Is a pension really worth it while trying to clear £15k credit card debt?

[lovely100]

@asuheel24 As well as the tax implications, I would also quite bluntly tell you that you probably haven't changed (yet). It's good that you've chosen to make the first steps but while I know nothing about you, your spending probably comes down to your personality making you susceptible to debt and it can take anywhere between 3-10 years to effectively put coping methods in place so that you never regress again.

I applaud your efforts but you must recognize that right now you are at your most vulnerable and taking out your pension may just result in you still being in 15k debt but now with no pension as well. You will regress and slide down multiple times and that's OK because we all do in our areas of weakness but you don't want to put yourself in a worse place by tempting yourself with your pension too.

 

[asuheel24]

@lovely100 Thank you for your honesty, I definitely don’t think you’re wrong!

 

[irishfarmer]

@asuheel24 As someone who is still having to work at 68years old I can tell you with all my heart that you should put your pension first after food and lodging. Pension contributions grow exponentially over time and the earlier you put in savings the bigger the impact that they will have in the future.

 

[kelly75]

@asuheel24 This is maybe a different take from someone who has been here. I had to stop my pension contributions because I was drowning and that extra £100 a month made a massive difference. BUT I also committed to paying extra into my pension once I was debt clear, to go someways to making up the shortfall for the time I didn’t pay in.

With your £7k. I would pay off cc 2-6 in full now. Clear the cards, you MAY get a balance transfer opportunity from one of more of these cards in the future. But your NHS prescription pass. Put as much as you can towards clearing the debts each month. If you’re about to continue paying £800 without increasing your debt then do it - you’ll be debt free in a year and putting £500 a month extra into your pension for one year will make up for lost time.

If paying £800 a month is going to mean you have to put things on cards, pay £600 or whatever is reasonable.

You’ve taken action - you’re on the right road. Look out for balance transfers if you get an option but continue paying. Once you’re clear, close the CC accounts.

Good luck!

 

[againstfalseteaching]

@asuheel24 If you add up the employer contribution that is usually twice of your contribution and the tax that is not payed because it is deducted from your gross salary then you will realise that you will be losing more than your current interest payments.

An example:

You contribute a minimum of 3% and your employer 6% or for example £100 and your employer £200.

So every month £300 are added as pension contributions.

Your £100 are from your Gross income, so depending on your tax bracket you will see £75 or £60 as a net amount on your bank every month if you opt out.

So, you will more or less lose £220+ every single month. This doesn’t even account for the profits you would gain in the long run from your pension plan investments.

 

[welldigging]

@asuheel24 The pension contribution is a drop in the bucket. You need to do something drastic to end these debts and the windfall you have received is your best opportunity to do something now.

Repay the high Apr, low balance cards plus a chunk of cc1 with your 7k, and you will almost cut your debt in half. Keep one card open with some available credit limit and you still effectively have an emergency fund you can use by tapping into the credit card. This is simpler and much cheaper than holding savings whilst paying massive Apr on the credit cards.

After the big payment you could pay off the remaining balances balances and close more of your cards in a matter of months to consolidate your holdings and improve your credit status.

Keep your matched pension contributions as they are. Future you will thank present you for this.

Can you drastically reduce any of your spending, for example by moving in with parents whilst you pay off the cards? 6 months of no rent/bills would see all of your remaining debt cleared.

Or could you increase income with a side hustle etc? If you cant move out could you sublet a bedroom? See beermoneyuk for bank switches, matched betting, surveys etc. I have personally made approx £1800 from bank switches and the matched betting can reliably return a few hundred a month.

 

[resjudicata]

@asuheel24 Don't touch your pension, no offence but you're not a money person clearly. So just don't touch it.

Pay off your credit cards, in the highest interest order. Use that 7k to pay them off.

You need to cut back on all spending and just focus on paying these awful CC off. You can do it, but it won't be easy

 

[travis97]

@asuheel24 Take a step back.

You said you are young.

You are 24. You will be 44 in what seems like the blink of an eye. It only gets faster and you are racing towards your death.

Bit morbid, but 44 year old you will appreciate 24 year old you keeping that pension. 64 year old you will love you dearly.

Things you do in your youth can have a big impact on the rest of your life, pensions is one of those things.

 

[davidtitor]

@travis97 64 you is unlikely to be alive at the current life expectancy rates in the UK.

 

[marafernandez]

@asuheel24 Why are you paying that much for prescriptions? It’s £111.60 for an annual pass. You can get as many as you need for a full 12 months for that price.

 

[asuheel24]

@marafernandez I'd never heard of this before some other commenters on this post let me know!! Will definitely get one of these.

 

[marafernandez]

@asuheel24 You can also get a three month one. I sometimes get a three month one and then order another lot for the 4th month just before it runs out.