How Much do you Save?

Cotta

EachPenny wrote: »

That question probably needs it's own thread on a different board

But in simple terms, if you aren't planning on applying for a mortgage in the near future then what is the point of having a good credit history if you aren't going to make some use of it? Lenders are primarily interested in ability and reliability when it comes to repayments. If you have no consumer debt you have very little history for the lenders to look at and base their decisions on.

Borrowing a small amount on a credit card (by balance transfer or spending, not cash withdrawals) and then paying the amount down by regular monthly payments, always made on time, demonstrates responsibility when it comes to borrowing and repaying debt. In most cases this will enhance, not damage your 'credit rating'.

In my case I hadn't taken out a loan or credit card for many years. I had a satisfactory level of savings and investments. When I signed up for my free credit report I was shocked to see how low my 'score' was compared to the averages, especially when it came to the average for the area in which I live. Since I started stoozing my 'score' has gone up, it jumped significantly just after being offered and accepting a new credit card with a £4.5k limit - nearly twice the amount of my total credit elsewhere - which normal logic would say doesn't make sense. However, you have to remember the largely meaningless score and ratings work to a different logic than the average consumer would assume. Hence small amounts of credit, repaid regularly and in full are likely to be a positive benefit to your overall financial situation. It seems to make applying for new accounts much easier, and one day if you need to take out a loan (not mortgage) you may find a nice tidy credit history to be essential.

Ok that is good feedback and alleviates one big concern.

My next point is what would one do with the £8k that would make the process worthwhile?

EachPenny

Cotta wrote: »

My next point is what would one do with the £8k that would make the process worthwhile?

Unless you are happy and confident with taking risks the simple answer is put it into the best bank account(s) available to you that pay the highest interest rate but allows access to the money when you need to repay it.

E.g. The Nationwide Flexdirect account pays 5% interest on up to £2500. So the first £2500 of your £8k could earn up to £125 in the first year. Regular saver account also pay good rates of interest, but the T&C's may mean you can't withdraw the money when you need to - so research and careful planning is required.

Also, be aware that when you first get the 0% credit card the balance will be zero. It takes time to build the card balance up to take full advantage of the savings interest, and as the FlexDirect only offers the high rate for a limited amount of time you may be better off delaying using the higher rate accounts until you have more money to save in them.

It is important to use a stoozing credit card only for your normal spending - never spend money just to increase your card balance and never withdraw cash. However you can rearrange your normal spending to make best use of the card and 'grow' your stooze balance as quickly as possible. The stoozing thread has far more detailed information on how it works, and the risks involved.

One of the things you mentioned in your OP was you had money in your current account - is this earning interest?

Crystal_Pixie

I am interested to know what people generally put in their rainy day fund. I have a fund that's about 3 months of my salary but it would be over £20 if I took into account my husband's salary as well.


We save about £1,000 a month. Mixture of work share scheme, S&S ISAs and regular savers. I don't put too much to my SIPP because I have final salary pension and I am concerned that I might hit the pension limit.

Cotta

EachPenny wrote: »

Unless you are happy and confident with taking risks the simple answer is put it into the best bank account(s) available to you that pay the highest interest rate but allows access to the money when you need to repay it.

E.g. The Nationwide Flexdirect account pays 5% interest on up to £2500. So the first £2500 of your £8k could earn up to £125 in the first year. Regular saver account also pay good rates of interest, but the T&C's may mean you can't withdraw the money when you need to - so research and careful planning is required.

Also, be aware that when you first get the 0% credit card the balance will be zero. It takes time to build the card balance up to take full advantage of the savings interest, and as the FlexDirect only offers the high rate for a limited amount of time you may be better off delaying using the higher rate accounts until you have more money to save in them.

It is important to use a stoozing credit card only for your normal spending - never spend money just to increase your card balance and never withdraw cash. However you can rearrange your normal spending to make best use of the card and 'grow' your stooze balance as quickly as possible. The stoozing thread has far more detailed information on how it works, and the risks involved.

One of the things you mentioned in your OP was you had money in your current account - is this earning interest?

Is there an update thread on how to manage a quantity of money via stoozing?

