Debt.

[FleurDuMal]

Gotcha. I can understand your situation completely. I lived just outside of London for two years and my parents and I were astonished at the cost of real estate in the United Kingdom and Europe in general. Is that due to taxes or just a high demand for property (e.g. not enough land for everyone, so the cost increases?)

As someone else has pointed out, the starting salary in the UK seems to be close to the starting salary in the States (where I am posting from) but the main difference is the availability of fairly inexpensive property and land, especially in the state that I'm from, Texas.

For instance, with enough searching, an individual in Texas could purchase land for about $8,000-$10,000 per acre. That's just the raw land, but it usually has water and electrical hook-ups. Obviously, planning and building a house increase the final cost, but it's not uncommon in Texas to have people buying several acres with a very comfortable house.

Granted, many locations in the United States, especially around major urban centers (e.g. Chicago, New York, San Francisco, etc) don't have land in abundance, and thus property prices are much, much higher.

I can definitely see the case for renting, especially if you are living in a larger city because of your profession. But due to the availability and relative affordability of land and houses in the United States, home ownership has become a fairly common goal for many families, hence the large and rapid growth of the suburbs outside of the cities.



Again, speaking from a Texas perspective, I believe there is a law that allows you to declare your house as a "homestead" so that if you lose your job, and aren't able to make payments, the bank cannot seize it for a certain amount of time. This is intended to allow you time to go find another job without forcing you and your family from your home.

I can definitely understand the fear of having that much debt, especially with job security as shaky as it is these days, especially for people just entering the working world, but you'd also have to take into consideration that the majority of American's purchasing homes tend to be further along in their life, usually around 35-40 years of age and thus are less likely to switch or lose their jobs. By that point, most people probably have some savings to tide them over if they did lose their jobs, so again, home ownership and the debt that goes along with it, isn't too big of a concern.



I guess for me, a home represents more than a montetary investment, although it certainly represents one for many individuals. Honestly, my family has had a 150 acre farm in Ohio for the last 75 years that has been passed down from generation to generation. It's completely paid off and if anyone ever needs to retire, they can live out there. I'd tend to think of a house, not as something to be flipped to make a profit, but more of a gift and a legacy for my children to have something to call their own when the time comes. There's nothing more secure than having a property that is completely paid off and that you hold the deed to.



I would assume that we're both fairly close in age...I'm 20, but I'm definitely looking forward to purchasing land and building a house.

Well, I did take the most expensive example in London. Property is much cheaper in other areas. However, that's not to say that it's still affordable. The housing crisis in Britain shouldn't be underestimated. House prices have been outstripping increase in earnings for many, many years now, and we're only just beginning to feel the pinch. The situation can only get worse.

In no way do I feel sorry for myself in all of this. Like I said before, I think I'd rather have the security of freedom from debt free than the security of home-ownerships - and that's a personal choice. Furthermore, I have no real emotional attachment to any particular area, and will always have a decent job (probably), so I'll never struggle to find somewhere to live. It's people who can't afford to live in the areas they grew up in that I feel most sorry for. Those who live in rural villages close to major cities where property prices have sky rocketed because city folk are buying up property in their village as 'weekend homes', or live in areas which have now become attractive holiday destinations. The biggest outrage in all of that being that the reason some people can't afford to live in the areas they (and several generations before them) grew up is because property is being bought up and then being left empty - contributing nothing to the local economy (in fact, taking away from the local economy as someone who lived in the house permanently would be buying goods and services 7 days a week), and weakening the constitution of the community.

As you can see, I am REALLY against second home ownership. It's shallow, self-indulgant and destroys lives. It rips the heart of local communities and local economies and has no place whatsoever in a nation undergoing a housing crisis.

And of course, because Thatcher and her subsequent ideologues saw "no such thing as society", all our social/council housing was sold off, meaning that the destitute, desperate and hopeless now struggle to even find a roof over their head to rent. There barely exists a safety net for those left out of the property boom because they were born too late and don't earn enough. Furthermore, lack of social housing means that the most overworked and underpaid who sweep our streets, nurse our sick and teach our children can't afford to live anywhere near their place of work in comfort because local authorities are being forced to sell off the property they used to maintain for staff to live in.

 

[sushi]

If I fast forwarded a year, in my first proper job as a graduate earning the average starting salary (£18-23,000), living in London, and I was looking for my own flat, I would have to take out a mortgage around 10x my salary!!

This is where many people take a harder path to be successful.

Instead of a 10x mortgage, try to find a much cheaper one by finding a smaller or older place for example.

 

[Fuzzy14]

I'm afraid there isn't any quick and easy schemes to pay it off.

I stand corrected. Go on a reality TV show and act stupid, it made Jade Goody £7 million.

 

[iW00t]

I owe my parents a personal debt of gratitude for putting me on this planet (my Father says it's due to his charm, but my Mother credits the bottle of Baby Duck charged to room service).

I owe my wife everything for giving birth to my kids, and I owe my little girl everything her heart desires. I plan to give my son all the opportunity to achieve his dreams, and plan to pay them both every compliment earned.

This is going to cost me every penny i have, but it will leave me a rich man.

Oh, and $150K equity against the remaining $150K principal on my mortgage. So I break even.

That's the sweetest post I've read in a while

 

[MarkCollette]

Thanks, I see what you mean. I am not paying all of the bills every month. For example, my electric bill - they let you go 3 months with no late fee to pay your bill until they shut off your electric. I paid them last month, so I know that this month I will not pay them. I always pay my mortgage payment, and there are months I do not make my credit card or other loan payments. Not great for my credit rating, but what else can I do?

Ok, now I understand what you're going through. I was pretty close to that situation when I finished my degree.

Still, the numbers are pretty stacked against you, and in that situation of getting by while juggling things, it can be hard to see if the numbers are actually improving. Can I recommend something? Each month tally all of your debts, sutracting your cash and bank balance. Graph that value, and after 3 or 6 months, make sure that things are actually going down. Furthermore, see if the rate of improvement is actually negligible. You might have found a way to keep afloat, but it doesn't mean that you'll actually pull yourself out of debt, in this lifetime.

I'm in no way trying to discourage you, it's just that your 70x multiple might be beyond a point of no return, and it might make sense, after verifying numbers of course, to simply declare bankruptcy.

Of course, if the majority of that debt is really just from a low interest mortgage, then this might be a totally useless post.

 

[sushi]

I would say further behind --- but because I have no more credit available to me, the only way I'm falling behind is by not paying some bills.

There are so many things that I want to say. But rather than overload you at this point, just remember, that once you embrace your issue, just take it a day at a time. Each and every day try to make your situation a little bit better by paying off some of your debt. I know that this may sound strange, but if you take it a step at a time, the enormity of your problem is much easier to handle.

PM me if you want to discuss some ideas.

Good luck!

 

[njmac]

Thank you MarkCollette and Sushi for taking the time to offer up some advice. I sincerely appreciate it.


I think the bottom line for us is that we need a higher income. I quit working full time when my kids were born to raise them - it was tight but definitely acceptable - then my husband lost his job and had to take a job with much lower pay. That's when I started to use credit cards to pay for things like food and gas... and fairly quickly, before I had a grasp on just how bad that was -it got out of hand. I do freelance work when I can (limited because of childcare) and in the evenings I give cooking classes locally. I plan on ramping that up to raise my income, and I'm working on a website (may or may not make $, but couldn't hurt.)

Meanwhile, I'm just trying to stay afloat. Any advice is welcome.

The % of my debts are approximately: Mortgage (35%), Home Equity Loan (30%), 2 very high balance Credit cards (20%), 2 Car loans (10%), Student Loan (5%).