Structuring finance

lazer-zxr

Thanks to DFW board, I feel my finances are thoroughly reviewed and organised.

As part of this, I now have an "Annual spends" account, where I put in £120 per month, for things like insurances, subscriptions, MOTs, Xmas and holiday funds.

This account sits with a balance of around £600

Considering I'm overpaying my debt at around £300 per month at the moment, I'm thinking, a more efficient way of using this £600, is to over pay my debt by an additional £300 from the "Annual spends account".

If my annual spends then require upto £600 in that month, I would use the remaining £300 from the account, and forgo the £300 overpayment in that period.

The benefit would be interest saved on the £300 overpaid early.

I don't see a downside, can anyone else?

Am I over doing this?

Thanks in advance.

EssexHebridean

First, think ahead - when is the next time you expect to have an annual spend. Time for some financial planning - work out what you have coming up, how much, and when, and then plan accordingly with your shuffling of money from that account to debt. I take it you have an emergency fund? If you don't then I'd suggest increasing the amount in that account to cover that as well, and then do your planning from that point.

Great work so far though - you're making fantastic progress!

Oh - you may already have thought of/done it, but take a good look at your NRAM loan for PPI mis-selling - Northern Rock used to be shockers for telling you that you had to take their insurance for them to approve the loan - I got mine back as a result of that.

lazer-zxr

EssexHebridean wrote: »

First, think ahead - when is the next time you expect to have an annual spend. Time for some financial planning - work out what you have coming up, how much, and when, and then plan accordingly with your shuffling of money from that account to debt. I take it you have an emergency fund? If you don't then I'd suggest increasing the amount in that account to cover that as well, and then do your planning from that point.

Great work so far though - you're making fantastic progress!

Oh - you may already have thought of/done it, but take a good look at your NRAM loan for PPI mis-selling - Northern Rock used to be shockers for telling you that you had to take their insurance for them to approve the loan - I got mine back as a result of that.

Thanks for the reply.

I'll my future outgoings, like a mini cashflow forecast.

My emergency fund is recovering, and separate to this.

I can't put my hand on my original NRAM documents. I asked for copies, and I don't think I took out any PPI with them. If I ask them, are they obligated to tell me?

lazer-zxr

I felt it was time to revisit this thread.

The original plan was to use the float of my annual spend accounts, to paydown debt, and forego overpayments in the months where an annual spend was required.

This has worked really well, and really recommend it.

I've now paid back 70% of my original debt, £37k of £52k paid back, and I'm so proud and motivated to keep going ... but I'm entering a new phase of finance structuring.

I'm going to turn my attention to mortgage overpaying now.
My unsecured debt is £15k @ 3.3%, 30 months remaining.
My new Nationwide mortgage is ~£145k @2.27%, 15 years remaining.

I now have £1650 / mnth available to overpay debt, which will increase to £2k over the next 4 years.

I've had a play around on excel, and a snowball calculator, and it looks like I can be mortgage free, and debt free in 4 years, and then have £3600 spare per month ..... that would be an absolute dream.

So ... what I'm going to do is:
Pay £15k loan at minimum payments (will be repaid in 30 months)
Over pay mortgage, and hopefully clear this in 4 years.
I know this doesn't make sense when considering apr%, but I'm afraid that if I clear the unsecured loan, I won't commit all of the newly available money to the mortgage, I'll waste some. Where if I am used to overpaying the mortgage to the max, and this is the longest running loan ..... I'll see it through to the end. This may seem odd ... but sometimes its about more than the APR%, it's where your head is at and the emotional management of the situation.

This complete turnaround, form £51k, to ..... plan to be mortgage free in 4 years, it's all down to you guys and this site. From a change in attitude to spending, selling on ebay, getting better deals on my bills and purchases, using coupons. I don't even feel my family's lifestyle has changed much, it's just more efficient.

Sorry for this little essay .... but thanks to this site and you forumites.