Small Steps Out Of Massive Debt!

enthusiasticsaver

Glad you decided to take up the offer and it will be a great opportunity to save and to get rid of the debt.  As a West country girl  myself Somerset is a great choice although I have only lived in Cornwall for 32 years so may not yet be able to call myself that . As a lot of people are now able to work from home I do wonder if a lot will move out of the cities into somewhere more rural.  If anything lockdown has made those of us who live out in the country appreciate our surroundings more. Walking on the coast path or through the fields is my favourite thing to do. 

GeorgianaCavendish

Thank you @enthusiasticsaver - I'm really glad we've moved, it is a great opportunity for us to make a lot of progress towards our financial goals and I really love Somerset Cornwall is gorgeous too, I have a few colleagues who have relocated there during lockdown and I'm jealous every time we speak on Zoom! I think long-term we will settle somewhere between here and London as I expect we will need to commute at least 2 days per week each, but then again - who knows! The landscape of office life is changing so much. 

I confess that I'm getting myself in a muddle around how best to achieve my savings and debt payment goals going forward, so I'm sure there will be a lot of rambling on my diary in the coming few weeks! I'm going to let the dust settle for a couple of weeks (working out the payments and refunds due on final bills etc) and then draw up a new priority list and the temporary budget to cover while we are living here. 

My rough thoughts about financial priorities : 
- emergency fund (ideally I'd like to have 6 - 12 months in here, I've got 3 months for now which is an ok buffer to deal with an emergency but with a difficult job market I would feel more comfortable with more in there. I want to try to grow the EF at a more relaxed rate while working on the other priorities) 
- moving fund (I've got enough in here to cover removal costs, rental deposit plus first month's rent, some towards utilities / insurance, plus a little extra for the incidental costs like parking permits or getting a takeaway the first night etc) 
- deposit saving for house purchase - currently using LISA. The annual £1000 bonus for £4000 saved is so good that I would prioritise saving into the LISA above debt repayment in the short term. 
- debt repayment (if I can keep it all on 0%, I would be ok with this taking until April 2022. I'm planning to clear Tesco early 2021 but open to transferring some of the MBNA balance to another 0% so I don't have the pressure of meeting LISA deadline for this tax year and having £5850 on two 0% rates expiring in April 2021) 
- increase pension contributions. Currently contributing as much as is matched by my employer but I'm aware that I've had years of not making the most of this, and I need to save for retirement too, so I do want to increase this. 
- proper savings pots for upcoming expenses, so I can benefit from cost reductions on things like insurance policies 
- mid-term savings - to be addressed when I've got a better handle on the other priorities, but I would like to start a stocks and shares ISA or similar 

GeorgianaCavendish

One small change that I'm implementing straight away is that I'll now be putting cashback, survey money etc towards a 'fun' expense rather than debts or emergency fund (either birthdays or hair appointments) - I think it will help me to get started with saving for these expenses in advance  

astrocytic_kitten

I like the financial priority list. I have a few big savings goals floating round but approaching the same was as debt repayments and prioritising is a good idea...a lot to think about.

GeorgianaCavendish

The priority list is doing my head in at the moment! I think I’ve got a bit of financial FOMO, I’m a bit muddled about what to focus on first and then I get distracted by other people’s achievements on these boards and think maybe I should be doing that too. 

I keep second guessing my decision to put debt repayments further down the list than other things, I think I’ll do some cost calculations to help with that. 

I know that at some point I’m going to have to revisit my budget and this is getting me stressed. I’ve tried but don’t do well with the “giving every pound a job” method from YNAB, it feels too restricting which then makes me want to go on a spending binge, so I try to find a light touch to budgeting with a “personal spends” pot. I think there are some wins to be made from examining this pot again so will do that, but not looking forward to it! 

astrocytic_kitten

Wish I had some words of wisdom to offer, but having attempted my own financial priority list I can confirm it’s not as easy at it seems 😂 so many priorities, all so important, and no quick wins in sight...

Good luck with revisiting the budget. 

GeorgianaCavendish

astrocytic_kitten said:

Wish I had some words of wisdom to offer, but having attempted my own financial priority list I can confirm it’s not as easy at it seems 😂 so many priorities, all so important, and no quick wins in sight...

Good luck with revisiting the budget. 

Thank you! At least we have company on this part of the journey

GeorgianaCavendish

I've finished reconciling the final bills. We owed a bit on the council tax which I've paid today, but we are due refund on electricity and water. When the refunds arrive I will transfer the money over to the Insurance Subscriptions pot on Monzo to go towards next year's policies - I feel better already having made the decision on this (even though there will be more saving to do)  

enthusiasticsaver

I am glad you are enjoying Somerset and I have noticed quite a few people have moved down to the West Country over recent months.  I was walking the coast path yesterday and chatted to a lady from the Midlands who had just moved down with her daughter.

I love the financial priority list and you have some good objectives there.  As with anything I think it is getting a balance right between saving for the future, enjoying the present and paying for the overspending of the past (repay debt).

You have a new house to save for and the LISA is great for that.  What I would say for pensions is the earlier you start the longer it is there to grow hopefully and you start to not miss it after a while. I would focus on the pension initially rather than stocks and shares isas if you have a lot of catching up to do.  It is more tax efficient going into a pension but a stocks and shares isa is more tax efficient coming out. The costs would be cheaper in your pension if you intend to use the one your employer contributes to.  An ISA  is a great tool for early retirement for the gap between stopping work and being able to draw on pensions but if that is not something you are interested in then I would stick to the pensions.  For reference we did not start stocks and shares ISAs until I was 55 although I wish I had started earlier.  As you have not yet got a house though I would make that a primary focus but you may be different.  You also need to live and having some monthly spending money for the odd meal out or putting money aside for holidays is important too.  

Why not split spare money in three and put some to EF, some to debt and the rest to savings in LISA, annual pots and pension? 

GeorgianaCavendish

Thank you @enthusiasticsaver that is a really good suggestion to split spare money between the competing goals, and as my plan was to save the "spare" money into named Monzo pots for the time being before either making an overpayment or paying into the LISA at the beginning of next year, I've got some time to get used to this new feeling of not instantly "spending" all my money.

That is very interesting about the stocks and shares ISA as a way of bridging the gap between retirement and pension age, and I can see that the growth in a pension would be a lot more. I need to spend some time with the pension projections and see what my shortfall is, but I agree that the top priority for 'spare' money is to put towards buying a house but I will continue to work on the pension goals too.