Saving but still in debt.

carlisleboy

Hi,

Well I'm pretty happy at the moment, I've managed to go from -£7 in the bank in January to £7400 in the bank when I got paid friday just gone.

How have I done it, well 90% of it, is mainly because I decided to give up gambling online and offline. It has really made me see how much money I was wasting each month. The rest has been cutting down on things I don't really need and become pretty tight with things I do need and going for cheaper brands, special offers or multibuys

As I say I'm pretty happy, BUT I do still owe about £13500 which is 2 loans and a credit card. I currently pay out £534 for these, but still manage to save at least £400 a month. My job involves overtime oppotunities every month, so I can earn anywhere between £1800 - £2500 a month. Generally all the overtime goes to saving.

I currently have 2 loans and a credit card, the credit card is on 0% till September and the outstanding balance is £3450, I pay £200 on it currently and intend to up the amount nearing the end to pay it off fully.

I have a loan and can get a settlement figure of £2980 or I can continue to pay £134 a month and pay roughly £3400 until April 2012. My other loan has £6800 outstanding and I haven't asked for a settlement figure. I currently pay about £201 a month and that runs out in late 2012.

I know it would make sense to use some of the savings to reduce the debt, but the biggest block is the fact I can't bear to see say £5000 wiped off my bank account after all the months of saving and it then taking months before I really notice the difference in the balance again.

Any advice in particular on how to get over the gutting feeling I'll have if I see my bank account go from £7000 to £2000 after doing what would be the sensible thing.

Shoe_Gal

First of all - a massive well done :j

And maybe your last sentance answers your question? Can you take satisfaction from doing the sensible thing? And the fact that you've built the balance up once and can do it again - and quicker without the loan payments each month

thefoolonthehill

Hi Good work on saving that amount of cash.

I dont want to put a dampner on it but I am guessing you are earning less interest on your savings that what you are paying on your debt. If i was in you shoes I would write to my creditors and offer them a F&F. You will probably use all your savings but at least the slate will be wiped clean and you can start saving again

thefoolonthehill

sorry got distracted and didnt read the bottom of your post <idiotsmiley>!

I dont think there will ever be an easy way to see 5k go out of your acct. Just console yourself that you will be debt free and still have cash in the bank

mummum2

Fantastic news and well done to you. I would pay off the debts with F&F's, if you can save that amount within such a small space of time, after paying your debts you'll soon save that amount again plus more, as no debts will have to be paid.

poorandindenial

Hi Carlisleboy

Don't beat yourslef up too hard, there is the 'right' thing (which is clearly the hammering down of the interest earning debt) and then there is the right thing for you.

I clung onto a couple of grand of savings when I started getting rid of my debt, but after about 6 months the desire to see my debt come down outweighed the desire to see a positive figure in my ISA!!

You could make a deal with yourself and try to keep your account at £5k constantly from here on in (with everything else going towards your debt and anything below £5k being seen as an 'overdraft' - or fill your ISA up for this year's allocation and then save next years allocation slowly and steadily until April next year and throw everything else to your debt)

That way you get a bit of both worlds.

Don't forget to use the snowball calculator to see how quickly you will be debt free if you carry on at your current rate, and then redo it with the whole of the money each month that you could pay and see what the difference is. https://www.whatsthecost.com/snowball.aspx

Well done on your massive progress so far, keep on going and you will be debt free in no time (if that is what you decide you want - don't forget, this really is ENTIRELY your decision and you know what motivates you best)

Jesthar

carlisleboy wrote: »

Any advice in particular on how to get over the gutting feeling I'll have if I see my bank account go from £7000 to £2000 after doing what would be the sensible thing.

Well, for me a bit of maths would help

Paying off the credit card is only sensible when the interest rate is about to be no longer zero (is it this September or September 2010 the 0% runs out?), as then it starts costing you money - LOTS of money, as the APR will probably be around the 20% mark?. You COULD carry on paying minimum payments, but it would take ages and cost you a shedload of interest per month - my rough mental maths (and I may be wrong:o) @20% indicates £600+ in interest in the first year alone - three full monthly payments at your current amount!

On the other hand, you can pay it off in full, and not only save all that extra interest, but the £200 a month you were paying them too - and at that rate it will only take 18 months to have saved more than the balance you owed on the card - plus it will earn interest, too.

Same for the loan - paying it off early saves you £400 straight up anyway, and the £134 a month goes into the savings pot instead - earning you money instead of costing you money.

So, £400 guaranteed saving by paying the loan off early, and a potential £334 extra a month (which is £4,008 over 12 months) in your savings, earning interest, plus two big debts no longer hanging over your head - what's not to love?

Oh, and WELL DONE - you've done BRILLIANTLY this year! :T

~Jes

carlisleboy

Thanks for the replies guys and gals and the encouragement.

The credit card is until September 2010, so plenty of time and certainly at the moment I will be able to get another 0% card in August next year as my credit score is good and I've been succesful in getting high end cards over the years. Of course I do realise that I might have to pay upto 3% doing a BT, but if I can get my cc debt down to below £1000, that won't be to bad.

I've sort of become addicted to saving and budgetting, which I suppose has made it all the more difficult to let go off what I've saved lol. At the moment I'm thinking I can carry on paying my debts, reducing it by £534 a month for the next 12 months, thus £6400 less debt, in the meantime save £400 a month as a base figure, thus giving me at least £11000 in the bank and then looking at either paying everything off or at least moving the credit card balance and pay the other two off outright.

Or pay off the £2980 (be a bit less after next payment on 1st September). I can afford that and it makes 100% sense. After everything else I pay out and going to Blackpool for a week, that will still leave me £2000 and when I get paid, I'll have based on my overtime about £4200 this time next month.

anh1904

Incredibly well done so far.
I would make minimum payments to the CC and pay off the balance in full on the statement prior to the end of the interest free period (to allow a little leeway for the clearing etc.)

As for the loans, you need to work out the interest rebate compared to the interest and gained.

If paying off early means the extra cashflow has net benefit by the time the loan would otherwise have been repaid, then of course it makes mathematical, as well as ethical sense.

If there is nothing to be gained by repaying early, then why bother.

I believe the calcs for settlement are based on adding all the payments you have yet to make, and then calculating some sort of rebate, which isn't always very much, so get the figures and then do a sort of "net present value" calculation on the projected cashflows both with, and without the debt repayments.

black_taxi_2

im in same boat as you---reversing my financial situation by cutting down my gambling by 90%.also if i do take a new loan it will be on 0% interest-free 1 year,and will pay full payment without penalty charges.

im concentrating paying off debt/only savings--monthly investment trust i.s.a

my monthly out-going are coming down as i pay each debt.one debt is 50% of monthly out-goings and will finish dec 2010.

bank keeps phoning me for financial meeting(sell me more products)so i must be getting healthier.

goodluck bud