Where to start when you are finally debt free?!

ponypal

I have been paying off my Career Development Loan since 2013 (a whole different thread, do not recommend getting one!) and thanks to this website have used a lot of tips to reduce the overall total, and pay it off quicker than projected.


This time next month I will be out of debt for the first time in my life!


I guess I feel like I want to be better with money but wonder how to learn more about it and use money more wisely now that most of my pay won't be going straight out of my account after payday. I literally don't know where to start and can't find an obvious place on the forum to begin... can anyone advise me? I basically need an idiot's guide!

ada-or-ardor

I would recommend spending some time on the Monevator blog; it's really very good and will give you some good basic pointers.

The answer to your question will depend on your priorities but regardless, you probably want to start saving the money you have been putting to debts this far. An emergency fund is also a good idea (perhaps start with 1 month's expenditure, build to 3 as and when you can, but you want to balance this with saving for new cars, house moves, travel, or anything else that might be on the horizon for you!

Congratulations on a debt-free life!!! :-)

Ada

EssexHebridean

Congratulations on being so nearly debt free - that's brilliant, well done to you!

Emergency fund and longer term savings can initially overlap. So start by saving £1,000, then make your next target one full month's outgoings. First off save into the highest interest easy access account you have access to - that might be your existing bank's regular saver (Nationwide's allows payments in of £500 a month max and pays 5%, for example). Next target is 3 months income, and once you have that level anything else you can save is a bonus. Bear in mind any specific targets and set up "savings funds" for those - so maybe money towards a replacement car, or a Help to Buy/Lifetime ISA towards a property deposit) - your aim going forwards is that with the exception of a mortgage, you budget for things you want ahead of time.

Budget for treats and fun, but only to a small proportion of your surplus. Maybe give yourself a set amount for general spending each week - take it out of the cashpoint on the same day each week, and then just top up the next week accounting for whatever you have left - so if your "weekly spends" are £30, and you still have £20 in your purse/wallet from the week before, you just withdraw £10 - make sense?

Keep to the habits of stopping to think before spending, and keeping track of your money, that will have enabled you to get debt free - those are tools for life now.

enjoyyourshoes

use Pen and paper oe own excel spreadsheet to do following!

1. Reconcile your bank account daily including all spends (Switch, contactless, Pay @ pump, DD, SO, accruals for annual bills (see comment 2) and ALL CC purchases (this therefore accounts for expenditure ahead of the bill and the payment date (if you don't do this then you, like hundreds of thousands, will end up in debt!!)

Have a spike for all receipts so as to keep on top of everything

All this will take 30 seconds a day

2. Do cash flow of all annual, 1/2 and 1/4ly bills, then work out how much monthly you need to allocate to pay for these (accrual)

Write date contracts/agreements are up for renewal, then month before do same with note to follow MSE advice on contract renewal (utilities, phone, insurances etc) Pay all insurances annually not monthly.

This should take 30 minutes annually.

3. Monthly, allocate time to review all expenditure, forthcoming diarised contract renewals and any savings/investments.

Again 30 minutes per month.

All this can be done with pen and paper.

Its not the software, or excel etc, its a systematic processes which keeps you on top of your financial situation.

So 30, 30, 30.

If you at a later date want to Excel it, get on local course and get trained, as your own situations are more specific than any generic off the shelf package.


start saving use cash you allocated to debt reduction, start simple with a regular saver.

tealady

Hi well done on being debt free.
Think of savings as a debt to be paid. I found it helped having something to save for.
Is there something you REALLY want, car, house, holiday. Well, put it in your budget.
I also found it helped to round up (for example if your rates are £102.63 per month then write £110 in your budget. Then at the end of the month syphon off those few pennies into a savings account.
By all means have a treats fund but you mustbe disciplined enough to tell yourself when its gone, its gone.
HTH