The Vault with Financielle - UNLOCKED: Your Money Questions Answered: Life Insurance, Buying a Home & Paying Off Debt

Episode Date: March 10, 2025

Send us a text💸 Welcome to The Vault Unlocked – a special bonus series of The Vault Podcast, where we deep dive into the big money topics no one wants to talk about.Today, we’re doing something different: answering your questions. We get SO many DMs, emails, and comments, and this is our chance to break them down. No question is too big, too small, or too awkward.In this episode:1️⃣ How do I convince my mum to get life insurance?2️⃣ Should I clear £6k of debt before buying a house?3️⃣ How does paying into my pension reduce my income tax?4️⃣ Should I pay off my HECS debt or save for a home closer to my son’s hospital?💬 Have a question or a topic you’d love us to unlock next? Email us at [e-mail]👉 Subscribe to Financielle for honest conversations about money, and let’s rewrite your money story together.Guess what! As a Vault listener, you can get 25% off our digital course, The Money Playbook. This is a step by step guide to being financially well. It has 101 lessons where you'll learn how to budget, ditch debt, build savings and grow wealth. Use this offer code at checkout: VAULTCheck out The Money Playbook course here  💸The Vault is an entertaining yet thought provoking podcast that answers our community’s dilemmas and confessions surrounding women and money.Visit https://www.financielle.com to download our app.Watch the podcast on YouTube.Follow Financielle for more:▶︎ TikTok▶︎ InstagramAbout Financielle:Financielle is a female focussed finance app helping women to take back control of their money, ditch debt, increase savings and invest in their future.Recorded and Produced by Liverpool Podcast Studios▶︎ Web ▶︎ Instagram▶︎ LinkedIn

Welcome to The Vault Unlocked where I take a deep dive into many topics that no one wants to talk about. Last week we had our legacy week and I want to thank you all personally for all you did to interact with the content, consume it, send it to friends and family, ask questions about it and really embrace the concept of Legacy Week. Legacy Week is there to give you permission to think about those bigger life-changing events that quite frankly none of us want to, but odds show us that it's gonna impact our lives in some way, sooner.

Start again. Welcome to The Vault Unlocked, where I take a deep dive into money topics that no one wants to talk about. And in the world of financial last week, we were talking lots. It was legacy week. Legacy week is a week that we created a few years ago

to give you one week's permission to delve into some of these bigger life admin things that we might put off, that we might find uncomfortable, all that quite frankly we just don't understand. And we package it all up into one week so that you can think about these really important factors for you, your loved ones, your friends, your pets, your children, whatever your situation,

so that you think about it once and then you don't have to think about it all the time. So it's always there for you, you can go back and watch the pod you can watch the vault pod where we talked about dilemmas You can read everything on the protection area of our website. We want you to feel confident in this area we don't want you to feel like you're overwhelmed and that you don't understand the different elements of protection and The importance of having a will and a lot of questions around getting a will. Also, we've had a couple of new features released on the app, well, little tweaks and little ones,

but I feel like you will want to know about them. And so I don't think I shout about them enough. Coming onto the vault, I was like, actually I wanna make sure I share with you all these couple of things. Firstly, we've built an asset donut. So I know you all love the budget doughnut, the budget doughnut that is the beautiful pastel colors

and divides up basically your income, the household income or the budget income into fixed expenses, flexible expenses, sinking funds and excess. And it's firstly, obviously super aesthetic and really helpful to see, you know, in a graph form, in a chart form.

But more importantly, it's really cool to see the change over time. So usually when someone does their first budget, the way that the budget doughnut looks is, there's hardly any green, that's like the excess, which you will not have known about when you first do the budget. And if you've not been familiar with sinking funds before,

then you've obviously know purple as well. So it'll be predominantly all your fixed and flexible expenses being spent. Then when you get a handle on the financial budget method and you learn the concept of sinking funds where we're saving up for something in advance. And when you understand the concept of an excess, which is making sure that you have excess money

in every budget to put towards the goal that you're working towards at that time, that's your excess. And so what we wanna see is a lovely healthy, green and purple elements to the budget. We're all different, so percentages, there's no rules. I've seen people try and aim for a 5% excess at first and work their way up to you know 15 20 percent even more later when they become

mortgage free or whether they've had a really big income draw jump or whether they've had expense drop whatever it is and but it's all personal to you so there's kind of no right or wrong but making sure as a proportion of your budget you make sure you have a good excess and the budget is there, budget doughnuts there to help you. So we liked it so much that I was like, I really want an asset doughnut. Truth be told, at first I was like, I want a net worth doughnut. You all know net worth is one of my favorite tools in the app because it's the long term trajectory of your financial wellbeing. If you have a high and growing net worth, more importantly growing, but you know,

the higher the net worth, the more financially well you are. But I also think it's important to understand how your net worth is made up. What you'll understand is the net worth is the difference between your assets and your liabilities. So you can't actually donut a net worth, but you can donut your assets.

