Work Bonus advise

Kitten_Pie

I've just been told that i will be receiving a bonus from work of 8% my yearly salary yay! :j which works out at £1600 ish i'm hoping after tax this will be just over £1000. Currently my debts stand at:

Lloyds tsb: £1600
Mint: £800
Capitol one: £0
Over draft: £1000
Loan: £6000
Car: £3000
Savings: £250 (gulp)

Originally i was going to pay £500 off my credit card, put £500 (for emergencys) in savings and then use the rest as a nice well done bonus if there is anything and get some make-up etc (I haven't treated myself for a good long while and feel i deserve it)

My lightbulb moment was last August and i have managed to pay off 33% of my debt and should have it paid off in 21/2 years if i stick to the plan not including any bonus i might receive.

Thought tonight that maybe i should pay off my overdraft and then in 6 months be able to reduced the interest rate on my loan or put it all in savings and plod away at the debt. What are peoples ideas am i missing something blatant?

Thank you in advance for your help/advise/comments

daily_2

Savings is more debt, pay off the highest apr, and use the existing savings to reduce the debt or overdraft.

Kitten_Pie

Thats what i was thinking hense the credit card however want to have some savings so that should the worse happen i am prepared

daily_2

You have an overdraft.

Kitten_Pie

unfortunately i am up to the limit every month so couldn't use that as my savings unless i use the bonus to pay off the overdraft then use that as savings should the worse happen. Hmm i see an idea forming.

daily_2

If you put the savings into the overdraft account, then you have a smaller overdraft, and are no longer at the limit.

If you pay off a credit card with it, you presumably free up credit on that for emergencies.

The only reason not to pay off debt with savings is when they are 0%

http://www.moneysavingexpert.com/cards/pay-off-debts

Kitten_Pie

I always thought you should try and save up three months of living allowance for that emergency that would happen but reading that makes so much sense so think i will pay off the overdraft completely and then go into it should an emergency happen will just have to make sure that i don't go back into it just because i can.

daily_2

I'm pleasantly surprised, many people on this board continue to make things worse by trying to save by borrowing from overdrafts etc, even when directed to the golden moneysaving rule article. Old habits die hard.

You have £250 now, use it (or £249 if you want to keep the account open) to your best advantage and pay off some debt.

Kitten_Pie

I would use my current savings however i have a flat that i rent out and use these savings as a quick get to for when things go wrong which is quite regularly. £250 is a nice buffer just for that (still not quite on board about the no savings) but the bonus will go directly to the overdraft and depending how much above the £1000 i get i will put what i don't spend on me, which will be no more than £50 not used to spending money on me anymore, will go towards the cards which i am transferring to a lower apr card with no balance transfer fee so a saving off about £140 a year which will make quite a nice difference that and the £12 a month saving from paying off the overdraft. Thank you. for your help you've helped make this decision easy

daily_2

I spoke to soon.;)

Debt costs far more than savings earn, and if you free up some credit by paying off debt, then you save money straight away, whether that emergency happens or not. If you post details of the debts and apr's and credit limits, it would be easier to tailor advice to your situation.

Kitten_Pie

I haven't used my credit cards for over a year and am petrified that if i go into them i will loose control so if i have a bit of money aside i don't go into them at all. Although my self control has been good so far i don't want to tempt myself. I'll keep the savings at £250 and stop putting into it and add to the debt which will give me some make believe security and will still pay more of the debt than i am.