Can I share my "financial plan" with you clever money people please?...

[Becaroooo]

....and get your views on it?

I freely admit I am not the most financially astute person in the world and its been pretty horrendous since we moved in Dec and things need sorting!!!

So.

We have;
A mortgage - on a 5 yr FR
A cc - about £4k (bought a money pit house in Dec)

We own my car and and dh has a company car.

We dont have any savings (all spent on said money pit)

So far I have:
Got us a good balance transfer interest free cc (interest free for 20 months and less apr than our current one)
Want to start overpaying 10% on the mortgage (by dd) - would really like to do 20% but not sure we can.
Want to start saving each month (by dd) and paying cc off by the end of this year.
Want to start a pension for me at some point this year.

Does that sound sensible?

I would be quite happy to move house again to a smaller one - and thereby cut the mortage we owe - but dh (and the dc) really like this house - I just see the money and stress it has cost. I am not really very sentimental re; houses tbh...its just bricks and mortar to me.

If we really try this year (no holiday etc) I think we can do the overpayments, get some savings and pay off the cc.

wwyd?

Pay the credit card off before saving.

Sorry should have said savings will be to pay off cc initially IYSWIM?

Disclaimer: I'm not a financial adviser.

I understand that you want to save up - while the credit card is interest free- and use the sum to pay off the cc? I suggest that you continue saving so that you have some 'rainy day' money (they usually recommend the equivalent of three months' wages).
Only then think about overpaying the mortgage.

Yes thats right senua We can make the min payment each month for a few months as we wont be being charged interest.

I think we could pay the cc off by Oct if we did this.

Why do you not just pay it off the card? Rather than saving it up?

Disclaimer: I'm clueless with money!

You should repay your credit card and save up to 3 months incime as an emergency fund before you think
Of overpaying yr mortgage.

Because, wips, if they save the money instead of paying off the cc then they will earn -oooh, I don't know -all of 5p in interest.
But:
-it will get them into the habit of saving, and
-they will, in the mean time, have rainy day money in case there is an emergency.

I guess its because since we moved we have had to spend £4k on the hosue (new boiler, leaky roof, new appliances etc) and at least if its in the bank it means we wont be using a cc if we need to replace yet mor stuff/things go wrong IYSWIM? Then we can pay off lump sums off the cc - which we arent paying interest on anyway.

Oh dear, I am not explaining this very well am I?

According to MSE calculator by overpaying slightly over 10% we could knock 5 years off our mortgage and save £25k in interest!!!

Google 'snowball calculator' and use that to work out the different ways of paying off your debts, and how that affects the interest you pay.

Sounds good, but I think you need a budget as well - I'm a big fan of YNAB but there are other products out there that will help you keep track of costs, too. It's well worth looking at their help material and tutorials as there are lots of good ideas you can take out of it without using their application.

The other thing I'd say is that it's a bit like a diet. If you start off being mega strict and virtuous, it's much harder to stick to because every day feels like a grind. Plus if you're watching every single calorie and suddenly get invited out for dinner, there's no way to accommodate it within the diet, so you end up blowing it and then feel like you're back to square one. I'd maybe focus on short-term debt and then work up to the mortgage overpayments later in the year when you feel you have the outgoings under control.

I think you intend to put the savings money aside for the interest free period of the cc and then pay it off at the end (whilst the money is working for you earning interest) but you would probably be better off initially just paying the card off and not having good intentions that may go awry if something else comes off. Once you've put the money on the card it's much harder to get it back than if you're put it aside but can easily access it again.

I wouldn't move house to save money at this stage, the unbelievable stress - and cost - are just not worth it if you think you can get your spending under control without it. That said, if the house has consumed 4K that you don't have since December, how much of a money pit is it likely to be this year?

I can understand why you want to pay off the mortgage early but don't do it to the extent that it makes your life a misery eg going without holidays.

Have you checked that the mortgager is OK with overpayments and won't charge penalties?

I agree with senua, why cause difficulty paying 10% more mortgage payments. Dont let that be at the expense of your family life. If you could save that 10% and let it accumulate over a 12 month period, that could be a wee holiday, or a worry free Christmas surely??

Its great to have paid the mortgage off early, but when you are 50 and kids have left home and you couldnt afford family time, will it be worth it?
Could you not do this when they are older/independent?

Whatever you do, don't buy anything at all on the credit card. This is because that is exactly what the cc company want you to do.

They then apply interest to new purchases and you have to pay off the entire "interest free balance" - i.e. £4k, before they apply your repayments to the interest accruing purchase. Therefore you rack up sheds load of interest

You are probably too astute to do something this dumb, but believe it or not, I once did this (about 10 yrs ago) despite being an accountant so I really should have rad the small print. That frikkin jumper ended costing me about twice what it should have so I warn everyone now.

Anyway, on that basis, definitely save up rainy day fund so that if you do have an emergency you don't have to card it.

real As soon as it arrives it is going in a drawer safely out of the way!

