Pay off which first? Help please

Bringvaluetome

Well the loan was £7.5k and I did use it to invest. Lost heavily in Jan 2019 when Flybe went bust.


Stupid mistake!!!!!!!!!!!

enthusiasticsaver

No, never borrow to invest and I would say get rid of debt before saving once your EF is at £1k.

middleclassbutpoor

Bringvaluetome wrote: »

Well the loan was £7.5k and I did use it to invest. Lost heavily in Jan 2019 when Flybe went bust.


Stupid mistake!!!!!!!!!!!

Ok... That is called leverage and its high risk as you have found out.

Look at your financial balance sheet.

On the left you have your assets and on the right you have your liabilities. Regardless of how you accrued the assets or the liabilities, it is usually recommended that you look to clear your liabilities through selling of assets as it looks like you are borrowing to save.

In your situation - not contributing further to your assets column to reduce your liabilities should be sufficient given how quickly you can deal with this. You can be debt free again within 12 months.

So my answer is that its OK to stop saving and investing whilst you repay debt given its such a short period of time. Plus you cant withdraw from a SIPP and your HTB ISA will have penalties.

Usually I would say that you should keep your workplace pension going but that is only where you are getting your employer match.

enthusiasticsaver

Bringvaluetome wrote: »

Circumstances have currently changed and back living with parents. This means I could pay off extra per month. However was unsure which to tackle first and need to put a plan in place.

I would tackle the credit card first and then the personal loan. The soa needs to include everything so presents, entertainment and car maintenance. I would also say if you are investing in individual shares (Flybe as example of your earlier investment) that is incredibly high risk.

JayRitchie

I would tackle the credit card with maximum efforts and then build up savings/ emergency funds. The loan is at a reasonable rate so better to have some safety margin to need to borrow money in the future.

Bringvaluetome

Thank you for the great replies.
What about withdrawing say £600-£800 from the help to buy ISA and paying off some of the credit card?

enthusiasticsaver

Bringvaluetome wrote: »

Thank you for the great replies.
What about withdrawing say £600-£800 from the help to buy ISA and paying off some of the credit card?

As the credit card is 0% for another year I would not withdraw from the Help to Buy ISA now but I would stop putting in the £200 and up your monthly repayments to the credit card to clear it by the time the 0% deal finishes. If you have a pension with your employer I would also stop the SIPP monthly payment.

redux

I'd have a different approach.

Keep all the payments including the savings as they are, open another monthly savings account or two, and practise seeing how much you can put away there.

The Help to Buy ISA can be counted as an emergency fund for the time being, and build up more besides.

You would need to have about £3200 to clear the credit card next April, so £250 per month or so until then would cover it. If the extra savings account has more than that, fine, if it's a bit less there should be £5000 in the ISA to dip into slightly

Bringvaluetome

So I will tackle the credit card debt first. My mindset has completely changed this weekend.

I've just made a payment of £775 off the credit card, so I'll be under 4k now!!!

enthusiasticsaver

Bringvaluetome wrote: »

So I will tackle the credit card debt first. My mindset has completely changed this weekend.

I've just made a payment of £775 off the credit card, so I'll be under 4k now!!!

That is a great start.