Saving + clearing debt

AshKitch

Hello everybody!

Mine name is Ash and I am new to the forum. I have always been very rubbish with money, despite earning a reasonable wage have always spent it as fast as it comes in, at times - even faster.

I have amounted around £6000 in credit card debt over the past couple of years and have now decided I can’t go on like this. I also have my first baby due in July, which has also prompted me to get my act together in regards to buying a house, I am 28 years old.

So I have taken a look at my finances, looked at what goes in and what goes out, I’ve been accepted for a new 18-month 0% balance transfer card which I will shift as much as possible onto (around £4500, limit permitting). I also have a current 0% card with £1300 on with another 28 months of 0% on.

I work as an electrician and currently earn £15.89/hr. I do a minimum of 40 hours per work, but have the option of unlimited overtime as we are so busy at this time. With no overtime I take home around £2100/month. I am looking to boost this to around £2400 by working overtime.

I currently have £1200 which goes out for rent, car finance, bills etc. And am looking to pay off £250/month off the new credit card and £50/Month off the existing one (£1300) which should hopefully see them cleared in around 18 months or so. I am then thinking of opening a LISA and depositing around £330 a month into that, and also switching banks to HSBC to receive the £175 bonus (which I’ll either save or pay off more of the credit cards) and then taking advantage of the 5% savings account, which I plan to deposit £250/month into. I should then receive the maximum £1000 bonus on the LISA and also max out the £3000 limit on the saver - netting an additional £125.

All of this totals to just short of £2100/month. Leaving me with ~£300-£350 for living, which I think is enough, at least until the baby arrives. Then I may need to rethink.

I guess I am just asking for advice on whether this seems the beat approach, if those accounts are the best places to be putting my savings, and also if I should just focus on paying or the debts before I save any money.

Thanks

Mnd

Hi Ash, and welcome.

You might get more advice on the debt free wannabee board for your situation

atush

So I have taken a look at my finances, looked at what goes in and what goes out,

Have you done and SOA and a spending diary? how much have you cut back yrou lifestyle to help pay off your debts?

Cut back on what goes out

Mr.Saver

Will you still be able to work 40 hours per week after the child is born? Paying into LISA will lock your money away. You will not be able to access the money penality free, unless you use it to buy your first home (unrealistic in short to medium term considering your current situation) or reach age 55 (that's 27 years latter).

Think twice before you lock your money away in a LISA. Also remember to always clear the expensive debts before start saving.

jaybeetoo

Are you investing in a pension?

lytton

You done all the utility bill swaps etc in order to bring down your monthly spending? Definitely good that you’ve decided to do a money makeover of sorts. Typically if your debt accrues at a greater rate than savings it usually makes sense to clear debt first before saving. I think a back to basics budget plan and mega-switch session is in order - utility bills, phone and broadband services, membership fees etc. Then challenge yourself to find top value on weekly shops, I always go reduced/yellow sticker shopping, especially for stuff that can be thrown in the freezer. When baby is due (congrats) think twice about loads of expensive stuff. It’s easy to get bogged down in the magic but there’s nothing wrong with accepting hand me downs or buying second hand stuff, providing it’s safe. Actually with the child allowance i found adapting my budget for our two nippers (very close together) was not that challenging at first. Tiny babies actually don’t need much money throwing at them, I’m sure others will berate me for this suggestion but your time spent with them is the most important thing. Formula milk and own brand nappies were the biggest monthly costs, clothes conversely were often gifted to us. Even a pram needn’t cost too much if you go second hand. I’m speaking as a full time dad who gave up his job to do the parenting, so I’ve just forced myself to adapt to a lower household income. Also, have you sorted your basic current account affairs? Even just by using current account loopholes to spread your income/savings around a bit you can pocket a few tens of £ extra each month. Good luck.