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?

I would have a few saving pots. One long term (if you lost your job, or towards next house) one medium (so for next years holidays) and one for emergencies. I’d pay off debts and then save at least 300 initially then see from there (more going into medium and long term). Then with an extra 100 a month I would have more treats (meal or coffee out) and buy myself new clothes or make up more often and not feel guilty about it.

For the last 10 years we have saved 50% of any increase in our earnings/cuts in expenditure - either small or big. From saving £10 a month we have gone to saving £2000 per mpnth

Save it!

It’s utter madness to pay interest on a credit card while you have 7.5k in savings. That’s money 101. Pay off your credit card!

don’t get why people spend say £10k in a used car any more when for £300pmonth you can get a really nice car

Because for £8k I can buy a car that will more than suit my needs and last 10 years. £30k worth of leasing.

£300 pcm is a lot to spend on a car, IMO. And this family need 2.

I bought a 2.5 year old car for £6000 around 5 years ago. It's a small 5 door. It has passed all MOTs easily and maintenance issues have been minor e.g. new break pads, wheel balancing, new tyres. Likely I have spent around £250 per year on maintenance including a full service. I will keep it for another year at which point it will have cost me around £100 per month over the 6 years and it will have a resale value of about £2k. If I keep it much longer I think I will be into more maintenance cost and hassle now as it gets older. I haven't had the joy of a 'new' car and changing it every three years but it does stack up better financially in my opinion.

Leasing is great where you don't have the cash upfront or you like a fancy/new car - financially it can work out better value for more expensive and newer cars.

Paying interest is a waste of money. You won't be earning interest in this climate so pay card immediately out of funds you have. Then as previous people said do 75 savings and spend 25. You can rebuild the emergency fund fast that way and have something as a treat. Interest debt when yiu have cash makes no sense if you have a secure job. Not to mention its likely you coukd switch it to jnterest free.....although the admin when you have the cash isn't worth it

Clear your debts. Perhaps allow yourself £50 for treats and save the rest. Definitely don't let it burn a hole in your pocket and give you a sense it should be spent on something.

Re cars, I've heard people with PCP or lease plans or whatever talk about their car being 'free' after they have paid their loan off, and that they will enjoy 6 months of free before starting a new plan. It's a mindset to think you always have to be paying a monthly car payment in the same way you'd expect to pay a mortgage monthly for years and years and years. Or I've heard people say their sofa is paid off in 2 months so then they can have something else with that £100 per month and start a new payment plan....again as if that money must always be dedicated to repayments. Why not just save it and not spend it.

When you get a boost like this;
A. If in debt, pay down debt
B. if not in debt but lacking savings and security, build some up.
C. IF you've got savings and security, build up some more and consider some lifestyle changes such as a holiday, DIY , new car etc.

I'd always say to only go for C once A and B are achieved.

If you feel like you need a treat after a long period of being very hard up, have a treat or two, but it doesn't have to be a monthly thing and could just be once or twice.

Why on earth are you paying interest on credit card debt and sitting on £7.5k of savings?Pay off the credit card in full now.

yup - what they said.