Tortoise or the hare?

FireWyrm

Hi All

So, the last month has been a bit of an interesting one and I was hoping for some opinions on a situation I have now. Essentially, I was made redundant on 30th April and initially, I was concerned about we would do. Thankfully, I work in a fairly niche industry and I have a new job lined up to start on the 1st June, which means a payday at the end of June. My ex-employer were pretty nice about things and they have given me 3 months pay as notice, great. Now, I have a quandary and I am not sure which way to go.

I am down to our last £7500 of debt. If things had carried on, I would have paid it off by December 1st as expected and not looked back. However, I have calculated that with the debt repayments I held off making last month (because I saw the redundancy coming) and the 2 months pay that I dont strictly need and planned payments for June I was going to make, I can pay off that debt almost immediately at the beginning of June.

All the debts are interest free and not actually costing anything. They are on long credit card agreements so, interest isnt even imminent. I dont spend on them and have no plans to after this is over. I could simply carry on as normal and keep paying them off at the rate I had been and keep the £5000 pay as a buffer (YNAB concept). If I did that, I would pay it all off on December 1st as planned and keep the '2 months' pay as the buffer.

Paying off the debt is very much a psychological thing at the moment rather than an actual necessity. I will get there eventually. I sort of like the idea of having the £5000 as a buffer, we've never had that before and it would be an instant 2 months notice on the new job too.

On the other hand, I could be debt free by 5th June.

I just dont know which way to go. Tortoise or the hare...opinions?

redux

It depends whether any of them will discount for early settlement offers. If so, pay now. If not, up to you.

dobbollah

like you say there's a physiological factor......if I were in your shoes I'd bin the debt off, trying to negotiate a discount, even if they said no I'd then still pay it.

Whatever your monthly payment is you can build a buffer with that...

I cant wait for that magical day of debt free.......

FireWyrm

I should make it clear, the 'debts' are all self managed and are on 0% credit cards. Sadly, no bonus for early payments available to me, it is either paid or not and the credit card companies would clearly prefer 'not'.

redux

Put most of the money in 2 or 3 decent interest bank accounts for a few months. 5% or 4% possible, in TSB & Club Lloyds etc. See other forum section.

Tixy

I would keep the buffer and carry on as you are.
If the new job doesn't work out for any reason, you still have the buffer in place.

For some people I think there would bethe risk of temptation to spend some of it if it sat as a buffer, but because you are so organised with your finances I don't think that would apply to you.

andyfromotley

Hi fire,

hows your EF? Assuming thats ok (if not top it up). Other than that i think id split it 50/50. great start to the buffer, big chunk of debt gone.

Obviously there is a small advantage in putting it in interest bearing accounts, but not much. There is also an advantage to paying off your debt as it frees you from commitments in case of a change in circumstances. Its all swings and roundabouts. TBH i think you will be fine whatever you choose.

FireWyrm

Thanks for the advice.

I have added £700 off the top to the EF (in reply to Andy).

I would like to say that Tixy was spot on the money there with her praise, but I would be lying. I bought some new clothes and a satnav (both needed for new job) and having just done the accounts, we spent £90 on take-aways this month (yeah...I know!). YNAB is balanced as of today having been avoiding it for much of the month but I now know the true picture. BTW, this month has been a VERY good demonstration why 'finger in the air' accounting doesnt work. We spent nearly £700 this month over the budget just with 'stuff'. I can pay off all the debts by the end of June and on balance, having topped up the buffer with £700 off the top etc, it would do us well to pay the whole debt once and for all. I am anxious to start the new year and I dont want that £5700 to get frittered away by mistake and have nothing. If I pay off the debts, it is out of sight and out of mind. I wont have it to fritter, the money has been given a purpose and I can concentrate on building the buffer with the new salary coming in. I also wangled a payrise of over £500 a month which will be buffer bound automatically from now on. I am planning that we live on the previous salary amount for the forseeable future anyway.

Decision made then - unless anyone has any better ideas. I will pay off the debts finally and be done with them. A 2 month buffer would be nice, but I think it could be put to use elsewhere.

andyfromotley

Whoo hooo!

fires gonna be debt free!

FireWyrm

I cant wait to make the announcement and get my badge. After 4 years of trying, it is finally a reality and within my grasp. I'm almost tempted to raid all of my buffers and overflow accounts to get it done by the 1st of June rather than the 1st of July, but I think that might be going too far. I actually have over £500 sitting in an 'energy' account which I started siphoning last year when the energy company lowered my DD and I didnt trust it. I put the excess into a savings fund which has been gradually growing amongst others.

Muhren

I am going to be in a similar situation in September next year, when my share save matures. At that point I will be able to cash in the shares and clear my debt off in full, however I have got my mind set on keeping them invested and collecting the dividends each year. That would mean I would have to send and extra year living at home with my folks though. I really don't know what the best option is!

... and wowzers a £500 a month pay increase, I have just recieved a £30 a month increase!