# Early 20s; 30k on deposit



## François (1 Sep 2008)

Hi eveyone

I am looking for some advice on my current financial situation.

I am in my early twenties, still living at home but I hope to move out within the next 18 months. I presently take home €650 after taxes each week. I don't have a college qualification and I don't know how secure my job is in todays climate. If I were to lose my job I think I would be on €500 after tax elsewhere.


*Monthly expenses:*
€300 rent
€80 contract phone
€230 on petrol - approx
€170 - fixed rate personal loan with 15 months remaining
€150 - socialising
€5-8 daily on sandwiches from Spar on work days, which is probably €150 a month.
€150 on bits and pieces

I have a credit card limit of €5250 and I currently owe €3300. At the moment, I have 4 months 0% interest on payments remaining and I am chipping away at it each week. I normally would owe no more than €500 but I had to pay for car insurance, went on holiday and I had a couple of moments of weakness recently.


*Savings:*
I have €35,000 in savings, of which €30,000 is tied up in a high rate deposit account until February 2009. So I can realistically only access €5000 at the moment.

I'm adding about €200 each week into my Northern Rock savings account from my wages.

I am doing a course at night, so I will need to come up with €2000 for registration fees next week. I don't know whether to pay with my credit card and chip away at the balance weekly as I have 0% interest for the next 4 months, or should I pay outright by dabbling into my savings, remember I can only access €5000 at the present time. If I pay with my credit card I will have maxed out my card and owe the bank €5250 but as I mentioned it is 0% for the next four months.

I want to buy a car next month for €10,000. I will need to borrow some money to fund it and I was looking towards Tesco 6.9% fixed rate personal loan over three years. I was thinking along the lines of using €3000 of my savings and borrowing the remaining €7000.

I would be grateful for some solid advice on my financial situation.

_François_


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## ClubMan (1 Sep 2008)

*Re: Advise me on my financial situation*



François said:


> I have a credit card limit of €5250 and I currently owe €3300. At the moment, I have 4 months 0% interest on payments remaining and I am chipping away at it each week. I normally would owe no more than €500 but I had to pay for car insurance, went on holiday and I had a couple of momemts of weakness recently.
> 
> 
> *Savings:*
> I have €35,000 in savings, of which €30,000 is tied up in a high rate deposit account until February 2009. So I can realistically only access €5000 at the moment.


If your _CC _debt is 0% right now then leave it but you should clear it in full immediately the 0% period ends. You have enough savings to do this.


> I am doing a course at night, so I will need to come up with €2000 for registration fees next week. I don't know whether to pay with my credit card and chip away at the balance weekly as I have 0% interest for the next 4 months, or should I pay outright by dabbling into my savings, remember I can only access €5000 at the present time.


What sort of account and rate is it that is locking the money away until February 2009? If there are any penalties for accessing the money early then these may be less than the cost of not clearing your _CC _bill once the 0% period is up. In which case it might be an option to use some of the €5K on demand for college fees etc. and some of your €30K to help clear the _CC _bill.


> If I pay with my credit card I will have maxed out my card and owe the bank €5250 but as I mentioned it is 0% for the next four months.


Are you sure that 0% applies to new purchases too?


> I want to buy a car next month for €10,000. I will need to borrow some money to fund it and I was looking towards Tesco 6.9% fixed rate personal loan over three years. I was thinking along the lines of using €3000 of my savings and borrowing the remaining €7000.


Again it makes little sense to borrow when you have savings that could cover such expenditure.

You need to manage your savings better (e.g. not lock them away when you really need to access them in the short term).


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## François (1 Sep 2008)

*Re: Advise me on my financial situation*

Thanks Clubman.

The €30,000 is unfortunately locked in a Rabodirect term account, I am almost certain that I'll lose the high rate if I withdraw it before February. I think the rate is 4.8%.
For some reason, I don't want to touch the €30,000 I kind of view that as the foundations of my future, be it a deposit for a house or whatever. It was hard to amass and I feel if I touch it I will squander it over time. Stupid reasoning, I know.


I am pretty sure the 0% applies to new purchases as well, as I do not think I have been charged interest on new purchases on my last two bills. It is with Halifax.

I don't think Tesco charge a penalty for early payment so I could always clear the loan in the near future.

