So close to the end, advice needed

SR999

Hi all, 
it has been an incredibly difficult journey, but by working hard and some luck I’ve managed to reduce my out of control credit cards (was £40k) to manageable levels and I now have a monthly amount to pay stuff off but now I need advice on what to do next. 

I’m planning to retire in 5-7 years and will have a lump sum to finalise a mortgage etc but what is best for me to do in those years please? I know I’m in an enviable position now but 3 years ago I was all over the place. In some ways the pandemic helped me earn more and I ploughed everything into debt. I’ve also become very strong in budgeting and haven’t made my mistakes (spending) in recent times.

Here is my current standings

mortgage - £122,000 fixed at 2.85% for another 4.5 years. Current payment £790 - not currently over paying and about 16 years left
loan - £12,500 at 2.5% and £310 per month.
car pcp - £135 with 4k to go and balloon of £18k
the last of credit card debt - approx £10k all at 0% for 3 years. I currently pay about £200.

So advice please. Where do I go now and what would you pay off first?. The credit card is now manageable debt and in some ways it’s it seems wasteful to pay it off in my opinion. I possibly have about £500 - £700 to pay stuff off. My gut says pay down the mortgage but I’m worried about that pcp too as the balloon is very high and car probably won’t be worth that.

Any advice gratefully received

Steve

mumtoomany

Advice, please excuse me if i sound blunt. 
Looking at the above, you owe £10,000 on cards, £12,500 on loan and £22,000 on the car, (payments plus balloon); this in total is £44,500!
Is the car worth £22,000 to you? If you plan to keep it then use any extra money, and any more you can find, to firstly save for your balloon. This means you will actually be paying around £735 per month for the car for the next two and a half years, plus the costs associated, fuel,tax,insurance,wear and tear, etc. Some of these may be included in the PCP, I don't know, our car is very old, we've always paid cash. Looking at this it may be cheaper overall to sell and buy an older, cheaper car outright.
If you save for the balloon as above, then once the car is paid, you should just have time to pay off the cards, using the extra and the car payment, before the 0% ends. 
Once the cards are gone, throw the extra money at the mortgage, as the interest is higher than the loan. 

Personally, I would save the extra £700 for the next 2-3 months. Then after Christmas, sell the PCP car and buy a runaround. Then put £150 per month in a jam jar/savings account. This will pay for problems the "new" car may develop, if you can't fix it yourself, (YouTube is your friend). I would pay around £300 per month on the cards, to ensure they are cleared by the end of the 0%. Any extra I would pay as over-payments on the mortgage. Once the loan is finished also pay those payments off the mortgage.

I'm guessing that when you retire you are planning to use your cash lump sum to clear the mortgage. Wouldn't it be better to keep as much of this as possible to spend on things when you retire?

I hope you are not still using the cards and have an emergency fund.

My other piece of advise is to keep this diary going, or a diary on paper. You need to keep yourself accountable.

Good luck with your journey, hugs, mumtoomany.xx

enthusiasticsaver

SR999 said:

Hi all, 
it has been an incredibly difficult journey, but by working hard and some luck I’ve managed to reduce my out of control credit cards (was £40k) to manageable levels and I now have a monthly amount to pay stuff off but now I need advice on what to do next. 

I’m planning to retire in 5-7 years and will have a lump sum to finalise a mortgage etc but what is best for me to do in those years please? I know I’m in an enviable position now but 3 years ago I was all over the place. In some ways the pandemic helped me earn more and I ploughed everything into debt. I’ve also become very strong in budgeting and haven’t made my mistakes (spending) in recent times.

Here is my current standings

mortgage - £122,000 fixed at 2.85% for another 4.5 years. Current payment £790 - not currently over paying and about 16 years left
loan - £12,500 at 2.5% and £310 per month.
car pcp - £135 with 4k to go and balloon of £18k
the last of credit card debt - approx £10k all at 0% for 3 years. I currently pay about £200.

So advice please. Where do I go now and what would you pay off first?. The credit card is now manageable debt and in some ways it’s it seems wasteful to pay it off in my opinion. I possibly have about £500 - £700 to pay stuff off. My gut says pay down the mortgage but I’m worried about that pcp too as the balloon is very high and car probably won’t be worth that.

Any advice gratefully received

Steve

That is one heck of an expensive car.  Are you intending to pay the balloon when it falls due? If the car isn't worth it then I would be looking to buy a cheaper car outright.  I think PCP deals are not very economical at all.  Are you 50% through the deal?

I think if you were to focus on anything it should be the mortgage and the car as both are your highest liabilities.  The credit card is at 0% and will be virtually paid off in 3 years anyway.  The loan presumably will go before retirement too?  

Have you worked out your pension entitlement and what type of pension do you have?  Do you have other savings? 

SR999

mumtoomany said:

Advice, please excuse me if i sound blunt. 
Looking at the above, you owe £10,000 on cards, £12,500 on loan and £22,000 on the car, (payments plus balloon); this in total is £44,500!
Is the car worth £22,000 to you? If you plan to keep it then use any extra money, and any more you can find, to firstly save for your balloon. This means you will actually be paying around £735 per month for the car for the next two and a half years, plus the costs associated, fuel,tax,insurance,wear and tear, etc. Some of these may be included in the PCP, I don't know, our car is very old, we've always paid cash. Looking at this it may be cheaper overall to sell and buy an older, cheaper car outright.
If you save for the balloon as above, then once the car is paid, you should just have time to pay off the cards, using the extra and the car payment, before the 0% ends. 
Once the cards are gone, throw the extra money at the mortgage, as the interest is higher than the loan. 

