Big pay rise - debts to pay

[Changingplace]

I’ve landed myself a new job with a hefty payrise, but I’ve also got a load of credit card debt and a loan.

So, much as I’m really pleased, I want to channel paying off debt first before saving and wanted to check what other people would prioritise.

New job will mean an extra £1k a month disposable income, I’m planning on ploughing that into the credit card debt and continuing to live on what I’m used to, until that’s all clear.

Then I have a car loan, I’d get penalised if I pay that off early, but I’m thinking after I’ve cleared the credit cards, I start putting £1k a month into savings that earn interest and make the loan payment from that pot.

I’ll also be increasing my pension contributions, I’ve taken that into account before figuring out what I’ll have left.

I have a mortgage and can make overpayments on that but feel like clearing the debt is my priority first.

Is this the best plan? If not please tell me what you’d do, I’ve frankly been awful with money in the past and need to get this right now I have the opportunity to.

Paying off the credit cards with the highest interest rates first is the best plan to start with, yes.

Congratulations. Your plan looks good.

https://www.stepchange.org/ are a nonprofit organisation that can help you prioritise clearing debts and making a budget plan.

Lots of helpful advice https://forums.moneysavingexpert.com/categories/debt-free-wannabe

Consider a CC balance transfer with a low or 0% interest rate if possible. Then tackle the debts starting with the highest % repayment.

Congratulations on the new job 🥳

Well done on the new job and on prioritising you finances.

One priority is to build a comfortable pot of cash, you need at least 3 months salary to cover unexpected events to make sure you don't take on more debt in the future.

So pay off the cc, the build a large pot of cash, then pay into the pension.

Remember anything you put into the pension you can't get back until you're 57. On the other hand you should put in as much as you can afford to get your employer's contribution maxed out. You'll also get your tax paid back into the pension

You can also hold long term savings in a stocks and shares ISA. You don't get yourtax back on the money you paid in, but there's no tax on the capital growth or dividend income from it. This option is good of you want an accessible nest egg before age 57, and you have enough self control not to blow it on stupid stuff.

Can you move the credit cards to 0% deals?

Google 'financial flow chart', this is good for knowing what to do in what order.

They already are on 0% deals and have been for a while but this will mean I can pay it all off rather than the small amounts I’ve been able to chip away at until now.

I would continue to pay off minimum payments and put all excess funds into an interest bearing account and pay off the credit card balances when the 0% ends and the loan when that is due. Use that same account as an emergency fund, once all that is paid off and you have some liquidity, then build up your pension.

This is a very good idea, thank you - yes this is exactly the kind of thing I’ve not considered.

I can make a note of when each 0% ends and have more in interest to pay them off in a bigger chuck.