This Post May Contain Affiliate Links

Mistakes we made when paying off debt

Life without the credit cards, overdrafts and car finance sure feels liberating. But it wasn't always this way for Chris and I. Getting out of debit is simple on paper but there is a plethora of information out on the internet about the best way to go about it.
The simplest lesson we learnt was that getting out of debt is never easy. But that there ways to make it easier and to avoid some of the mistakes we encountered.

Focusing on only the big

When we reviewed our budget when we first started on this journey in January 2015 we were solely focused on the big expenses. We looked at what things could we cut out of our lives. For example, Chris had an annual cinema and theme park tickets that we cancelled. These were big expenses and quick and easy savings. However, once we had cut back on our big direct debits we kinda felt that our work was done.

But we were so wrong. It took months for us to appreciate how significant the little expenses were to in contributing to our ability to pay off debt. It is all about looking at the micro and macro of our budget. Both are important but in many ways the micro reflects behaviour so much more.

Being unified

Chris has no qualms in admitting he was not super keen on the whole "lets get debt free" journey at first. Why because it is all about changing habits. He admits that he was worried that life would become boring and we would never be able to have fun. We were not unified in our efforts at first and this lead to tension and disagreement about how we should budget. What changed, seeing progress and knowing that life hadn't become boring. Chris quickly became 100% behind the goal and if you asked him now about his accomplishments he is super proud (in fact he loves to encourage those around him to know it is possible to become debt free).

I believe that central to our success was us becoming unified as a family in our goal. We both worked to meet in the middle about our expectations whilst focusing on the goal in mind. Getting your family involved in the goal not only lightens the burden but allows you to feel a collective sense of achievement.

Leave room for fun

Paying off debt can be serious business, but it doesn't have to be at the expense of having fun. I am quite a serious person and so cutting out 'fun' was not to challenging at first. But after a while is causes you to resent the process. A small budget really pushed us to be inventive in our recreational time and dates. We love using the resources on the dating divas for fun, budget friendly date nights. It has also caused us to think about each other when asking for christmas gifts and for the past two years we have asked for boardgames so that we can enjoy these with friends and family as part of our recreational time. 

ISA Deadline: a last minute guide to ISAs

The tax year is almost at a close (5th April is the D-Day). If you haven't already opened a ISA now is the time to do so!! (We're serious make the most on the next month to get your tax free savings in tip-top shape).

Here's our last minute guide to all things ISA

Total allowance for adults £20,000 this can be distributed across cash, stocks and shares and innovative finance ISAs.

ISAs are tax free savings accounts, this means you pay no income or Capital Gains Tax on the money invested. Each year you have an allowance which allows a contribution of this much per year (the amount you contribute is the same, regardless of whether or not you make any withdrawals).

Cash ISAs

  • Includes Help2Buy and some lifetime ISAs
  • Money is held as cash in an account like a usual savings account
  • Can come in easy access or tied-up (fixed) accounts. 
  • Various interest rates but all are quite low at the moment. 

At this stage we would not encourage you to open a Help 2 Buy because it is based on regular monthly contributions and so you can't put in a last minute bulk of money.

Why choose a Lifetime ISA?

Lifetime ISAs are good for those who:

  • Don't necessarily want to save on a regular basis
  • Want to save more than £200 per month (or £2400 per year)
  • Willing to save £4000 or less in the ISA
  • Haven't contributed to another cash Isa this tax year
  • Are looking to save for a house (N.B they can be used for a retirement but we'll share in another post why this is a BAD idea). 
  • looking to buy a house anywhere in the UK up to £450,000
  • are a first time buyer
  • want to take advantage of some awesome government bonus
In fact we wrote a whole post about whether or not a Lifetime ISA is for you

For those looking to buy in the next 5 years or so a cash version is buy far the best option due to the fact that investment in stocks and shares should always form part of the long-term investment aspect of your portfolio. 

Currently Skipton are the only provider offering the cash version and it seems exceptionally unlikely that any of the big banks are going to open in time for the end of the tax year. It is offered with a 0.75% interest rate. Whilst considerably less than the Help-2-buy ISA is worth it due to the increased potential bonus (in our opinion). As always the Skipton ISA is covered by the FSCS scheme which means your money is protected in the case the bank goes into liquidation (this is not the case for the stocks and shares lifetime ISA and thus your capital is always at risk). 

We have tested out the Skipton account for ourselves and have been really impressed by the quality of customer service. The only downside we have found is the potential for branches to be quite sparse depending on where you live (here in Brighton our nearest branch is almost an hour away). However, you should be able most of the banking online. 

Best Cash ISA Rates
  • Best fixed ISA - Paragon 5 years 1.9%
  • Best "easy access" ISA- Nationwide 1.4% (but only allowed one withdrawal a year) 
  • Best easy access ISA- Virgin 1.16%

Junior ISA

These replace the old style child-trust funds and allow for tax free savings of up to £4128 per year per child. You might think "but my child doesn't earn enough to pay tax" and you'd probably be right but when your child turns 18 any money in the junior ISA gets transferred into an adult ISA. This means if you saved at the current allowance at the best rate available (see below) your child at age 18 could have over £100,000 in savings !!

Currently Coventry Building Society has the best rate at 3.5% interest for a cash ISA (junior ISAs can also be stocks and shares). 

Stocks and Shares/ Innovative finance ISAs
  • These ISAs have the potential for much greater returns that the current low rates available for cash ISAs.
  • However, they are also associated with much higher levels of risk.
  • Making an last-minute rushed investment decision is not a good idea and we would therefore no recommend at this stage of the tax year opening up one of these ISAs 
  • You are much better off putting the money in an easy-access cash ISA and transferring it at a later date once you are clear what your risk appetite and investment goals are. 
Our biggest advice is don't delay, all financial providers are very busy at the moment and things make take longer than usual. 

