Paying down debt & Saving Up deposit....Reassurance?

Deafening_Silence

Hi all

I'm hoping that someone is able to glance over my post and let me know if my idea is on the right track...

To sum up I spent 2010 paying off a credit card balance (approx £1600 transferred to a 0% Egg credit card at the time - balance fee was less than 2x months interest). With that sorted I set about consistently staying in the black in 2011 whilst building up a VERY small amount of savings (3 x expensive handbags and a laptop [all paid for in cash] limited my saving ability somewhat!).

I'm 28 and live with my parents. I'm an only child and pay no rent (I fully appreciate how lucky I am in this situation). I'm a fan of Dave Ramsey and read a number of PF blogs along with this website. 2012 is the year I get serious! My current borrowings sit as below:

PERSONAL LOAN
ORIGINAL BALANCE (INCLUDING TOTAL INTEREST) - £17,049.64
INTEREST RATE 9.05%
BALANCE @ 28.01.2012 - £6769.71
TOTAL PAYMENTS REMAINING - 27 X £250.73
LAST PAYMENT DUE 25.04.2014

CAR FINANCE
ORIGINAL BALANCE (INCLUDING TOTAL INTEREST) - £9,685.36
INTEREST RATE 8.90%
BALANCE @ 28.01.2012 - £6057.10
TOTAL PAYMENTS REMAINING - 30 X £201.57
LAST PAYMENT DUE 01.07.2014

STUDENT LOAN
SKETCHY! (SLC Website awful? Statements apparently sent but not received?)
POST 1998 LOAN
INTEREST RATE CURRENT 1.5%
APPROXIMATE BALANCE (based on online calculation) - £11400
PAYMENTS OF £53.00 PM THROUGH PAYE
JUST KEEPING UP WITH INTEREST
LAST PAYMENT DUE - HEAVEN KNOWS!

My current Income sits as: £1389.00 net p/m (after taxes and Student Loan payment).

My current budget sits as:

ITEMMETHODAMOUNTDiesel/MiscellaneousCASH£100.00Car FinanceDD£201.57Car Ins/Maint/BreakdownS/O£50.00Adventure! (skydive 2013)S/O£15.00Mobile Phone (2yr contract)DD£45.00Lovefilm.com (2 dvds p/m)DD£4.07LoanDD£250.73HOUSE DEPOSIT (NATWEST E-ISA)TRANSFER£720.00

I'm trying my best to zero balance my budget each month. It may seem extreme to some (eg where do I budget for haircuts etc - I cut my own hair!) and I cannot stress enough to say that I am boring - I don't drink/smoke etc etc! I'm a hermit!

Anyway... my plan as it stands at the moment is to keep on paying the loan and the car finance whilst saving for a deposit over the next two years. I figure by the time I finish my loan/finance I should have approx £22-23k deposit and a good record of a healthy spending habit in terms of paying off things? I've never missed a payment.

The thing I want to ask... is it stupid to take the psychological benefit (to save and pay off instead of just paying everything off and THEN saving) with my method or is there something completely stupid that I'm overlooking?

All thoughts/opinions/suggestions welcome. If I don't start aggressively tackling my finances now I'll never progress in life!

Saints2011

I would say pay of the loan first, then car finance before saving. (i.e obviously continue monthly payments but overpay the loan etc)

A savings account will pay you about 3%ish when you compare that to 9.05% on the loan and 8.90% on the car it makes financial sense to clear these and then start saving, wouldnt be in such a hurry to clear student loan at 1.5%.

Good luck!

P.S

If anything you may want to build up a emergency savings account to cover 3-6months of living if the worst was to happen.

Deafening_Silence

Thanks Saints2011 for the response - I think I'll do as you suggest - looking at the numbers (rather than the in my head thoughts) makes more sense.

Saints2011

Deafening_Silence wrote: »

Thanks Saints2011 for the response - I think I'll do as you suggest - looking at the numbers (rather than the in my head thoughts) makes more sense.

Best of luck keep us updated :beer:

jamesd

You might try making some use of 0% for purchase credit card deals. Then you can pay the money you spend on the card off the loan sooner. As the deal end time approaches you either balance transfer or switch to clearing the card(s).