Keep paying off debt or save

Imlay

Hi everyone, 
We have been working hard to pay off our debt and are down to the final £3000 which had hoped to pay off by April of this year.  I am a teacher and am currently working from home and supporting our children with remote learning whilst my partner works out of the home.  With phased return being mentioned in media, I would be expected to return to school in the first phase and my partner would ask to be furloughed to support our children with remote learning.  
My question is, should we go back to making the required payments to pay off in the allotted time (0% credit card which expires in July 2022) and save what we can or continue to save hard to pay off the debt as planned?  I can see the pros and cons of both and wondered what the Money Saving community would advise.
Thank you in advance 

CreditCardJunkie

Some people won't agree, but I chose to pay off my 0% debt. Honestly life after debt is so freeing, I don't regret my decision.

enthusiasticsaver

I would normally choose to get rid of the debt as soon as possible but if it is 0% interest and there is a chance of either or both of you having reduced income I would use the option of dividing the balance by the number of months left until the deal expires and doing that.  You can always repay it in full when your income is secure.  Just look on it as you being debt neutral when the savings get to £3k rather than debt free. 

madaboutspots

I would agree with always preferring to be debt free. That said, we are in very challenging times.

As your debt is 0% it can't hurt to hedge your bets but you need to see your "savings" as not being your money but that which you owe. It really does need to be only to cover emergencies outside of debt payments. 

A balance might be to have an emergency fund of maybe £1k and throw the rest at debt?

Debt free is the bee's knees though. Keep focused on that. You won't regret it.

Sharon87

I would definitely have some savings if I were you. 

i would also divide the debt with the amount of months left on the debt (£3000/18 months is £166.67 - as a rough guide) and make your monthly DD that amount. That's how I clear my 0% deals.

I had £1500 in my emergency fund and 11k of debt at the beginning of 2020. I'm glad I had those savings as in November/December I had very little work... I now have £20 in my emergency fund and 7.5k of debt - but I'm working. I'm glad I had those savings as using my cards as emergency fund would have been more expensive - having to pay a 4% money transfer transfer fee.

Get an emergency fund in place and pay down your debt at the set rate. If you have more income than planned later down the line you can always make additional payments to clear it faster. And it'll also be more financially beneficial if you get a decent savings rate - some fixed savings are decent rates but you can't take your money out for a year (Natwest have a good one for small amount of savings - £50/month a max but its 3% interest! I have this as well as HSBC's fixed savings account)

MrDebtWarrior

I was in a very similar position recently.

I decided to wait a few months, turns out it was two, so that I had a bit more in savings, so that when I paid off the debt, I still had an emergency fund.

In general though, I'd say pay the debt off when you can and be free of it.

Imlay

Thanks everyone.  We have a baby emergency fund of £1 000 which we are very good with and only use for real emergencies.  @CreditCardJunkie the lure of being debt free is so enticing and we have worked hard to get our debt down this far, so I can understand continuing to work hard to pay it off.  We are YNAB users so the negative balance drives me mad  @enthusiasticsaver I like thinking of it as debt neutral  @madaboutspots that was some my thinking too if it is sitting there it can pay off the credit card or be used if we need it. @Sharon87 great minds think alike.  I have adjusted my credit card payments and treat it like a loan so that it will be paid off before the 0% offer runs out. I have been popping money in an ISA but I will need to look into an account with better interest rates. @MrDebtWarrior I think that's what I will do, save hard and wait and see what happens.  I like a plan 

Thanks everyone.  I am very lucky to be in the position that we are in and I want the debt paid off but I think waiting and saving is the way forward and become debt neutral whilst paying the credit card off like a loan

Mickey666

You can't really have 'savings' while also being in debt. 

Imagine someone posting here stating that they have no debts and no savings and asking if they should borrow some money from somewhere in order to have some 'savings'.  Wouldn't make sense would it?

I get the value of an emergency fund, but it needn't be actual cash - it only needs to be readily available funds.  Thus, if you have a CC with, say, a £3k credit limit then that could be regarded as an emergency fund.  OK, you'd pay interest if you actually used it unlike with cash savings, but we are talking emergency here, not normal expenditure.

So as long as you have some sort of access to emergency funds, I'd most certainly be focused on paying off the debts and not trick myself into believing I was building up my savings by not repaying my debts.  You sound tantalisingly close to being debt-free so don't relax now.

Imlay

Thanks @Mickey666 I should have saved enough to pay off my credit card by the end of February (if everything goes to plan) if not it will be a couple of weeks into March.  You are right that being debt free is tantalisingly close and I would love to be debt free.  
I suppose I trying to have an emergency fund in cash so that I no longer rely on credit cards as a safety net.  
I am going to save up the money I would normally have paid straight to the credit card as it can be a safety net but I can also pay the credit card off in one payment which is a very exciting thought and prospect 

Sharon87

Mickey666 said:

You can't really have 'savings' while also being in debt. 

Imagine someone posting here stating that they have no debts and no savings and asking if they should borrow some money from somewhere in order to have some 'savings'.  Wouldn't make sense would it?

I get the value of an emergency fund, but it needn't be actual cash - it only needs to be readily available funds.  Thus, if you have a CC with, say, a £3k credit limit then that could be regarded as an emergency fund.  OK, you'd pay interest if you actually used it unlike with cash savings, but we are talking emergency here, not normal expenditure.

So as long as you have some sort of access to emergency funds, I'd most certainly be focused on paying off the debts and not trick myself into believing I was building up my savings by not repaying my debts.  You sound tantalisingly close to being debt-free so don't relax now.

That's the thinking that got me into debt to begin with... my student overdraft, that's my emergency fund... then again with a credit card. If I didn't have emergency savings I would have been in a bit of a pickle last month with rent and bills! You can't pay rent with a credit card - unless you do an expensive money transfer if you have them available to you. Now I need to build that emergency fund back up now that I'm working.

BabyStepper

Access to credit is not an emergency fund. It was also that kind of thinking that got me into debt trouble. Not using credit cards at all is really important when trying to get debt free. Emergencies will always come up, have some cash and be ready for them. Apart from anything else, it's so much less stressful to manage your money in this way. 

I understand your dilemma OP. For what it's worth, I'd say take one month at a time and do not make yourself vulnerable for the sake of getting your debt paid off faster. Keep budgeting, don't overspend, save your money, review regularly to make sure you're not missing any expenses coming up and then make occasional big overpayments to your credit card when you feel secure enough to do that. You have paid off a lot already, you're nailing it! Your debt free date will come in time and you could have a good amount of savings by that point too. Then come and tell us so we can all celebrate with you.