We're back !!

After an extended hiatus owing to ill-health and family commitments we are excited to announce that Saving Scotts is back and we are looking forward to sharing new and exciting content with our readers. 

Thank you for all your continuing support :) 

Creating a super savings plan

If as Dave Ramsey says "personal finance is 80% behaviour" then changing that behaviour is central to your success. Creating a super savings plan will provide you with the tools you need to achieve your financial goals. 

First of what is a savings/plan goal?
While your budget takes care of your monthly expenses a savings plan take a more long term view, whilst it is connected to how you budget it is essentially deicing how much you are going to set aside, to save for a specific purpose. 

How to create a successful savings plan?

Budget Mastery
Central to saving success is having control on your budget. If you are not already doing so, taking the time each and every month to go over the previous months spending, looking at where change can be made, and praising yourself for your successes, before moving on to making a plan for the coming month. Once you have managed to wrestle your budget under control you will be in a better position to see how much money you actually have available each and every month to contribute to your savings plan. 

You might find that you are budgeting, but yet there is not money spare to contribute to savings. There are two ways to tackle this, either by reducing expenditure or increasing your income (or a combination of both). By having a solid grasp of your budget you will be able to easily identify where you are spending your money, and in turn where you can make cutbacks. 

Earn More, Spend Less
There will be expenses, essentials which it will not be possible to cut down spending. It is worthwhile separating expenses into two categories, essential and non-essential. Then rank those non-essentials in order of importance. Know you know which of your non-essential expenses is least important to you, this is where you will start making cutbacks, progressively working up the list of importance until you are able to cut back the amount you want to contribute to your savings goal. 

The alternative is to increase you income, there are lots of ways to add additional income beyond simply picking up as second job , we have plenty of them on our site that work around busy schedules so be sure to check out all your options. 

Goal Setting 
Setting goals is very important but setting goals in the right manner is the key to achieving them. You might remember as a child SMART goals, a principle of goal setting that increases you success rate. 

This means that these goals must be:
- Specific
- Measurable
- Attainable
- Relevant
- Time 

An example could be "I am going to save £50 a month, towards my car maintenance sinking fund, for 12 months". 

Lets break down this goal
- It is specific, it is for the purpose of a sinking fund. We know where the money is going and what it will be used for. 
- It is measurable by the set amount each month, rather than "I'll just save a bit each month".
- It is attainable because it is not a huge amount to contribute each month, though of course, this should assessed in light of your budget. 
- It is relevant to the needs of car ownership.
- It is time specific, only for the duration of 12 months. 

Now you've determined your SMART savings goal, it is important to write out your plan for success. Maybe even consider filling out a chart where you colour in as you make progress such as these ones.  Share your goals with others for added accountability. 

What are your savings goals at the moment? 

Hiring a car with a debit card

Here at Saving Scotts were big advocates of living a debt free lifestyle. When we paid of the credit card for good almost two years ago, we also decided to cut up the card and enjoy life without that temptation.

Whilst using a credit card wisely, paying it off every month, is great for building a credit score for a mortgage. We knew as Chris was only just starting university at this point that would be a while away. We instead decided we would get a card after I finish my masters (and start full-time employment or a funded PhD). So until then we live debit only (or cash). 

car hire debit card

Up until a couple of months ago, we have had no issues living debit only. We have been travelling, hired cars abroad, even paid £1000s in tuition for my masters. However, hiring a car in the UK saw us run into a bit of challenge, credit card requirements, in the name of the driver. As far as we understand the desire for hire companies to have a credit (rather than debit) stems from the fact that if you cause damage or steal the car they can charge it to the credit card (also it is easier to put money on hold for the deposit). 

It took some time but we finally found some car hire companies that allow you to pay on the debit card only. Many will require a refundable deposit (similar to the holding fee on a credit card) so be prepared to put some money aside, and contact the hire company if you are not sure how much you need to put aside.

Whilst they may not be the cheapest companies out there, it is worth shopping around between those who allow debit cards to find the best option for your needs. None of them accept pre-paid debit cards or international debit cards, so you will have to look for an alternative solution if that affects you.

Allow hire on a UK debit card (in the driver's name) with a £250 deposit + the cost of the hire. This means if you pay for the cost of the hire upfront (which is always the cheapest option), you only need to set aside £250 for the deposit. See link to further info

Allow debit card only hire but it is a bit more of a tricky process.
They too require a deposit between £200 and £400 and this must be made on a card in the drivers name. 
They also require additional security checks when you pay by debit card. This is what enterprise had to say about the checks when we enquired. 

If the driver choses to use a Debit card in their name then we do perform an additional security check as we deem this payment method a less secure method than a Credit card. This check that is performed to every Debit card paying customer across the UK checks the person, their personal details against their address. It is checking if they have 3 connections to that address. By connections it checks electoral register, mortgage payments, utility bill payments & other payments in their name at that address. To qualify to rent with ourselves that renter must have at least 3 connections as described above to that address. If this is not the case and they cannot pay on a Credit card then unfortunately we are unable to rent to that individual. This is done as an insurance underwriting tool to securely protect our asset.

Easement require a return ticket and a priced deposit (may vary at location but around the £200 mark, worth checking with them before booking). They do require you to take the full-comp coverage if you are paying on debit only so you won't be able to get the cheapest prices available on their site. But they are still pretty competitive, but their customer service can be less than satisfactory. 

Have you hired a car using a debit card only? Who did you hire with? 

*Part of Financially Savvy Saturdays on brokeGIRLrich.*