We decided not to do liabilities. I mean, if everyone's really obsessed with it, maybe we'll think about it in the future, but I have no interest in really knowing the split between credit cards or buying that pay later or car loan or mortgage. I mean, it would be helpful to know that if you do have debt, it's the bigger proportion of it is on property

and an asset that grows in value. But I didn't want to highlight this area, I wanted to highlight assets. And actually, I think we went through this a little bit in the Net Worth Unlocked, which is a really good podcast episode of The Vault where we dive into net worth. But knowing how your assets are made up and knowing how liquid or illiquid they are, and what that means is simply how easy is it to access. So if it's liquid, you can get access to it really quickly. If it's illiquid, it means you can't.

So let's let's use an example. If you have a property worth one hundred thousand pounds, that's an illiquid asset because you cannot get access to the capital, the cash, until you sell the house and think about how long that takes to actually sell a home. Whereas if you have 100,000 pounds in a bank account, I could transfer that to somewhere today.

And so that's the difference between liquid and illiquid. And it also is really good to show that you are diversified when it comes to your assets. So understanding what proportion of your wealth and assets are made up in stocks and shares, what proportion is made up in real estate, what proportion is made up in cash, all the proportion that's made up by other things,

for example, cryptocurrency. So having this full picture, I think is really, really healthy. I think if you're someone who is unsure about investing and you see cash being such a big part of your asset, though you might want to look at diversifying that bit more and maybe leaning into investing. If it's very heavy on property,

like lots of people have, you know, their home and that is whacked on there as an asset and you're kind of proud of yourself. But actually, if that makes up 80, 90% of your net worth, you're really not doing enough to balance out your assets and making sure that you don't just have this illiquid, you know, physical asset, but that you also have accessible assets.

So go and check out the Net Worth Donor. I would love it if you could take screenshots and show us. I'm not sure yet. You can hide figures and that might be something that we'll follow up on because the first iteration was just get it out there and see if people like it, but have a little look and tell me what you think

in the community about your asset donut. So the other one, just a little one, but we've added a blog search box onto the homepage of the app. Previously, you would have had to go to blogs, clicked more, come to, you know, kind of a long list and there'll be a search box at the top. Whereas actually now it's on the front page,

not a lot of people realize that you can search blogs in the app, so you can now. So you could search for the Money Deals blog, for example, go search for that and actually you can save them so you can keep them when you save so you don't have to keep searching for them every time. So have a little look, what are the blogs that you like, get them saved, but it should be quicker for you to do

and not a lot of people realize that you can't actually search the blogs. It's just a couple of steps down, so we moved it up. So two little tweaks that be really good if you could check those out and let us know what else you want. I probably shouldn't say this right but a lot of you want a no spend tracker. It is something that we're building up to and thinking that we might do.

If you want a no spend tracker, DM us, message us, tell us your thoughts, what could it look like? You know, I'm not suggesting this is like an adult coloring competition where you have to design it, but I'd love to know what you're envisaging if you want one. And that might be something we tackle this summer. What do you think? And finally, before we get into the episode, I just wanted to say how, in a non-condescending way, proud I am of you all. Managing money is tough.

It's always been tough and it's probably always going to be tough. There are always things that come up that whack us in the face. There are always exciting times and stressful times. There's curveballs, there's changes. You think you've just nailed one thing and it's like whack-a-mole and the other thing comes up over here and you are doing amazing. The journey that you are on to become financially well, to pay off your debt, to build up emergency savings, to build sinking funds, to pay for things in advance, to start investing your money for the long term

and not trying to get this immediate return. This is weird. Not a lot of people do all these things together. Do you know why? Because it's hard. So if you're finding it tough right now, then tick. It means you're doing the right thing. It means this is working.

