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clear all debts then save or a bit of both at the same time? 24-Mar-08 06:47 PM

which is the best option?

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(3 Ratings)

31/Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 10:51 AM

Reduce your outgoings by clearing debt first.

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(2 Ratings)

Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 11:38 AM

It's best to clear your debts first as any interest you earn on your investments will be offset against the interest you pay on your debts. Short term pain, long term gain!

I think the one exception is student loans - as the interest is roughly the rate of inflation you're not losing anything by pay that off slowly, and the money that would have gone to pay that off could have appreciated by a bigger percentage if invested.

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(4 Ratings)

Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 12:09 PM

What if you have mortgage? Would be sensible to invest some and make downpayents too or just down payments?

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Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 12:11 PM

Because of the power of compounding, I would suggest investing and paying of debt.

Especially if you invest via a pension - tax relief etc.

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(3 Ratings)

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 12:15 PM

Compounding works on both sides of the equation therefore pay off the debt before you invest. If you invest and win great, if you do not win you lose your debt will still be there but will have increased.

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(3 Ratings)

Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 12:12 PM

I don't really understand your question to be honest.

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(3 Ratings)

Male

Re: clear all debts then save or a bit of both at the same time? 16-May-08 09:13 AM

Could you pleases point me in the direction fo a cash savings product that would give me an after tax interst rate better than inflation.( ie real inflation and not cpi)

Sentiment : Sell

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53/Male
bolton

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 12:11 PM

Which has the higher interest rate - your debt or your savings? (and when you make the comparison, remember that you pay tax on interest from savings)

Debts usually have higher interest rates than savings accounts, especially once tax is taken into account, so it is usually better to pay off debt before saving.

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30/Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 02:09 PM

Suppose you can save 15k a year. Should oen pay all 15k towards the mortgage? Or say 10k towards mortgage and 5k on isa funds /higher return?

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(1 Rating)

Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 04:46 PM

It is estimated that for every £10k of morgage debt over the average 25year deal you will run up another £8k of interest. Personally I would pay off all non-morgage debt (excluding student loans) first then save at least £3k for a cash isa (£3600 from april 08) then put the rest or at least 80% of whats left towards overpaying the morgage. Just imagine what you could do with the money every month if you had no morgage? Although before you commence on this road look at the finer details of your morgage deal to make sure you dont get stung by paying in too much during a set period, most allow only 10% overpayment per annum. Hope this helps.

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(6 Ratings)

33
NA, NA Unit...

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 05:33 PM

Unless you've been "prudent" in which all your savings could have been built up in cash TAX FREE isa's over the years. After all it's quite a lot for most people to save each year (up to now been £3000 pa, and £3600 from April)
Over 10 yrs easily over £30,000 plus interest taxfree, which at the moment can be at least 6.15%.pa. with rates fixed for 1- 2yrs if wanted.

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Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 02:23 PM

I would always keep some cash savings for a rainy day.

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(3 Ratings)

Male
Gloucester ...

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 07:15 PM

If you have more than 10K savings, it might be worthwhile to consider an offset mortgage. It allows you access to the money in case of a rainy day. At the same time, you reduce the total amount of interest you have to pay for your mortgage. Example: Mortgage = £100,000, Savings = £10,000. Interest rate on mortgage = 6% and on savings account = 3.5%. The savings of 10K will be offset against the mortgage of 100K, leaving a balance of 90K. Interest will be £450 per month. While no interest will be paid on the £10,000 savings, you will save £50 each month on the mortgage. After basic rate tax, had you held the 10K in a savings account, you would earn £23.33 net. By offsetting, you have saved £27 per month. Remember, you still have access to the 10K should you ever need it urgently. But short term debt, excluding student loans, should be cleared first.

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(1 Rating)

Male

Re: clear all debts then save or a bit of both at the same time? 25-Mar-08 09:24 PM

Generally pay off the most expensive loans first. That is, those with the highest APR. Store cards are often the worst. However, be careful that you are not paying over the odds to pay off a loan early. Most people are aware of early redemption penalties on mortgages. However, many car loans are hire purchase agreements. Paying these off early usually incurs a penalty charge of approx 2 months interest. It is generally not worth paying off these loans if there is less than a year to run.

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Male
Gloucester ...

Re: clear all debts then save or a bit of both at the same time? 26-Mar-08 07:17 AM

With inflation rising the temptation must be to borrow more because the value of your liabilities falls when prices rise. But minimise interest costs use an interest offset mortgage and invest only in commodities with strong liquidity. The risks to housing and general corporate profits from inflation are quite clear and a defensive strategy over the long term will pay dividends

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49/Male
NA

Re: clear all debts then save or a bit of both at the same time? 26-Mar-08 11:48 AM

I'd say the complete opposite; when inflation rises so do interest rates, so you don't want to borrow more, you want to save more!

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(2 Ratings)

Male

Re: clear all debts then save or a bit of both at the same time? 26-Mar-08 12:34 PM

Martin

I'd agree up to a point. However, when inflation gets really bad the interest rates do not keep up with the inflation rate. Savings then lose value in real terms. e.g. Germany in the 1930s or Yugoslavia in the 1980s. Thankfully we are a long way off that situation.

Mark

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(1 Rating)

Male
Gloucester ...

Re: clear all debts then save or a bit of both at the same time? 26-Mar-08 02:24 PM

I see your point, but when will a bank ever lend money at an interest rate which is less than the rate of inflation?

Having said that, it wouldn't suprise me with all the recent banking shenanigans.

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Male

Best fund for young, Adventurous investor? 26-Mar-08 02:47 PM

Could someone suggests a good fund for a young and Adventurous investor looking to invest about 3-4k for long term?

