Pay off as much as you can in 2012 challenge!

rachelww1

Hi, number 45 here with my Feb update. In Feb I have managed to pay £1015.87. Bringing my total to date to £2152.89/£14000.

sarahs999

DedicatedDFW wrote: »

Advice Please


Several years ago i took out a long term savings account. This requires i pay in a set amount each month during the term of the savings. When i took out the savings my situation was very different to the one i'm in now. I was not in debt, I had savings, i had a job paying more than double what i'm earning now and i didn't have a mortgage (at that time - got the house just before being made redundant) and the mortgage is higher than the rent i was paying. Following redundancy i am working but have been unable to find a job with the same salary i was on before - i know alot of us know how hard it is with jobs now. So when i took out the savings account i was paying 6% of my salary into this which means with my new job i am paying about 12% of my income into this. - Putting this a little more into perspective my mortgage is 43% of my salary :eek::eek::eek: - i know but i was earning more before and the rent would still be 29% if i hadn't moved.

I am now considering if it would be best to cash in these savings early and pay the money towards the debt.


Positives i can come up with for keeping the account going are:

I have no other savings and i have no pension - these savings were something for the future so that will be gone. I have used all my other savings meeting the mortgage and bills payments when i was scraping in £400month working part time.

I have kept up the payments so should still be able to do so.

Currently alot of my debt is 0% but that will end soon.

If i cash in early then i will lose some money - but as savings are linked to stuff that fluctuates i could save and still lose money - not sure if the is a plus or minus really


Reasons to [STRIKE]take the money and run[/STRIKE] cash in early:

The savings are not guaranteed - linked to things that fluctuate so i could carry on paying in over the next few years and lose alot of money (to me).

If i cancel this and use the money to pay towards debts i could set the same amount up to be paid into a more guaranteed account like a cash isa - so still have saving that are less risky.

The debt has been getting me down alot lately sleepless nights etc. am sure alot of us know what i mean so this would relieve some of that - i'd still have debt to clear but it would be less

Currently alot of my debt is 0% but that will end soon - as a negative as it will end soon.

Any advice would be really appreciated

jwil - hope you don't mind me popping this on here its just that there's alot of traffic on here

You don't say what interest rate you're getting on your savings. That's key. If it was fixed some years ago it may well be worth biting the bullet to keep the payments going. But otherwise, as you say, if by fluctuating you mean that the interest rate is changing, then it's a no-brainer. Spending 43% of your monthly income on your mortgage is very difficult to keep up long term. I would look into maybe keeping a 'cushion' that you feel comfortable with, and using the rest judiciously to pay off debt. Can you overpay your mortgage? If you can keep up regular overpayments on your CC debts, it might make sense to make a lump mortgage overpayment to reduce either your monthly payments or your mortgage term. You also don't mention how much is in the account! Are we talking thousands or hundreds?

DedicatedDFW

sarahs999 wrote: »

You don't say what interest rate you're getting on your savings. That's key. If it was fixed some years ago it may well be worth biting the bullet to keep the payments going. But otherwise, as you say, if by fluctuating you mean that the interest rate is changing, then it's a no-brainer. Spending 43% of your monthly income on your mortgage is very difficult to keep up long term. I would look into maybe keeping a 'cushion' that you feel comfortable with, and using the rest judiciously to pay off debt. Can you overpay your mortgage? If you can keep up regular overpayments on your CC debts, it might make sense to make a lump mortgage overpayment to reduce either your monthly payments or your mortgage term. You also don't mention how much is in the account! Are we talking thousands or hundreds?

Thanks sarahs some useful points and i'll try and answer the questions as best i can - there is no set / guaranteed interest rate it fluctuates so currently there is less in there than what i have paid in. Yes it could go up but as i continue to pay into it it could go down also. Before i had savings which had a set interest rate and this also.

The mortgage is such a high percentage of my income following redundancy - before it was very easily manageable. I am looking for a new job all the time but there is so little available - or with the hours i work by the time i get home to do the application the position has been closed as having enough applicants. There will be something for me though i am sure so again this will change.

