How should I save my extra cash
Discussion
Hi
I'm after a bit of financial advice... I've just managed to pay off my overdraft and I'm left with a £2000 credit card balance (it's at the limit) where the minimum monthly payment is £95, £40 of which is last month's interest. I live in a rented house with my girlfriend and I've got a pretty poor credit rating.
I'm now in the position of having £500 - £700 a month to spare once all bills are paid and food shop done etc. and I'm trying to figure out the best way of clearing the credit card too, then building up some savings and improving my credit rating.
The best idea I've come up with so far is to do the credit card in the shortest possible time by ploughing all my spare cash into it, then use it to pay a few monthly bills clearing the balance at the end of each month to improve the credit rating, and put whatever else I can spare into a savings account.
What are PH's opinions on this? I'm 36, should that be relevant... thanks
I'm after a bit of financial advice... I've just managed to pay off my overdraft and I'm left with a £2000 credit card balance (it's at the limit) where the minimum monthly payment is £95, £40 of which is last month's interest. I live in a rented house with my girlfriend and I've got a pretty poor credit rating.
I'm now in the position of having £500 - £700 a month to spare once all bills are paid and food shop done etc. and I'm trying to figure out the best way of clearing the credit card too, then building up some savings and improving my credit rating.
The best idea I've come up with so far is to do the credit card in the shortest possible time by ploughing all my spare cash into it, then use it to pay a few monthly bills clearing the balance at the end of each month to improve the credit rating, and put whatever else I can spare into a savings account.
What are PH's opinions on this? I'm 36, should that be relevant... thanks
It's a great idea, but precluded by the aforementioned poor credit rating. For clarity, I've had the card at the limit for a while and focused on the overdraft as it was a more pressing issue. The credit card's next and I'll be debt free once I've cleared it. I guess with Christmas coming I won't really have the cash for that until end of January but putting everything I can into it will clear it by end of March.
The question is, is that the best way to do it? Also what's the best way to save my extra cash once that's done - savings or buy some shares?
The question is, is that the best way to do it? Also what's the best way to save my extra cash once that's done - savings or buy some shares?
jonny70 said:
build up 6 months of basic living expenses and keep them in a easy access savings isa .That means enough for your bills like rent/utilities/groceries etc .This is very important and first rule before saving/investing
Do this, get a buffer In a savings account, then look to buy shares with good yields, like BP, Shell, etc ...Btw, good for you getting your debt sorted and saving, most people would just got and buy a new car on finance with the extra money.
I'd get a Tesco credit card & pay huge chunks off each month & then use the card to pay all you're monthly outgoings gaining club points as you go .
Every couple of months the points accrued would pay for a weekly shop .
Ideally the idea would be to pay the balance off each month so not to accrue interest charges , whilst picking up the points
Every couple of months the points accrued would pay for a weekly shop .
Ideally the idea would be to pay the balance off each month so not to accrue interest charges , whilst picking up the points
Rob,
Build up a good buffer so that in future you can avoid financial shocks and whatever you do, get rid of that debt. Being realistic, no one expects you to build an emergency fund at the exclusion of all else, but when you have a month or two's salary parked in an instant access account, then keep adding smaller amounts to it. It probably isn't a good idea to consider an investment ISA just yet, but use as much of your cash ISA allowance as you can.
Consider insurance so that if you get injured or lose your job, you'll be covered. Rome wasn't built in a day, so chill out with your expectations - skyscrapers aren't built on quicksand, so get all the foundations in place first - and once you've done that, then strike out with slightly loftier aspirations. Take advice off a good mate you trust, get informed, see an adviser. Make a plan; identify your goals and objectives and work backwards from that. Focus on just one or two key areas to begin with.
Good luck!
Build up a good buffer so that in future you can avoid financial shocks and whatever you do, get rid of that debt. Being realistic, no one expects you to build an emergency fund at the exclusion of all else, but when you have a month or two's salary parked in an instant access account, then keep adding smaller amounts to it. It probably isn't a good idea to consider an investment ISA just yet, but use as much of your cash ISA allowance as you can.
Consider insurance so that if you get injured or lose your job, you'll be covered. Rome wasn't built in a day, so chill out with your expectations - skyscrapers aren't built on quicksand, so get all the foundations in place first - and once you've done that, then strike out with slightly loftier aspirations. Take advice off a good mate you trust, get informed, see an adviser. Make a plan; identify your goals and objectives and work backwards from that. Focus on just one or two key areas to begin with.
Good luck!
GingerMunky said:
Do this, get a buffer In a savings account, then look to buy shares with good yields, like BP, Shell, etc ...
Btw, good for you getting your debt sorted and saving, most people would just got and buy a new car on finance with the extra money.
gignermunky , I said 6 months, how much of a buffer do you think ? some say 9months or a year!Btw, good for you getting your debt sorted and saving, most people would just got and buy a new car on finance with the extra money.
Wow some really helpful advice there, thanks. Ok so here's my revised plan taking on board what's been posted:
January onwards: plough all extra cash into credit card. This will clear the balance in three months, four at the most if I have a bad month's commission (I'm in sales)
Following that I'll keep the card but only use it for my monthly costs ie car and bike insurance, Lovefilm and gym membership. They're the same every month so I can just set up a standing order to cover them and that means the card will always be clear at the end of the month
All extra cash - at least £500 a month - straight into an unused current acount. At the end of a year I'll think about how best to invest the money.
