So I've decided to list the options, detail any specific targets for each and prioritise.
The options are...
- Rainy day / fallback savings.
- I think having enough to cover one month of normal outgoings (£2629.29) is the minimum I should have.
- This should be accessible at short notice, but doesn't need to be regularly accessed.
- Probably a Cash ISA with limited withdrawals - and therefore increase interest rate - would be the sensible option.
- Savings for fun
- Ideally when we go on holiday / want to purchase something new this'll come out of a stash of cash we've put aside. Rather than hitting the monthly accounts.
- I think the amount saved in here depends on what we're saving for.
- So the target has to be paying for our Group holiday to France in Aug '17.
- Remaining accommodation cost is £392.76
- Remaining ferry cost is £280
- Total target therefore is £672.76.
- Over 12 months this would be £56 per month.
- Long term savings for retirement and kids (Uni?)
- Currently already pay into my pension via work.
- I don't plan to touch any additional money put in here for at least 15 years - when kids would be about Uni age.
- Should limit it to a monthly payment that can be absorbed and not leaving us potentially short in the short term.
- This shouldn't be accessible easily - so stocks and shares seems suitable.
- Overpaying on mortgage.
- Paying off Credit Card debt
- currently paying minimum payments but on a 0% rate until late into '17.
- Paying off Student Loan
- Expect to put bonus money into paying this off in full in Summer '16
- Paying off House Loan
- Currently paying off each month and due to be paid off in 2018.
What's the relative priority?
Will leave the student and house loans as planned.
Will leave the Credit Card debt simply because I was able to get a 0% interest rate for so long and potentially could shift this again at that time. Therefore at this time without the need for any additional borrowing this is best left alone.
Overpaying on the mortgage is probably the lowest priority of the remaining items.
So it's out of savings for rainy day, fun or long term.
I think that given the small amount required for the holiday savings - and the fact that the holiday is already booked this should take priority at this moment.
Any left over money can then be put into the rainy day / fallback savings until the 1 month cost is reached.
Once this is covered (probably not for another 12-18 months) I can look at whether long term or mortgage pay off is the most sensible.
So next steps...
Set up a direct debit to pay £56 per month into a separate savings account for the France holiday.
Any further money available each month can be added to my current savings pot and a suitable account found for this. It's currently around £200~ so plenty to save up before moving on.