To Use Savings or not to??

pigsmightfly

Hi everyone!

It's been a while since I posted on here but am always reading and keeping up to date and have been working really had at reducing my debt.

My debt at its highest was £16,227.06 in November 2008 and is now £4,199.74 so am really pleased with my progress :j

I know its normally advised that if you have savings to use them to pay the debt off then start building your savings up again but here's my query....I have just finished work and am on maternity leave now. I have worked out what income I will have and can still afford to keep up the monthly payments I have been at the moment. I have 3 debts left now which are a loan at £2,411.87 which has a fixed payment and they won't allow me to lower/change the payments, a loan at £1,315.00 which again I have asked and they won't change the payment and a credit card at £472.87 which I can pay more/less as needed so long as meet the minimum payment.

As we have been buying things to get ready for our baby I have used savings etc. as I didn't want to mess up the monthly amounts I pay and wanted to stick to my plan I had made myself. I now only have £775 in my savings but wondered if it was worth clearing the credit card? Normally I would without a doubt but with being on maternity / having a baby on the way I was worried having savings might be more important :think:

Any advice or recommendations anyone can give me would be appreciated.

As I say I am proud with my plan and seeing the debt drop how it has and don't want to stray away from that and end up getting fees etc which got me into my original mess in the first place, but also have a little one on the way to think about as well now.

Thanks everyone

Tixy

Hi

Well done on reducing your debts by so much. And congrats on your little one.

Do you think you have bought all the big baby items you expect to need? the one-off bits?
Do you still have the credit card active. If the card has a high APR you could pay this off and then just keep £300 in savings and the card as a backup?

I can understand why you might want a buffer of savings. Maybe you could work out how much interest you would save by paying it towards your debts and then you can decide whether you would rather make that saving or rather pay the extra in interest for the security of keeping the savings?

pigsmightfly

Tixy wrote: »

Hi

Well done on reducing your debts by so much. And congrats on your little one.

Do you think you have bought all the big baby items you expect to need? the one-off bits?
Do you still have the credit card active. If the card has a high APR you could pay this off and then just keep £300 in savings and the card as a backup?

I can understand why you might want a buffer of savings. Maybe you could work out how much interest you would save by paying it towards your debts and then you can decide whether you would rather make that saving or rather pay the extra in interest for the security of keeping the savings?

Hi,

Thanks for your reply

Yes we have bought everything we need now.

The credit card is still active but I haven't used it for about 2 years now as I've been working on reducing it and don't really want to start using it again.

The APR on the card is 19.9% - compared to my loans very high - which is why I wanted rid of this account if I could then I could just forget about it. I do have another credit card that I paid off a year ago which I have locked away for emergencies but has never been used since it was paid off.

Will have a look into what interest I would pay/save though.

Thanks again

pigsmightfly

Have now looked into my interest rates. My interest on my savings is 5.85% per annum (It's an ISA) and I have £775 in this.

On my credit card I am considering paying off with these savings, I have a balance of £472.87 and pay 19.90% APR.

I'm no whizz at working things like this out so can anyone advise what they think is best to do?

Thank you

climbgirl

I'd pay the credit card off - you'll save a lot in interest (your savings only earn 5.85% and you pay 19.9% - that's a huge difference!)

If you need the savings buffer for any emergencies, then you can always use the card again if you absolutely need to. Just requires a bit of discipline to make sure it's a true emergency! But given that you've cleared so much debt, you clearly have that.

Sharon87

Even after paying off the credit card you will have £302.12 left. Plus you'll have whatever you pay towards the credit card. Use that repayment to add to the savings.

As long as you are sure you don't need anything really big then this is the best course of action. Pay off debt and still have some savings.

pigsmightfly

Thank you, its nice just to get a bit of reassurance before I do anything

Mojisola

Sharon87 wrote: »

Even after paying off the credit card you will have £302.12 left. Plus you'll have whatever you pay towards the credit card. Use that repayment to add to the savings.

This is what I was going to suggest, especially the last bit. Be firm - and you obviously can be as you've done so well in reducing your debt - and put what was the repayment away each month and your savings will build up again.

pigsmightfly

Thanks everyone, am going to get this card paid off and closed then another one bites the dust

gailey_2

Hi

I think pay off cc and like they say whatever paying off cc pay into savings.
We strated getting into finacial trouble when first was born as vastly underestimated cost of child, loss of income and childcare costs when I returned to work.

lessons learnt says me whos expecting a 3rd child now.

With 1st was mug brought everything new so look up carboots, ebay, nct nearly new sales for baby clothes and any baby equipment baby may need to keep costs down.
I used cloth nappies, breastfed and made own babyfood which kept costs down.

Do sign up to all the free parenting clubs. keep eye on baby events in supermarkets.
save up as many points tesco and advantage very good as tesco direct have baby and boots do 3 for 2toys plus clothes.

Remember to apply for tax credits and see what tax credits comboned with cb gives you income wise as with my 1st had 6weeks maternity fullpay then statutory which was 400 or so a month for 12weeks.

Also remember if spare limit on cc most do 52days interest free or if you think creditratings good try switch to better card.

well done on debt busting and congrats on new baby.