How to use my settlement

lovelylouca

Hello. Hoping that some helpful creative brains can help me clarify how best to invest/save/budget.

I have recently left work after the job I jad done for 5 years had changed and was no longer practical for me to do. Work agreed to pay me 30k tax free and a further 10k net wages.

I am a single mum to two young children and although I need to find a job, I can afford to take a few months off to be full time Mum.

My current financial situation is 5k in credit card debt (on an interest free) and 3.5k owed to my Dad for some building work and new boiler.

We need approx 2k per month to cover bills (£650 mortgage) and living expenses.

How should I bank my money? Given I don't know how long I will be without an income, I need to have access to at least 12k of it.

Should I pay off my debts first or wait until I find a job?

Ideally I'd find a job within 4 months and have money invested or building interest.

Would be really interested to hear what anyone else would do in this scenario... I can't see the wood for the trees. 🤔🙈

Thank you

xylophone

You might consider opening a Santander 123 and shift cash back DDs on to it - you might hold £20,000 of the redundancy there and keep it topped up to that amount.

You might consider opening a Nationwide Flexdirect account and holding £2500 there for a year, cycling in/out £1000 a month by same day SO (S to N/N to S).

You might open the associated Flexclusive Regular saver.

You might open a BM savings account.

http://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

kidmugsy

lovelylouca wrote: »

Work agreed to pay me 30k tax free and a further 10k net wages.

My current financial situation is 5k in credit card debt (on an interest free) and 3.5k owed to my Dad for some building work and new boiler.

I'd recommend you repay your father, unless he urges you to delay until you have a job. At least make the offer.

Also try to earn some interest on the £5k that you will be keeping to repay the credit card when the interest-free period expires.

As xylophone says, high interest current accounts and regular savers are your best bet.

Alexland

Frankly finding the right next job is much more important and will have a greater influence on your future prosperity than trying to optimise your savings rate on the settlement. The debts sound fine for now unless there is a pressing need to repay.

juliebunny

Hello,
Well it would be a no brainer for me to pay off my credit card debt. You shouldn't be budgeting to spend money which 'you don't have' - i.e. debt.
Family debt may be a different matter - I would certainly talk to your dad about it and see what he says. He might not be expecting repayment, he may consider it a gift, but if he needs the money back, or considers it a bona fide loan, then you should pay him back too, why wouldn't you? If you get unstuck again, you can always borrow it back and he'll have faith in you making repayment. He might have put himself in hardship to help you out too, what is his own situation?


I think it's natural to want to take a break from work, but imagine if you got a part time job even, AND had the money, how much further you could stretch it. I'd be reluctant to just spend such a sum on day to day living (although no-one can blame you for wanting a break and family time.) Would be nice to perhaps do something that you couldn't afford, a few small treats for the family and certainly having a fund for a rainy day.
Enjoy this 'nicer problem to have' (-:

greenglide

Well it would be a no brainer for me to pay off my credit card debt.

But the OP has stated that the credit card is interest free so it is by no means a "no brainer" to pay it off.

If the interest free period is only a month or so it may be tidier but if it is a year or more it makes no sense to do this.

ewaste

lovelylouca wrote: »

I am a single mum to two young children and although I need to find a job, I can afford to take a few months off to be full time Mum.

Depending upon your profession or career I wouldn't underestimate just how difficult it is to re-enter the workforce especially if you need some additional flexibility as this can be a real minefield.

juliebunny

Greenglide, I respect your opinion on this, but...unfortunately I think this is a very 'modern' view of credit - as long as it's interest free it's 'ok'. I'm old fashioned and sleep better without debt...it has to be paid off sooner or later, why not when you have a lump sum you weren't expecting. If not now, when? Credit on the 'never, never...'..


The next issue would be to understand how this debt arose, and what, if anything, can be changed to stop it coming back.

Eco_Miser

juliebunny wrote: »

I'm old fashioned and sleep better without debt...it has to be paid off sooner or later, why not when you have a lump sum you weren't expecting.

Because that lump sum is all you have to live on until you get a new job - and since you are currently unemployed, you may not be able to borrow money at such a good rate (or at all) when the money runs out. [All yous refer to hypothetical debtor].

OP - start looking for a new job straight away, good ones take time to find, interview for, selection decisions made, etc.

Malthusian

She'd still have the credit card facility even if she paid the debt off, no? If she pays the credit card off and then runs out of money she can simply borrow £5,000 again using the same card. She'd be in the same position as if she'd kept the £5,000 on the card in order to keep more in her bank account.

(If she can't pay it off without closing the card and losing the 0% facility, then keep a nominal £1 on it.)

I tend to agree with Julie: if not now, when? The loss of interest is the only real drawback, and unless the OP likes to stooze it's not a major loss. The 0% interest free period will run out long before the OP runs out of money, and it's not guaranteed that she'd be able to shift it onto another one.

TBC15

Malthusian wrote: »

She'd still have the credit card facility even if she paid the debt off, no? If she pays the credit card off and then runs out of money she can simply borrow £5,000 again using the same card. She'd be in the same position as if she'd kept the £5,000 on the card in order to keep more in her bank account.

(If she can't pay it off without closing the card and losing the 0% facility, then keep a nominal £1 on it.)

I tend to agree with Julie: if not now, when? The loss of interest is the only real drawback, and unless the OP likes to stooze it's not a major loss. The 0% interest free period will run out long before the OP runs out of money, and it's not guaranteed that she'd be able to shift it onto another one.

But if the 5K was getting interest somewhere, it would be foolish to pay the card off? Just have the mind-set the 5K is not available. If you can’t prioritise in such a fashion pay the card off.