What to do with extra £400 per month

[Smarshian]

We have been struggling for money a bit for the last year. I have now found a new job which will mean we are about £400 a month better off.

We can cover all our essentials with our current earnings and managed a short caravan break this year, but things like meals out etc have had to be cut and we both will need to replace our cars soon and we haven’t had anything spare to put away for that.

What would you do with the extra?

Do you have any savings? If not I'd be putting £300 pcm into Premium Bonds and using £100 pcm to spend on frivolities for the family.

Congratulations on the new job!

Save it! If you Have everything covered then you save it! It is sods law that in two months the car will break down or the boiler will break down or something equally as expensive.
Don't go creating an expense just to spend it. Take it out and put it into savings on pay day and forget about it.

We have a small amount of savings - about 2 months salary and around £1k in credit card debt (this is down from around 3.5k a year ago). No overdraft or anything.

£350 to savings - aim to build an emergency fund of at least 3 x monthly expenses including food. Use £50 for 2x takeaways a month or days out fun money.

After you have built your emergency fund, use the £350 to start saving for holidays/overpay mortgage/increase pensions.

If your credit card is charging interest then tackle that! Or at least swap it to 0%
Then save a large chunk but with Christmas coming put a few extra treats or gifts away.
After Christmas save for a rainy day

Cross posted! In that case, pay off the debt first then emergency fund.

Once the credit card debt is paid off, I would put £300 into savings and £100 to be for family treats.

I really want to not have to be sooo careful about spending over the next year. Especially as we know our expenses will significantly reduce next September (eldest starts school and youngest starts getting free hours childcare).
Just not sure what percentage to save/ spend

So 75% saving/ debt 25% spend?

Pay off the debt first, then please try and save some more. It's always a good idea to have a bit more savings tucked away (6 months worth of expenses/salary) given Covid-19, you never know what's going to happen.

Save most of it if you’ll need new cars x2. If you don’t get used to spending it, you’ll be able to save a good deposit and if you need to take out loans or finance for the cars then you’ll already be used to having that ‘payment’ going out.

Agree debt if not on 0%, save an easy access emergency fund, pensions contributions, a bit of fun stuff. Whatever you do don’t just let in evaporate on stuff and you can’t even explain where it went

Mortgage overpayment or new car. Maybe a little into a savings pot.

We already have money put away for Christmas so not too worried about that x

Lots of cross posts! Ok I think most in savings and a little in family pot.

And if your credit card is charging interest definitely pay it off.

75% to 25% sounds good.

Yes you don't have to spend it because you have it. Agree with everyone, most in savings and then a little extra for treats

Absolutely pay off the cc debt first (unless it's on 0% interest). It'll be gone in 3 months and you won't notice the payments as you're already accustomed to living on £400 less per month.

Pay debts off.

Save £3000 for emergency fund then invest a portion in long term low risk investments.

I’d Pay off the credit card first (sounds like this won’t take too long). Then put some in premium bonds each month (no interest on savings accounts at the mo so better option) and use some to do something nice each month as a family.

Are you paying interest on the credit card?
Why will you need to replace both your cars?

For those saying put money into premium bonds (mainly @ColdBlow and @Itsallinthename ) are they actually worth it long term? I thought I had heard that they weren't a great investment? I've just been sticking my monthly savings into a bog standard savings account, would premium bonds be a better option?

Definitely get rid of your debt first especially as you have a bit of savings.

Yes we are paying interest on the credit cards. I’m not even sure how much to be honest.
Just checked and savings amount to approx £7.5k - this includes Christmas fund, holiday fund, emergency fund, savings for kids when they are older etc, but if needed could all be used as emergency fund. Would you keep putting into the ‘emergency fund’ pot or put it all into ‘car pot’ (around £500 in there presently).
Husbands car is on its last legs and although mine is fine now, it’s 10 years old and by the time we’ve saved up we will need to replace as it will have probably done around 100k miles.

At the moment with low interest rates premium bonds are a good option. Obviously there’s no guarantee each month that you will get a return but there is virtually no interest on savings (even long-term bonds). Can access money at anytime with no penalty with premium bonds so if personal situation or interest rates change you can access the money quickly and easily. If interests change won’t be the best option.