Advice needed ... pay debt off or not ?

ian_alfa_33

I have just obtained a substanial amount of shares through a savings scheme.

I also have around £10,000 of personal debt (cards, etc), plus a mortgage.

My initial instinct is to pay all the personal debt off asap, but is there a more efficient / better way to use the money available.

I have been toying with the idea of getting the money out in cash, and physically paying the amount off at a bank branch - to get satisfaction that it's paid off, but also to stop me from running up debts again ...?

I would appreciate some good advice here, as this is a large sum of money and I don't want to make any stupid mistakes.

Thanks in advance.

Al_Mac

If you have debt

Pay off credit cards, highest APR first.
Personal loans, highest APR first.
Ensure you have one months outgoings, in an instant access savings account.
Mortage.
Longe term saving.

This could be my next signature.

chitty

Congrats on your winfall. Pay off the debts mate. I know it's nice knowing you've got a nice little sum in bank, but it's not really your money, it's just balancing out the debt and the more you hold onto it, the more interest you're paying.

Hope this helps.

deemy2004

Yeh as above, pay off your debts !

Afterall you would not borrow £10k on credit cards and invest it into the stock market would you ?

Debt_Free_Chick

ian_alfa_33 wrote:

I have been toying with the idea of getting the money out in cash, and physically paying the amount off at a bank branch - to get satisfaction that it's paid off, but also to stop me from running up debts again ...?

The only way to stop running up debts in the future is to live within your means i.e. only spend what you actually have. In addition, you need a robust budget that ensures you put aside money for all your bills and some for savings too, so that you have a "spending" amount left over. If you only spend this amount, you'll avoid debt.

Or you could make a career out of being a "mean git", like me Having paid off all my debt, I find there are plenty of things I can now do without. I really don't need all that "stuff" I used to accumulate on credit cards anymore. I am now fanatical at getting only what I really need at the best possible price and watching my savings build up.

Having paid off your debt, which is absolutely the right thing to do, then make sure you have a proper budget so you actually KNOW - without any doubt - how much you can spend from month to month.

Good luck

mountainofdebt

Capital Gains Tax!!!!

Not sure what the figure is but I wouldn't sell any shares that took me over the Capital Gains Tax Allowance.

Don't know if this applies to you but it is worth considering before you sell your shares to clear your debt.

Debt_Free_Chick

mountainofdebt wrote:

Capital Gains Tax!!!!

Not sure what the figure is but I wouldn't sell any shares that took me over the Capital Gains Tax Allowance.

Don't know if this applies to you but it is worth considering before you sell your shares to clear your debt.

A good point. However, in order to do a full comparison, one would need to weigh up the interest that would accumulate on any unpaid debt and compare that to any CGT - it might be a price worth paying.

Hunnymonster

Sell up to your CGT limit then and knock a CGT-threshold-sized hole in the debt - and if there's still some debt left, it'll at least be growing more slowly in absolute terms and the repayments less onerous (if you kept repaying at the current level it would disappear faster too).

Then next tax year, flog the rest of the shares (if you want to) and do with it what you will.

Moncs_2

I to am lucky enough to be coming into some money, not until Oct next year and I was going to ask the best way to use it.

I should be getting between £20k - £30k from a percentage of the sale of my dad's house, house is currently valued at £112k, I'm going on a selling figure of £100k just in case the house market drops.

My debts are (as of Oct 06)
Mortgage - £72k
Loan 1 - £8k
Loan 2 - £4
C/C - £2k

My plan was to pay off both loans and the CC first and pay whats left towards the mortgage.
Should I do this, it just pay the full amount to the mortgage?

Debt_Free_Chick

On the assumption that the interest rate is higher on your Loans & CC, then pay those off first.

I would then use up my ISA allowance, in full. And then put some "rainy day", instant access money in ING. And only then, pay a chunk off the mortgage. Check your mortgage terms to see whether there is an option to overpay and whether there are any restrictions.

Cheers

Debt_Free_Chick

Rainy Day money - should be enough for you to live for 3 months, in case you have no income.

This should cover all essential bills and as much, or as little, as you think you can get by on for "personal spending" money. Personally, my spending money is about £50 a month - if that!