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  • FIRST POST
    • Nellie77
    • By Nellie77 30th Jun 17, 1:04 PM
    • 31Posts
    • 95Thanks
    Nellie77
    Paying off debt with savings, am I right??
    • #1
    • 30th Jun 17, 1:04 PM
    Paying off debt with savings, am I right?? 30th Jun 17 at 1:04 PM
    In the process of trying to pay off my debt using a combination of advice from this site YNAB and Dave Ramsay.


    I have transferred as much credit as I can to 0% cards. This is something I am continuing to do but making sure I am not taking out any further credit as I have made the 'consolidation' error in the past.


    I am also in the process of saving a £1000 emergency fund and ensuring my budget accounts for all true expenditure (xmas etc) with YNAB


    My plan after I had got my £1000 was to then aggressively pay down my debt via snowballing.


    However I have a balance of just over £600 left on a store card that is interest free. The interest free period is just about to run out in a few days. The balance will incur interest from the date of purchase so will increase to just over £750.


    I have managed to save enough in my emergency fund and for a holiday coming up in 2 weeks time to pay off the balance on the card and not incur the interest.


    I am happy to re-save the emergency fund as I do have monies available on a cut up but active credit card for true emergencies. However I had hoped to take £250 for spending money on our Holiday (free travel and accommodation as with family) and I am not sure that I can re-save in such a short space of time.


    My thinking is that even if I cant save the spending money if I put it on a credit card I would have 54 days to pay off before accruing interest which should be plenty of time and if I didn't pay off the interest accrued would be minimal compared to the storecard debt.


    As I need to make a snap decision I just wanted some advice as I am not convinced I am not missing something and about to make the wrong decision.


    Thanks in advance for any advice given.
Page 1
  • National Debtline
    • #2
    • 30th Jun 17, 5:08 PM
    • #2
    • 30th Jun 17, 5:08 PM
    Hi Nellie77,


    There is nothing really wrong with any of the choices you have 'put on the table' so it becomes a case of doing what you feel is best and what you are able to stay on top of. It may end up being the case that you pay a small amount of interest somewhere, and whilst that is ideally avoidable, based on what you have said, that interest would be quite minimal and some of the these choices do seem more complicated than they need to be.


    The simplest answer would be if you have the money saved and ready to be used for holiday, then use it for that purpose and not to take out on any more credit. Maintain the minimum payments on everything that is interest free, clear the store card as quick as you can once you are back and then overpay the other debts to make sure those are cleared within the interest free period.


    Don't forget you always have the snowball calculator and can use your budget to check exactly what is affordable in the future.


    Laura
    @natdebtline
    We work as money advisers for National Debtline and have specific permission from MSE to post to try to help those in debt. Read more information on National Debtline in MSE's Debt Problems: What to do and where to get help guide. If you find you're struggling with debt and need further help try our online advice tool My Money Steps
    • tking
    • By tking 1st Jul 17, 4:34 AM
    • 71 Posts
    • 69 Thanks
    tking
    • #3
    • 1st Jul 17, 4:34 AM
    • #3
    • 1st Jul 17, 4:34 AM
    I disagree with the previous poster, I would pay off the about-to-be interest accruing card and spend for the holiday on your remaining card - try and be as thrifty as possible without spoiling the holiday (maybe keep a note of what you spend and then review each evening). You can then pay that off after the 40-55 days when it is due. Otherwise you're giving money away to the credit card company unnecessarily. Now you are aware of the pitfalls of credit and interest I think you'll manage this process just fine.

    You seem to be headed in the right direction and I hope you enjoy your holiday!
    Saving hard for Financial Independence
    • Happier Me
    • By Happier Me 1st Jul 17, 8:01 AM
    • 373 Posts
    • 800 Thanks
    Happier Me
    • #4
    • 1st Jul 17, 8:01 AM
    • #4
    • 1st Jul 17, 8:01 AM
    I too would pay the store card off with savings to avoid a big interest charge. You have to control your spending on a credit card when on holiday as if it were cash though, don't overspend. And pay it off as soon as you can to keep any interest paid to an absolute minimum.
    • Profligate
    • By Profligate 1st Jul 17, 10:41 AM
    • 35 Posts
    • 38 Thanks
    Profligate
    • #5
    • 1st Jul 17, 10:41 AM
    • #5
    • 1st Jul 17, 10:41 AM
    If you have c £600 saved currently in your emergency fund, I would perhaps use £250 for holiday spending, and throw the rest at the storecard.

    Therefore you'd owe only £250 on your storecard - plus any interest which would be less than your initial estimate.
    You wouldn't be accruing further debt (unless unforseen emergencies were put on the CC)

    And, psychologically, you'd know exactly where you were - and that you would be able to pay off your storecard really quickly after your holiday, hopefully.

    This way might not be the most money-efficient. But, I think it might be easier to keep track of holiday spending, and you wouldn't be putting debt on a CC again: you wouldn't be accruing 'new' debt.
    (And I don't think cash withdrawals from a CC are usually a good idea, and presumably you would want some holiday money as 'cash in your pocket', not just on a CC?)

    I agree with Laura - ultimately it's about what feels best to you, and what will work for you.
    • EssexHebridean
    • By EssexHebridean 1st Jul 17, 12:43 PM
    • 8,013 Posts
    • 41,455 Thanks
    EssexHebridean
    • #6
    • 1st Jul 17, 12:43 PM
    • #6
    • 1st Jul 17, 12:43 PM
    I'm assuming that you're not talking about using the CC for withdrawing cash on holiday, but rather for using it for spending on things like meals out etc that you would otherwise have used your £250 cash for?

