Getting there! Now debt free. Where to put my money?

dannywhitehouse

Hi all,
Over the last couple of years I've been working really hard to get myself debt free, and I've done it. Apart from student loan, which will stay with me until the end of time..

I had 3 credit cards, about 500 quids worth of long term loans that I was paying off each month, and they are finally gone. Phew!!!

I made the mistake of having a small amount of debt and thinking I could consolidate that lot with a higher rate, 'consolidation' credit card - do not believe the hype. Mine was 40% APR and not to mention about 5 calls and letters AT LEAST to every known number and address constantly.

I'm luckily in a position where I've worked myself up to a 40k salary in as little as 3 years. In that time I've managed to get as much paid off as possible, and It's now done. What a relief!

It's funny what I've picked up over these years. I HATE credit, loans, overdrafts and everything else in between. People only 'need' these things if they are impatient. Why not go the other route to a loan and save for it. You don't pay any interest on savings, but you do on any sort of credit agreement.

Either way, I'm still saving and LOVING IT. I've only just started but I've got a cash ISA with C&G (2nd year, but only just started adding to it) that's got 1k in it, an esaver with 2k in it and a regular income of 2.5k p/m and outgoingings (including rent and bills) of around 1.3k p/m. Wow, it feels so good just saying it!!

Anyway, that's just half the story.

What I've been doing for the last couple of weeks is looking for a bank account that is going to suit my needs. NOT just something that has the best offer for May for example. I'd really like to find something that I can place my salary in and continually think that's the best place.

I'm also not sure that an ISA is the best place for my savings, as if I need them I still (shouldn't) touch them as I lose my allowance.

I've been round the houses on this site and others. Although the info is fantastic, I was thinking there must be young professionals like me who want to save, have little outgoings and want to be able to just save for a rainy day, as well as things like mortgages etc..

Can anyone offer an opinion?

Thanks in advance and I hope you enjoyed my story!

Dan

opinions4u

Well done. You're probably best posting in the Savings forum.

And check your ISA is getting a bonus. It normally drops off after 12 months.

Chrisblue1962

Well Done on your debt-slaying and starting to save :T

sariebeth

Hi there, well done on getting debt free! And welcome to the world of saving. I've only just arrived here myself.

I have to say that in my opinion ISA's are the best place for your savings as you're not going to pay tax on your interest. That means if you have one paying around 3.1% it still beats most other savings accounts.

The way I use my ISA is by saving as much as I can in the best paying one, then transferring to a new one every year. I do take money out when I need it - ok yes I loose the tax free status on that bit but it doesn't really make that much difference to me, I need to spend it anyway.

If I use up my ISA allowance then I put the over spill into an esaver paying 3.1%. Obvioulsy I'd dip in here before plundering the ISA. I actually keep cash in here to move around current accounts to get all the deals (£5 from halifax, 5% from santander) as I don't actually earn enough to get these deals.

Is this the most efficient way to do it? Don't know really but I'm happy with it and it works with my life at the min. x

dannywhitehouse

It's a great feeling, so I thought I'd share! I can't believe I've gone so long without savings, it's quite scary when you think about not having any sort of backup if anything should happen.

I think an ISA is great, and I do need to transfer, but I may do it once I reached around 3k so I can command the top interest rates. It's only small % in it, but worth it I think.

The problem for me with an ISA, is that I want to put it in there, and forget about it, forever and just get my teeny bit of interest trickle in. I'd like something else where I can save regularly, but actually take it out each year for a holiday or something else big.

Any ideas all? Thanks again.

innovate

You can get better interest in ISAs that do not have a minimum deposit requirement than in a normal savings account. Check the best current instant ISAs thread.

You must quickly forget the idea of "putting it in there and then forget about it", for two reasons

1. there is no market-leading instant access ISA that doesn't have a bonus rate which expires after 12, max 18, months. The interest on fixed term ISAs also plummets like a rock on maturity.
2. unless some sort of miracle happens, cash ISA interest rates will be better than instant access saver rates for some time come.

So you'd want to keep your eye on what ISA rates are on offer, and transfer as necessary. And you'd ideally want to max your allowance each tax year - or at least use as much of it as you can.

Also, there is nothing stopping you to have several ISAs - one for each tax year. You do not have to combine you money, though sometimes it might make sense, if it is possible to do.

As for other idea, I suggest you should read Martin's articles on Banking and Savings. They will give you a very good grounding.

Well done so far, keep saving ;-)

innovate

Also, if the total you can save is less than your annual ISA allowance, and you need to dip into your savings for holidays etc, it is still worth saving into an instant access ISA. Unless you chose a really dire ISA (which can easily be avoided), no instant access saver will pay you more interest than an instant access ISA will.

It's only when you have maxed your ISA allowance that you need to look elsewhere for a home for your money.

The only possible exception is a Regular Saver which pays 8%+ interest (First Direct is the only one in this category atm) - BUT you effectively need to tie up your money for a year to get that interest, and it doesn't actually pay as much as the Nationwide Flexclusive ISA (4.25% still, but might close for new applications soon). You might be able to use the Dripfeed technique to beat the Flexclusive ISA but for that, you do need a lump sum to start with, and it still does tie up your money for a year.

One final piece of advice: don't expect other people to make your choices - - only YOU know what your circumstances and requirements are.

innovate

Just skimmed through your original post again and see you have an ISA with C&G. If it pays 2.7%, it is not the worst one, but also quite a way from the best one.

If you have already paid money into this ISA this financial year, only ISAs that allow transfers in will be in your reach, and the Flexclusive ISA is definitely out of bounds, this tax year.