What to do with Dads money?

debtdesperado

hmmm... I disagree, slightly. I don't think it's the best way to honour someone's memory and the discipline that they showed in saving the money and then leaving it to you, to repay 'frivolous' debt. However, I think it would honour their memory to pay off good debt, eg a mortgage, or student loans or even a car loan if that was a necessity.

I know that you can add it up in terms of pure figures and then it 'makes sense' to pay off the debt, with the vague future intention of saving up to 'replace' the money, but it somehow doesn't feel right to me (but then my debt was due to me going out too much, buying too many clothes etc etc - basically wasting it). Your debt might have been a bit more sensibly incurred, say through bad luck, rather than (like me) just being childish with money.

Imagine if your dad had given you the money whilst he was alive and you were telling him how you had spent it...how would he react? If he would think that you'd used the money wisely, go ahead and pay off the debt, but if he would have been disappointed, you'll feel better if you do something else with it - not least because by forcing yourself to go through the slog of paying the debt off yourself, you will appreciate why he never got into debt.

Otherwise, I'd suggest that what will happen is that you'll pay your debt off, promise yourself you will start saving to replace the money and then never quite do so. In the meantime, you'll also run up more debt. Then you'll feel terrible. I know this, because I did it myself over a decade ago, and I still feel bad about it.

DVardysShadow

bugbabe1970 wrote: »

We also have a bank loan for 8k which costs me about £170 a month.

I think ikk hold on to that one though as I really want to keep some of the money for savings. This loan will be paid off in 3 years.

What do you mean by 'savings' ?? This is really important. If it is a small pot of money for a rainy day', then fair enough, it is better to have the money than dip into OD. But if it is just a pile of money and you have no idea how you are going to spend it, it is just crazy to borrow money at over 10% [say] and have it in some account paying less than 2.5% [say]. Does anyone ever take out a loan because they want to open a savings account?

Really, you need to fill out the loans part of an SoA [amount owed, APR, monthly payment, end date] to see what you should pay off.

heppy23

DVardysShadow wrote: »

What do you mean by 'savings' ?? This is really important. If it is a small pot of money for a rainy day', then fair enough, it is better to have the money than dip into OD. But if it is just a pile of money and you have no idea how you are going to spend it, it is just crazy to borrow money at over 10% [say] and have it in some account paying less than 2.5% [say]. Does anyone ever take out a loan because they want to open a savings account?

Really, you need to fill out the loans part of an SoA [amount owed, APR, monthly payment, end date] to see what you should pay off.

I agree. I might be worth holding back say £1000 to cover stuff like fridge/freezer/washing machine/car going bang but I would throw the rest at the debt.

Interest rates on savings are as low as they have been for many years. Interest rates on loans etc have remained high.

heppy23

debtdesperado wrote: »

hmmm... I disagree, slightly. I don't think it's the best way to honour someone's memory and the discipline that they showed in saving the money and then leaving it to you, to repay 'frivolous' debt. However, I think it would honour their memory to pay off good debt, eg a mortgage, or student loans or even a car loan if that was a necessity.

I know that you can add it up in terms of pure figures and then it 'makes sense' to pay off the debt, with the vague future intention of saving up to 'replace' the money, but it somehow doesn't feel right to me (but then my debt was due to me going out too much, buying too many clothes etc etc - basically wasting it). Your debt might have been a bit more sensibly incurred, say through bad luck, rather than (like me) just being childish with money.

Imagine if your dad had given you the money whilst he was alive and you were telling him how you had spent it...how would he react? If he would think that you'd used the money wisely, go ahead and pay off the debt, but if he would have been disappointed, you'll feel better if you do something else with it - not least because by forcing yourself to go through the slog of paying the debt off yourself, you will appreciate why he never got into debt.

Otherwise, I'd suggest that what will happen is that you'll pay your debt off, promise yourself you will start saving to replace the money and then never quite do so. In the meantime, you'll also run up more debt. Then you'll feel terrible. I know this, because I did it myself over a decade ago, and I still feel bad about it.

"Good" or "bad" debt, it all needs paying off. If I were the OP I would use this as an opportunity to start afresh with the aim of staying out of debt.
The OP is obviously worried about their debt enough to post on here so I think to be able to get rid of that worry would be a good thing.

It would be all to easy to get the slate wiped clean then dig yourself into a hole again, it's something I've done and it's not nice.

bugbabe1970

Quick post as im just off to work,
but Good Debt? Bad Debt? I think its all the same really.

My dad really wouldnt mind me paying off my debts with his money. My dad offered me the money when he was alive to pay my debts but i wouldnt take it. They were incurred while supporting my family while my husband went back to uni to train as a teacher. So he knows the sacrifice we went through to do that.

I am not going to get myself into debt again. Had my LBM about 4 months ago and was going to take a second job to pay my debts off, but i already work full time shifts and go to uni and have 3 kids to look after so wasnt really sure how that was going to work out as I think I would have to have found another 2 days to add onto the week!!

As far as savings are concerned, as i said earlier, want to keep at least 5k of the money as im hoping my children will go to uni so I want to be able to help out financialy when they do, and yes, my dad would aprove.

Thanks again

RAS

Hi

Clear the most expensive debts first, those with the highest APR.

DarkConvict

Yours debts cost more in interest than you make in savings, the solution is clear. You pay off your debts first. Martin has a guide about this

1- http://www.moneysavingexpert.com/cards/pay-off-debts
2- http://www.moneysavingexpert.com/loans/debt-help-plan

DVardysShadow

bugbabe1970 wrote: »

.... These debts cost me a minimum payment of around £250 a month, but I try and pay £10 or £20 0n each over the minimum so that figure is about £300 a month really.

Only just spotted this. If you overpay anything, it is best to put it ALL to the one with the highest APR. That way, you pay less interest overall and you can come more quickly to the point of having one paid off.

bugbabe1970

Paid of everything but MBNA. Wasn't to sure, so thanks for all your advice.
Feels great!!
Just got to take the plunge and pay the big one off now!

natsplatnat

How about using a portion of the money you have freed up each month to over-pay your loan if poss. This way, you have some money tucked away in savings and can finish your loan faster (as long as this is within your T&C's).