Dealing with debt and self employed

confused.com2

Evening,

Really interested in peoples stories about debt repayments and being self employed, so a fluctuating income!

I have some debt, currently manageable and luckily on interest free cards. I'm self employed, income really does fluctuate and I'm chipping away at my debts with weekly amounts as I'm getting money in weekly. Feel quite proud as I do see progress being made and I feel in control. Still be easier  and much happier when it's gone!

I do have a rainy day buffer which could potentially clear half my debt, however I'm very wary to use it. Especially after last year when I couldn't work and had no entitlement to help. What if it happens again?! And with my debt being interest free? Am I being silly not to clear what I can?

It's hard to have set payments and plans in place to clear it due to the fluctuations in my business. However I always pay over and also add to my rainy day buffer.

Really interested in thoughts?

Thank you.

bargainbetty

Two years ago I would have suggested you use half of the buffer and then repay your savings, but given the last couple of years, I'm not sure I'd say the same. I lost my job and like you had no recourse to help, so used nearly half my savings to live. That was my mortgage clearance fund... 

Personally, until the third wave has crashed onto us and washed away, I'd be tempted to keep my money stashed where I can get at it.

If the debt is interest free, it makes no real difference in terms of cost, just keep paying off all you can each month as money comes in to reduce your exposure to debt. 

sourcrates

All consumer credit debt is what is termed "non essential".

You have mortgage or rent, council tax/utility bills and food etc to pay for first.

So if push comes to shove, credit companies have to accept what you are able to pay, not what you are contractually obliged to pay, even if its just a pound a month.

So I would not worry too much about your debts, I'd keep that money tucked up nice and tight, just in case covid 3 makes an appearance, which is looking more likely by the day.

Andyjflet

Agree with the above, stay in Storm mode at least until 2022 and we can see how the winter affects us, you are right to have this emergency fund right now. I too could use some of my savings to clear 1/3 of my debt, but haven't at the moment just in case, next year I hope to be able to pay a chunk off and see the finish line even nearer. 

monetxchange

I’m self employed and even when I was hardcore debt clearing I always left a sizeable buffer just in case there was a dry spell. 

Even now I take every spare penny leftover after my monthly bills and allocated spending money and stash it into my tax bill savings. That way I oversave for the tax bill and come January when I’ve paid it, I then feel more comfortable putting the surplus (or maybe half of it to keep a buffer) towards paying something off (in my case mortgage overpayments). 

Debt clearing is very different being self employed. I know employed people always advocate throwing every spare penny at the debt as they’re guaranteed the next months income, but as self employed people we need to be aware and careful about the drought nature of the work!

Even after the last 18 months I have an idiot relative who spends every last penny on crap like holidays and designer clothes when he has a “good month” and then is begging people for £20 to eat the next month when he has no work at all. It’s an exhausting way to live and is a mentality we need to overcome to become long term debt free as SI.

confused.com2

monetxchange said:

I’m self employed and even when I was hardcore debt clearing I always left a sizeable buffer just in case there was a dry spell. 

Even now I take every spare penny leftover after my monthly bills and allocated spending money and stash it into my tax bill savings. That way I oversave for the tax bill and come January when I’ve paid it, I then feel more comfortable putting the surplus (or maybe half of it to keep a buffer) towards paying something off (in my case mortgage overpayments). 

Debt clearing is very different being self employed. I know employed people always advocate throwing every spare penny at the debt as they’re guaranteed the next months income, but as self employed people we need to be aware and careful about the drought nature of the work!

Even after the last 18 months I have an idiot relative who spends every last penny on crap like holidays and designer clothes when he has a “good month” and then is begging people for £20 to eat the next month when he has no work at all. It’s an exhausting way to live and is a mentality we need to overcome to become long term debt free as SI.

Thank you for this detailed post, I'm appreciate another self employed member giving their perspective. I have decided to keep paying what I can off, but I'm keeping my lump sum in the bank for now. Seeing as they are all interest free, I feel in current times this is the most sensible course of action.