Use my surplus to pay off debts or saving goals

Greg89

I'm paying £180 towards debts via DD every month.

Debts £3.7k total-

3 mobile phone companies
Loan
Credit card

I won't take out any more credit cards, store cards or loans as it's a learning lesson 

The only loan I'll get is a mortgage, that's in 3-5 years time 

Martico

As others have asked, what interest rates are you paying on your debts? I'd say that's pretty crucial. Credit cards not in a deal tend to start at 20%, yours may be higher. It would take a very long time to pay those off at minimum monthly payments, as you'd accrue high-rate interest each month. So it's 22 steps forward, 21 steps back. 
If they're on 0% deals, then fair enough, you have a window to pay a lesser amount while you build some savings. But make sure you're able to pay them off by the end of the deal.

I suspect you may be paying high rate interest, in which case I'd say you should pay them off as swiftly as you can, or at the very least see if you can get a 0% balance transfer.

kimwp

Greg89 said:

I'm paying £180 towards debts via DD every month.

Debts £3.7k total-

3 mobile phone companies
Loan
Credit card

I won't take out any more credit cards, store cards or loans as it's a learning lesson 

The only loan I'll get is a mortgage, that's in 3-5 years time 

Ok, well if you put that £500+ excess towards your debts, you'd be rid of them in six months. You'll need to save for a deposit if you want a mortgage, so I suggest you pick a figure, pay that towards your debts until it's paid off, then change to saving that figure towards your deposit and emergency fund.

£300 a month for three years would give you £10,000 deposit, so I suggest this is the minimum you aim for - the debt would be paid in about a year and you'd have £10,000 deposit plus £3000 for solicitor fees and a small emergency fund five years from now. Note that you'd probably need more than this saved for moving costs, white goods, furniture etc, even second hand.

kimwp

Sorry for lots of messages- have you looked at what the finances of owning a house and having a mortgage would be? You've said your rent is low, how would mortgage payments compare? You'd also have utility bills and insurance to pay, maintenance costs, also is your food currently covered by your rent? It might be worth posting on the mortgage board to find out about the various costs of buying and owning a house so you know what you are heading towards.

Greg89

Yes I've thought about it.

I've heard you can pay 5 per cent and my friend who brought a property for £130k, £20k deposit is paying £120 pw mortgage.

kimwp

Greg89 said:

Yes I've thought about it.

I've heard you can pay 5 per cent and my friend who brought a property for £130k, £20k deposit is paying £120 pw mortgage.

Ok, so likely that £10,000 would cover deposit, fees, stamp duty and moving costs as long as house prices don't change too much from when he bought his.

Just a thought experiment - As a rough first pass (all based on costs for one person and fairly conservative):
Mortgage: £480 per month

Water rates: £15
Gas & electricity: £100 
Internet: £20
Council tax: £120
Mobile Phone: £10 (sim only)

Buildings and contents insurance: £15
TV license plus netflix: £20

Groceries (Food, cleaning stuff): £100 
Medical (dentist, optician, prescriptions, cold medicine etc): £10
Savings for house/appliance repairs: £50
Emergency fund: assumed already saved and not yet needed

Total: £940, leaving £560 for 

Car- insurance, mot, tax, servicing, parking, petrol: £50 plus petrol and parking

So £510 for:
Petrol & parking
Clothes

Saving for new handset 

Presents

Entertainment/socialising
Haircuts

Random spends (DIY tools, electronics etc)

Holidays

Definitely at a level where you'll need to keep a close eye on your spends to avoid needing credit, but doable!

As a reference, I don't have rent or mortgage to pay, I have about £1500 going into my account each month and save about £500 a month for house improvements, but very rarely use my car as I mostly WFH now, don't drink alcohol, go for dinner twice a month and takeaways 2-3 times a month. Most of my clothes are second hand, though I do buy some things new (£200 ish a year on new shoes and clothes), I buy mostly organic food. Very modest holidays - long weekend away 1-2 times a year, though buying all meals out or a self-catering caravan holiday, sharing with friends. Refurbed £100 phone. 

Greg89

kimwp said:

Greg89 said:

Yes I've thought about it.

I've heard you can pay 5 per cent and my friend who brought a property for £130k, £20k deposit is paying £120 pw mortgage.

Ok, so likely that £10,000 would cover deposit, fees, stamp duty and moving costs as long as house prices don't change too much from when he bought his.

