Getting the balance right

robynlouise

Hi everyone

I've been a bit of a lurker on this board so thought I'd post. My current conundrum is how do you get the balance right between paying off debt, and living? We moved house in april, and my current debt situation is:

£1600 on a credit card which is interest free until May. C
Interest free £1500 on b and q kitchen - paid off next April
Loan at 9% - £2300 outstanding (house require)

In terms of income and outgoing I do ok, usually end up a couple of hundred overdrawn in a free overdraft before pay day.

I'd really like to go on our first family holiday next war but I am literally fighting with myself! I feel a bit guilty that I'm contemplating booking when I could use the money to pay the loan off (I'm due a bonus in March) but given I'd class my debt as 'manageable' I'm also thinking that money can't always be the be all and end all?!

bexster1975

Hello

Why is it important to you to pay off the loan early? If it were me, I might say because an interest rate of 9% is pretty high. But if that's not a concern, why pay it early? It's possible you may have to pay a penalty to finish the loan early too so check that.

I tend to agree the debt is manageable, but that's pretty subjective and depends on a range of things. If you are on track to pay off the £1600 CC by May when 0% runs out, or can/will shift to another 0% I think the " life is for living" philosophy seems fair.

I would however suggest that ending the month £200 overdrawn ( whether it costs or not) is not ideal as a default position. You leave yourself out £200 wages every single month. Just a thought.

Bexster

enthusiasticsaver

If you have three lines of credit and an overdraft you use every month then I would hesitate to say you are managing ok but then I am extremely cautious when it comes to debt as I have seen so many times people thinking they are coping ok then something happens (loss of job, overtime, expensive bill for car etc etc) and then it is a disaster. My feeling is wait until April next year when the kitchen loan is repaid.

Save as much in a holiday fund between now and then and try to clear the credit card as well. I think if you booked a holiday and just had the loan left that would be manageable so long as you weren't adding to the debt. Also get a handle on your monthly budget so you aren't using the overdraft each month. Banks are starting to make these much more expensive because of the new rules re making charges more visible. That free overdraft may no longer be free then.

leicestersq

Pay your debts rather than go on holiday.

If I could get a guaranteed 9% on some of my savings I would. I cant, but you can by repaying that loan. 9% on £2300 is £200 a year, that is a great way to increase your long term wealth. In the long run, that means more and better holidays.

kram

Why don't you keep a spending diary, that will will help see where the moneys going?

K

fiisch

I used to be of the same mindset, but can you really enjoy that holiday when you have debt to return home to?

Every day the loans are outstanding you're paying interest - money up in smoke. One year deferring the holiday and instead focusing on your debts will have a long term benefit to your finances (you could start earning rather than paying interest, and the earlier you do this, the better, for example!).

Don't get me wrong - in the past, we have splurged when we have debt outstanding, but it's always done with the accompanying feeling of guilt. Getting these monkeys off your back will be a big win, and what's one year without a holiday?

Ultimately, it's your choice, but the key to financial freedom is looking at your finances with a long-term outlook.

SHill

It's great to hear that you asking question have spoken to your respective OH.

Or are you just broaching the subject online first.

So you could economies for Christmas...keep within a relevant budget.
Do the down shift challenge and monitor your food shop or take out meals

You can write out your spending either in a book or app.. then you can see why you are getting over drawn each month.

Check your utility bills and see if you can find a better deal for car & house and insurance....

Transfer balances on cc if you are paying any interest ..

I think your having your light bulb moment...well done..

EssexHebridean

Hey welcome lurker!

It seems to me that as things stand you're not actually budgeting for what goes where as far as your finances are concerned - you're just letting the money trickle out but not really keeping a rein on it. The trick to being money savvy is to make sure that your money works for you, rather than letting it control you, in my opinion, so as a starting point I'll suggest that you put together a Statement Of Affairs (SOA) - you'll find the link in the sticky post at the top of this board. make it as accurate as you can and make sure it reflects the way things are right now - not the way you would like it to look, or what you think other people expect to see. Post it in here and we can give you some input on where there are savings that maybe you might have missed, and also bits and pieces you might have missed (which could be where some of your money is going without you realising!)

The aim is to get to a position where you're budgeting for things like holidays, and for stuff like presents so that Christmas doesn't come up and bite you in the bank account. It's also to get to a position where that overdraft is there as a "just in case" - for that odd time when you take your finger off the ball and go into the red by a fiver because a DD came out earlier than you expected - that sort of thing, not as an accepted method of getting through the month.

You can do it - and well done for spotting the situation you were in and looking to deal with it ahead of it becoming a problem! :T