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  • FIRST POST
    • EimearF
    • By EimearF 13th Jan 20, 5:18 PM
    • 30Posts
    • 42Thanks
    EimearF
    Psychological benefits of using savings to clear debt
    • #1
    • 13th Jan 20, 5:18 PM
    Psychological benefits of using savings to clear debt 13th Jan 20 at 5:18 PM
    Can anyone give me an insight into whether they felt it was worth emptying their savings and becoming debt free?

    I have 4643 interest free on credit card and 4700 in savings. I know the smart thing to do is keep the savings but the fact i still have debt is stressing me out as I am in the final stages of paying off over 40K.

    Id be interested to hear how other approached this situation and whether its worth taking 3700 from savings so that i still have emergency fund and paying the card off as soon as possible.

    Thanks for reading.
    Last edited by EimearF; 13-01-2020 at 5:21 PM. Reason: typo
    Light Bulb Moment 13/09/17: Non- Mortgage Debt 42295
    01/04/19: Non-Mortgage Debt 13645
    01/10/19: Non-Mortgage Debt 9707
    01/11/19: Non-Mortgage Debt 5525
    14/01/20: Non-Mortgage Debt 883
Page 1
    • Willing2Learn
    • By Willing2Learn 13th Jan 20, 5:22 PM
    • 5,200 Posts
    • 4,840 Thanks
    Willing2Learn
    • #2
    • 13th Jan 20, 5:22 PM
    • #2
    • 13th Jan 20, 5:22 PM
    I would definitely keep your Emergency Fund.

    As far as your savings go. If your savings earns less interest than you are paying toward your debts, then I would use some of the savings to repay the card debt. Is the card debt frozen (not charging interest)?

    Like I said, I would still retain the EF though.

    And well done on debt-busting 38,000 so quickly.
    I work within the voluntary sector, supporting vulnerable people to rebuild their lives.

    I love my job

    • EimearF
    • By EimearF 13th Jan 20, 5:26 PM
    • 30 Posts
    • 42 Thanks
    EimearF
    • #3
    • 13th Jan 20, 5:26 PM
    • #3
    • 13th Jan 20, 5:26 PM
    My card is an interest free balance transfer, ive luckily caught and acted on my problem before it came to defaults.

    No matter what i will be keeping 1k as an emergency fund.

    I know the savings will earn a little interest but Im not sure if that money is worth the stress of continuing to carry debt - even if its interest free.

    but having no savings carries its own stress!!
    Light Bulb Moment 13/09/17: Non- Mortgage Debt 42295
    01/04/19: Non-Mortgage Debt 13645
    01/10/19: Non-Mortgage Debt 9707
    01/11/19: Non-Mortgage Debt 5525
    14/01/20: Non-Mortgage Debt 883
    • PasturesNew
    • By PasturesNew 13th Jan 20, 5:37 PM
    • 67,817 Posts
    • 396,806 Thanks
    PasturesNew
    • #4
    • 13th Jan 20, 5:37 PM
    • #4
    • 13th Jan 20, 5:37 PM
    Pay off the debt. If you get an emergency, use the now empty card.
    • Silver Queen
    • By Silver Queen 13th Jan 20, 5:38 PM
    • 797 Posts
    • 3,433 Thanks
    Silver Queen
    • #5
    • 13th Jan 20, 5:38 PM
    • #5
    • 13th Jan 20, 5:38 PM
    Keep 1k emergency fund and use the rest to partially pay off the debt. Then pay off the remaining 1k debt ASAP.
    Debt Totals July 2019::
    350 Natwest Credit Card / ]Now 0 (paid off and closed 04/2017) 15,500 postgrad loan from parents/ Now 7,000 5,000 sister loan/ Now 0500 train ticket loan from parents / Now 0 (paid off 16/02/18)2,000 Overdraft Now 0 (paid off 09/03/18) 1,967.83 Barclays 0% card Now 0
    Total 7,000
    • debtfreefrom2020
    • By debtfreefrom2020 13th Jan 20, 6:51 PM
    • 26 Posts
    • 28 Thanks
    debtfreefrom2020
    • #6
    • 13th Jan 20, 6:51 PM
    • #6
    • 13th Jan 20, 6:51 PM
    I did exactly this last autumn and it was a huge relief to know that I'd wiped 7k off my total debt figure in one click.

    I guess it depends on your values: how much you value your own mental wellbeing, compared to the value of interest on the 4.7k savings pot. For me, my day-to-day mental far outweighed the fact that I might have made an extra 150 or so over a year on my savings. Martin has a good post on this on the main site ('Repay debts or save?')
    SD (Dec 19) - 12,366 (Barclaycard - 4,677, HSBC - 7,277, Halifax - 412)

    CD (Jan 20) - 11,662 (Barclaycard - 4,567, HSBC - 7,095, Halifax - 0) - 94.3% of SD / EF 30/1000
    • middleclassbutpoor
    • By middleclassbutpoor 13th Jan 20, 6:56 PM
    • 657 Posts
    • 616 Thanks
    middleclassbutpoor
    • #7
    • 13th Jan 20, 6:56 PM
    • #7
    • 13th Jan 20, 6:56 PM
    I agree- keep 1k and repay the rest off.

