I am paying into a Debt Management Plan through Debt Release Direct, Im managing to save a bit of money now and was wondering would I be better increasing my payments into the DMP to try and rid the debt quicker or would I be better paying additional sums of money directly to the companys I owe money too? I owe about 19k altogether and I am paying Debt Release Direct £275 a month, only problem is my job is on a temporary contract and Im not guarrenteed work beyond September, hence the reason Im not on an IVA. Thanks in advance

Thanks very much, that all makes good sense to me. I have been a bit careless with my money in recent years plus had some bad luck along the way which made me have to basically increase my loan amounts to sums of money I couldnt afford. Long story though! Thanks again

The usual wisdom is that it is unwise (in pure financial terms) to save whilst in debt, because you will pay a higher rate for your borrowing than you will ever get for your savings. Whether it is "a good idea", however, does not depend on pure financial logic alone. I choose to keep savings that I could be using to reduce my debts because it helps to have some flexibility, and if I exercise that flexibility by spending on a credit card, I mess up some good balance transfer rates... so I'd rather keep spare funds in cash.

If you have the sort of debt where you could reduce and increase it without penalty (i.e. a credit card at a single fixed rate, or an overdraft well within limits) then the financial logic applies... it is better to reduce your debt by £500 now and increase it again when the boiler breaks down (or Christmas comes) than to keep the debt at 10% interest and the savings at 1% interest.

Given that you have a DMP, I'm assuming that you can't easily get more credit to cover Christmas/the boiler breaking down/whatever, which makes a case for having savings in cash if you possibly can, even if that means that you take longer to clear the debt. Obviously, if and when you have a few thousand in savings, divert any surplus to paying the debt.

Finally, and I know this isn't the question you asked, but from experience I feel I ought to add... while I think that having savings is good, I don't think you should be saving up to buy Christmas presents/holidays/luxuries that you couldn't otherwise afford; that's what got me (and maybe you?) into debt in the first place.

I don't mean to preach (I'm still in a similar spot) but recognising that you can't afford it will let you keep your savings and get out of debt quicker. It has taken me quite long enough to realise this... save by all means, but blow it on Christmas and you're in the same rut that caused you to use credit in the first place. If you want out of debt, then get your expenditure below your income at any cost, including reducing Christmas expenses... I spent about £50 in total on Christmas and frankly don't care what people thought of it. I'm now in less debt than I was, and with more savings.

Best of luck with your savings, and may you remain frugal!

I am in quite a lot of debt, over 15k but was wondering if it was a good idea to still try and save a bit of money each month whilst I am paying off this debt. I am thinking of saving money for christmas presents because I hardly bought anything for anybody last year and dont want to be in that situation again, or even saving some money over a year or so to pay off a chunk of my debt? I am thinking of trying to save just a few hundred pounds or so. Would this be a good idea or should I use the money each month to increase my monthly payments to my DMP?