To ask for a collection of knowledge about how to prepare for debt...(12 Posts)
My first AIBU!
At the moment DH and I in jobs, we can pay the bills and have a disposable income. In addition, with the exception of the mortgage, we have savings that would cover all debt. We haven’t used it yet because a) we don’t need to and b) our debt is interest free and manageable. I know how blessed we really are. We work hard yes, but we are in an exceptionally fortunate position.
I know that if, for example, one of us lost our job, we’d be able to clear most of our debt and cut all of our expenses to the bare minimum and get by.
But if we both lost our jobs we’d be in real trouble (though we both work in sectors where we can freelance so that helps)
Our mortgage is fixed for another 23 months and we currently overpay a tiny amount.
What are the steps that we (and anyone else) could be taking to prepare?
Obviously the sooner we clear our debts the better as that means our savings could be a nest egg rather than used to clear debt
Just looking for ideas.
If your debt is interest free then you're doing the right thing by keeping the money in savings where it's accumulating interest, as long as you're not dipping into it.
Honestly there's nothing anyone can do to prepare for potential future debt other than saving.
Well yes, pay off debt and start saving but I was thinking of a whole host of other things that might help. If we collected them here this could be a resource for others. So stuff like join a credit union, use the Library (this because I read an article today about universal credit in Inverness and the lady was standing in the doorway of Asda to use their free Wi-fi on her smart phone) Inverness should be big enough to have a library.
I suppose if we really got into bother we could try and rent out our home, then rent somewhere cheaper?
I would suggest if you are saving to spread savings over different systems eg savings, ISAs, premium bonds, pension, property, buying other assets, stocks and shares so that you dont have all your eggs in one basket - check out moneysavingexpert website
If you loose your job I would suggest be open to career change, moving location, getting a second job, renting out a room, down sizing
You can take out income protection insurance I believe
I would suggest continue to learn new skills and complete some training courses
I like to spend some, save some and give some to charity
I am not a big fan of save, save save, life is too short
I think at the moment you are in a fortunate situation
Inverness has 3 libraries. One in town and 2 out of town, all with computer access.
Universal credit is utterly sickening though.
Stop overpaying the mortgage and try to clear your other debt, but try to keep a nest egg that would tide you over for a few months.
Look at your 'what if scenarios' and decide what you could do and what you might insure against. For instance if you lost your jobs you could cut costs, freelance, potentially move. But if you were seriously ill or your partner died what would you do? This is where life and critical illness insurance come in.
We’re insured up to the eyeballs! In fact we joke we’re worth more to each other dead than alive. Only thing we don’t have is an income replacement plan if one of us is made redundant. They are no longer a good deal for us so won’t bother with them anymore.
I’m always thinking about what if scenarios. My biggest money saver is the local library. I love it. Used to spend a fortune on books and magazines. Now I don’t. Borrow them from the library instead. I love gadgets but save up and buy them all second hand. We run a car but I’m always thinking about how we’d survive without one. I just like having plans.
Probably need to start being serious about growing more food but we are awful at that.
I’m a thinker and a planner!
And very, very fortunate.
Money Saving Expert is an absolutely amazing resource for learning about all things money... saving, investing, paying off debt, everything.
I don't work for them, although I realise that probably sounds like a walking advertisement. I'm just someone who loves and uses their website a lot
mainly for debt.
Second vote here for "stop overpaying the mortgage". As long as you can be disciplined enough to put the money to one side instead of spending it, and it sounds like you can, overpaying your mortgage is actively unhelpful. Partly because it's easy to get a better return on your money than your mortgage costs right now, so you can make more than the extra interest you pay. But mainly for the flexibility. Although some mortgage products are exceptions to this rule, it's typically an awful lot harder to get more money from your mortgage lender than it is to give more money to them. So if you find yourself suddenly needing a bunch of cash, perhaps for a new boiler, better to have that money to hand rather than have a lower mortgage balance but a fresh loan. And if you fall on hard times, the bank is unlikely to give you credit for earlier overpayments - they'll keep on expecting you to cough up the standard payment every month, and you'll wish you had what was previously spare money still under your control.
That’s really interesting that 2 people have said stop overpaying the mortgage. We only over pay by £100 pcm and it’s been done because it was a cheaper way to bring our term down to 20 years IYSWIM? I’ll have a serious think about that. I’m absolutely determined to get the mortgage paid off and before that the term down. My Dad will never pay his off and that terrifies me.
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