Wwyd? Clear all debts or put some in savings?

[Badvoc]

My dh and I have been given £10k as a gift.
We have £7.5k of cc debt (moved into a money pit of a house!) and we the dc need winter clothes desperately. We are alo both heavily into our overdrafts.
Dh feels we should pay off the overdrafts and £4.5k off the cc (which we have just moved onto a 0% card) and put the rest into savings after buying the clothes we need.
Forums like MSE say you should pay off all debts first.
I sort of see his point. Not having much in savings was the reason we had to use a cc in the first place.
We are planning to start using you need a budget next month to help us budget better.
Could we do better? Use the money more wisely? I am not very financially savvy sadly.
Wwyd?

Interest rates are so low there is no point in paying interest on debt while squirrelling away. Pay off the highest interest rate first , usually cc.

If you think long term, paying off some of debts now will mean less monthly out goings, so you gain money

Apply for a new credit card with a 0% balance transfer rate. If you are accepted pay off both overdrafts and use the rest to reduce your credit card balance.

But the essential clothes, and then pay off the debt!
Then look at how much money was going towards servicing the debt each month, and put 75% of that amount into a savings account the day afer pay day each month. If there is anything left at the end of the month, sweep that across too - you get a savings account, debt free and a little more money to spend each month.

I would make sure you have at least £2k into savings for emergencies, otherwise you'll end up using the credit cards if you have unexpected outgoings. Use the other £8k to clear overdrafts and as much of the CC as you can, then transfer the rest to 0%.

Then once the debt it cleared set up a savings account and a monthly DD for whatever the CC/OD payments were.

Definitely keep a small amount in savings though.

Nextphase said it perfectly. Pay off all debt then you can put money into savings every month, which is a very useful habit!

I'm uncomfortable if I don't have enough in the bank to buy a replacement car should the head gasket go, or get the boiler fixed if something catastrophic happens to its inner works - about £3000.

Buy the children the essential clothes, put £3000 in the best account you can find on MSE, and pay off whatever debts have highest interest rates with what's left over.

I would pay it all off - imagine the load off your mind! Then I would set up a standing order to a savings account for the amount you are currently paying onto the cc each month.

And badvoc may I say how happy I am you have nice financial news :)

Agree with Robothamster.

Pay off all the debt first. You have to. It will be such a relief.

It's always more cost effective to clear debt - you're not making savings (mortgage excluded) if you're running debt. Especially as interest rates are crap!

Alvin hall says so and I love him!

If you've just moved the credit cards to interest free I'd pay off the overdraft, buy NECESSARY clothes & put the rest in a savings account. When the interest free period comes to an end use the money to pay off the credit card balance before you start paying interest again.

I agree with Splatt34 in theory, If you are very, very good at managing your money.... if you have debt at 0%, then in theory it's better to put the equivalent money into an interest earning account until the 0% comes to an end. But in real life, interest rtes on savings are so low, and, while you have that money witting there, it can be a temptation, so I would actually pay off all debt and then start saving.

repeat, clear the debt. Savers are dirt at the moment and will be for years. You cannot get interest rates that beat inflation. You need some savings for emergencies but debts COST so clear them.

then get down the charity shops for as much of the clothing as possible.

simple budgeting -

stop buying clothes for adults unless something wears out
don't buy magazines (trash), books (use the library) take away coffees etc
stop buying makeup
go own-brand
make sure you waste no food
shop around for all insurances every year

good luck and glad you have the money!

Essential winter clothing only (and shop around for bargains), repay debt, start saving what would have been your monthly repayments towards credit card/overdraft...

Hi everyone.
Thanks for all the advice.
Just to reiterate...the cc debt has just been shifted to a 0% card so we will pay no interest for 15 months :) I got the best deal off the MSE forum.
I will look around for a high (ha!) interest savings account and put the savings in there. I reckon 3% is about the highest ATM?
I like your idea splatt....gain a bit of interest and then pay off the whole cc at the end of the 15 months.
Then we would have savings, and money for emergencies (which has been our downfall tbh) and not have to use the cc.
Also, we could pay off a decent chunk each month rather than the minimum repayment.
Sadly we all need winter coats, and winter clothes. I am wearing clothes from 6 years ago and I have lost some weight since then! :) my sister has given me some clothes for ds2 which is great and I got quite a bit off e bay for him a few months ago.
Sorting the overdrafts out will be a big help tbh.
Thanks for replying x

Thanks big kid :)
It's been a rough few months!
Lets hope bits of the house don't start falling down again!

I would pay off all the debt and use the money you will have free from repayments to buy winter clothes. Places like the regatta outlet store and field and trek are good for affordable outdoor clothing as well as charity shops and the usual affordable high street stores.

Buy any essentials first.

Then put a small amount into savings for emergencies - say about 2k, and DON'T TOUCH IT unless it is a genuine emergency.

Then use the rest to clear debt.