And it's kind of like a slow, slow moving feast that gradually you grind out a win and you grind out a win. And the flywheel starts to move that little bit easier. Bit by bit, payday by payday, debt by debt. You will grind out these wins and you'll gain momentum and you'll get faster and it will get easier. So you are doing amazing. Keep in the community, keep talking about your situation,

keep sharing where you're up to. People will give you support and the accountability that you need, but you have to be brave enough to share in the first place. And likewise, if someone is vulnerable, shares their story, shares something they're worried about, jump in there and give them the pep talk that they need because the more we help each other, the better we will all do. But this stuff's hard and you're doing amazing and as we embark on, we're getting close to

spring and summer and in the UK at least for Australian girlies and guys, appreciate, listen, you're coming into your winter at some point but it's still going to be warmer than our spring or even summer in some cases. But just as the seasons change and as time's going on, as you're coming into your winter at some point, but it's still going to be warmer than our spring or even summer in some cases. But just as the seasons change and as times going on, as you further away from like New Year's and, you know, the New Year, new me stuff, just keep going, keep cracking on. And we're here for you wherever you need. If you have any dilemmas that you would like help with, email them into the vol.atfarmandshaw.com. This episode is going to be a mini dilemma episode. We got really good feedback to the last one we did, which was smaller Q&A's,

not quite lengthy enough for the bigger vault that we do on a Thursday, but ones that we felt were important to answer. And sometimes in some cases there were two or three questions with the same question in it, just obviously worded differently. And so therefore it must be something important to people. So we're gonna dive in. I want to tell my mom to get a life insurance policy, but she never seems to listen or be interested.

What can I say to get through to her? This question probably is coming off the back of legacy week last week. So I'm not surprised that someone's interested in not just like themselves and their position, but also their families. It's a really interesting relationship dynamic, the parent-child one.

If you think about it, these people raised us, like they cared for everything. In fact, they're probably still doing it in lots of form. And so dependent on your parental relationship, the relationship you have with your parents or parent, it can be difficult to talk about money. If a parent has a particularly bad financial habit and you're in a really good place,

you can't preach to them and tell them what they should be doing, I imagine. I imagine the dynamics means that that's a really difficult conversation to have. And it's hard because if you love them and you want them to do better, you know a certain way and you want them to look after themselves. Our listener has asked specifically around telling her mum to get a life insurance policy. So again, we don't know whether it sounds like maybe there's just mum or just mum on her own

because it's not tell my parents. Could be that dad has one and mum doesn't, but let's workshop on the basis that there's just mum. And the easiest way to navigate this is to, let's first do the test on whether someone needs life insurance. So we need life insurance when someone depends on us. Now, predominantly that's about depending on the income

that we bring him. But sometimes it can also be the practical help. So we've given the example before of, you could have a stay at home dad who doesn't bring in money, but does the childcare. So we don't want him and his life not being protected because he brings value to this home and he leaves a practical and financial gap

if something were to happen to him because suddenly who's gonna do all the childcare, who's gonna look after the house, who's gonna kind of do the school runs and everything like that. So we need life insurance if someone depends on us practically or depends on the income that we bring in. Let's move forward on this scenario

and let's imagine that mum lives alone. If mum lives alone and no one depends on her for income to contribute to rent or bills or food, then really you may question whether she actually needs life insurance in this scenario, because who is it for? As an adult, we all should make sure that we have enough assets to be able to settle something like funeral expenses.

That might be quite blunt to say, but practically, that is the only thing that in the unfortunate event that your mum dies, money would be needed for. We have seen horror stories where family and typically the children of people with no assets or negative assets have to fund a burial funeral expenses it's very very expensive and it's really difficult because then you know you're paying for everything and imagine that you know you're trying to decide about what you just you've just lost your parent and you're trying to decide what things cost and then you're flushing the bill for it we've had stories of some

wonderful people in our community who have spent years paying off the funeral expenses of a loved one so you're navigating losing them and then you're also navigating having to pay for like this wasn't you and you might even be angry at them. You might think, why didn't you take care of this one particular thing? And so in our listeners mum's case, does she have enough assets to make sure that all her expenses can be settled if she died? So coming back to whether she needs life insurance, often people have, at the very least, what's called a funeral policy and you can actually get insurance that covers the cost of funeral. But as well as or instead, she could have a life insurance policy,

which would pay out in the event of her death and the recipients of that life insurance policy could choose whether to use that money for funeral and burial expenses and stuff, or not to by the way, because that's a separate point. Like that would be the life insurance proceeds would go to the beneficiaries of that policy. To be clear, they can use it for whatever they want. But this is why someone in a scenario

where no one depends on them should consider life insurance. That's true of it's someone's mom or friend or whatever. If however, for example, our listener depended on mom's income, they might still live together, they might share joint bills. You know, if we've got this scenario where they do depend on each other, that's where an open conversation around

possibly her getting life insurance. And I'm saying both parties as well, by the way, not just mom, but our listener as well. They can have that open conversation. And this is what Legacy Week was about really, because it's about those practical chats about, can we have a hypothetical? What if? If this, you know, what if, this, this, this? I think it kind of relaxes the conversation a bit more.

