Mummy's attempt to budget & save.

Mummy_Moo

Thanks Mr Orchard,
I know paying off the debts with the savings makes the most sense logically, and I know I'm making no sense what so ever but I just can't bring myself to empty the savings account. But you are right, and if I haven't got myself in a considerably better position by new year then I will indeed take your advice and give myself a clean slate to begin 2013 with. Has anyone else felt nervous emptying their savings or am I just being silly?

On the plus side, I've had a fairly successful day, needed to stock up on fresh fruit for me & baby, managed to get a bunch of bananas, bag of apples, bag of pears, bag of clementines and two tins of tomato soup for £1.08 (used this week's £3.10 Healthy Start voucher). And to make it even better I also got £5 selling some old DVDs. Just need to shift some more stuff now.......

Newbie2saving

Just read your thread, clearing OD is important as is paying off any CC's.

Think about then using ISA's to avoid paying tax on your savings and getting the best interest rate.

I sold all my old CD's earlier this year and got >£100 (had a lot though). Also think about ebaying some old things, baby items sell well, I sold a bumbo for £25, not bad 2nd hand price.

Try setting a budget for Christmas and sticking to it. This can also be applied to days out / treats - but also feel quality time with your LO is invaluable, so enjoy!

Good luck!

innovate

Mummy_Moo wrote: »

Has anyone else felt nervous emptying their savings or am I just being silly?

I'm afraid, yes, you are just being silly, emotional and quite illogical.

You sound intelligent enough to understand this: You are paying way more for your overdraft and your CC than you get in savings interest. Now is not the time to keep your savings. Savings are for a rainy day - and it's pouring heavily now where you are, so use your savings!

Very rough example: you get £1 a day in savings interest and your debts cost you £2 day. So you are £1 down each and every day. Your actual figures will of course be different, but the principle still stands - - you will no get better interest on savings than the interest you pay for debts.


If you pay off your debts with your savings, you won't get your savings interest but you also do not have to pay interest on your debts - i.e. you no longer clock up the £1/day debt! Your net balance will probably be zero for a while - way better than having a negative net balance! Within absolutely no time, you will then be able to start your savings pot again and make real headway financially.

As Cyrus has already suggested:

Cyrus wrote: »

If the OD and the CC are costing you money then it is logical to clear the balances with your savings.

With an OD and a CC you still have available funds for an emergency even if you have no savings.

psychic_teabag

Does you OD have a fixed daily charge, or is it an interest rate ? I can't remember if you said which bank you use.

If it's a daily charge, there's an argument for not reducing it if you can't clear it. Someone will correct me if I'm wrong, but if you are paying £1 per day whether you are £20 overdrawn or £200 overdrawn, you may as well keep £180 in your savings account, since you get interest on £180, and pay the same on the overdraft either way.

Some accounts have stepped OD rates : if you can reduce it so that you pay £1 rather than £2, that's good, but there's no point reducing it further unless you can completely clear it. I hope you see what I mean.

But if it's an "old-fashioned" overdraft that's just interest-based, ignore all that.

Your credit card almost certainly does charge interest, so you should definitely pay that one off.

innovate

Looking at the first post, she has something like £885 in savings accounts and £978 in overdrafts/CC debts.

There is just no way that she will make more interest from the savings account than what she has to pay in interest and charges for the debts.

If she sinks her savings into the debts, she will be left with around £100 debt. She should be able to pay that off within a month with some frugal living (and Xmas pressies from the rellies). Then start serious saving in 2013, and she'll soon have £885 in her savings account again - - but this time without the debt that eats up any savings interest.

psychic_teabag

One other thing from the original post : you say you want to stop using your credit card, but used correctly, they're good things, since they allow you defer having to actually pay for things. And cashback and reward cards even give you something back.

You say you move weekly spending money to a separate account, which presumably increases your overdraft. If instead you paid using your credit card, you'd defer having to actually spend the money for up to 6 weeks. But obviously this requires you to be much more vigilant about your spending : you can't just rely on the balance of your spending account to tell you how much is left.

Note that I think you only get the interest free period once you have paid in full for a couple of months. Once you've started carrying over balance from one statement to the next, I think you pay interest from date of purchase.

marathon_man_3

I can only agree with the last poster.
As long as the credit card is useable and the overdraft is accessible, you will have access to emergency funds. It would be silly not to use your funds to pay as much as you can off the debt.
Tell anyone who might buy you a present that you are finding it a bit tight financially this year and can't afford to spend very much, if anything, on their presents. If they still want to buy you something, ask for cash instead.
There is nothing embarrassing about trying to sort out your financial and your friends and family should recognise that fact.situation

innovate

Consumerist wrote: »

There is probably much you can do to save on your expenditure so I would advise copying your post over to the <Debt-free Wannabe forum> for loads of helpful advice from many in the know. Please put a note on this thread if you do that so people don't post further comments on this thread.

This is such good advice - - the folks over on the DFWB forum will have loads better ideas than most of us here do. E.g. shifting your credit card debts to a zero percent card might buy you some breathing space.

Mummy Moo is in a lot better starting position than many others I have seen on MSE, and should be able to get on top of her finances in no time if she puts her mind to it. She's not far off it, anyway, since she is actively thinking about it already.

Mummy_Moo

Ok everyone. Thank you for this much needed kick in the right direction. You're all right, I was just being silly holding on to the savings and paying for the debt. You'll be pleased to hear I've done as I was told my balances are now as follows.....

Long Term Savings - £0
Short Term Savings - £0
Car Savings - £142.06 (This account covers all my car bills, insurance, MOT, tax etc)
Weekly Budget Account - £35.00
Credit Card - £0
Main Bank Account - £409.96 overdrawn

My main bank account always fluctuates up and down as money comes in and goes at different frequencies, but my aim now will be to get that permanently in the black (even at it's lowest), and once I've done that it will be time to start replenishing those savings.

Thank you again everyone, I knew it made sense, just needed a push.

New Target - Debt free by New Year???

innovate

Mummy_Moo wrote: »

New Target - Debt free by New Year???

Good going so far, girl, and the new target is a super idea. You can do it, just stay strong!