Pay off debt v save for maternity leave?

mrso2b

I don't know what is the best thing to do.


I have about £4k on 0% credit cards. One is running out of it's deal at the end of this month and the other two run out in October.


I got a bonus last week which means I can pay off the debt off the card which comes off its 0% this month.


I'm going on maternity leave at the end of next month. I get 90% of my salary for 6 weeks, then 70% for the next 12 weeks, then statutory till around 9 months then nothing up to 12 months. Was hoping to take 12 months mat leave, if possible. So money will be tight as we'll be going down to one salary effectively.


My husband gets paid 3 months salary in advance at the end of this month, I can save 2/3rds of this to pay off the remaining debt in October.


But should I be saving this money for when my income is reduced rather than paying off the debt? I know that Martin says to pay off debts rather than having savings, but I'm a first time mum who's income is being reduced, so not sure what is the best thing to do. I think paying off all the debt and then trying to manage is the best thing... what would you do?

walby1993

Hi,

I suppose it depends on a number of things. Firstly, how much are you currently having to pay towards those debts each month? Remember that once they are gone, you will have less outgoings making maternity leave a little easier. Secondly, don't forget you will be spending less on travel as you will not be at work. Thirdly, do you currently have any "spare" money each month? Posting a SOA would probably make it easier for people to properly assess your situation. It may be that the best answer is to pay off some and save some.

retepetsir

If they're all finishing the 0% interest periods soon, then I'd pay off the debts asap before you start owing interest on the £4k as that will be an additional cost from October onwards which you don't want!

Rather than save that 2/3 of the salary, pay the card off as soon as you can and then you're ready to budget for the coming year.

As suggested, posting an SOA would be useful. What I did (currently doing as other half is on maternity leave) is work out her total pay for the year and then average this out over 12 months. That gave us an income to use for budgeting.

Remember you'll also start receiving child benefit at £82/month

mrso2b

Thanks walby. We currently pay out around £70 a month to these debts.


My travel costs are £100 a month so we would save on that too.


We do have spare cash every month, but have been spending to get stuff ready for baby.

mrso2b

Thanks rete, I didn't think of the interest being added as extra cost...


So you would pay off the cards that are due to come of there 0% in Oct now, rather than waiting till October?


Some great tips there - thank you.

walby1993

So with these debts gone and not needing to spend on travel to work you can afford to take £170 drop in wages each month without it having any effect on your life.

With regards to spending on stuff to get ready for baby, obviously once baby is here this will reduce massively (although not completely as they will outgrow clothes etc) so this could also be used to help take the drop in income.

As retepetsir said, don't forget you will also have child benefit coming in to.

With regards to keeping costs down - don't waste money on brand nappies, just buy supermarket own. They are half the price and work just as well (I have used both Tesco and Sainsburys own brand for the last 16 months with no issues).

daphnemoon

They do say that paying off debt rather than having saving is the best route to go down.

Avoid paying interest by paying the cards off then save what you can to replace the capital you've spent that way it's cheaper for you in the long run.

Hope this helps (don't forget Aldi and Lidl for baby essentials).

All the best

Idiophreak

Hmm, just to buck the trend, if I were you, I'd be saving the cash and letting the credit card stay put (in fact, I'd probably look at balance transferring it to a nice long 0% deal in October).

I'm assuming you don't have a massive amount of savings already, so you're going to take a severe hit in wages especially as the year rolls on - you're going to need some savings to top you up. Savings also act as security against unforeseen costs, redundancy etc...and you're a lot less likely to be granted interest free credit once you're on ML, so I'd use the facility you have now.

Take one of the low fee offers on at the moment, it'll cost you < £30 for over a year's peace of mind. Sounds like a bargain to me.

asparagus1968

think I would pay off the CC that 0% is ending on with your bonus money, then balance transfer the other two CC to another 0% if you can get one, or as above, a low interest life of balance card.
Save like mad, fill out a statement of affairs (for yourselves or to post here) and work out your budget once you know whats what.


congratulations by the way

lstozza

I was in the same predicament last year. My partner had debt i was unaware of. I wasn't in a position to pay it all off however i did get a temp promotion at work for 6 months before the baby was due so i saved that extra money and divided it up over my maternity to make up my wages, transferred into a 0% (MBNA had one for 22 months) then once everything else was sorted i would use any spare cash from that month to pay off a little extra, that way we weren't scrimping, i still felt like i could provide adequately for my baby. Aldi nappies are brill, i also used to buy in bulk when things were on offer or on sale. My whole world was turned upside down when i found out but with some good budgeting my baby has never went without anything.. Good luck xx

moohound

Save like mad while you are still earning, don't buy everything in sight for your baby they don't need designer clothes. Totally agree with the above comment on Aldi nappies by the way.