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Pay off which first? Help please

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  • Do not get involved in car finance. You'd be crazy to take on yet more debt when you've got money saved to buy a car outright. Forget about financing a fancy car that looks nice, costs you a fortune and loses value by the day - secondhand cars don't instantly become money pits just because they're older. Do your research and buy a reliable car that's cheap on any repairs. Mine's 13 years old, cost me £2K outright and have never had a problem with it in nearly three years. The most I ever had was an MOT with a new set of tyres plus other repairs for £80!

    It'll be a good lesson to start buying what you can afford instead of always falling back on borrowing.
    Debt Free: 06/03/2020 Highest Debt: £37,514
  • My current car was £1100 from Ebay. Put £600 clutch in it just after purchase and spent around £500 on other repairs for it. I'd happily keep it but its losing coolant daily. So I think it's time to cut ties.


    I'm finding it difficult to find a car between £2-£3K. Looking at another VW. Current car is a 54 plate VW Touran 1.9TDI. All have stupid miles.
  • RAS
    RAS Posts: 36,093 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    A new car will lose £thousands the minute you drive it off the forecourt and you will probably be left owing £thousands when the 0% ends.

    Get something you can afford from your savings and budget some money for maintenance. Do the AA or another company do the vehicle checks still? A fee like that is worth paying to ensure that what you buy is not a dodo.
    If you've have not made a mistake, you've made nothing
  • 1. This wasn't planned, didn't have a choice. Although it's probably for the greater good. You're fortunate to have this option even if it wasn't by choice.

    2. For the company to pay out 5%, I would need to pay 5% also. That would cost me £70 net per month. You're not actually losing the money, though. It just gets save for your retirement and you get free money on top.

    3. I've never budgeted for anything other than rent/fuel and direct debits, so this will be an exciting project for me!

    4. Never thought about it that way, as simple as it is...
    So £3994 / 14 = £258 per month. Exactly!

    5. I can increase my monthly payment on loan, even if it's £50 extra (money saved from S&S ISA and SIPP, monthly payments) Do this. Every penny you put into the loan saves you money in interest

    6. Restart the £200 H2B payments after the debt is cleared? Not looked in to a LISA. Thinking of transferring it to someone like Barclays that offer over 2% instead of the 1.75 I'm currently getting. Yep, seems like a good idea. I like my LISA because I get my bonus paid monthly and I can get returns on the free money.

    7. I'll always try and keep some aside.

    8. After debt free?If you want. But it was a bad decision for you to walk away from the employer pension when it's salary sacrifice AND they match. You were getting free money and then more free money in the form of saved tax and extra put in from your employer on top. What was your reasoning for this?


    Not trying to give you a hard time but honestly trying to understand the reasoning behind your choices.
    Debt Totals July 2019::
    [STRIKE]£350 Natwest Credit Card [/STRIKE]/ ]Now £0 (paid off and closed 04/2017) £15,500 postgrad loan from parents/ Now £7,000 £5,000 sister loan/ Now £0[STRIKE]£500 train ticket loan from parents [/STRIKE]/ Now £0 (paid off 16/02/18)[STRIKE]£2,000 Overdraft[/STRIKE] Now £0 (paid off 09/03/18) £1,967.83 Barclays 0% card Now £0
    Total £7,000
  • 8. After debt free?If you want. But it was a bad decision for you to walk away from the employer pension when it's salary sacrifice AND they match. You were getting free money and then more free money in the form of saved tax and extra put in from your employer on top. What was your reasoning for this?


    So I could try and get better returns on my pension via a SIPP.


    Please be as brutal as needed! I'm here for help, advice and guidance whatever it takes!!!!!!!


    I guess I'm only 32, so time is on my side.
  • Silver_Queen
    Silver_Queen Posts: 824 Forumite
    edited 4 February 2020 at 7:18PM
    8. After debt free?If you want. But it was a bad decision for you to walk away from the employer pension when it's salary sacrifice AND they match. You were getting free money and then more free money in the form of saved tax and extra put in from your employer on top. What was your reasoning for this?


    So I could try and get better returns on my pension via a SIPP.


    Please be as brutal as needed! I'm here for help, advice and guidance whatever it takes!!!!!!!


    I guess I'm only 32, so time is on my side.


    OK, let's do some rough, guesstimating maths.(Full disclosure, I'm crap at maths)

    You take home about £1.6k a month so you're a basic rate tax payer (assuming you don't have tons of other income you haven't mentioned)

    You pay in £70 per month and on top of that you get 20% tax relief so you actually pay £84 into your pension. Assuming your employer then pays in the same amount of £84, you're getting £168 into your pension each month but you're only actually losing £70. You're gaining £98 per month. It's a 140% increase (I think....see note about being crap at maths above).

