Almost Debt free. What's next?

Fender4 · 4 May 2016 at 11:43PM

Hello everyone.

I've had Loans, credit card and overdraft debt since I was 18. I'm now 31 and I can finally see an end to it. Only 3K left to go which I am also expecting the same amount to come in and clear that.

For the last 12 months I seem to have gone into hibernation, Not drank not smoked. and not wasted any unnecessary money!

When I'm debt free what is my next stage. I'm scared of going out and !!!!ing all my hard work up the wall. I also don't want to stay in this trap of not really going out and spending nothing as that doesn't help with my depression and ansixty.

I suppose what I would like is some money saved to fall back on in case I lost my job.. How much would you recommend I have saved and how much should i be saving a month to reach that?

Right now my income is 1800 after tax

rent and Bill's is 575 month
shopping about 60 a week
and debt payment is 250 a month
Phone / LL / BB is 50 a month
I'm aware I don't have much outgoings.

Sanctioned_Parts_List · 5 May 2016 at 2:38AM

Well done on your progress so far - I guess you're into the final year of paying it down?

Your numbers don't quite add up -
£575 + (£60*52/12=£260) + £250 + £50 = £1,135 so it looks like you've an extra £665 going... somewhere.

A couple of rules of thumb are:
i) Keep £1000 in a cash account (instant-access savings or basic bank account) to cover against breakdowns and emergencies
ii) Keep 3-6 months living expenses in a readily accessible form (could be the same savings/basic bank account/cash ISA as the above)
iii) The minimum you should be saving is 10% net salary - so if you're earning £1800pm after tax, saving £180pm is the benchmark.

Just for amusement, the more you save, the faster you're free from the need to work.

Good fortune!

enjoyyourshoes · 5 May 2016 at 7:38AM

Hi well done after paying off the last £3K

As you rent you may be in line for the help to buy ISA (first time buyer?) Get 25% Govt bonus if you use ISA as deposit for home.

Look at Regular savers (HSBC & FD) offering 6%

Look into great interest current accounts (TSB 5%, Lloyds 4%, Santander 3%)

If you fancy investing rather than saving suggest look into a S&S ISA.

Get the benefit from compound interest rather than being a slave to it.

andyfromotley · 5 May 2016 at 10:23AM

First aim, build your savings to about £3k. This provides an nice emergency fund for you. Second ensure that you are saving for your retirement. There are plenty of retirement calculators out there, but a rough guide would be at least 15% of your wages. Make sure you have a plan for big long term expenses, house purchase, car replacement etc.

Finally loosen the leads on your personal spending. Loosen not cut!!! Budget for some nights out, social events that you want to go to etc.

You are doing great, you wont mess it up.

Happier_Me · 5 May 2016 at 5:37PM

You've had some really good advice already. I would be working on a 'debt free' budget and include a sensible amount for entertainment...and then stick to it to avoid undoing your hard work.

Fender4 · 6 May 2016 at 12:31PM

Thanks everyone..

You are right there is an extra 600 quid which I have been throwing at the debt.

if I need to have 3K expenses and 1K in a separate account how much would you think I should put aside for savings each month?

KirstyO · 6 May 2016 at 2:58PM

if you have been used to living with no additional spending, I might be inclined to say continue with this for a few months, as if you throw as much at your savings as you are at your debts, your emergency fund will be sorted by the end of the year.

Then in the new year, make a conscious effort to make a budget and stick to it. Find a constructive way to spend a small entertainment budget. If you don't feel like going out one week, spend that weeks budget on a film and takeaway instead.

Its normal to know that your attitude to money has changed, and it is scary thinking about having money to spend after having it committed to debt repayments for so long. But you can do this! With the parameters of a budget you know that you are OK as long as you spend no more than (x) on product (y).

pennystretcher · 12 May 2016 at 3:24PM

Emergency fund is the first thing - £1k should do for that.

Then the rainy day savings - I think most commonly it is recommended that you have six months' salary banked in case something serious happens. Once you reach that, aim for 12 months' worth of savings. (Best interest paying accounts of course!!

)

Anything after that I would look into additional pension (remember that you get tax relief on those) and then additional savings (specifically deposit if you are planning to buy your own place in the future)

I have tried to follow the "thirds" option - one third of income for expenses (rent, utilities), one third for food and other essentials and then one third for savings. Obviously I can't always save the full target, but if I have treated myself one month, I save the next...

Fender4 · 19 March 2018 at 1:08AM

Hi all thanks for your advice. It was all very helpful.

We are 2 years on so i thought i would provide an update.

I ended up having 8K come in and not 3K as expected so i cleared all my debts used a grand on a new rented deposit and a grand to get some furniture.

However ive carried on Saving about 500 a month so im happy to say ive now got 8200 in savings.

Ive put 4000 in a lifetime cash isa
4000 is sitting in my current account waiting to go into my ISA after the 6th April so ive made 2K straight away for when i want to buy a house.
Im going to be saving 400 a month in a 1.someting percent Virgin Money account i know its not great interest but it means i can only make one with withdrawal a year then ill bank that in im ISA in 2020. (Plus i get access to the lounges in london for free coffee and biscuits which i love hahaha

All is great but im really struggling to go out and spend money. I proper beat myself up when i do.
I went out for the first time in ages last night and spent:

40 quid on 2 bottles of prosecco
20 quid on transport
4.60 on a pint of beer
1.49 in maccy ds

Well i only have a 10 quid budget a day so OMG im devistated and hung over

Its ok right? Tell me its ok lol. I feel sensitive and i dont go out much as all. It just pains me that i spent so much in one night.

Almost Debt free. What's next?

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