial situation?

Ok, so this is out situation.
I work full time and have a seasonal contract so in total earn about 39k pre-tax
Hubby works for his family business which isn't doing very well but is keeping its head above water. He brings home just under Ј1000 a month AFTER tax, as some of his is dividends its easier to give his salary like this. He doesn't even have gcses so trying to get another job would be difficult and not what he wants, he still believes in the business.
I work very long hours mon-fri and hubby works 6 days a week minimum usually 8:30-5:30.
We have an 18 month old and are currently expecting number 2. We always wanted a family and are not willing to compromise on this but 2 children will be enough for us.
We own our own house but as the area we live in us expensive we have Ј180,000 mortgage. We pay interest only.Both our families are here and hubby's work, plus for good schools etc we wouldn't want to be in another area.
We pay for 4days childcare and do get some tax relief but still a huge cost and still rely on my parents for out of hours care and 1 dau a week. We both have cars and realistically need them for work.
I took 9 months mayernity with my first which we used savings to pay for plus about Ј1500 overdraft. We are back without any other debt except mortgage and can say that we will be able to save enough for my next maternity.
Our problem is that our hectic work schedule is killing us as a family, we don't get a day off together, the house is always a mess, both of us are exhausted and we both want this to change.
Hubby can't drop days as its his business despite his being the lower income, we think I could drop 2 days a week but then we would only be covering the bills. We wouldn't be able to save virtually anything, and nice holidays etc would have to go on the back burner.
I'm really scared that we would end up in debt. But I'm scared if we keep trying to work this much it's going to ruin our family. It feels like everything is centred around work and everything else takes a back seat.
Part of me is just at the stage where I think we just can't control everything and just need to stop stressing about money, but having seen my mum end up in huge difficulties with credit cards ttc I don't want to end up there either.
Obviously at the moment we only owe for our mortgage but with interest payments alone of over Ј800 a month it's a huge amount.
I did a budget and our bills each month before food are just over Ј1500. Mortgage, petrol, car maintainance, gas electric, insurances etc.
So how should I be feeling about the future? What would you do in our situation? I'm looking at part time after maternity so 18 months away but I need to decide if its really what we want.

Best answers:

• Hi Emma. Obviously no one can tell you what to do in your situation. Ultimately the decision has to be yours. However I would say that your children are only young once. If I was in your shoes I would want more time home with my children and I would forego the nice holidays etc. Young children don't need lots of money spent on them, things and holidays.
  Why don't you post a SOA? Perhaps we can find some savings for you.
  Cutting back your hours and a reduction in salary doesn't have to mean you getting into debt if you are smart about your spending.
• I know in my heart it's what I want to do, we are going to try to budget as if that's our income between now and then so we should know if we can do it. I'm intending to keep my additional contract as it brings in about 5k pre tax and its only 1 month out of the year where I will have a lot on.
  There are ways we could cut out budget, sky tv, I phone contracts, etc but unfortunately they all seem to be the things my hubby likes! In fairness I intend to curb my spending on dd"s clothes, down-branding!
  It's tough but I guess anything that's worthwhile is!
• I agree with Grow, post up a SOA and we can advise and see where you could save some money here and there which could make things easier. Is it worth going onto comparison sites and seeing if you can get some things more cheaply by switching?
• Could you drops your hours in stages and see how it goes. Try a couple of months on 4 days a week, then if you are managing drop again to 3 days per week? Would you be allowed to keep your options open to return to full time if it doesn't work out?
  Just one more question, your mortgage is interest only, do you have any plans in place for paying off the capital?
  Someone made the comment to me here recently that you can't get back time and it made so much sense to me. I am totally focused on paying back debt as soon as possible but I am a grandmother and hope to retire in 10 years or so. You are a young mother and your time with your children can never be relived. If you can afford it, go for the time with the kids
• How much does he take in dividends and how often ?
  Just re read , does the Ј1000 include dividends?.
• I would probably have to fight quite hard to get part time hours where I work, I know a colleague who applied, was turned down and had to take it to appeal to get it so chopping and changing would not really be an option.
  I don't think dropping to 4 days would give me the work/life balance I am looking for. What is a SOA? Should I post it on this thread? I switched to British gas for my duel fuel about 6 months ago so tied in for another 6 but used the comparison sights then.
  With regard to our mortgage being interest only, no we have no current investment to help pay off the capital. To be honest we bought a house that would last us, we never need to move, it's big enough for our family and in the area we want. We basically plan to live here forever, however dire house prices and the economy is at the moment I have no doubt that in 10, 20 30 years time 180,000 pound will be a much smaller amount in real terms than it sounds now. My mum bought her house for Ј4900 when I was a child, imagine if that was your mortgage nowadays? But it was a lot then! Maybe that's not the safest way to look at mortgages but we can't afford to be paying off the capital anyway so hopefully long term the weight if that interest repayment will become lighter and then we will be able to pay off the capital. Not ideal but what we needed to do.
• Btw I'm 27 so in 20 years I will only be 47 and far from retirement age. I do pay into a good (although used to be better) pension scheme,this will be my 6th year. I am planning to continue with this, I would assume that's the right thing to do? Is it?
• Husbands salary includes his dividends.
• I'm not an expert on mortgages but don't interest only mortgages assume that at the end of the period you will be able to pay off the balance of the mortgage with a lump sum? So you need to find Ј180,000 in 20 years time to pay off the actual mortgage. Probably worth thinking about where you will find this money now!! I'd say definitely keep your pension scheme, it'll be worth it in the long run
  You can post an SOA here using this link: https://www.stoozing.com/msoc/soacalc.php
  You'll need to fill it out (probably best to fill it out with the income you will have on 3 days a week), format for MSE and delete the link at the bottom before you paste it into a post. That way you can see whether you will be breaking even if you do this, and where you might be able to cut back on things that aren't that important to be able to afford things you really do want.
• That's the official theory but in reality you can always get another mortgage. We are on a 5year fixed rate at the moment so will be re-mortgaging next year. In an ideal world yes we would have an investment plan but the reality is we can't afford it, we chose interest only as opposed to renting, the cost is much the same and like I said in 20 years 180,000 mortgage will not feel the same as it does today, plus inflation does happen, even if very slowly so in 20 years we would still be better off than if we were renting. Yes we could have bought smaller or in a worse area but then we wouldn't have access to good schools or the room for a family.
  Our mortgage amount will never go up and the real value of money will inevitably go down so this isn't something I am worried about.
• Oookay, not sure I'd have such a relaxed attitude to a Ј180k debt!! It's still money you have to find eventually, and I'm not sure it's realistic to expect that inflation will rise so much that in 30 or 40 years time you'll just be able to find Ј180k down the back of the sofa to pay it off... Then again as I said, I'm not a mortgage expert so maybe I'm wrong
• You will need to consider the long term. Clearly at some point you will need to start paying towards the capital of the house. Until then, you are at massive risk of you equity growing more and more in the negative which could leave you very vulnerable and of course, the inevitable possibility that interest rates will go up in the next 10 years.
  In the end, whatever choice you make will come with a compromise:
  - continue as now, you are financially stable and protect yourself for the future and enjoying a pleasant lifestyle, but you are paying for a better family life.
  - you go to 2 days, but you will have to give up something that you currently really enjoy, and that's most likely to be more than just some luxuries like nice mobile phone. It could mean having to accept downsizing/moving areas.
  - you go down in hours, only make few changes to your lifestyle, rack debts and take the risk that you might find yourself in a position to pay it all up later, so you are in a win/win position, but also might end up losing everything.
  Don't forget also that once you've gone down to two days, which you will most likely very much enjoy, it will be much harder to go back to full-time. Things don't get easier when children are older because of childcare.
• By the way, while googling for information on interest only mortgages (for my own interest ) I read a lot about things changing so banks are only doing these mortgages for partial amount of a property and having an endowment or long term investment in place to pay it off. Might be something to look into before you re-mortgage, as you may struggle to find as good a deal as you currently have! Only saying this to help out as I came across this info just now, please don't take it as criticism!
  Of course I imagine you can still get another mortgage at the end of your term as you say, and hopefully as the years go by your mortgage will be a smaller percentage of your income/expenses so you can start to put some money aside to pay it off even partially.
• We had a 25% cash deposit for the house upfront so I can't see getting a remortgage on these terms would be an issue. We bought our house just as the market was crashing, we actually got a repossession, at the time other houses on our road were selling for about 300k, we paid under 250k.
  A house similar to ours here sold last year for 265 so I'm pretty confident in the house. We weren't and never would be willing to forgo a safe neighbourhood and good schools.
  As I said it was really this or rent so we invested our savings. Like I said my mum bought hers when I was a baby for under Ј5k. 20 something years later you might not be able to find it down the soda but paying off 5k wouldn't be a massive burden. We just look at the interest as rent really but whatever the property goes up is the return on our original investment. I know the markets bad at the moment but inflation has to happen even if its slowly. We have a 5 year fixed rate and would get the same or longer in the future so if interest rates did go up we woul not feel it instantly and would have time to plan what to do. It wasn't a decision we took lightly, but its one were comfortable with
• True but we would be in the same position even if we were paying off some of the equity, if interest rates jumped up drastically either way we would have to deal with that then, if that meant selling up and moving to rented, me going back full time, whatever we would have to deal with it but that's not really specific to paying interest only.
• And actually that's not your current issue is it - the main thing is to figure out if (or how) you can afford to reduce your hours to increase your quality of life. As long as you continue to get financial advice about re-mortgaging etc. I'm sure you'll figure that out. Even if you don't want to post your SOA here (although you'd get some good advice by doing so) if you fill one out for your ideal work situation, you can see where you may have to cut back. Remember to factor in reduced childcare costs if you are at home more!
• You'd be struggling to remortgage IMHO so please bear that in mind - it's much stricter now with many high street institutions offering 3 x the higher income or 2.5 x joint (so you'd get nowhere near Ј180k).
  Personally, I can't see the point in having kids if you're not going to spend quality time with them (& enjoy them as a couple) when they're young. Also, if you never see / spend time together and a working constantly so you rarely have a day off together, it's going to place a lot of strain on the marriage (sorry, just my opinion based on seeing it happen far too many times).
• Obviously at my current salary we could have afforded a pretty hefty increase in interest pretty easily. We always thought we would both work full time, but the reality of working full time, having a family, looking after a house etc is very different.
  We are realising we can't have it all, at the moment I'm sacrificing time with my little one for financial gain, I'm not happy with this so yes in future our financial situation will probably become far more precarious which is why I'm struggling so much with the decision.we can probably manage in the current climate but as you say if something changes we would be struggling. This is why I'm worried that the decision may lead us to get into debt, but in honesty I don't really know what else to do. I can't magic more money or make more time in the day so what can I do?