    What increase are you getting on your SIPP?

    (By the way, I only have a rudimentary understanding of pensions so if I'm wrong, please point it out)
    Debt Totals July 2019::
    [STRIKE]£350 Natwest Credit Card [/STRIKE]/ ]Now £0 (paid off and closed 04/2017) £15,500 postgrad loan from parents/ Now £7,000 £5,000 sister loan/ Now £0[STRIKE]£500 train ticket loan from parents [/STRIKE]/ Now £0 (paid off 16/02/18)[STRIKE]£2,000 Overdraft[/STRIKE] Now £0 (paid off 09/03/18) £1,967.83 Barclays 0% card Now £0
    Total £7,000
  • OK, let's do some rough, guesstimating maths.(Full disclosure, I'm crap at maths)

    You take home about £1.6k a month so you're a basic rate tax payer (assuming you don't have tons of other income you haven't mentioned)

    You pay in £70 per month and on top of that you get 20% tax relief so you actually pay £84 into your pension. Assuming your employer then pays in the same amount of £84, you're getting £168 into your pension each month but you're only actually losing £70. You're gaining £98 per month. It's a 140% increase (I think....see note about being crap at maths above).

    What increase are you getting on your SIPP?

    (By the way, I only have a rudimentary understanding of pensions so if I'm wrong, please point it out)

    Whilst the benefits are spot on and the advice to encourage maximising the contribution to gain maximum employer match is right.

    The pension is taken through salary sacrifice (confirmed on page 2) so he pays in £70 and doesn't pay an income tax on this - so effectively saving £14 a month in tax @20%.
  • SusieT
    SusieT Posts: 1,267 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    My current car was £1100 from Ebay. Put £600 clutch in it just after purchase and spent around £500 on other repairs for it. I'd happily keep it but its losing coolant daily. So I think it's time to cut ties.


    I'm finding it difficult to find a car between £2-£3K. Looking at another VW. Current car is a 54 plate VW Touran 1.9TDI. All have stupid miles.
    Where is your car losing the coolant from? If a hose thats a few £ to repair, if its something else it could be £000's so find that out first - plus you need to sell it so a repair of some sort would get more for it than someone seeing it with a river of coolant running from it!
    If yours will not last another year with a repair just look for a car with a maximum 1.4 engine, cheaper insurance, cheaper tax, cheaper fuel bill, normally cheaper tryes+repairs, cheaper to buy.
    When you are debt free which will not be all that long if you do as above, save for a nicer car or house and enjoy shopping around for the highest savings rates rather than the lowest debt rates so that soves your after you are debt free question as well :D
    Credit card debt - NIL
    Home improvement secured loans 30,130/41,000 and 23,156/28,000 End 2027 and 2029
    Mortgage 64,513/100,000 End Nov 2035
    2022 all rolling into new mortgage + extra to finish house. 125,000 End 2036
  • Whilst the benefits are spot on and the advice to encourage maximising the contribution to gain maximum employer match is right.

    The pension is taken through salary sacrifice (confirmed on page 2) so he pays in £70 and doesn't pay an income tax on this - so effectively saving £14 a month in tax @20%.

    Thanks. Knew I’d get something wrong :p
    Debt Totals July 2019::
    [STRIKE]£350 Natwest Credit Card [/STRIKE]/ ]Now £0 (paid off and closed 04/2017) £15,500 postgrad loan from parents/ Now £7,000 £5,000 sister loan/ Now £0[STRIKE]£500 train ticket loan from parents [/STRIKE]/ Now £0 (paid off 16/02/18)[STRIKE]£2,000 Overdraft[/STRIKE] Now £0 (paid off 09/03/18) £1,967.83 Barclays 0% card Now £0
    Total £7,000
  • I'd like to own a house eventually. Early retirement won't be an option sadly.

    The ISA & SIPP require a minimum monthly payment of £25 to keep them open.

    The S&S ISA cash was used for various things. My car I have now, repairs to it etc. Paid off another loan. £1200 to H2B ISA. Various big losses in the market.....

    I really appreciate the effort and advice on here!

    It seems like you are dabbling with investing when you do not have you have debt a dodgy car and to be blunt do not understand investing and the importance of diversification and have made some poor investment decisions including opting out of your workplace pension?

    Living with relatives to save money is sensible.

    Buying an expensive car at this point would not be sensible. Have you had an estimate of how much it would cost to sort your current car out? Only when you know that can you decide whether it is best to throw a few hundred at it to keep it road worthy or replace it but not with an £18k car and certainly not on finance when you already have £8k debt.
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