Just a thought experiment - As a rough first pass (all based on costs for one person and fairly conservative):
Mortgage: £480 per month

Water rates: £15
Gas & electricity: £100 
Internet: £20
Council tax: £120
Mobile Phone: £10 (sim only)

Buildings and contents insurance: £15
TV license plus netflix: £20

Groceries (Food, cleaning stuff): £100 
Medical (dentist, optician, prescriptions, cold medicine etc): £10
Savings for house/appliance repairs: £50
Emergency fund: assumed already saved and not yet needed

Total: £940, leaving £560 for 

Car- insurance, mot, tax, servicing, parking, petrol: £50 plus petrol and parking

So £510 for:
Petrol & parking
Clothes

Saving for new handset 

Presents

Entertainment/socialising
Haircuts

Random spends (DIY tools, electronics etc)

Holidays

Definitely at a level where you'll need to keep a close eye on your spends to avoid needing credit, but doable!

As a reference, I don't have rent or mortgage to pay, I have about £1500 going into my account each month and save about £500 a month for house improvements, but very rarely use my car as I mostly WFH now, don't drink alcohol, go for dinner twice a month and takeaways 2-3 times a month. Most of my clothes are second hand, though I do buy some things new (£200 ish a year on new shoes and clothes), I buy mostly organic food. Very modest holidays - long weekend away 1-2 times a year, though buying all meals out or a self-catering caravan holiday, sharing with friends. Refurbed £100 phone. 

Thank you for all of this.

My car insurance is actually £130pm
Petrol £120pm
Car tax £18
Entertainment/outing £70

Leaving £200 each month 

Put £200 in savings account pm

£50pm house repairs 

kimwp

Greg89 said:

kimwp said:

Greg89 said:

Yes I've thought about it.

I've heard you can pay 5 per cent and my friend who brought a property for £130k, £20k deposit is paying £120 pw mortgage.

Ok, so likely that £10,000 would cover deposit, fees, stamp duty and moving costs as long as house prices don't change too much from when he bought his.

Just a thought experiment - As a rough first pass (all based on costs for one person and fairly conservative):
Mortgage: £480 per month

Water rates: £15
Gas & electricity: £100 
Internet: £20
Council tax: £120
Mobile Phone: £10 (sim only)

Buildings and contents insurance: £15
TV license plus netflix: £20

Groceries (Food, cleaning stuff): £100 
Medical (dentist, optician, prescriptions, cold medicine etc): £10
Savings for house/appliance repairs: £50
Emergency fund: assumed already saved and not yet needed

Total: £940, leaving £560 for 

Car
- insurance & tax £148
- petrol £120
- mot, servicing, parking £20

Entertainment/outing: £70

So £200 for:
Clothes

Saving for new handset 

Presents

Haircuts

Random spends (DIY tools, electronics etc)

Holidays

Thank you for all of this.

My car insurance is actually £130pm
Petrol £120pm
Car tax £18
Entertainment/outing £70

Leaving £200 each month 

Put £200 in savings account pm

£50pm house repairs 

Great - I've updated the numbers. It's worth looking to see if you can increase your income, as £200 would disappear quite quickly with going a bit over the numbers in the different categories. Also for a mortgage, you'd need to stress test your finances ie still be ok if your interest rate went up by 3-7%.

I'd have a think about how much of that £200 is actually savings, given the categories that it needs to cover.

As a rough first pass (all based on costs for one person and fairly conservative):

Mortgage: £480 per month

Water rates: £15

Gas & electricity: £100 

Internet: £20

Council tax: £120

Mobile Phone: £10 (sim only)

Buildings and contents insurance: £15

TV license plus netflix: £20

Groceries (Food, cleaning stuff): £100 

Medical (dentist, optician, prescriptions, cold medicine etc): £10

Savings for house/appliance repairs: £50

Emergency fund: assumed already saved and not yet needed

Total: £940, leaving £560 for 

Car

- insurance & tax £148

- petrol £120

- mot, servicing, parking £20

Entertainment/outing: £70

So £200 for:

Clothes

Saving for new handset 

Presents

Haircuts

Random spends (DIY tools, electronics etc)

Holidays

EssexHebridean

Greg89 said:

kimwp said:

Greg89 said:

Yes I've thought about it.

I've heard you can pay 5 per cent and my friend who brought a property for £130k, £20k deposit is paying £120 pw mortgage.

Ok, so likely that £10,000 would cover deposit, fees, stamp duty and moving costs as long as house prices don't change too much from when he bought his.

