Thanks for the great comments on post 1, how nice to be finding others in similar circumstances! I’ve been thinking about where and how I went wrong - the reality is that I am sure didn’t do 1 thing wrong, I did several. While my debt is down to around £2000 at the moment, I’ve actually cleared off a bigger debt (or 2). I’ll write more about that, but I’m going to begin with part I of where I went wrong.
*Disclaimer, no one else caused my debt but me*
Background: My mother was from an incredibly poor family, her biggest childhood memory is of eating potato peelings most nights for dinner, never having money for basics like shoes. Horrific. My Dad came from a family that was “keeping up with the Jones”. His parents had everything that people were beginning to accumulate first - tv, car etc. Years later when my parents met, they did something very good, they never bought ANYTHING until they could afford it. Cars were run for 10-20 years, the main TV until 2 years ago lasted 24 years. Great principles. They made 3 very crucial mistakes. The first, they didn’t have life insurance cover of any kind, so when my Dad died my mum was left with a mortgage and suddenly 1/2 their income was gone. Second, they sent me to private school, which was so wonderfully noble and kind of them but it meant they had NO savings. They were too selfless. Finally, because of my Dad’s death and my schooling my mum was never able to save for retirement.
I should say my mum has a good pension, about 70% of what she earned. But, her retirement pension didn’t come with any lump sum and coincided with her having to move from a cheaper area to a much more expensive one with houses about double. This leads to my big mistake.
About 2 years ago, I was feeling very guilty about my mum’s housing dilemma. She was leaving a lovely home and was being shown dumps. Every day she was call me crying, upset. She was in a rental property and she couldn’t get her head around renting and “wasting her money” (a generational issue I think) even short term, she was so desperate to find a house in the area we were both new to (I moved there about 6 months prior). I was so very busy at work, I wasn’t viewing properties with her. After about 3 months, I began to feel really guilty, so I thought maybe we should buy a home together. My mum was ecstatic, over the moon. Within a week I had serious doubts, whenever I mentioned these rational reasons, my mum would become despondent. I offered to give her my savings to help (15K at that point) but she kept talking about how much better it would be for both of us if we purchased a property together. I did it, with HUGE red flags knowing it was the wrong decision for us both.
Why was it so wrong? Firstly we split it so that I paid the mortgage (I took out a 15 year mortgage - 5 years fixed rate), the plan was I would pay the mortgage, food and house repairs/maintenance, my mum was to pay the bills. As we saw it as a 5 year plan I was paying a LOT down on the mortgage, as much as I could. In a year I paid 10% off the mortgage, which is an amazing task on 1 income. The food I was buying was costing me about £35 more a week than it needed to, remember my mum’s poor childhood, well it means she needs to see stocked fridges and cupboards and she is one of those people who is 8 stone and eats constantly. As the home was older I was spending about £100 a month on added housing costs, then there was petrol, my grad school fees and voila I was left with NOTHING at the end of the month to save. NOTHING! When I would try to have a frank discussion about finances my mum would say “why do you need savings” she just couldn’t get it. Suddenly 18 months later, I could see that I was eating out more (probably 2x a week so I could have some alone time), all my money was going on a mortgage that was taking 60% of my take home pay plus food. On top of that I was definitely unhappy and spending unplanned money on things I didn’t need (here is a report from CNN that unhappy people spend more - totally true!) and worse off, my mother hadn’t saved so in reality we were no closer to selling up, coupled with the UK market slowing down, well you can see where this is going.
In hindsight, my mum could have brought a property. We needed more time to find better areas that she could afford, agents to not show her dumps that they were hoping she would buy as they couldn’t get them off their books and her perceptions and feelings about downsizing needed time to be worked through. This doesn’t happen in 3 months or 6 months. In fact, I’m pretty sure if she had had the time, she would have chosen to move back where she knows people, has a good circle of friends and could have brought a nice property and had money left.
My parents did a great deal for me for which I will always be thankful, but they did too much at a cost to themselves, their financial security and well-being. I’ll never be able to make up for all they did and purchasing a house together was certainly not the right way to go about that.
Cost of Lesson: 2 years costing me £30K (including all of my savings being lost) of which I was reimbursed £5, 000 (what my mum could afford to give me back) which I used to pay off my 2K debt and 1K grad school fees. The other 2K is for rent deposit and moving costs. I move in 2 weeks!
Expensive lesson!
Stay tuned to the next installment to see my 2nd mistake - having a lack of confidence!
Posted in Family Life, My Financial Mistakes, My financial story