I can overpay the mortgage and that is the plan for later in the year - right now though i am worrying about the debt and clearing some debt and therefore 'freeing up' the monthly payments will ease this stress. Also i am on a fixed rate right now so the amount i pay won't change and i'm not earning enough to shop around for a new mortgage. I know an overpayment will reduce the term and that is what i'm planning to do later in the year.

I don't know how much i will get out of my savings because they'll make deductions as i'm cancelling it early also i don't want to post any amounts in case i'm identified by family This years target of £17000 is for full debt repayment and mortgage overpayment. I have already reduced the debt as my sig shows, in a few days *fingers crossed* i'm hoping to clear target 1 in my sig. Following this *if* i get out of the account the amount i have in my head as worse case scenario following deductions i will be paying a 1/3 off my debt and clearing the credit card which is due to have interest applied. Sorry if this is a bit woolly but i do worry about being identified

Many thanks for the input so far and any advice would be gratefully received. The plan would be cancel this account, set up a savings account which has a guaranteed interest rate so my money isn't going down at all and i'll still have savings for the future.

sarahs999

DedicatedDFW wrote: »

so currently there is less in there than what i have paid in.

:eek::eek: In that case I think you should definitely stop paying in and use it for something else. You'd have been better off putting it under the mattress!

So disgusting, how our banks do this to us. What about sticking a chunk in an ISA - you can still make use of this year's allowance, and then get another allowance from April. It will earn you proper interest and you can also pay off some more debt.

Good luck

sarahs999

Just got in there in time.... £54.08 minimum payment to Cap One.

kavics17

DedicatedDFW wrote: »

Thanks sarahs some useful points and i'll try and answer the questions as best i can - there is no set / guaranteed interest rate it fluctuates so currently there is less in there than what i have paid in. Yes it could go up but as i continue to pay into it it could go down also. Before i had savings which had a set interest rate and this also.

The mortgage is such a high percentage of my income following redundancy - before it was very easily manageable. I am looking for a new job all the time but there is so little available - or with the hours i work by the time i get home to do the application the position has been closed as having enough applicants. There will be something for me though i am sure so again this will change.

I can overpay the mortgage and that is the plan for later in the year - right now though i am worrying about the debt and clearing some debt and therefore 'freeing up' the monthly payments will ease this stress. Also i am on a fixed rate right now so the amount i pay won't change and i'm not earning enough to shop around for a new mortgage. I know an overpayment will reduce the term and that is what i'm planning to do later in the year.

I don't know how much i will get out of my savings because they'll make deductions as i'm cancelling it early also i don't want to post any amounts in case i'm identified by family This years target of £17000 is for full debt repayment and mortgage overpayment. I have already reduced the debt as my sig shows, in a few days *fingers crossed* i'm hoping to clear target 1 in my sig. Following this *if* i get out of the account the amount i have in my head as worse case scenario following deductions i will be paying a 1/3 off my debt and clearing the credit card which is due to have interest applied. Sorry if this is a bit woolly but i do worry about being identified

Many thanks for the input so far and any advice would be gratefully received. The plan would be cancel this account, set up a savings account which has a guaranteed interest rate so my money isn't going down at all and i'll still have savings for the future.

I have just seen this Dedicated. I cashed in my saving account when things got heated up, I paid £50 every month for about a year or two. I had to pay penalty to get out the fixed deal so I got back appr. the same amount as I invested. My point was that this money would help to reduce the debt therefore saving interest but before I cashed in I took out a credit card with a limit of £2500 and I also increased my overdraft to £2500. This was if I ever need money than at least I will have the option to get it straight away. I haven't used the overdraft limit or credit card at all since than at least I have something if I need to.

I have no pension either, and my current account has appr. £100 on it. As long as I have debts I will not bother with savings. Hope this helps.

DedicatedDFW

sarahs999 wrote: »

:eek::eek: In that case I think you should definitely stop paying in and use it for something else. You'd have been better off putting it under the mattress!