It's not as heightened. It's not as, as revealing that we're thinking about, well, what would happen if you were to die? And we are like, you know, I want to be really honest and transparent about this this is why we create legacy week for this reason because it is a bit awkward the British especially you know for those of you are not British listening to this like we are rubbish at this kind of thing and so by being practical and having those chats around hypotheticals we can really understand firstly what would happen in those

scenarios if we did nothing and then secondly what extra benefits there could be if we had certain protections in place. Obviously the thing with life insurance is it's cheaper the younger you are and the healthier that you are. So there is an element of navigating the age of your mum and looking for the right price when it comes to life insurance. And also thinking about the settlement amount like is this because there's a mortgage that you would want to be paid out? Is this because it's to support living expenses? Or quite frankly, and let me be very clear, the wealthy take on life insurance policies to be able to gift to people in the event of their death. It's part of an inheritance plan. There are many different tax issues related to life insurance and specifically when they're held in trust that we won't go into. And that's the exact

type of thing that an advisor can help with if you are interested in this kind of product. But long story short, I think having a relaxed conversation with mum about the different eventualities in different scenarios. And if you have any other questions that weren't exactly answered, head to financialhealth.com forward slash protection

with loads of other information on there. Good luck for having the chat with your mom and they're excited to see what the outcome is, but well done for having that thought and the brave conversation. Now we've got question two. I'm so close to hitting my house deposit goal, which is 45,000 pounds, but I have 6,000 pounds debt.

Should I push back the date, I can start looking for houses and clear the debt or just carry on and pay off the debt in future." Oh my god I can feel the like excitement where you've been saving this amazing amount of money. You're trying to go for 45,000 pounds and you say you're really close and you almost I mean you'd definitely be on right move I mean god most of us are on right move without a deposit never nevermind with one. But you know, you've got this debt

and that must have been hard, by the way, to save that amount of money for the deposit whilst at the same time, you know, knowing that you had that debt sat there, probably still chipping away at that with minimum payments. And I don't think you're gonna like my answer. And you'll do what you're ever gonna do, like I'm not gonna judge. This is completely personal to you.

Debt is not just a figure in the corner that sits there. It's a feeling. It weighs heavy on us. It is there on our credit report. It's there for, you know, any potential borrowers to see. It is something that's gonna affect affordability because when someone's looking at whether you can afford a particular mortgage They're not going to look at your expenses and there's debt on there that needn't be really like I said

If it's just there and it could be paid off it needn't be there But it is there so it will be factored into affordability and there are so many unknown Expenses when it comes to buying a home that to have six grand on debt, a credit card loan, whatever, in the corner, whilst you're trying to navigate a super expensive purchase, the biggest purchase you're ever going to make, most people with a home may well say that they'd have paid off the debt. It's something that you just don't need because depending on the, it doesn't matter, brand new house, old house stuff happens, you're gonna need as much emergency cash as possible,

you're gonna need to be navigating the new bills, you're gonna need to be on top of your financial game and having that debt in the corner is not gonna help. It's gonna be much harder to pay off this debt when you own a home and all the expenses that come with owning a home, because I tell you what's gonna happen and you'll be forgiven for it because you're human,

what's gonna happen is you're gonna find Instagram for it, because you're human, what's gonna happen is, you're gonna find Instagram. If you've not already got a Pinterest page, you'll find Pinterest. And suddenly you're gonna get in, you're gonna get those keys, and you're gonna get excited. And you're gonna say that you're gonna need this media wall, and you're gonna need a new fire,

and you're gonna need a new TV, because the TV doesn't plug in properly and it needs like, you know, Wi-Fi and stuff. And you're gonna need to pay in every room. But then you'll find out that the electrics weren't as great as the previous owners said they were. So then you need electrics and plastering. And then you just had to have a particular light fitting.

