Should I pay off my Debt with my Savings

ehdx wrote: »

I know, it's absolutely ridiculous. I suffer from Depression, it was at it's worst around 2 years ago and that was when things completely spiralled out of control. I'd buy something because it made me feel good and then I'd feel down again. However, looking in my room - I wouldn't be able to find 17k worth of stuff. I was also working at a very successful law firm at the time and wasn't getting paid much but was expected to go out and socialise on a regular basis. I think a lot of money was also spent on nights out/dinners etc.


A one bedroom studio flat in my area starts at £190,000 and that's for the worst parts that you wouldn't really want to live in unless you absolute had to. (I live in a London Borough)


Oh just to add to this complete disaster, I've also been withdrawing money from cards.


My annual salary is £23,300.


Loan - £10340.00
Barlcays CC - £3372.02 balance out of a £3400.00 limit
Tesco CC (1) - £2802.59 balance out of a £2800.00 limit
Tesco CC (2) - £650.00 balance out of a £1200.00 limit (currently what I'm living on until pay day)
Overdraft - £500 planned overdraft but I'm currently overdrawn by £700.
Very account -£200 on account


I think that is everything. My car was paid outright so only thing I pay for is Insurance which is about £60 a month.


With all of this, I've never missed a payment. although at the start of the year things were so bad that I wanted to declare myself bankrupt although I couldn't because of my savings..... I wrote to Lloyds to tell them my situation but they said the only time Fixed Bonds are released early are through Death. (Yes, I thought of that too)

Based on your salary and even if you didn't touch the £52k and used it as a deposit, there's no chance in you being able to get a mortgage anyway, not based on £190k for a property. I thought you perhaps lived up North and were referring to prices sub £100k, not London prices.

So with that knowledge, your best bet is to clear all your debts and start afresh. You'll still have £35k to use as a future deposit but this way you can start to save from your own wages to top up your fund and also move out to shared accommodation if living with your mum is becoming strained, so that way you have your independence and also if you meet a partner later, that way you two can both look for a property and the joint buying power will mean you will be able to look for a higher mortgage amount and you will also have your £35k to add to the pot. Just make sure that if this happens you speak to a solicitor about protecting your deposit so that you get it back when you sell (I'm assuming if your future partner doesn't contribute the same amount).

Or if you can bear living with your mum (I'm assuming you either live there rent free or pay a nominal amount) then try and stick it out as long as possible to make sure you make maximum savings from your wages and then move out when you meet a partner.

And if you truly can't stand living with your mum then clear your debts and perhaps widen your search to look for areas outside London which are cheaper. A rough guideline I'd say you would be able to look for is properties with a max price of £140k (this includes the £35k deposit). Or just plug your details into some banks mortgage affordability calculators and see what results they come up with.

BoGoF wrote: »

With those debts you would be struggling to get a mortgage - get rid of the overdraft then start paying off your most expensive debt first

Exactly. If you pay off the debts & then commit yourself to saving what you have been paying in debt repayments. That includes all those overlimit charges etc. Hopefully if you can see an independent future for yourself it will keep you focused & you can avoid the debt route again.

If you are sure you can avoid spending you could possibly (but you would need to be really sure) pay off the items which are charging you, put the amount to pay off the others in an instant access account, but keep paying them off as normal, then at the end of the (free) period if not already done then clear them.

Putting the rest of the money somewhere you can't get at it until you need it for a deposit. Basically you need to preserve as much of your inheritance as you can.

I can understand your mum being worried but I am sure she will 'back off' when she sees you dealing with this in an adult way. Once you show her that you may have used it to pay off your debts but you are replacing it with savings her attitude will change.

I'm going to echo what everyone else is saying: Pay off the debts!

You could work out a plan to pay off the 0% cards independently, but I wouldn't bother as you could use the money to live instead. Without sending most of your earnings to your creditors, you'll have more money for yourself and this will reduce the need to go running to your credit cards.

Another thing to do is to close every credit card account, with the exception of one - the one with the lowest APR. Contact the company for this card and get them to reduce the credit limit to £1000 and then keep that card for emergencies only. Cut up all the cards you have cancelled, as the act of chopping them up is quite cathartic and symbolises you breaking your ties with them.

Then, work out a budget which includes some amount of saving, and STICK TO IT! You don't need to go mad and cut your spare cash to the bone, but the more you can save, the better.

Put the rest of your bond money into a LISA and top it up with some of the money you're saving. Make sure you keep a little by, for things like birthday and Christmas presents, as you don't want to go dipping into your LISA for that.

Now, all I need to do is follow my own advice... What I wouldn't give for a sizeable matured bond to help me clear my own debts off

ehdx wrote: »

Hopefully I will have learnt my lesson.

Id hope you have learnt your lesson.

Id get the debts paid off and look at your spending if as you say your stuggling.

Living at home should give you a huge chunk of your wages to pay some of the debts off.