Advice please. New job and best way to invest/save.

[NickM450]

Hi folks,

I've recently takes a promotion at work and I'm lucky enough to have some spare cash at the end of each month on top of what I had before.

As a quick fix all I did was up my mortgage overpayment, I'd like to know if people think this is the best use of my newly acquired wage increase?

Bit of background:

Mortgage of ~£130k at around 3% I think.
Personal Loan ~£6k at 3.4% if I remember.
Credit Card ~ £5k at 0% until late 2018.

Well there you go, where would your money go? I'm leaning towards saving like mad and paying debts then going back to overpayments but open to any other ideas....

Also considering a house move which would see me with a substantial (to me) amount of cash, maybe £30k+, in the near future. So could use that to pay debts instead.

Edit to add: I really am not used to having spare cash and apologise of this post makes me sound like an arrogant dick or just a tt in general. I just want to use it sensibly and not waste it away... although some wastage will occur on cars and car stuff

Edited by NickM450 on Saturday 1st July 20:08

[Rowley92]

I would try and clear the credit card and loan off first then hammer overpayments on the mortgage. Considering the interest rates are so low on savings you might as well!
Have you thought about drip feeding into a S&S ISA with any additional funds?

[benjijames28]

First you clear the most expensive debts you have, even if they are manageable and not causing you any stress.

Then maybe look at a split of 50 50 between saving / investment, and overpaying your mortgage.

I just took out a 8 grand loan at 3.3 percent to buy a new car despite having the cash in savings.

Money is better in my account, it keeps me flexible.

[mjb1]

Depends a bit on how much spare cash you have each month. Enough to clear the CC balance before the interest free period ends? More? Biggest priority is being in a position to clear the CC debt before the interest comes back on it. Since you've presumably already paid the fee for the zero interest period, you might as well make the money work for you (a bit) in the meantime.

Nationwide have a current account that pays 5% interest for the first 12 months (on the first 2.5k), and they also have a regular saver account that is also 5%, and you can put in up to £500 per month. If you can max that out for 12 months you'll earn a bit of interest on it before using it to pay off the CC. As long as you can avoid the temptation to spend it! Once you're saving enough to clear the CC, use the rest to build a bit of a rainy day savings fund (assuming you don't have any savings at present), and then overpay the loan and mortgage if possible.

On the other hand, how likely is your credit card to offer you a further interest free period (and what fee is it likely to be to take it up)? If you can get another year or more int free for a charge of 2% or so, it makes more sense to clear the loan first. But that's a big gamble - int. rates could go up before then, or your card provider might not offer a sensible int. free follow on.

[James_B]

Financial disaster tends to come from unexpected events hitting you when you have no access to cash. When they do hit, it often means that you also lose access to credit, so in my opinion the most important thing that you can do to stave off a future disaster is to have an emergency fund.

A minimum of three months net salary, or six months if you can manage it, in accounts that you can access on a timescale of a few weeks at most will protect you from all manner of cost or expense later.

So I'd suggest paying down the debt, and then setting up direct debits to start paying into one of the high-interest savings accounts that offer uneconomically high rates to tempt new customers in.

Once you've got that money saved up then you should come back and start looking at how you can make your longer term investments match your needs, and make them tax efficient, but for now, get that emergency fund sorted.

[NickM450]

Thanks folks, that was really helpful

I will get started on the emergency fund and have already opened a 5% savings account with Nationwide. I'm around £1000 better of per month than before, that doesn't include any bonuses that I'll be earning. Still getting used to it, it's only been a couple of months and I've kinda gone a bit mad but need to reign it in

[bmwmike]

+1 on the emergency fund but the trick I think is not to keep too much in cash but safe investment that you can convert to cash quickly and minimal cost. Need some in cash obviously.. at least a month ideally two or three. Depends on outgoings too.