I'm saying this because I have done it. Like you are human, this is what's gonna happen. This all happens every time. You always need more money for things. And so then what will happen is you'll either use, you know, any spare cash for that instead of overpaying your debt, or you're gonna add it onto credit.

And then suddenly you're gonna turn around and you're gonna have 10 grand debt, 15 grand debt. And it's like, it's fine, it's fine, it's fine, I'll do it later, because I've got my dream home, but you're just causing your future self problems. So the playbook would say, be patient, make sure that you've got an emergency fund and you don't say that.

So make sure you have a minimum three months expenses to your name if you are going buying a home. Then get consumer debt-free, get it out your life. Don't have it on your credit report. Don't have it like taking away from your income in these monthly payments. Don't have that risk there, get it gone. So we're a couple of questions down,

but before I jump into the third one, I wanted to use this time to ask you if you could do us a favor and like and subscribe to this podcast if you're watching on YouTube. In fact do it on YouTube and on where you listen to your podcast we really appreciate the support. If you enjoy listening to The Vault and The Vault Unlocked and you think it's helped you in some way please do leave a review because what it does is it helps get this podcast to more people so that more people can be helped. Right we're going to dive into question number three. How does reducing my personal income tax through paying into my pension work? Okay so this is a really good question and it's not easy to explain off the cuff

and maybe without diagrams but I'm going to go for it. This is going to be a UK specific answer, but a lot of the principles are replicated in other countries. We'll give it a go. So we save into a pension so that we have money when we are older to look after us. When we don't want to or can't work anymore, we will have a pot of money that hopefully over time has grown in value. It's grown in value through saving into it. So making contributions and hopefully it's been put into different investments and bonds and stuff that will have grown in that time as well.

Governments love private pensions for quite a few reasons. But the main one is that they don't want to be taking care of all of us forever. Like they want us to be able to look after ourselves. And so they do actively encourage contributing into your pension. Now, pensions, the P word is like a stuffy word for lots of people.

We at Financial, you'll know, want to encourage you with pension and retirement investing. And it is exactly that. It's more often than not investing, especially when the only way that you are is going into equities. And just because you can't get access to it doesn't mean it doesn't count as part of your net worth

and your financial stability, it's something to be proud of. And in fact, we've talked about this before, investing for pre-retirement investing and post-retirement investing, so that you can kind of invest for the shorter term, which is shorter than retirement age, and then you invest for retirement. In many cases, personal pensions are also assets,

are things that we can leave to our family. It's not something that necessarily dies with us, that obviously depends on the type of pension. But generally, they're a really good idea, and we're massive advocates of closing the pension gap at financial and making sure that men and women have great contributions and great pots that they can rely on later.

So we talked about the government actively encouraging investing and contributing into a pension. One of the ways they do this is through tax relief. Now there's a little bit of jargon here, but in the UK there's typically three ways that you pay into a pension. Definitely one of the most common is relief at source, which essentially means you contribute to your pension after you've paid your tax.

So if you're an employee, you can check your pay slip. What you will see is the tax will be taken and the national insurance will be taken and then you have your net pay and then pension contributions are taken from you then and put into the you know workplace pension or personal pension whatever you have it sent into but it's after tax it's an after-tax contribution. You also can have a net pay arrangement this means that pension contributions are taken from your salary before tax is calculated and And then lastly, and more commonly used in workplace pension schemes, you have salary sacrifice.

This means you effectively agree to reduce your salary and your employer pays the amount directly into your pension, thus saving you on both tax and national insurance. In fact, in that scenario, employers also benefit from reduced national insurance contributions from the employer perspective as well. So there's three main ways.

And so what you can see is with the with the latter two with the net pay arrangement and salary sacrifice the pension contribution is being made before you've paid any tax and so that's think about this this is some of your money going into your pot and no tax has been paid on that money so that's how for those two it effectively reduces the personal tax that you pay in this country because it's already gone out before you've paid tax on it. The more common arrangement is relief at source. So you've got your payslip, you've paid tax, you've paid national insurance

and either your employer pays into your pension for you at that point or you don't do it through your employer, you take the money home yourself and from your bank account you put that into your pension. That's more of a self-invested personal pension rather than a workplace pension typically. This is also the same if you're self-employed. So if you're self-employed, you obviously will do a tax return,

but you will contribute into a pension from your own income. So let's say you make an 80 pound contribution into your pension. The pension provider will automatically go and claim 20%, so in this case, 20 pounds from HMRC and put it into your pension for you. So with your 80 pounds and HMRC's 20 pounds,

your 80 pound contribution becomes 100 pounds because you've been given the tax back. If you're a higher rate taxpayer where you pay 40% on some income or an additional rate taxpayer where you pay 40% on some income or an additional rate taxpayer where you pay 45% on some of your income, the pension provider doesn't claim that. You do that yourself through a self-assessment tax return.

