Saving while paying off debt?

catralense

Hi All

Now that I've had my LBM and m finally getting serious abnout tackling our debt, I'm wondering about savings. Not that we have any! But should I be trying to build up some sort of emergency fund or should I be concentrating on throwing every spare penny to reduce our debt?

Any thoughts on this?

TIA

Tixy

Usually the advice is to pay off debts before trying to build up any savings.

But it does partly depend on your circumstances and how you would manage an emergency, and also what sort of emergency you might have (e.g. a homeowner could have different emergencies compared to a renter or someone living with parents etc).

Do you have a credit card that you can still spend on and that has some spare capacity? If you do then that is always an option in an emergency. If you don't have any access to credit then building up a small emergency fund would be better than having to consider falling back on something like payday loans.

Broke_Kitty

I am personally building up a small emergency fund (£600) because although I have credit cards I'm paying off, I don't want to spend on them (any spending would incur interest where as at the moment I have 0% balance transfers on them).

As long as I have this, I'm throwing all extra money at debts, but if I were to need to dip into this, I'd make the minimum payments for a couple of months until I'd built it back up.

That's just what I'm doing, though.

National_Debtline

Hi Catralense

It's certainly advisable to allow for some sort of emergency fund in your household budget, even if it's only £20 per month. If something breaks down and needs repairing/replacing in a hurry, it's best if you have a little something put aside already to deal with it. I would always encourage someone to allow some "slack" in their budget - if you manage to spend less on groceries in a given month than you have earmarked, you can then add the savings made to the emergency pot.

If you want to put up an SoA here:

http://www.stoozing.com/calculator/soa.php

I'm sure forumites will have suggestions on what you can afford to put by.

Regards

Dennis @NDL

Larac

IMHO you do need some form of emergency fund as there is always something that comes along unexpectedly. I am on a DMP and there is small amount set aside each month in the budget. It would be too stressful not to have something in case of emergencies as I don't have access to credit as part of the agreement.

its_maths_not_magic

As others have said, it depends on your debt. ATM Im paying off our wonga loan (which will be done tomorrow ) so I haven't bothered saving during this time. Mainly because the interest on wonga is so very much more than any interest I'd earn from the bank. However, once that is done I plan to save a little every week as the rest of our debts do not accrue (sp?) interest and I point blank refuse to allow myself a credit card. We also do not have friends/family in UK to borrow from should something bad happen. So in our situation, it makes sense to have an emergency fund so we never have to rely on payday loans again.

Jason_Bourne_2

Save save save.

3 years into a DMP and I had zero savings. Massive mistake and I'm now trying to save something every month.

catralense

Thanks for all your responses. Now that I've got the bit between my teeth I'm really eager to get debts cleared ASAP. However, knowing our luck, something will come along to put a spanner in the works! We've got 2 overdrafts totaling £1250 which we are permanently living in. If I can get us back to a zero balance BEFORE payday then I could use the overdraft for emergencies. At least that wouldn't open the floodgates for more credit card spending.

I think the difficult thing will be changing our mindset about NEVER going in to our overdraft (on a normal month) as we've lived in that bl00dy thing for years!

Thanks for your thoughts xx

seanavfc92

On a DMP, it's advised that you don't put money away for savings when it can go towards paying off your debts quicker. A pension, maybe, but not general savings.