To have savings when i have debt?

[SummerSix]

Just that really...

I don't have much savings as i only started saving a couple of months ago after paying a couple 'bigger' debts off and already had to dip into it but I wish to continue saving a little each month.

Atm I have around 400 in savings so not much at all but its a little buffer should I need it.

I have one debt really except my car with only a few months left to pay on it, as I consolidated everything else onto my credit card with low APR (which is less than half of the interest rate if i hadn't have consolidated).

So I have around 2.5k in debt.

AIBU to keep savings or should I transfer savings into paying off credit card and if needed use the credit card as in an emergency as my buffer?

Keep the buffer. It’s an emergency fund, you may need it.

Financial advisers say pay off debts and then save. But if you are on a low income I know having a bit 'in case' is worth it's weight in gold. Do you have enough income at the moment to save,say £30 a month, and over pay the consolidated CC by another £30? That's how I would do it. Getting rid of the CC debt is important. For people on low income/ bank jobs it's not always possible.

Yes, to your last post! VG idea

I think its great you're questionning it, always good to look after your finances. I get what you're saying in theory, on paper if you have debt, you don't technically don't have savings as it cancels it out, so see the savings just as a bit of cash flow for hard times, but an idea could be that you work out how much of a buffer you need (say a few months salary) then anything over that u save put straight on card to get rid of it, it'll make you feel fab!
Also have a look at interest free credit cards etc if you havent already, swap the balance on it so u dont pay interest
Good luck x

All those saying pay off the debt first -yes if you have a considerable chunk ie 1-2K or can pay off the whole debt.

I agree with Dave Ramsay,build a small reserve of emergency cash to stop the cycle of borrowing on credit when something crops up .

Absolutely agree re your last post.

It’s sensible to keep chipping away at the debt. If it’s on a cc can you move it to a 0% card?

Also are you doing the standing order trick to pay it off? (Look at the last minimum payment you made by direct debit and set up a standing order for that amount plus a little more (could be £1 more or £5more a month). Then cancel the direct debit. This will chip away at the debt faster).

Oh and im not planning on saving 5k and pushing nothing into my debt. Thinking about keeping 1k savings and anything over that goes into paying off debt?

This is a bad idea. If you want to know how much you have saved take the amount in your savings account and subtract your debt. Having one account 1k up and 2.5k of debt doesn't mean you actually have savings it means you have -1.5k debt but you're paying almost twice the interest on it than you should be.

I would keep that £400 savings, but any future savings should go towards paying off your debt. I'm really good with finances. I pay off my credit card bill in full each month. The only debt I have is my mortgage. Good luck.

Can you not transfer it on to another CC with interest free on transfers for so many months? That way you still pay it off but aren’t incurring fees on it? Not sure if this is possible for you? If you go on money saving expert you can put your details in and it will give you your best options.

You should keep saving so you have a savings buffer to cope with emergencies. Get to a goal of £1000 then start overpaying your debts. Saving first gets you into really good money management habits.

I agree that if by keeping something in reserve it means in the case of a storm you won't have to rely on methods that increase your debt then you need to do that. After you've got the amount you'd need to ride the storm without adding to debt then you can focus all remaining efforts on clearing the debt.

Another Dave Ramsey fan here. 1k in savings is his first baby step and then you attack your debt.

The problem is if you have no savings and an emergency happens (car needs repairs, fence blows down, boiler breaks), you’ll shove it on credit card. You need to break cycle of borrowing.

in the case of a storm you won't have to rely on methods that increase your debt then you need to do that.
This is very misguided. What you are doing by holding back money from repaying your debt is behaving like the “storm” has already happened and paying for it now.

It’s completely normal to keep savings when you have debt as an emergency fund is important. We are the same. We could pay our debt off if we wanted to but it would be too risky not to have a buffer if something happened.

Just make sure you get a 0% interest credit card offer so you’re not paying unnecessary interest.

How important savings are depends on your other circumstances.

