Loans better than overtime?

System

In my case I sometimes cut myself short trying to pay off the mortgage and then getting an unexpected leasehold service charge or car repair - or someone might want to get married sooner rather than later for example (not just to share married couples tax thresholds lol) - stuff happens and in theory people shouldn't get credit approval if they can't pay. Also at higher tax thresholds like 40% could make sense again

System

Savings would of course be ideal if that's possible, if not its generally loan/overtime as the options

Pixie5740

Learn how to budget properly and then you'll be able to roll with the punches without having to resort to getting yourself into debt.

System

Pixie - ideally yes, but leasehold service charges can be like "were doing some major works, it'll cost you 5k, payment within 30 days please" - luckily my freeholder allows me to pay in installments when that happens, but not all of them. Keeping thousands in an isa rather than mortgage is a lot of forsaken interest over the years, so it can make sense to just keep 1 or 2 thousand and borrow the rest as needed. You could just have terrible bad luck, like car repairs and dentistry all at the same time, budgeting accidents happen when trying to minimise forsaken interest. Also you may have a 5+yr fixed isa or regular saver that actually pays more than some loans (more so mortgage) charge

iainscomputer

I don't really agree with the OP, the best way is to cut spending & save up. When I do overtime my rate is time plus 3/4, so any overtime always pays more. I'm only on basic rate tax & do not receive any tax credits. I do overtime & it enables me to save up & not take out loans.

System

Ian - I save up too but this is just planning for emergencies, overtime for me is the same rate, as its treated as a separate zero hour contract, so the net hourly pay in my case is less for overtime, which is why I feel like I do, and the child tax credits drop by 41p for every £1 i earn too, so adding a 41% tax to PAYE and ni makes a powerful disincentive

CKhalvashi

MatthewAinsworth wrote: »

Ian - I save up too but this is just planning for emergencies, overtime for me is the same rate, as its treated as a separate zero hour contract, so the net hourly pay in my case is less for overtime, which is why I feel like I do, and the child tax credits drop by 41p for every £1 i earn too, so adding a 41% tax to PAYE and ni makes a powerful disincentive

However you're still better off overall by working the overtime.

I do get where you're coming from, but that's not the way I manage my finances.

System

You will have more in your pocket for overtime, but im aiming instead for minimum lifetime work, for me that's the whole point of monetsaving... if I loved work I might as well rent and have no pension (though have read that work is good for health...)

Thrugelmir

MatthewAinsworth wrote: »

Banks borrow from the Bank of England, from depositors, from each other, and from pension pots

They also have to adhere to strict regulations and law when conducting business.

pelirocco

JimmyTheWig wrote: »

I've got you! I understand what you're trying to say.

Right, lets say the OP works 28 hours a week, earning £7 an hour.
They earn £10,192 a year.
They pay £38 a year income tax.
They have a Tax Credit withdrawal of £1,547.
Net income from working is £8,607.
That's £5.91 an hour.

If they work an hour overtime they would earn an extra £7.
They would pay an extra £1.40 income tax.
They would lose an extra £2.87 tax credits.
So that extra hour brings them £2.73.

Ok, so lets say out of the blue they need £273 that they don't have.
They could work 100 hours overtime to get it.

Or they could borrow it and pay back an extra 10%.
That would mean paying back £300 from their £5.91 an hour pay, which means working 51 hours.

So by working overtime that £273 costs them 100 hours of work.
But by borrowing it it costs them 51 hours of work.

But you have calculated over time at basic rate ....what if overtime is time and a half