    Focus on clearing the 1k and building a bigger emergency fund.
    • Moneyminded
    • By Moneyminded 13th Jan 20, 8:08 PM
    • 91 Posts
    • 116 Thanks
    Moneyminded
    • #8
    • 13th Jan 20, 8:08 PM
    • #8
    • 13th Jan 20, 8:08 PM
    When is the 0% interest period up? Can you afford to keep your savings in tact and clear the balance before the 0% rate ends? If so I would do this. If not, I would pay the minimum each month (and not spend any more) and then when the 0% is about to come to an end clear the lot from savings.

    Whilst you are not paying any interest on the credit card it makes sense to have the savings earning something.

    It's your choice though
    MFW 1% Challenge 2020 - 493.65/ 993
    MFW #110 2020 - 493.65 /6,000
    Save 12k in 2020 - 309.18 /4,000
    • EimearF
    • By EimearF 13th Jan 20, 8:38 PM
    • 30 Posts
    • 42 Thanks
    EimearF
    • #9
    • 13th Jan 20, 8:38 PM
    • #9
    • 13th Jan 20, 8:38 PM
    I can clear the card in 3 months, but equally that means I could be debt free come pay day and rebuild my savings within 3 months.

    I feeling stressed cause I haven’t really touched the debt in months while I’ve been saving .
    Light Bulb Moment 13/09/17: Non- Mortgage Debt 42295
    01/04/19: Non-Mortgage Debt 13645
    01/10/19: Non-Mortgage Debt 9707
    01/11/19: Non-Mortgage Debt 5525
    14/01/20: Non-Mortgage Debt 883
    • JGB1955
    • By JGB1955 13th Jan 20, 8:48 PM
    • 438 Posts
    • 516 Thanks
    JGB1955
    Pay the debt off...then tomorrow is the first day of the rest of your life.
    #36 Saving for Christmas 2020 - 1 a day challenge.... 126/366
    • gettingtheresometime
    • By gettingtheresometime 13th Jan 20, 10:54 PM
    • 5,096 Posts
    • 12,669 Thanks
    gettingtheresometime
    If the debt is interest free and you're earning interest it would be costing you, however little to pay off the debt.

    Personally I would keep the savings and just work towards clearing the debt
    Lloyds OD / Natwest OD / PO CC / Wescott / Argos Card / JD Williams cleared thanks to the 1 debt v 100 day challenge
    • Anno88
    • By Anno88 14th Jan 20, 1:38 PM
    • 17 Posts
    • 21 Thanks
    Anno88
    Reluctant to use savings ..... ME TOO!!
    I know what you mean !


    I have been slowly and painfully trying to save, and now have about 6,000 in savings YET - I have needed to do urgent redec / repair work on my home but... so reluctant to touch these hard-earned savings of mine that I've done ALL the work on interest free credit.


    Am now trying to have that much more saved up in savings and THEN pay all the interest -free debt off .. before the interest free period ends.


    I just feel worried that I can't gather momentum in savings, and if I use it all, then I'll never get this much saved again ..
    • EimearF
    • By EimearF 14th Jan 20, 1:59 PM
    • 30 Posts
    • 42 Thanks
    EimearF
    Thanks so much for taking the time to reply.

    I decided to take 3700 from my savings and I had 60 surplus in my current account and pay most of the card off. I know I was earning interest but it was only a few pounds a month and I feel like a huge weight has been lifted off me. Ill be debt free on pay day in less than two weeks after 6 years of stress!!

    I should add a few comments on how I paid so much off so quickly. My situation is not typical.
    I have a very small mortgage (a lot of the debt was from our fixer upper) and eat with parents 6 nights a week which means minimal spending on groceries. We have no children yet, decent wages (for where we live) and I have a second job where I work occasionally for some extra money.
    I haggled with my insurances and TV/internet and mobile providers to get my monthly bills down, which helped chip away. Sold surplus furniture and clothes on facebook and ebay (for a fraction of what I paid for them d’oh)

    I tried to avoid balance transfers on cards I could clear in a few months as interest free cards made me think I didn’t need to clear them. I have to say Dave Ramsey’s approach has a lot of merit as so much is in the mentality as opposed to the numbers.

    This board has helped me stay (reasonably) focused over the last 2.5 years and I am really grateful to those who post their stories and those who provide great advice.
    Light Bulb Moment 13/09/17: Non- Mortgage Debt 42295
    01/04/19: Non-Mortgage Debt 13645
    01/10/19: Non-Mortgage Debt 9707
    01/11/19: Non-Mortgage Debt 5525
    14/01/20: Non-Mortgage Debt 883
    • EimearF
    • By EimearF 14th Jan 20, 2:03 PM
    • 30 Posts
    • 42 Thanks
    EimearF
    I know what you mean !


    I have been slowly and painfully trying to save, and now have about 6,000 in savings YET - I have needed to do urgent redec / repair work on my home but... so reluctant to touch these hard-earned savings of mine that I've done ALL the work on interest free credit.