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Male

Re: Best fund for young, Adventurous investor? 26-Mar-08 06:27 PM

"Could someone suggests a good fund for a young and Adventurous investor looking to invest about 3-4k for long term? "

By "adventurous", do you mean you are willing to lose some of your money?

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46/Male

Re: Best fund for young, Adventurous investor? 27-Mar-08 04:39 PM

Nop - Adventurous meaning, I am willing to take high risks for potential high return.

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(1 Rating)

Male

Re: Best fund for young, Adventurous investor? 3-Apr-08 11:38 PM

Jigz, in investment terms, high risk you accept losing your initial outlay. Very high risk means you could lose more than your initial outlay.

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Male

Re: clear all debts then save or a bit of both at the same time? 26-Mar-08 03:02 PM

The Fed currently lends at 2.25%, US CPI is between 3 and 4%.

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38/Male

Re: clear all debts then save or a bit of both at the same time? 26-Mar-08 09:28 PM

Yes,

What a rubbish deal especially since US inflation is probably double the official CPI figures - why is anybody investing in US Treasuries? You might as well throw your money out of the window!

Maybe we should all open a bank account in Iceland instead at 15% interest rates :-).

Seriously Icelandic treasuries could be a good investment as long as Iceland can avoid credit freeze issues and foreign investors don't withdraw from the carry trade.

Anybody interested in investing in Icelandic bonds can find information at www.bonds.is

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(1 Rating)

29/Male

Re: clear all debts then save or a bit of both at the same time? 26-Mar-08 11:59 PM

Be wary; if a bank in Iceland went to the wall in the same way as "The Rock" did, I doubt it would be bailed out - Iceland isn't a big country!

Of course, they could probably stop a run on the bank by simply shutting down their website!

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(1 Rating)

Male

Re: clear all debts then save or a bit of both at the same time? 27-Mar-08 06:01 PM

As of 01/09/2007, the APR on student loans is now 4.8%. So maybe the earlier posters who said don't worry about paying off your student loan so soon should rethink their position.

That's a heck of a lot of interest being added onto my student loan each year people.

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28/Male

Re: clear all debts then save or a bit of both at the same time? 3-Apr-08 11:27 PM

As for the investment in Iceland, don't just look at the nominal 15% figure. There is some currency risk associated with an offshore investment. For this one in particular, the exchange rate was 1 pound to 130.84 kronurs last year on 3 April 2007. On 3 April 2008, 1 pound was equal to 149.29. So if u put £1,000 in that investment on 3 April last year, it would be worth about £1,007 this year. What about the dealing fees & commissions involved? Your money would be worth less than what you actually put in. Based on this simple calculation, your money would have been safer invested in UK Gilts.

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(No ratings)

Male

Re: clear all debts then save or a bit of both at the same time? 16-May-08 08:14 PM

If they are fixed rate loans, you can save as you repay. If they are credit cards, then pay them off ASAP as they all have a high interest rate.

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Re: clear all debts then save or a bit of both at the same time? 30-Sep-08 03:45 PM

Depends on the net interest rate you can achieve for your savings versus the interest you pay on your debt. That said, you should always keep some easily accessible spare cash around for emergencies (redundancy etc).

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39/Male
London

Re: clear all debts then save or a bit of both at the same time? 5-Oct-08 08:26 PM

It depends on the interest rates on your savings/debt. If the interest rate on a saving account is higher than the interest on your mortgage by more than the tax charged on your savings, then you are making better use of your money by doing both. If you have high interest on your debt however, it would be more economical in the long run to pay off the debts first.

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Re: clear all debts then save or a bit of both at the same time? 30-Nov-08 07:57 PM

depends on your personal cir$%^&tances.

depends on interest rates for borrowing and how much they are likely to increase in the future. How much individual earns and how much debt he has. present and future commitments.

depends on how important it is for the individual to keep liquid cash for a rainy day. events may occur during the next six months for which it may be important to have liquid cash available.

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Re: clear all debts then save or a bit of both at the same time? 15-Sep-09 05:16 PM

if you can borrow cheaply and re invest it on the stockmarket.choosing companies paying a higher dividend than the interest your paying back its easy to make money,compounded.plus the shares may go up.they could go down but if you hold your nerve in time they should go up.or you could buy more as they drop in price.its ok to borrow to buy assets,dont borrow to spend.

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Male

Re: clear all debts then save or a bit of both at the same time? 17-Sep-09 01:47 PM

Its OK to borrow to buy certain assets. Its best though to be a wholly Zero Debtor - have every outgoing on a Direct Debit or Standing Order (they just go around) - have far more income coming in that you can spend (or need) - any extra just goes "somewhere" - and watch others getting their knickers in a twist IN a recession over debt. Its very relaxing too - I find it so ....

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62/Male

Re: clear all debts then save or a bit of both at the same time? 14-Oct-09 09:17 PM

I suggest you pay into whichever has the highest interest.

E.g. If you happen to be the lucky one who signed up your loan years ago and tracking the BoE rate with really low APR, it is sensible to put your money in saving which earn you 5% - 6%. I would go the extra mile, if the mortgage/loan provider allows you to raise more money at the same low interest, I would even remortgage/reloan and dump my money in saving (provided they allow you to reloan at the same low rate).

If you are not the so lucky one, and sign up a loan which has interest higher than saving rate. You will be better off dump every penny you have got to clear off the loan (watch out for early repayment penalty).

Some people borrow to invest in stocks/shares. They are confident that their return from shares can beat the loan interest rate. I have no objection to those who are really confident in what they are doing. But I tend to see more people sank into deeper debt because they cannot control their emotion in the stock market.

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99/Male
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