Tidying up the mess

PositiveBalance

BabyStepper wrote: »

Thanks Kitten 868. You're totally right, I don't think I'll be able to close the Santander card online so it probably will involve a phone call, a long wait on hold, figuring out what numbers to press as I listen to a whole load of irrelevant nonsensical options, then speaking to someone in a call centre who will likely try and persuade me to keep the credit card. And I'm STILL looking forward to doing it! Funny how stressed I used to get calling them about anything credit card related. It will be brilliant to just get it closed down. Thank you for all your support, you're appreciated. :A

I'm pretty sure I was able to close mine over the phone. I don't even remember them trying to keep me too much as a customer! (I hadn't paid them any interest so I think realised they were on a loser with me!:rotfl:)


You are doing brilliantly. Keep going! You'll be posting on the Debt Free thread before long! :T

BabyStepper

I want to run something by you all. Me and OH have been having a chat about pensions. Dave Ramsey advises to stop paying into pensions while you're paying down debt, so we did. OH came out of his pension last summer. However, back then things were desperate and we were struggling to make any progress and really get going. And we needed the cash really. Now that things look better we want to reinstate his pension. Mine can be overpaid later when were debt free to make up for lost time but OH has a ridiculously large match that we lose out on every single month. The payments from OH would be around £200 (we think) but once tax is added and the match then OH's pension would increase by around £600 per month. Not one to rest on my laurels I'm thinking about a £200 challenge for us every month, to keep the debt repayments going at £1400 even with his pension.

Does this sound mad or sensible? Am I getting ahead of myself? Should I wait until we're debt free? There is so much less urgency now - the deals are there to have everything interest free until November 2020 and really the debt should be gone LONG before that, even with the odd life event to deal with.

The only thing I can think of getting in the way is Brexit (again!) but I can't predict or do anything about that.

I'd appreciate your thoughts everyone.

BabyStepper

PositiveBalance wrote: »

I'm pretty sure I was able to close mine over the phone. I don't even remember them trying to keep me too much as a customer! (I hadn't paid them any interest so I think realised they were on a loser with me!:rotfl:)

Well done you! :T:T:T:T I'll let you know how I get on with them - they might want rid of me too!

Moneywhizz

I think the advice you will get from here is to reinstate the pension immediately. To be honest most people would not advise stopping your pension because of the tax benefits and employer contributions. My advice would be to restart it as soon as possible. If you can make the extra money, thats great, but even if it slows the debt repayments it is makes much better financial sense to pay into the pension. I think you will get the same advice from your other readers.

PositiveBalance

BabyStepper wrote: »

Well done you! :T:T:T:T I'll let you know how I get on with them - they might want rid of me too!

We can be founding members of the 'Santander Doesn't Want Us Any More' club!


Any ideas on what you want the badges to look like?!


About the pensions...I would totally start back up your husband's, even if you don't do anything for yourself until you are debt free. It's mad to miss that match. If you don't decide to do anything for yourself for now, you could perhaps investigate the best options for you so that when you are ready to start, you can start straight away.


I don't think you are going to be in debt for much longer and I'm sure you will steamroller the investments/pensions once you start.

enthusiasticsaver

No way would I recommend stopping pension payments and to be honest I think the Dave Ramsey advice is irresponsible. I am not sure how US pensions work but in the UK your DH has missed out on employer contributions and tax relief. As your debt is at 0% I would suggest he reinstate as soon as possible and up contributions to make up for the missing year as soon as possible. He may not be able to get the employer contributions back as I assume they only match up to a certain percentage.

I would give the same advice even if you have to reduce the debt reductions.

PositiveBalance

enthusiasticsaver wrote: »

No way would I recommend stopping pension payments and to be honest I think the Dave Ramsey advice is irresponsible. I am not sure how US pensions work but in the UK your DH has missed out on employer contributions and tax relief. As your debt is at 0% I would suggest he reinstate as soon as possible and up contributions to make up for the missing year as soon as possible. He may not be able to get the employer contributions back as I assume they only match up to a certain percentage.

I would give the same advice even if you have to reduce the debt reductions.

Americans don't seem to use pensions as much as we do - they mostly use something called a 401k, which from what I have heard listening to the Dave Ramsey show, seems far better and far more flexible, to be honest. I've heard about something similar in Australia called Superannuation which seems similar.

They mostly get an employee match with them, too.

DR's theory is that if people 'focus' intently on getting out of debt for a period of normally about 2 years they will be more successful in getting out of debt and can then add more to their retirement afterwards. In theory, if they follow his plan through totally, not just the bits getting out of debt, it wouldn't normally have too much of an effect on retirement income as they are then supposed to invest 15% of their income into retirement savings once they are out of debt. (This is assuming that the person isn't about to retire imminently and he doesn't recommend diverting funds from retirement for longer than 2 years.)