I take your points re: overpayments...perhaps its something to look at once the cc is paid off? (we can pay off up to 20% p/m without penalty)

We are planning to get an annual NT pass so we can take the dc out on lots of day trips (castles, battlefields etc) should be fun!

Really want some money put aside though so if we have another problem we dont need to use the cc.

tribpot That is whats worrying me tbh...We have used all our savings and are not in debt because of this house...we will need to replace the windows at the back of the house at some point - they are the originals and the bathroom one wont close properly! Perhaps I could just get the others resealed though....back door locking mechanism is also a bit dodgy.

10% overpayment is only £80 so not much really in the great scheme of things.

Sigh..also need to spend less generally...food etc.

senua Thank you

The last 3 months have been pretty stressful tbh...we have moved and taken on a bigger house and mortgage (due to our age it was now or never) and if I am honest I am feeling regret - not at moving - I hated where we were before - but just that we didnt go for something smaller/less expensive.

Its not a mansion or anything btw!! and we have borrowed 3 x times dh's salary so pretty standard, but I would be lying if the problems we have had havent coloured my view of the house.

Well the good news is that you're planning to get things under control, Becaroooo, before everything swamps you. I honestly would try budgeting for a month just on general everyday expenses - even the act of writing them down can help clarify areas where you can cut down quite easily, and then that's all money you can put to one side or pay down the credit card.

I second the advice not to buy anything on the card. Treat it as a loan only, I have just finished paying one off at 0% and set up a monthly repayment that exactly paid it off within the interest free period. Once set up, I could effectively forget about it, which was great. Although I didn't, I could of course have paid more off at any time. I would start with that as your basic debt-reduction plan - pay down enough to get the card paid off in its interest free period before you put things aside for the repairs on the house. Then I would look to the essentials only - nice to have can wait til you're a bit more comfortable with your costs.

10% overpayment is only £80 so not much really in the great scheme of things.

It isn't - but it is if you don't have that extra 80 quid surplus in your budget. I really, really recommend looking at your spending so you don't over-commit.

I haven't read all the replies but, in your situation, I would use the period of the 0% credit card to pay the balance off in full. Put by enough 'rainy day' savings just in case there is some emergency but don't build them up excessively. The mortgage is the loan costing you the least money so overpay that one after you've dealt with the CC.

With the above plan you would eliminate high-cost debts and (hopefully) a modest amount of savings would mean you avoided adding more debts on credit cards in an emergency. Houses always find ways to cost you more than you expect, however new or old they are. If you have all your spare cash tied up in your house, you have fewer options.

Thanks cog

I've thought long and hard about this and my own mother is "enjoying her life" now the kids have left home.
Well I want to enjoy my life whilst the kids are at home personally.
I'm happy to work like a dog to clear the mortgage between the ages of 45-55 when my children are out in the big wide world and I've time to chill at the weekends after a hard weeks work.
Right here and now I'll budget and not get into debt but I'm not living like a pauper to pay off the mortgage even though I know that is the sensible thing to do but if I was sensible I'd have cleared a lot more of it before having children.

£80 per month equates to £960 PA. Thats Christmas covered, save for 2 years and you could go on holiday!
Imho its better put into something that your family will get wonderful memories from rather than into paying the mortgage early.

Try the Martin Lewis website, its brilliant.

Also, re food shopping, do you meal plan and list? If not, i cant recommend it enough, it has cut my shopping bill from £70 per week, to £45-50 per week.

Don't put any further spending on the CC.

Either pay it down during the 0% period or put what money use would have used to reduce it in a savings account and then use that money to pay off what you can on the credit card nearer the end of the 0% period.

Personally, I'd pay off the CC now. Putting the money away in savings account to use later is too much of a temptation to spend the savings.

Don't pay doown the mortgage in preference to paying down the CC. Mortgages are cheap borrowing compared to CCs.

Have spoken to dh and we have agreed to pay off the cc as priority. We have til Dec next year interest free so at least its not costing us whilst we are paying it off IYSWIM?

Then my we will repay my parents (in fact we may set up a dd for this and get it done by the end of this year).

Then look at overpaying on the mortgage.

Thanks for all the advice.

Good news, Becaroooo. Remember, though, thinking it's not costing anything whilst the debt is on the 0% card is exactly what the cc company want you to think (they don't offer the product out of charity!) - they want you to put purchases on the card, which may have a very high APR, and they want you to carry the debt until the end of the 0% term thinking you'll get round to paying it off next month or the month after.

yes...they are very sneaky arent they!?

Cards arrived today actually - I think we got a good deal (virgin money) only a 1.99% balance transfer fee and as I said 20 months interest free BUT only noticed today that its ALSO got 6 months interest free on new purchases As I said, very sneaky.

Luckily, we are going to activate them and then put them in a drawer and forget about them!