Just a thought experiment - As a rough first pass (all based on costs for one person and fairly conservative):
Mortgage: £480 per month

Water rates: £15
Gas & electricity: £100 
Internet: £20
Council tax: £120
Mobile Phone: £10 (sim only)

Buildings and contents insurance: £15
TV license plus netflix: £20

Groceries (Food, cleaning stuff): £100 
Medical (dentist, optician, prescriptions, cold medicine etc): £10
Savings for house/appliance repairs: £50
Emergency fund: assumed already saved and not yet needed

Total: £940, leaving £560 for 

Car- insurance, mot, tax, servicing, parking, petrol: £50 plus petrol and parking

So £510 for:
Petrol & parking
Clothes

Saving for new handset 

Presents

Entertainment/socialising
Haircuts

Random spends (DIY tools, electronics etc)

Holidays

Definitely at a level where you'll need to keep a close eye on your spends to avoid needing credit, but doable!

As a reference, I don't have rent or mortgage to pay, I have about £1500 going into my account each month and save about £500 a month for house improvements, but very rarely use my car as I mostly WFH now, don't drink alcohol, go for dinner twice a month and takeaways 2-3 times a month. Most of my clothes are second hand, though I do buy some things new (£200 ish a year on new shoes and clothes), I buy mostly organic food. Very modest holidays - long weekend away 1-2 times a year, though buying all meals out or a self-catering caravan holiday, sharing with friends. Refurbed £100 phone. 

Thank you for all of this.

My car insurance is actually £130pm
Petrol £120pm
Car tax £18
Entertainment/outing £70

Leaving £200 each month 

Put £200 in savings account pm

£50pm house repairs 

Is that car insurance figure for the policy cost once the claim has been taken into account? You had a car involved in an accident recently as I recall and were trying to sort that out. If you’ve not reinsured since, bear in mind that regardless of whether you had protected NCB, the premium is also highly likely to be increased for the next few years simply because you are declaring a claim. 

Also - if you are paying car tax monthly then it would be a good idea to dedicate some of your surplus to saving to ensure you can pay up front next time - there is a charge for paying in instalments. (This also applies to the insurance, but it will be far less achievable to do anything about that, right now).

Greg89

EssexHebridean said:

Greg89 said:

kimwp said:

Greg89 said:

Yes I've thought about it.

I've heard you can pay 5 per cent and my friend who brought a property for £130k, £20k deposit is paying £120 pw mortgage.

Ok, so likely that £10,000 would cover deposit, fees, stamp duty and moving costs as long as house prices don't change too much from when he bought his.

Just a thought experiment - As a rough first pass (all based on costs for one person and fairly conservative):
Mortgage: £480 per month

Water rates: £15
Gas & electricity: £100 
Internet: £20
Council tax: £120
Mobile Phone: £10 (sim only)

Buildings and contents insurance: £15
TV license plus netflix: £20

Groceries (Food, cleaning stuff): £100 
Medical (dentist, optician, prescriptions, cold medicine etc): £10
Savings for house/appliance repairs: £50
Emergency fund: assumed already saved and not yet needed

Total: £940, leaving £560 for 

Car- insurance, mot, tax, servicing, parking, petrol: £50 plus petrol and parking

So £510 for:
Petrol & parking
Clothes

Saving for new handset 

Presents

Entertainment/socialising
Haircuts

Random spends (DIY tools, electronics etc)

Holidays

Definitely at a level where you'll need to keep a close eye on your spends to avoid needing credit, but doable!

As a reference, I don't have rent or mortgage to pay, I have about £1500 going into my account each month and save about £500 a month for house improvements, but very rarely use my car as I mostly WFH now, don't drink alcohol, go for dinner twice a month and takeaways 2-3 times a month. Most of my clothes are second hand, though I do buy some things new (£200 ish a year on new shoes and clothes), I buy mostly organic food. Very modest holidays - long weekend away 1-2 times a year, though buying all meals out or a self-catering caravan holiday, sharing with friends. Refurbed £100 phone. 

Thank you for all of this.

My car insurance is actually £130pm
Petrol £120pm
Car tax £18
Entertainment/outing £70

Leaving £200 each month 

Put £200 in savings account pm

£50pm house repairs 

Is that car insurance figure for the policy cost once the claim has been taken into account? You had a car involved in an accident recently as I recall and were trying to sort that out. If you’ve not reinsured since, bear in mind that regardless of whether you had protected NCB, the premium is also highly likely to be increased for the next few years simply because you are declaring a claim. 

Also - if you are paying car tax monthly then it would be a good idea to dedicate some of your surplus to saving to ensure you can pay up front next time - there is a charge for paying in instalments. (This also applies to the insurance, but it will be far less achievable to do anything about that, right now).

I'm still insured on the same insurer after those incidents