BabyStepper

Thanks as always for your good advice everyone. :A

PositiveBalance wrote: »

DR's theory is that if people 'focus' intently on getting out of debt for a period of normally about 2 years they will be more successful in getting out of debt and can then add more to their retirement afterwards. In theory, if they follow his plan through totally, not just the bits getting out of debt, it wouldn't normally have too much of an effect on retirement income as they are then supposed to invest 15% of their income into retirement savings once they are out of debt.

I agree with this. 1-2 years of not paying into a pension, in a 45 year working life, is not going to make a massive difference. But as you say Positive Balance, the key is following the plan through in its entirety, not just the part about getting out of debt. And following his plan means 15% to the pension and overpaying the mortgage, and this means I will be much better off long term than if I'd kept my original pension payments and stumbled along taking years getting rid of the debt. I know I say this all the time but it really is about behaviour change and not about numbers. I don't think he is irresponsible to suggest this enthusiasticsaver, but I think it is a huge risk for those people who don't learn the lessons and are trying to pay off debt so they can have more to spend on stuff later. That won't work. I would never advise anyone to do it (I obviously don't have Dave R's experience of helping millions of people) but I can say that stopping OH's pension for a year has been very successful for us.

OH went off to work with a plan to reinstate his pension, then forgot. I'll need to text him today to remind him.

I've been looking at a few ideas to increase the income to cover the pension payment. I'll keep you posted how I get on with it all.

PositiveBalance

BabyStepper wrote: »

But as you say Positive Balance, the key is following the plan through in its entirety, not just the part about getting out of debt. And following his plan means 15% to the pension and overpaying the mortgage, and this means I will be much better off long term than if I'd kept my original pension payments and stumbled along taking years getting rid of the debt. I know I say this all the time but it really is about behaviour change and not about numbers. I don't think he is irresponsible to suggest this enthusiasticsaver, but I think it is a huge risk for those people who don't learn the lessons and are trying to pay off debt so they can have more to spend on stuff later.

I agree with you on this, Babystepper, but as you said and, unfortunately, as we see on these boards, not everyone gets the mindset shift they need to change their behaviour long-term, so I completely understand where our wonderful enthusiasticsaver is coming from with that.

I didn't stop mine as I will be out of debt fairly soonish and this is my very first ever pension, so I have some serious catching up to do. I also wouldn't ever recommend anyone stop retirement savings under normal circumstances, but I can see how it could help under certain circumstances.

enthusiasticsaver

PositiveBalance wrote: »

Americans don't seem to use pensions as much as we do - they mostly use something called a 401k, which from what I have heard listening to the Dave Ramsey show, seems far better and far more flexible, to be honest. I've heard about something similar in Australia called Superannuation which seems similar.

They mostly get an employee match with them, too.

DR's theory is that if people 'focus' intently on getting out of debt for a period of normally about 2 years they will be more successful in getting out of debt and can then add more to their retirement afterwards. In theory, if they follow his plan through totally, not just the bits getting out of debt, it wouldn't normally have too much of an effect on retirement income as they are then supposed to invest 15% of their income into retirement savings once they are out of debt. (This is assuming that the person isn't about to retire imminently and he doesn't recommend diverting funds from retirement for longer than 2 years.)

In principle a few years of missed pension payments (plus the employers contributions and tax relief and growth in investments over those few years) may seem like it will be easy to make up. However there are many on here who have been struggling with debts for years and in some cases more than a decade. That is a large amount to make up and if they are on the approach to retirement they may never catch up. Those with substantial debts will take a lot longer than 2 years and once pension payments are off the radar it is tempting for some to think that there are better uses for those payments. Until of course retirement looms larger and then suddenly those people realise their mistake.

If, however he does not recommend the pension payments stopping for longer than 2 years I would reserve judgement on whether or not that is good advice depending on whether the debt repayments were going down at a satisfactory rate, no interest was being charged and the debtor was young enough to easily catch up. Many take the scenic route with debt repayment though so I am not sure that everyone would reinstate as soon as possible as a lot of people do not prioritise pension or long term savings until it is too late.

In general the percentage of income which should be paid into a pension should be 50% of the pension holders age at the start of their pension savings. So 15% is ok for someone of 30 but if older than that it should be higher. Whilst I certainly agree with a lot of Dave Ramsey's advice I still would not urge stopping pension contributions.


I do think though in babystepper's case it will not be a big problem to make up the lost years payments as she has shown focus, the debt should be gone within the next year and there will be a healthy surplus once the debt overpayments are not being paid out every month. I would urge both her and her DH though to sort the pensions out as soon as possible for both of them not just her DH.