Do you own or rent? If the boiler goes, who pays for it to be fixed? If your car is stolen/ breaks down beyond repair, can you get to work by public transport? If not you may want enough cash to buy a runaround to get to work, as without work your other debts cannot be paid.

What are your debts on? High interest cc? Can you change that?

I had a car loan. Very affordable paying it down etc. It had an early repayment charge, so instead of paying it off I built an emergency buffer - new boiler price etc.

Previously I had a moderate credit card debt due to poor life decisions/priorities. I put it on a 0%. Paid that down and built a small emergency buffer to stop me ever feeling the need to use credit cards like that again.

I'm now debt free (including student loan), except for a mortgage taken out last month. I feel a lot more secure in a house I own again (I've been renting for a couple of years) even though the bank owns most of it. And the boiler/pipework is my responsibility again

When we were on the bones of our arse vis a vis our overdraft..and frequently hitting our £15 k overdraft.

We saved £250 a month into my FD account. ( my account was as clean as a whistle) we used that to keep cars taxed and on the roads, ditto household insurance.

It worked.

Slightly off topic but I've noticed something that really annoys me. Has anyone else noticed that jobs with more women tend to ask you to run your own car with a pittance towards petrol and upkeep, whereas jobs where more men are involved seem to require a company car? Of all the cars in our communal carpark, the 2 nicest are work cars for 2 men and 3 women are carers who have to use their own cars for work. It means that people who can least afford to run a car and watch it depreciate are the ones who have to have them.

I think keeping an emergency pot is a good idea and £1000 should be plenty for most things.

If you have no emergency fund you have to use a credit card in an emergency and that spending could well be at 18% interest. Although 0% on spending credit cards exist of course I would avoid them if possible as it is too tempting to spend on them (made that mistake!) This is why the banks offer them because they know people are likely to run up debt on them which after the promotional period becomes interest bearing. I think you would watch your budget more closely if you had to use your emergency fund.

If you find that for you having “savings” means you relax the budget and dip into the emergency fund for a weekend away, eating out etc then perhaps this method won’t be the best one for you. In this case you would be better to pay everything you can off the card leaving you only what you need for the month and then if you do run out of money pop a little petrol or food on the card.

Good luck

I am the same, I have 2.5k on a 30 month interest free card so pay £100 a month but save double that. Try and move to an interest free so your debt isn't costing you, mine is a Sainsbury's card

You sound very sensible- and your plan is a great idea. Good luck!

Keep the buffer. Move the debt to an interest free card and aim to pay it off over the term of the interest free

I have about 55k debt and about £5000 savings which I’m building up
We pay a DMP but I want some savings just in case

I agree about keeping an emergency pot just in case. Once you’ve reached a level you are confortable with (I would actually have more than £1000) then I would repay more on the debt.
I would do the same with a mortgage btw. It’s nice to be able to repay debts, yes it’s “cheaper” as interest rates on savings are so low but there are times when you really need some cash and having savings is a god send.
Worth remembering too that yes you can put stuff in a CC but in 1 or 5 years time you might well not have a CC with a really low rate and will end up pay over the odds again (to repair the boiler/the car etc...). That’s the best way to create a spiral of debts again. Better imo to have an emergency fund to cover that sort if eventuality. And THEN repay your debts ASAP.

FWIW I also like having some savings, built it up and then move it as a lump to repay our mortgage p. I get much more satisfaction doing that that just increasing payments. Which then makes me more careful about increasing said savings....

It depends. My only debt is a few hundred on a 0% interest credit card. I have an ISA which gives me 2.56% interest, as well as some premium bonds and a little in a stocks and shares ISA.

I could completely pay off the card and still have savings left over, however since the debt isn't costing me anything and I can make returns on my savings, it's more sensible to pay if off gradually.

If your debt is attracting interest though, you should consider getting it paid down ASAP.

Keep the savings. It's good for your mental health and positivity to watch savings grow and it will make you feel positive about money which in turn will help you to pay off your debts.