Overpay or save?

[voxnihili]

I've recently taken out a consolidation loan in a last ditched attempt to get myself sorted. I've done this before and failed as I always take it out over too little time to pay it off quickest, fail to leave myself enough to live so just respend on the credit cards.

I've now massively adjusted my spending habits - tracking my spending never worked but having a weekly cash budget has worked wonders.

I could just afford 50% of my salary on repayments but was worried that as soon as there was an unexpected expense I'd be back to square one to I've kept the repayment to 25%. With the remaining 25% would it be better to make overpayments to reduce the term, but reduce it to the actual payment of something came up, or save the 25% in case a change in circumstances meant I couldn't afford the monthly repayment. I won't save anything by overpaying as the interest is fixed. I've made so many bad financial decisions and I desperately want to be sensible.

It depends.

Do you currently have any savings for an emergency?

Can you trust yourself to not spend it?

No I have no savings, which is half my problem as things go wrong, I put it on my credit card and once I've put one thing on, I add extras.

I don't know if I can trust myself but I need to learn. Most of my anxiety stems from the big expenses and how I'm going to pay for them - car service, medical bills etc. Because of that I think saving would make more sense.

I've always been an overshopper thinking it would make me feel better. It didn't. Today I went into a shop and saw my favourite perfume reduced to half price. I had enough points on my loyalty card to pay for it. It felt so good to buy something guilt free, rather than the way I usually feel when I've spent money. That's what I want for my life - not an endless spiral of debt :(

Well done on reining in your spending habit.

As you're still quite new in the changed way of things, though, how would you feel if you had a little put by? Would it make you relax and go on a mini spending binge?

Car services and some other items are fairly predictable I would have thought, so I'd be tempted to put something aside for that, myself. Yes you'll have to learn a bit but, personally, I still wouldn't put too too much stress on myself while changing my ways.

Why not split it? 12.5% overpay and the same into a savings account. Better still, open several savings accounts for different things

I have a standing order to a savings account held at a different bank to my main accounts. This goes straight out on payday. I haven't set up online banking for the savings, so if I want to dip into it I have to go into the branch. This stops me mindlessly spending it (which I found I did if it was linked to my main account online!).

A credit union is also a great way to save.

If mine is anything to go by, it's piss easy to pay into it - and a bloody nightmare to withdraw! Mine needs an appointment, forms filled in and ID for every withdrawal and the branch is only open for two hours, three days a week. Makes dipping in nigh on impossible though, it's like a military operation to get your money out.