Reaper

There's a whole MSE forum on it:
http://forums.moneysavingexpert.com/forumdisplay.php?f=95

jamesd

Cotta wrote: »

However does borrowing £8k for example from AA and putting this into a high interest account not damage credit ratings?

Like any other credit the amount borrowed will reduce the amount of unsecured credit others are likely to offer and count for mortgage affordability calculations. There will also be a short term new application effect. The regular on time payments will have a positive effect and unless borrowed amount or affordability are an issue it should help the credit scoring overall.

In my case MSE tools rate me as a fair credit card risk and gives low acceptance chance at most cards that I don't already have. That's not really true - I've never not made a card payment and never been late in all of my visible credit record. But it is how credit card lenders will initially view me. This doesn't bother me. My credit score is there to be used and any of it that I'm not using is money that I could be making but aren't making. Sixty thousand stoozed at 12% or so before bad debt makes a fair card rating worthwhile.

Meanwhile the same MSE tool rates my loan rating very good.

Some years back I got a mortgage from one of the fussiest lenders around with stoozing debt getting quite close to the mortgage amount borrowed. No problem, wasn't even asked to reduce it. But that was at an income multiple of only a little over one so affordability was easy. I could show enough in savings and investments to repay all of the card borrowing and still pay the deposit so it wasn't a borrowed deposit situation. A person borrowing more on the mortgage might have been asked to repay some of the borrowing or been declined.

One thing that savings can do is give you more options in areas like that.

jamesd

Crystal_Pixie wrote: »

I am interested to know what people generally put in their rainy day fund. I have a fund that's about 3 months of my salary but it would be over £20 if I took into account my husband's salary as well.


We save about £1,000 a month. Mixture of work share scheme, S&S ISAs and regular savers. I don't put too much to my SIPP because I have final salary pension and I am concerned that I might hit the pension limit.

For those who save a lot it's probably better to think of an emergency fund as x months of spending rather than x months of income. Else you increase the size by money you won't need to spend anyway.

When starting out you need to get at least a few months into plain current and savings accounts with instant or fast access. Multiple credit cards from different places - so they won't all get removed at the same time - can act as a further time buffer to get at other money.

As the amounts available increase beyond a few months you can add some money that's not so quickly accessible. Say some P2P loans that are scheduled to repay in a few months and/or at a place where selling is usually easy.

Once the potential amounts go well beyond just months you can use investments like VCTs where you must hold for at least five years or repay the initial 30% tax relief you get.

For equity/share investing you need enough elsewhere so that you won't be forced to sell after a market drop. That means at least one year and better three to five years, though you can count investment income in that planning so only a year or so of actual current or savings account money might be needed.

As you start to get closer to 55 and accessibility of pension money you can start to include that in your long term unemployment and similar planning and once you are 55 it can be used with only a few months of notice, or less, so it can become a core part of the after the first few months provision. When able to retire, even if you don't plan to yet, the long term emergency fund is just retiring and all you need in current and savings accounts is enough to cover potential time delays.

Today I have so much invested that I no longer really have or need an emergency fund. I keep enough cash in current accounts for the next month or so of normal cash flow and the income from my investments is now big enough to pay the bills just out of its normal cash flow. Pay is still around but I'm making salary sacrifice pension contributions down to only a little over minimum wage and all that would happen if it stopped is less new investing and more free time, possibly for life.

So it's a case of transitions as you move through life and your available resources start to become increasingly able to sustain you for ever-longer times.

cns06

I aim for 50% each month now, closer to 60% at the moment. Hoping to RE at 45.

pricew1970

Crystal_Pixie wrote: »

I am interested to know what people generally put in their rainy day fund. I have a fund that's about 3 months of my salary but it would be over £20 if I took into account my husband's salary as well.


We save about £1,000 a month. Mixture of work share scheme, S&S ISAs and regular savers. I don't put too much to my SIPP because I have final salary pension and I am concerned that I might hit the pension limit.

£20 for 3 months combined salary.. I would demand a rise that's slave labour ��

stoozie1

Today I have so much invested that I no longer really have or need an emergency fund. I keep enough cash in current accounts for the next month or so of normal cash flow and the income from my investments is now big enough to pay the bills just out of its normal cash flow.

This is very interesting. So if you had a £40k emergency, this would be ok because you could draw on your investments without worrying that you could have done so at a bad time, growth-wise?