So disgusting, how our banks do this to us. What about sticking a chunk in an ISA - you can still make use of this year's allowance, and then get another allowance from April. It will earn you proper interest and you can also pay off some more debt.

Good luck

Thanks sarahs - the fact that there is quite a bit less in there than i have paid in pushed me to get on the phone and cancel the next payment - even with zero interest as you say i would not have lost anything over the years whereas i'm now a fair bit down and they are going to take even more off me because i'm cancelling early. I will think about the ISA option depending on how much they pay out - interest will go on my highest balance in April so will consider things first.

But i took it out knowing it was best to leave it in for the full term but my circumstances are so vastly different to what they were that right now i just need my money to be in zero risk account

Really thank-you for taking the time to read and reply though - i really appreciate it

DedicatedDFW

kavics17 wrote: »

I have just seen this Dedicated. I cashed in my saving account when things got heated up, I paid £50 every month for about a year or two. I had to pay penalty to get out the fixed deal so I got back appr. the same amount as I invested. My point was that this money would help to reduce the debt therefore saving interest but before I cashed in I took out a credit card with a limit of £2500 and I also increased my overdraft to £2500. This was if I ever need money than at least I will have the option to get it straight away. I haven't used the overdraft limit or credit card at all since than at least I have something if I need to.

I have no pension either, and my current account has appr. £100 on it. As long as I have debts I will not bother with savings. Hope this helps.

kavics - thank-you so much for replying - annoyingly for me the money in my account is already less than the amount i have paid in over several years and with the penalties the money will go down more I can't really apply for any more credit just now - i do have the £2500 overdraft facility - target 1 which i used as an emergency to get the boiler replaced - i was going to close this account after paying it off though. I do have room on credit cards that i can use so could access funds if i *really* needed to.

I have cancelled the payments to the account now and am awaiting contact about what the amount will be - which when it is paid will be sent by cheque - this bit i do find shocking that you can't pay into the account i have by cheque each month but they pay you by cheque so i'll be waiting impatiently :rotfl::rotfl::rotfl: and they won't just do a transfer back to the account where they've taken the money from for years.

Oh well

thanks for the advice and support all x

Twiggy_34

DedicatedDFW wrote: »

The debt has been getting me down alot lately sleepless nights etc. am sure alot of us know what i mean so this would relieve some of that - i'd still have debt to clear but it would be less

Currently alot of my debt is 0% but that will end soon - as a negative as it will end soon.

Hi there

I think the fact your debts are giving you sleepless nights suggests that reducing them as quickly as you can would be a really good idea. Or at least making it so they cost you as little as possible.

I don't know how long you have until your 0% offer ends, but have you looked into transferring to another 0% card so that you could continue to keep something in savings and clear the c/cards at a more reasonable pace without incurring interest? You may have tried this already - I know I tried doing it when my card started incurring interest and struggled for ages to get any of it transferred to 0% until Halifax finally agreed to give me a card for half of the outstanding balance (phew!).

I think it's worth remembering that (as a general rule) the advice is it's better to clear debts than keep money in savings, certainly when you're being charged interest on your debt. As soon as I've settled the monthly bills & payments, I always transfer "spare" money over to a savings account and if it's still there at the end of the month use that to clear a chunk off the c/card (£170 sat waiting for payday on wednesday). It means I always have a little 'cushion' to fall on if needed. Plus, the fact it's not just sitting in my current account reduces the likelihood of temptation to spend it wastefully. Also, I get super excited when I see the outstanding balance on my card go down by a sizeable chunk! :j

Best of luck in finding yourself a better job btw. I'm lucky in that my job is really secure, but it also pays a rubbish salary and I've been trying to find something which pays better or at least is more satisfying for aaaages to no avail.

Twiggy_34

Twiggy_34 wrote: »

As soon as I've settled the monthly bills & payments, I always transfer "spare" money over to a savings account and if it's still there at the end of the month use that to clear a chunk off the c/card (£170 sat waiting for payday on wednesday).

:rotfl: BONUS! I only just realised it's wednesday/pay day tomorrow! Guess I can pay off that £170 now! Ha ha