    Am now trying to have that much more saved up in savings and THEN pay all the interest -free debt off .. before the interest free period ends.


    I just feel worried that I can't gather momentum in savings, and if I use it all, then I'll never get this much saved again ..
    Originally posted by Anno88
    I know how you feel. I am hoping that now Im (nearly) debt free i will continue living frugally and try and build up a really big pot of savings so i can fix some of the things that need done in my house and keep a big savings pot.
    Light Bulb Moment 13/09/17: Non- Mortgage Debt 42295
    01/04/19: Non-Mortgage Debt 13645
    01/10/19: Non-Mortgage Debt 9707
    01/11/19: Non-Mortgage Debt 5525
    14/01/20: Non-Mortgage Debt 883
    • Anno88
    • By Anno88 14th Jan 20, 2:17 PM
    • 17 Posts
    • 21 Thanks
    Anno88
    Will be worth it ...
    Sounds like an excellent plan!


    I found - which I really wasn't expecting! - was how comforting it is to have some savings, however small. I know feel a bit more grown up, and like I have a little bubble of protection around me.
    I wish I'd tried harder to save in my youth!!
    But - I thinks it is - unfortunately - in the genes somewhat!!! My son is just like me, and is so painful trying to educate him. Wheras my daughter takes after the savers in the family and is already accruing a safety net :-))


    Life, huh!
    • EimearF
    • By EimearF 14th Jan 20, 2:21 PM
    • 30 Posts
    • 42 Thanks
    EimearF
    Sounds like an excellent plan!


    I found - which I really wasn't expecting! - was how comforting it is to have some savings, however small. I know feel a bit more grown up, and like I have a little bubble of protection around me.
    I wish I'd tried harder to save in my youth!!
    But - I thinks it is - unfortunately - in the genes somewhat!!! My son is just like me, and is so painful trying to educate him. Wheras my daughter takes after the savers in the family and is already accruing a safety net :-))


    Life, huh!
    Originally posted by Anno88
    I was always a saver all my life.. until i got into debt doing up the house, then it was a free for all! I just kept adding to it because the bank said i could have it. Breaking that mentality was the hardest.

    I was so jittery about giving up my safety net this morning but I am glad i did it.I know in 13 days Ill have made it and clear all those stupid cards!
    Light Bulb Moment 13/09/17: Non- Mortgage Debt 42295
    01/04/19: Non-Mortgage Debt 13645
    01/10/19: Non-Mortgage Debt 9707
    01/11/19: Non-Mortgage Debt 5525
    14/01/20: Non-Mortgage Debt 883
    • debtfreefrom2020
    • By debtfreefrom2020 14th Jan 20, 2:52 PM
    • 26 Posts
    • 28 Thanks
    debtfreefrom2020
    Well done Eimear! What a relief!
    SD (Dec 19) - 12,366 (Barclaycard - 4,677, HSBC - 7,277, Halifax - 412)

    CD (Jan 20) - 11,662 (Barclaycard - 4,567, HSBC - 7,095, Halifax - 0) - 94.3% of SD / EF 30/1000
    • Anno88
    • By Anno88 14th Jan 20, 3:34 PM
    • 17 Posts
    • 21 Thanks
    Anno88
    Yes - I second that EimearF !
    I'm back to the almost-sleepless nights and the early morn frantic mental calcs as I ponder how much debt I've taken on I DON'T have enough in savings to actually clear it ALL now.
    Back to hoping my job lasts etc etc Will be very glad and relieved when I'm where you are now!
    • EimearF
    • By EimearF 14th Jan 20, 3:37 PM
    • 30 Posts
    • 42 Thanks
    EimearF
    Yes - I second that EimearF !
    I'm back to the almost-sleepless nights and the early morn frantic mental calcs as I ponder how much debt I've taken on I DON'T have enough in savings to actually clear it ALL now.
    Back to hoping my job lasts etc etc Will be very glad and relieved when I'm where you are now!
    Originally posted by Anno88
    Ugh the mental calculations! I was even doing them still today!
    You can get them cleared, at least they are interest free so the problem isnt getting worse!
    Light Bulb Moment 13/09/17: Non- Mortgage Debt 42295
    01/04/19: Non-Mortgage Debt 13645
    01/10/19: Non-Mortgage Debt 9707
    01/11/19: Non-Mortgage Debt 5525
    14/01/20: Non-Mortgage Debt 883
    • EssexHebridean
    • By EssexHebridean 14th Jan 20, 4:48 PM
    • 9,896 Posts
    • 50,327 Thanks
    EssexHebridean
    I'm going to be different and say that I would compromise:

    Open a regular saver account (Coventry have one that is as good as any currently - and accepts 500 a month) and max out what you can pay into that. Then throw EVERYTHING else you have spare at the card each month if it's bothering you. You're right in thinking that if you have savings paying interest and debt that isn't costing anything, then you're better to keep the savings.

    If the worst happened tomorrow, then look at it this way, you'd just clear the debt and be done with it - and that situation will get easier with each month that passes.
    MORTGAGE FREE 30/09/2016
    SOA CALCULATOR (for DFW newbies): SOA Calculator
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