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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

Unexpected money gift. Debt or savings.

28 replies

Alpacamabags · 25/12/2019 19:42

We unexpectedly received 2k. Very unusual and not in any way expected.
We have 8k debt interest free. We have no savings and usually this is the reason for being in more debt.
AIBU to save it to avoid this or should I pay some of the debt off?
Should I do a bit of both?

OP posts:
Mararunner · 25/12/2019 19:43

Bit of both. I've had a small windfall in the past, paid off debts, then had an unexpected bill causing me to go into debt again. I now keep a small sum aside for rainy days.

Junobug · 25/12/2019 19:45

I've had similar recently and put it in to savings, the reason being that my debt is interest free and I'm paying it off fine, whereas I'd never be able to save that money.

KittenVsXmastree · 25/12/2019 19:50

Are you on track to pay off the interest free debt before it will attract interest??
I'd keep it as savings, but look again at the debt when the interest free period ends. It may make sense to pay some off at that point, but id keep it as cash til then.

Original poster
Alpacamabags · 25/12/2019 19:52

No we would need to shift the debt again. A part of me wants to just clear 2k but then I feel like it won't feel like such a significant amount because its gone.
Having it saved and continuing to pay the debt makes me more comfortable but I've no idea why!

OP posts:
bridgetreilly · 25/12/2019 19:53

Keep half as an emergency fund, so that if something comes up you don't immediately add to the debt again, but start paying off the debt, and make plans to pay off the rest of it.

SometimesMaybe · 25/12/2019 19:54

Martin Lewis always says to pay the debt down but I think physiologically having savings is good - why don’t you 50/50 (and maybe get a take away ;) )

Tetran · 25/12/2019 19:55

Half and half? £1k on each?

Elieza · 25/12/2019 19:56

The amount of interest you will get on money saved in the bank will be zero but it would be good to have some cash about just in case you need it if the car needs fixed or the washing machine dies, you know those unexpected things that crop up! I’d save half for an emergency and pay off debt with the other half.

John470322 · 25/12/2019 19:57

If the debt is interest free then save most or all of the £2000

CarolinaPink · 25/12/2019 19:57

I'd put it in easily accessible savings, since your debt is interest fee and you don't have enough to wipe it out. Congrats on the windfall Thanks

ChazsBrilliantAttitude · 25/12/2019 19:59

If you have been frugal to try to start clear the debt then I would keep £50-100 fun money, then £1000 on the debt and £900 emergency fund.

A bit of guilt free spending money can make the journey less painful.

BackOnceAgainWithATinselHalo · 25/12/2019 20:00

I would clear £1500 and put £500 away as rainy day/emergency savings

Sparklfairy · 25/12/2019 20:00

Things like premium bonds are easily accessible (and you could win a million quid Grin) You could put it in savings until the interest free period is up and then see about paying it down before shifting the rest.

MyMajesty · 25/12/2019 20:03

Keep the money as savings until the end of the interest free period on the debt, then think about paying some of the debt off, before transferring it, to cut down on the balance transfer fee.

Unless you are likely to spend the savings on unnecessary things - if so, pay most of it to the debt.

stripeypillowcase · 25/12/2019 20:13

how long until interest free runs out?
if under a year put it towards the debt, it will make a massive difference once you need to pay back or refinance.

maybe take out a good sum for car/boiler repair and a sum for a nice family day out.

Original poster
Alpacamabags · 25/12/2019 20:18

Thanks everyone. I really appreciate everyone's input.

OP posts:
Waveysnail · 25/12/2019 20:38

Its interest free debt so I'd put money in highest interest savings account. Then pay off some later when u need to shift the debt

Obsidian77 · 25/12/2019 20:42

I'd clear 2k of the debt. If you habitually run up debt because you have no savings then this isn't a problem that's going away until you clear all the debt.

MamaFlintstone · 25/12/2019 20:43

I’d keep it for an emergency fund, then it’s there once the debt is gone, rather than clearing the debt and still having to build up the emergency savings.

Thelnebriati · 25/12/2019 20:46

Its interest free debt so don't waste the windfall on it, keep it as a buffer in case anything goes wrong. You don't want to have to extend your debt. Put some into premium bonds, you never know your luck.

nannynick · 25/12/2019 20:48

£1k starter emergency fund.
Rest to debt.
Then in 2020 really try to pay down all the debt.

Great time to start following the baby steps:
www.daveramsey.com/dave-ramsey-7-baby-steps

stripeypillowcase · 25/12/2019 20:50

how much do you pay your debt off each month?

in 'real value' terms you would be better off paying towards the debt that saving. it's too small an amount to attract interest.

NoSquirrels · 25/12/2019 20:51

Do you have a proper, all-items-accounted-for (even the annual expenses and the shit-hits/the-fan-boiler-car-emergency expenses)?

Until you do, don’t do anything yet!

Go to MSE, do the statement of affairs and then track your actual spending for a while. Only decide what to do when you’re SURE you know why you keep racking up debt.

NoSquirrels · 25/12/2019 20:55

If you habitually run up debt because you have no savings then this isn't a problem that's going away until you clear all the debt.

See, I would say the opposite to Obsidian. If you run up debt because you never have the cash on hand for a car repair or whatever, then if you aggressively pay down the debt and don’t build up any savings, you keep getting back in the same cycle.

Better to have a buffer alongside a rock-solid monthly/yearly budget and pay the debt steadily. Then emergencies don’t set you back, which is demoralising.

Cheeserton · 25/12/2019 20:56

I'd vote for fifty-fifty.