Use my EF to pay off my OD?

Bublin1

I have a quick question....


At the moment I have £631 in my Emergency Fund.


I also have a £437 Overdraft.


Should I use most of my EF to pay it off and then start to pay back into it?


Or, should I leave it alone and just cut back on spends to get rid of the OD which is costing £6 a month.


Cutting back on spends to get my account to zero will take about 2-3 months.

edinburghlad

Martin Lewis has a good article on this subject.
http://www.moneysavingexpert.com/savings/pay-off-debts

Basically you should pay off your overdraft with your EF. If for any reason you need that money for an emergency, it still there in your overdraft. If you don't need it, you will save £6 a month. If you do need it, your no worse off than you are now.

Hope this helps

andyfromotley

I did exactly this last week. It is rubbish seeing the EF take a dip but its another debt killed!!

DFB35

I have also used the emergency savings I had to put towards my debt, but I know what you mean as it is scary!

However you will still have almost £200 left in savings - so I would say go for it

Good luck :T

redux

It shouldn't be scary. It just needs a slight change in the way of looking at it.

Mentally count the overdraft as an emergency facility, there if needed, but not paid for if not used.

And there's an extra £6 a month topping up the savings.

Bublin1

Thanks everyone.
I just made the transfer....it was scary because im used to having that large safety cushion but i couldn't bare looking at the negative balance in my a/c any longer and it was holding me back from doing my zero based budget.

Have to admit my finances now look alot healthier and I can now get to work on my goals.

edinburghlad

I noticed you are a YNAB beginner. Once you see your net worth going up as you pay off your debts, the motivation will just keep coming! Well done

patman99

Bublin1, that is exactley what the EF is for. With your OD gone, thats £72 per year you will save in fees rather than giving it to the bank.

You can add this £6 p/m to your EF along with whatever you normally put in without making any changes to your current financial management.

Bublin1

edinburghlad wrote: »

I noticed you are a YNAB beginner. Once you see your net worth going up as you pay off your debts, the motivation will just keep coming! Well done

Yes Im a newbie to YNAB using the trial and seeing minus on the spreadsheet AND on my bank balance was demoralising.
It looks healthy now and I can now budget all of my income.

takingcontrolatlast

Excuse my ignorance but is a YNAB beginner please

MrWillyWonka

takingcontrolatlast wrote: »

Excuse my ignorance but is a YNAB beginner please

Its someone who has just started to use the YNAB (You Need A Budget) software. A bit of a learning curve but it's a fantastic way to budget. For a lot of us it's key to budgeting and getting out of debt quicker.