So the 20%, the basic rate is claimed automatically always and any additional amounts, if you're a higher rate taxpayer or an additional rate taxpayer, you do yourself through HMRC through a self-assessment tax return and so you're getting higher rate taxpayer or an additional rate taxpayer, you do yourself through HMRC, through a self-assessment tax return, and so you're getting that tax back. So I've used a super simple example.

There are lots of nuances, like if you earn over certain amounts of money, your personal tax allowance goes, but you can see how you can reduce your income tax liability by actively putting money into your pension. We probably need a really super detailed blog on this. And so I will do that and we'll get it on financial.com and you can have a look.

I think graphs are really helpful because what you can do is you can see your contribution, the top-up rate and also the way you go forward. So if you're self-employed, how do you handle this? If you're employed, how do you handle this? How can you tell if you are a relief at source pension versus a salary sacrifice pension versus a net pay. So it's not easy to describe, as I've said on the pod, but on a high level, the government

want you to put money into your pension. So you effectively get your tax back on pension contributions in a couple of different ways. And just final note, closing note is this is what the wealthy have done for decades. It's obviously very, very easier the higher income you have, but higher paid individuals will try and pay as much into their pension as possible. So they reduce the amount of tax that they hand over to the government and this is completely legal. And it's something that if you're not from a wealthy family

or if you've not been around higher earners, you don't know this. And if you are a new higher earner, if you are the first in your family to start hitting these, you know, 50, 60, 70,000 pound salaries or up, you may not be aware that other people are not just kind of increasing their lifestyle with that salary, they're not getting the better car, they're not getting the nicer house. I mean, they may well be, but what they're also doing is they're looking tactically at their pension contributions.

I know lots of people would play this game, which is can you get under that higher rate tax brand? In the UK at the moment, can you get under that 50,270 pounds annual income and only end up paying 20% tax? I'll stop there, but hopefully, if you didn't know anything about this, you learn a little bit more and it is hard to get your head around, especially when tax rules change with different governments and different autumn statements and stuff and different budgets and also different

tax years and bands change. Keeping an eye on it and seeing if you can take advantage of reducing your income tax liability is a really savvy thing to do. And I think more importantly, just be aware of it. Every time I put money into my pension, I'm going to get a top up from the government. Obviously, you also sometimes get a top up from your employer as well, which is nice and we'll take that, but it's something to be aware of.

So we have another question and this is from one of our Aussies. So I'm not going to say good day because that would be embarrassing because I'm very British. Hi, I have $33,800 in HECS debt. Now this is a higher education contribution scheme in Australia. I've called it HECS, it might be HEC, but essentially it's like a student loan system. I think the system is developed,

but a lot of people still call it that. Anyway, I have $33,800 in HECS debt, which doesn't accrue interest, but is indexed to inflation. And I've got $33,800 in HECS debt, which doesn't accrue interest, but is indexed to inflation. And I've got $25,000 in savings. Should I prioritize paying down my HECS debt or keep growing my savings to buy a home closer to my son's hospital?

For context, I know that this listener's son doesn't live in the hospital, but spends a lot of time, there are lots of appointments, it's got quite a long-term condition. And so that's why I think she's talking about the proximity to the hospital. I think the elephant in the room in this question is to do with the proximity of the hospital and so I'm going to caveat everything I say with this is a personal experience, it's a

personal decision. At the moment it sounds like our listener has got quite a commute to that hospital, it will be much more convenient to be closer to that hospital. Whether that's a renter or a buyer, so there's this wider thought process here about where you want to be. So she's got $25,000 in savings, she's got about $34,000 in debt, it's not increasing with interest but it is increasing with inflation and she also has a desire to buy a home, you know, for her and her son. Now typically at Financial when we look at student loan debt no matter what country you're in we often don't put it with consumer debt usually because it's of such a high amount that the problem is people will get dissuaded from paying off all