As I typed out my monthly expenses I realised I am wasting quite a bit of money unneccasarily.


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## ClubMan (1 Sep 2008)

*Re: Advise me on my financial situation*



François said:


> The €30,000 is unfortunately locked in a Rabodirect term account, I am almost certain that I'll lose the high rate if I withdraw it before February. I think the rate is 4.8%.


Losing 4.8% (on the portion accessed early?) may be less costly that paying probably double digit rates on the CC bill when the 0% period ends. Note also that there are many demand deposit accounts paying more than 4.8% these days and several regular savers paying almost twice that. 


> For some reason, I don't want to touch the €30,000 I kind of view that as the foundations of my future, be it a deposit for a house or whatever. It was hard to amass and I feel if I touch it I will squander it over time. Stupid reasoning, I know.


You said it. It makes little sense to be saving while needing to borrow on an unsecured and high cost basis for other purposes.

Have you read the www.itsyourmoney.ie guides to managing your finances?


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## François (1 Sep 2008)

*Re: Advise me on my financial situation*

Thanks again for the advice.

I logged into my Rabo account, the interest rate is actually 5.25% and it matures in December not February. I think I'll get approximately €1200 in interest after deductions in January between all my accounts.


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## ClubMan (2 Sep 2008)

*Re: Advise me on my financial situation*

Can you access any of the €30K without causing closure of the entire account and loss of interest? You need to weigh up the potential €1.2K in interest against the potential costs of borrowing in the meantime. And as I said above once the fixed deposit period is over you need to look at not locking money away when you could use it for other purposes. And rationalise your thought processes that make you believe that having savings while borrowing makes sense.


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## Howitzer (2 Sep 2008)

*Re: Advise me on my financial situation*

Next month is October, your account matures in December - why not just wait till December to make the purchase? December is also the best month (traditionally) for buying big ticket items such as cars.

Alternatively take out the loan for just 2 months, paying it off in full in December. At an effective cost of 1.15% (E80.5 of E7000) this isn't extortionate. You'd need to take out a variable rate loan and verify that it can be paid off early.

I still say you'd make an even bigger saving on the car price itself by waiting till December though.


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## Raskolnikov (2 Sep 2008)

*Re: Advise me on my financial situation*



François said:


> *Monthly expenses:*
> €300 rent
> €80 contract phone
> €230 on petrol - approx
> ...


E80pm for a phone contract sounds like robbery! I'm constantly using talking to people but I only spent ~E20pm. E10pm usually covers texts and emergency phone calls and the other E10pm is spent on Skype credit.

E230pm on petrol as well sounds like a horrendous amount. Are you commuting a sizable distance? Could you maybe consider public transport?

E150 a month on lunch as well is ludicrous. Rob a bit of ham, bread and packet of soup from home!

Also, you need to start keeping a spending diary. It's only then you will see how much you spend on crap you don't need. You can even manage it online. www.spendingdiary.com

On your wage, you could probably clear that credit card debt within two months if you tighten the belt.


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## ClubMan (2 Sep 2008)

*Re: Advise me on my financial situation*



Raskolnikov said:


> Also, you need to start keeping a spending diary. It's only then you will see how much you spend on crap you don't need. You can even manage it online. www.spendingdiary.com


Or just request and get receipts for absolutely every purchase and then reconcile them each day/week or whatever. Or there are (free or commercial) expenditure tracker applications for many (e.g. _Java_) phones that might be handy. Even my really basic _Nokia _can handle one.


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## Mumha (4 Sep 2008)

The one thing that hit me is, do you REALLY need to spend €10,000 on a car ? Perhaps you need it for a lot of travelling but for example, a friend of mine got a 2003 Volvo V40 for €6,000 cash from a garage. It is in superb condition. Actually I'm getting his 1997 S40 for €200 (it has just passed its NCT). Is 10K a notional figure or have you researched what you want ?


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## phileasfogg (5 Sep 2008)

I would probably use the 5000 you have access to pay off the credit card and your college fees.  And then try and wait to get your car when you have access to your savings.  since you will no longer be paying off your credit card and won't have a car loan, you should be able to start putting more into your savings and getting back up to 30,000 quickly again.    

If you have to get the car next month, a short term loan until your saving mature sounds like a very good suggestion.


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