    Assuming that assumption is correct, and bearing in mind everything else you're said AND the extremely high level of interest which will come and bit you on the backside shortly. I'm (extremely unusually for me) going to disagree with National Debtline on this one. I think your approach of clearing the storecard before interest gets added, re-saving as much as you can for your holiday in the time remaining but then putting any balance you need to (up to your budgeted spending budget!) onto a CC while you're away and then working like a mad thing to get that card cleared once you're back is the thing to do.

    Some things to remember though:
    - The more you can save back in the meantime, the less you'll need to put on that CC while away
    - Remember to subtract any cash you DO manage to save from that "£250" figure you have in your head for the card - otherwise you could end up overspending simply through miscalculation!
    -Maybe consider starting now with doing stuff like surveys if you're not already to help get the funds in place ASAP.
    MORTGAGE FREE 30/09/2016
    Sainsbugs 0% card: 22/12/16 £1229.00/£544.67 (17/10/17)
    • Nellie77
    • By Nellie77 2nd Jul 17, 11:33 PM
    • 31 Posts
    • 95 Thanks
    Nellie77
    • #7
    • 2nd Jul 17, 11:33 PM
    • #7
    • 2nd Jul 17, 11:33 PM
    Thank you so much everyone for your replies. All your advice was greatly appreciated and helped me get it all straight in my head.

    I decided to pay off the full balance of the storecard.

    I think by having a very frugal 2 weeks I should be able to save close to £250 and not have to use any credit. Just got a Starling account so hoping to transfer cash to this for all spends and avoid using credit card where possible. If not I think a combination of cutting back on holiday spends and paying off any small credit card balance I do get will be the way to go.

    Just about to have budget meeting with OH to see if my maths is right and get them on board with my super frugal fortnight ��

    Time to have a happy dance to celebrate paying off storecard and put my new numbers in my snowball calculator.

    Looking for another opinion - If any of you are YNABers should I create a new budget for my holiday as it will be in euros or should I convert each transaction to pounds and enter in my normal budget? Keen to track spending and dont want to get out of ynab habit as found it is really helping.

    Thanks again for taking the time to help.
    • MandM90
    • By MandM90 10th Jul 17, 3:22 PM
    • 1,274 Posts
    • 5,894 Thanks
    MandM90
    • #8
    • 10th Jul 17, 3:22 PM
    • #8
    • 10th Jul 17, 3:22 PM
    Thank you so much everyone for your replies. All your advice was greatly appreciated and helped me get it all straight in my head.

    I decided to pay off the full balance of the storecard.

    I think by having a very frugal 2 weeks I should be able to save close to £250 and not have to use any credit. Just got a Starling account so hoping to transfer cash to this for all spends and avoid using credit card where possible. If not I think a combination of cutting back on holiday spends and paying off any small credit card balance I do get will be the way to go.

    Just about to have budget meeting with OH to see if my maths is right and get them on board with my super frugal fortnight ��

    Time to have a happy dance to celebrate paying off storecard and put my new numbers in my snowball calculator.

    Looking for another opinion - If any of you are YNABers should I create a new budget for my holiday as it will be in euros or should I convert each transaction to pounds and enter in my normal budget? Keen to track spending and dont want to get out of ynab habit as found it is really helping.

    Thanks again for taking the time to help.
    Originally posted by Nellie77

    Hi Nellie,


    I would create a new budget with one account of X euros (whatever your budget equates to).


    You could either split it between activities, eating etc, or Day 1, Day 2 (then roll over what's left from first day category into second, etc).


    At the end of the hol you can then just enter it as one big transaction and close the Holiday budget.
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    • Nellie77
    • By Nellie77 11th Jul 17, 11:36 PM
    • 31 Posts
    • 95 Thanks
    Nellie77
    • #9
    • 11th Jul 17, 11:36 PM
    • #9
    • 11th Jul 17, 11:36 PM
    Thanks mandm90 Im going to create separate budget as you suggested. Think ill set a daily budget and track daily spends. Get paid when on holiday too so will be able to do a big YNAB budget as a treat on my holiday ������
    • Nellie77
    • By Nellie77 4th Aug 17, 10:17 PM
    • 31 Posts
    • 95 Thanks
    Nellie77
    Hi All

    Just wanted to check back in to let you know that I paid off the storecard as planned. Managed to save my spending money again in time for my holiday. Tracked all my spends on holiday and came in on budget with the exception of £50 extra for some work clothes for OH and new luggage, glad to say that these came out of a separate clothing budget that I had been saving as part of the 'embrace your true expenditure' part of YNAB. So still came in on target

    I am so happy that I took the plunge and paid off the card.

    Now for the next part of my debt free journey. This weekend I need to write to Tesco re an old credit card I have been paying up since 2007 at £70pm. Original balance was 10kish but no idea what the balance is now as they have never sent me statements or acknowledged any of my letters re interest etc. They were horrific to deal in the past and I get so anxious at the thought of having to deal with them again but I know I have to do it.

    Will also be cancelling the storecard account now that I have the zero balance statement through

    Thanks again for all your advice. It has really helped me work out what I need to do next to pay off my debts.
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