Personally, I would save the extra £700 for the next 2-3 months. Then after Christmas, sell the PCP car and buy a runaround. Then put £150 per month in a jam jar/savings account. This will pay for problems the "new" car may develop, if you can't fix it yourself, (YouTube is your friend). I would pay around £300 per month on the cards, to ensure they are cleared by the end of the 0%. Any extra I would pay as over-payments on the mortgage. Once the loan is finished also pay those payments off the mortgage.

I'm guessing that when you retire you are planning to use your cash lump sum to clear the mortgage. Wouldn't it be better to keep as much of this as possible to spend on things when you retire?

I hope you are not still using the cards and have an emergency fund.

My other piece of advise is to keep this diary going, or a diary on paper. You need to keep yourself accountable.

Good luck with your journey, hugs, mumtoomany.xx

Thank you for your time. Yes agreed. It is the mortgage and the car that worry me the most. I travel 2.5 hours per day and do on calls for the NHS. I’ve always been paranoid about having an unreliable car. I’ve had the pcp a year and was caught with the last car so I had to renew. I hate pcps and I’m a bit trapped but next year I finish paying for my daughter as she is 18, so I’m better off by £700 per month. With this I was going to hammer the car. 

I have a good NHS pension.
the only savings is a child trust fund which me and my ex still contribute to. This will pay for her university. Probably the only sensible financial decision I’ve ever made haha. 

Definitely not using cards to borrow. I pay them off at end of month if I ever use, I hardly ever do now. A complete change this. I have no emergency fund I’m afraid. I’ve just paid debt like mad. 

SR999

enthusiasticsaver said:

SR999 said:

Hi all, 
it has been an incredibly difficult journey, but by working hard and some luck I’ve managed to reduce my out of control credit cards (was £40k) to manageable levels and I now have a monthly amount to pay stuff off but now I need advice on what to do next. 

I’m planning to retire in 5-7 years and will have a lump sum to finalise a mortgage etc but what is best for me to do in those years please? I know I’m in an enviable position now but 3 years ago I was all over the place. In some ways the pandemic helped me earn more and I ploughed everything into debt. I’ve also become very strong in budgeting and haven’t made my mistakes (spending) in recent times.

Here is my current standings

mortgage - £122,000 fixed at 2.85% for another 4.5 years. Current payment £790 - not currently over paying and about 16 years left
loan - £12,500 at 2.5% and £310 per month.
car pcp - £135 with 4k to go and balloon of £18k
the last of credit card debt - approx £10k all at 0% for 3 years. I currently pay about £200.

So advice please. Where do I go now and what would you pay off first?. The credit card is now manageable debt and in some ways it’s it seems wasteful to pay it off in my opinion. I possibly have about £500 - £700 to pay stuff off. My gut says pay down the mortgage but I’m worried about that pcp too as the balloon is very high and car probably won’t be worth that.

Any advice gratefully received

Steve

That is one heck of an expensive car.  Are you intending to pay the balloon when it falls due? If the car isn't worth it then I would be looking to buy a cheaper car outright.  I think PCP deals are not very economical at all.  Are you 50% through the deal?

I think if you were to focus on anything it should be the mortgage and the car as both are your highest liabilities.  The credit card is at 0% and will be virtually paid off in 3 years anyway.  The loan presumably will go before retirement too?  

Have you worked out your pension entitlement and what type of pension do you have?  Do you have other savings? 

Yes I agree.. I’m trapped until my maintenance is over next year. I think I will save for it then and pay as much off my mortgage as possible. The loan goes in 3 and I have a nice lump sum but would rather not have a massive mortgage to pay off.
Thank you for taking the time to reply. It has been tough but I’m luckier than most on here. It is such a shame that I didn’t see sense 20 years ago..

CRANKY40

If you have an arrangement via the CMS then maintenance is payable until the child finishes full time education so if they are 18 soon after the start of the school year like mine is you would still be paying until June next year. I receive a widow's pension from the MOD for my son and the rules are similar. I hope your daughter is sensible as the Child Trust Fund belongs to her as soon as she is 18. The building society that my son's fund is with has already written to him to ask what he wants to do with it. He can't wait to get his hands on it but luckily for me he only wants to add it to his other savings account. 

SR999

CRANKY40 said:

If you have an arrangement via the CMS then maintenance is payable until the child finishes full time education so if they are 18 soon after the start of the school year like mine is you would still be paying until June next year. I receive a widow's pension from the MOD for my son and the rules are similar. I hope your daughter is sensible as the Child Trust Fund belongs to her as soon as she is 18. The building society that my son's fund is with has already written to him to ask what he wants to do with it. He can't wait to get his hands on it but luckily for me he only wants to add it to his other savings account. 

Thanks. She has known for a couple of years that is what it is for so I’m hopeful. As more maintenance we had an amicable split to save money so the arrangement between us. 

CRANKY40

Hopefully your daughter will also do the sensible thing. Mine was talking about having a gap year until I pointed out that a gap year will be way more fun if he gets his professional qualification first as he will be able to get better paid work during his travels. Sometimes they need a gentle nudge in the right direction. 

SR999

Update

I've paid off an extra £1500 off the mortgage.
I've saved £1000 for emergency fund
Still worried about the PCP but I can saved very quickly now so I think when my maintenance over I will be able to put money aside. 

I'm so tempted to use the emergency fund to pay extra off the mortgage. How do you keep going on the mortgage as it is so slow at coming down, I know it is but boy it is the toughest thing to overpay. How do you keep going on this?

I can get a car through Fleet at work but I don't know how this will affect my pension? Any advice on this would be good. The deals are usually for electric