Which Way is Best

Jberts

Hope someone can help. I sold my house last year and have about 40k now in a savings account. In the past I have some debts which to clear would be £7000 including a car loan and a ccj and £5000 in credit cards....gosh that seems hard to read back. I have not been good managing money in the past and got into a bit of trouble hence the ccj when I split from my first husband. I am now living in a rented property with my new partner and we would love to buy a home together. Because of my credit file I am unable to go onto a mortgage at this time but I would imagine if I settle these outstanding balances that maybe in 12 months time this would be different. But I would lose the security of finally having some money in the bank and Im scared that I would fall back into the trap of over spending. Should I pay off the outstanding debts in one go or should i try to chip away at the debts monthly or keep saving?

hazyjo

Think of it this way...


You are (presumably) paying to borrow money which you already have.


What would you say to me if I said 'I've got £40k in the bank, but am going to borrow £12k-ish to buy (say) a car so I don't lose that £40k I have in savings'.


If I were in your shoes, I'd clear all the debt.


Any lender is likely to offer you less anyway when you have debt - some for the debt and some for interest or their risk.


Jx

JoJo1978

I agree with Hazyjo. The way I thought of it when I read your post is that if you've got money that you owe then in a way not all of your savings are 'yours' as it were. It will be a smaller pot to start with when you've cleared the debts but it'll be all yours.

It will be a fab achievement to clear the slate before you borrow again for a mortgage, but think of how much more brilliant it will be to borrow jointly? I understand your concerns about overspending but trust yourself to learn from your experience.

Good luck x

Smodlet

Just ask yourself how much you and your partner want to be back in debt again with no savings... Then don't do it. You are in control of your spending so stop sounding as if it is all beyond you.

Learn to say "No" to yourself and apply the money mantras on the main board. If you don't need it, it is not a bargain. If you can live without it, you are not denying yourself anything; you are gaining freedom from debt.

Your call.

Jberts

Thank you for this. Your right I am looking at the money thinking that the credit is mine...and I also know the debt is mine.....its just as you say learning to say no. I really struggled last year and I never ever want to be in that position again. My finances seem to be so complicated and lots of direct debits. I am self employed so my money comes in all different times of the month and some days I feel rich and more tempted to spend than what I should. Thank you so much for this.

Smodlet

Jberts wrote: »

Thank you for this. Your right I am looking at the money thinking that the credit is mine...and I also know the debt is mine.....its just as you say learning to say no. I really struggled last year and I never ever want to be in that position again. My finances seem to be so complicated and lots of direct debits. I am self employed so my money comes in all different times of the month and some days I feel rich and more tempted to spend than what I should. Thank you so much for this.

Have you thought about posting an SOA? It is usual for people on here to see potential savings you might not ever think of. The Debt Free Wannabe board is the usual place for that but as far as I'm concerned you can post it where you want it (apologies to the Average White Band :cool:)

The rest of it is just learning a different way of thinking. It is not your money until every, single bill and expense is paid. Whatever is left after rent/mortgage, bills, food, groceries, toiletries are taken care of is yours to spend or save as you wish. Some months this might be a negative figure so you need a contingency fund to avoid getting into further debt. It's really not that difficult.

We have a simple spreadsheet with all our bills and income on it. Whatever is left is ours but saving is a priority. There is loads of help on here if you want it. You have taken the first and hardest step by acknowledging there is a problem. You are in control of your actions. To take responsibility is to take control; it is the first step to freedom.

Here endeth the lesson :cool:

Jberts

Thank you again. I was thinking of settling the debt but because of my past I am doubting my own decisions so I am not very money confident. I was really proud of owning my own home and although I didn't lose it - it was sold due to divorce and moving area. I wasn't able to get a mortgage to move straight into another bought home. So in one way I have a fear of not been able to get back onto the property ladder. Not sure if I mentioned but I am 44 and so would really be starting over again. I think its easy to hide and not face things but I like the honesty of forums to make me accept where I am now and to make sure I don't go back to where I was. I will start to get my things together to do a budget. I doubt it will be pretty.

AdrianC

Simple way to look at it...

What interest rate are you getting on the money in the bank?
What interest rate are you paying on your debts?

It is actively costing you money to maintain this fiction that you have £40k. You don't.

Also - you say...

some debts which to clear would be £7000 including a car loan and a ccj and £5000 in credit cards

Do you mean you owe £7k in total - £5k of that on cards, £2k on a car loan and a CCJ?

Or do you mean that you owe £7k on a car loan, have a CCJ (part of that £7k or separate?) and another £5k on cards, £12k in total?

AnotherJoe

Last year someone posted proudly that they had saved £20,000 for a deposit.
It came out later they also owed £20,000.
They really couldnt see all they done in effect, was borrow the £20k.

As AdrianC says,

It is actively costing you money to maintain this fiction that you have £40k. You don't.

Cakeguts

I agree with everyone else in that you actually only have £28k in savings not £40k.

Smodlet

Cakeguts wrote: »

I agree with everyone else in that you actually only have £28k in savings not £40k.

Unless it is even less than that; it is not at all clear from the above. An SOA would make it all clear. Perhaps that is what JBerts is afraid of.