their debt if they see an amount that's too big. Often it's been used to kind of leverage a new career and leverage advantage and sometimes is linked to income based repayments. It's just not a typical debt and so it is pushed further down the line and it's optional for people to pay off either as part of their debt snowball or debt avalanche or whether they would like to push it further down the line and and kind of pay it off as you earn which is the process or overpay it but overpay it later when you've got much more income because you've not got consumer debt. In most student loan payoff scenarios, income trajectory is really important to consider

because obviously as incomes going up, payments go up and actually payments only kick in at certain earning thresholds and so one thing that our listener should have a think about is her earning trajectory and how easily she is going to slip into having to pay this off anyway through earnings. And if she knows that, having a look on that basis, how quickly it's likely that she'll pay it off, I've seen calculators online that can do this, like these student loan calculators, where you can look at the amount of debt that you've got and the percentage it's growing out, whether that's through indexation or whether it's through interest rate, and your earning trajectory and you can kind of estimate

when you are likely to pay that off. The other thing to consider with this is the total amount of the student debt, especially in proportion to your income and the rate at which you can possibly pay it off. Because like I just said earlier, the bigger the amount, the more demoralizing it can be to go after,

and it can just shake us off our money journey, and we then end up not aggressively saving for a home, not paying and investing into retirement, not building our wealth because we're just so overwhelmed by this big amount. Where a student loan is smaller and kind of within grasp, there's something about it that makes us sometimes want to go after it. Yes we don't have to overpay student loans, in fact in this country lots of people claim back the overpayments, especially if they're on a trajectory that means they may never pay it off.

You kind of see it as more of a tax and you want more money back. And so some people do that. But where there's a scenario where it's within grasp, to pay it off would mean an increase in net income for people. Think about this. If you don't have that student debt, it's not being taken from your salary, therefore that's being given to you, therefore you have more money to do nice things

and also do sensible financial things. When you're applying for a mortgage, they will take into a consideration your net pay. They might not look at the loan as leverage in a traditional way, but they will look at how much money you get to pay for your mortgage, to pay for your essential bills and so on an affordability basis it does impact you. So I do think the amount of the student loan is really

important here. I think there are two clear options that she can take. One of them is leaving it alone and paying it off as she goes as she earns. In that scenario she's got $25,000 in savings. If she's a single parent of her son, she says I a lot, so I'm presuming that's the case, then she needs an emergency fund that helps give her the confidence she needs to take on the world. And that might be the $25,000, for example.

She can reduce that down and up, depending on different insurances that she may have or how stable her job is, how likely it is to get another job. But let's pretend for a minute there's $25,000 and that's her emergency fund. If she's no other consumer debt, the next thing she would do if she's leaving her student loan is build up that house deposit. If that's her next goal, then she can just go hell full of leather for that, concentrate on that one thing, build up that house deposit and buy the home that she wants. The other option, and it is probably the option I would take but again this is completely

personal is I think I'd want to go after that student loan debt because it's just not absolutely huge in comparison to if you've built up $25,000 in savings you I feel like you can save I feel like you're good at saving and I feel like you've probably also got the earning potential or the excess every payday to save and so if you've got that you've also got the ability to do it to pay off the debt and when you are a single mum like a single earning household you've got responsibility for a son especially who does have medical needs. I want as much of my income to be mine as possible and I would probably want that more than I would be desperate to buy a home. And so I think I would go after that student debt.

I would still keep a bigger emergency fund right now. Again, I think I would decide the amount of emergency fund that gives me peace right now and then apply everything else to the student debt. And then every excess, every payday, I'm going after it, I'm going after it. I give myself a goal. Might be the end of the year at this rate because you're doing so well. And once you've cleared that, not only is that debt not growing, it's gone and all your income is now yours again and you can build that up to build that house deposit and buy the home that you want to buy for you and your son. I think that was an amazing

one. And it gets me really excited. So please do keep in touch and let us know what you chose. That's a wrap on this Q&A episode. I hope you found it useful. I've loved getting into each of the different questions that people have sent in. People at different stages it feels as well, which is really, really helpful. If you have more questions, send them our way,

whether it's DM, whether it's emailing the vault at financial.com, whether it's dropping it into community there may be someone in your life that you thought of during this episode as well so get it over to them on whatsapp share the love make sure that they can benefit from this chat as well but that's us that's all folks for today just a disclaimer the vault unlocked is a light-hearted chat around life and money we are not giving financial advice