'Pay off my debts? Or go on holiday?'
It felt a bit like being asked to be King Solomon of finance on Radio 5 Live today. A woman emailed in with a: ‘Pay off my debts? Or go on holiday?’ family dilemma and said they’d do whatever I told them…
This was a big departure from my regular weekly 12pm Consumer Panel slot. It’s always fun and I suppose it’s because we all get on so well that they had no qualms throwing me this doozy of an email from listener Carol, live on air – far from my usual factual type questions…
Hi Shelagh can you ask Martin to settle an argument between my husband and I? In September our youngest goes to school – this will reduce our childcare costs by a whopping £600 per month.
I have no problem putting that towards our loans, credit cards etc. BUT I would like to take 1 month’s worth and put it towards a holiday, as we haven’t had a holiday on our own ever and haven’t had a shared family holiday in 2 years."
My husband thinks it should all go towards paying off debts. We will abide by Martin’s decision – what should we do?"
So live on air I had to make a decision. What would you’ve done?…
TO GIVE YOU TIME TO CONSIDER YOUR ANSWER – SCROLL DOWN
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Initially I talked through the question, to buy myself some thinking time. Both Shelagh and Dominic Laurie (business presenter) said: "If you ask me, I’d say take the holiday". I hope it wasn’t too arrogant that that I said: "That’s the reason they didn’t ask you – this is all about guilt, she wants permission from the ‘Money Saving Expert’ and if she gets it they won’t feel guilty taking the holiday, it’s a confession thing."
All that bought me enough time to come up with my solution which was:
You can have a month’s worth of the cash for a holiday, but not now. You need to repay the debts for the next six months to get yourself in the habit of doing so – if you do that successfully then you can reward yourself using the seventh month’s money for a trip"
My logic is, that if you use the first month’s extra cash for the holiday – it’s the start of a sticky spending slope, as it becomes normal not to have the cash, so making yourself repay it in future is tough. What’s needed is to first build the financial discipline of repayments and then some delayed gratification once that’s well established, and a little bit of a reward for doing it right is fine as it should be easy to go back to repayments after.
Carol emailed back to say she was really happy with the answer and they’d do it. What would you have said?