In addition to this, I work for a part of AXA UK. Every August, we're allowed to buy shares in the company at a 20% discount. I always take an interest free loan from the company to do this, buying about £1000 shares and paying it back from my pre-tax salary. Last year was the first year I did this (I've been here for 8 1/2 years) but I'm going to carry on doing it and might actually buy some extra shares with my savings as the scheme they offer us guarantees our original investment back to us if the value drops, which is nice.
January onwards: plough all extra cash into credit card. This will clear the balance in three months, four at the most if I have a bad month's commission (I'm in sales)
Following that I'll keep the card but only use it for my monthly costs ie car and bike insurance, Lovefilm and gym membership. They're the same every month so I can just set up a standing order to cover them and that means the card will always be clear at the end of the month
All extra cash - at least £500 a month - straight into an unused current acount. At the end of a year I'll think about how best to invest the money.
In addition to this, I work for a part of AXA UK. Every August, we're allowed to buy shares in the company at a 20% discount. I always take an interest free loan from the company to do this, buying about £1000 shares and paying it back from my pre-tax salary. Last year was the first year I did this (I've been here for 8 1/2 years) but I'm going to carry on doing it and might actually buy some extra shares with my savings as the scheme they offer us guarantees our original investment back to us if the value drops, which is nice.
Simpo Two said:
Or - if you get made redundant tomorrow, how long do you think it will take to find another job.
When it happened to me it was fairly easy to get unemployment benefit and mortgage interest paid (everyone had endowment mortgages so you got your whole mortgage paid). Not so easy now!
Redundancy would come with enough funds to last me for at least a year When it happened to me it was fairly easy to get unemployment benefit and mortgage interest paid (everyone had endowment mortgages so you got your whole mortgage paid). Not so easy now!
Rob,
Allow me to strike some balance into your share buying plans.
Investing into one company is always risky in that you have no diversification. Lets say though, the shares make 5% (plus your 20% premium), that there is no hold clause and that you eventually sell them and there is a tax liability. You possibly wouldn't be better off than if you had threw that money at your debt, dropped some more into your pension planning and spent £50 per month on insurance in the event that you got mullahed in an RTA and needed a stairlift/homehelp/medical treatment, or losing your job.
Just a few thoughts.
Allow me to strike some balance into your share buying plans.
Investing into one company is always risky in that you have no diversification. Lets say though, the shares make 5% (plus your 20% premium), that there is no hold clause and that you eventually sell them and there is a tax liability. You possibly wouldn't be better off than if you had threw that money at your debt, dropped some more into your pension planning and spent £50 per month on insurance in the event that you got mullahed in an RTA and needed a stairlift/homehelp/medical treatment, or losing your job.
Just a few thoughts.
Ginge R said:
Rob,
Allow me to strike some balance into your share buying plans.
Investing into one company is always risky in that you have no diversification. Lets say though, the shares make 5% (plus your 20% premium), that there is no hold clause and that you eventually sell them and there is a tax liability. You possibly wouldn't be better off than if you had threw that money at your debt, dropped some more into your pension planning and spent £50 per month on insurance in the event that you got mullahed in an RTA and needed a stairlift/homehelp/medical treatment, or losing your job.
Just a few thoughts.
You raise some good points.Allow me to strike some balance into your share buying plans.
Investing into one company is always risky in that you have no diversification. Lets say though, the shares make 5% (plus your 20% premium), that there is no hold clause and that you eventually sell them and there is a tax liability. You possibly wouldn't be better off than if you had threw that money at your debt, dropped some more into your pension planning and spent £50 per month on insurance in the event that you got mullahed in an RTA and needed a stairlift/homehelp/medical treatment, or losing your job.
Just a few thoughts.
Investing in one company - the one I work for has been in business for over 70 years. You're right to point out that things could go wrong, but we're the only private medical insurer in the UK that's growing at the moment and we're backed by one of the largest financial corporations in the world. I'm confident my job is secure although I accept you can never be completely certain what the future holds. I'm definitely going to look at investing in some shares elsewhere so I can get into some monthly/yearly trading as the work scheme requires I keep them for five years.
Tax liability - hadn't thought of that. Bums.
Pension planning - I have a work pension and I'm paying into it the maximum the scheme allows. My employer are at least matching what I'm paying.
Road accidents, being struck down with illness etc - I'm one of those people who just prefers to pretend it'll never happen, although my job comes with pretty top-notch insurance.
Definitely some food for thought here
This may not apply since I am not sure why the overdraft was a more "pressing issue".
But often banks are willing to give you a fairly decent rate on a small overdraft.
So you could take one out and pay off the credit card with that.
Then focus on paying down the O-D instead of the CC as fast as possible.
(Watch out for overdraft arrangement fees though - that may cancel out any interest rate benefit.)
And as above - putting something on the CC every month and paying it off in full is a good way to build your credit rating back up - I just make sure I have the CC on a direct debit and time it to come out just after I am paid.
But often banks are willing to give you a fairly decent rate on a small overdraft.
So you could take one out and pay off the credit card with that.
Then focus on paying down the O-D instead of the CC as fast as possible.
(Watch out for overdraft arrangement fees though - that may cancel out any interest rate benefit.)
And as above - putting something on the CC every month and paying it off in full is a good way to build your credit rating back up - I just make sure I have the CC on a direct debit and time it to come out just after I am paid.
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