Question Time: At last, I’m debt free - what now? Overpay my mortgage or invest? Do I need pay NI if I want to retire early?

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0:58The Martin Lewis Podcast I do wonder what that's going to be about And this is our Question Time episode, where you ask me your questions on absolutely anything and everything, within reason. This week, you asked me, should we prioritise saving, investing, overpaying the mortgage or children's savings for our new baby? I want to retire early. Do I need to pay for extra national insurance to get a full state pension? Should I start overpaying my postgraduate student loan? Martin, what's your beauty regime? Hey, I answer the questions, I don't ask them. And to finish, an inspiring question and conversation you just have to listen to.

1:37I had tears in my eyes, to be honest. Robert is in his 40s and has been in debt all his adult life. But now, having worked hard for the last few years, he's about to have his debt-free day next week. And he wants to know, what does he do with his money now? Play the theme tune.

2:03I got a mouth, I got a feet, so I'm going to make sure everybody eats. Hello and welcome to our Question Time podcast where you get to ask me anything and everything you like, brackets within reason, close brackets. You know, I have to have a little self-dignity and privacy left. And of course, joining me, it's the one and only, the person you've all been waiting for, the custodian of questions himself, Mr. Podcast Producer, Matt Burnham Esquire. Matt, please add him to more applause music at that point. I love that. Thank you very much again for the applause. How's your week been? You all right?

2:45Yeah, I'm good. Actually, it's quite funny. You just reminded me, someone emailed into the podcast email asking if I was related to the mayor of Manchester. Oh, could you be Andy Burnham's nephew, son, cousin? Are you? No, unfortunately not. Do you know? Have you done a DNA test? Have you done one of those DNA kits? We haven't. And he does come into the BBC quite a lot. And I was stood by him in the kitchen and nearly turned around and said, we've got the same surname and people think that we're related. And then I thought it was a bit weird if I just sort of tapped him on the shoulder and said that.

3:15Especially if you'd said to him, do you get people saying, are you related to Matt, the custodian of questions from the Martin Lewis podcast? I think he's an avid listener. That would have been especially, especially. Well, I have it because there's Paul Lewis who presents Moneybox on Radio 4. And people always ask, are we related? And we're not related in any way, shape, size and form. I'm sort of an Arivista Lewis. From what I know, when my ancestors were leaving the pogroms in Russia, the anti-Jewish pogroms in Russia, they came to Liverpool and then they went to Ellis Island and they got to Ellis Island.

3:51and they said, what's your name? And my great, great grandfather said, David Levi Wilczynski. And they said, welcome to America, David Lewis. And then they didn't stay long in Ellis Island. Then they came back here. So I think Paul is a Welsh Lewis and I'm a Luchinski Lewis. That's fascinating. So, yes. So many other Lewis's out there, I am not related to you. But if there are any Wilczynskis out there, then I might be related to you. Marta Lewis podcast. Speaking of the email address, we had one in from Elliot and it was relating to last week's question time. So your wrestling question where you gave your wrestler name.

4:33My wrestler name was DDoS and my move, my signature move was the credit crunch. Exactly. Well, what was the name that you gave yourself? DDoS. And what does DDoS stand for? Dedicated denial of service. Well, Elliot says, actually, you're wrong. He says, for the first time ever when listening, I have finally a correction I can offer. DDoS actually stands for distributed denial of service because the load generated is spread out in brackets distributed across a wide range of devices. And in your case, people. Well, listen, Elliot, thank you very much. It was an off the cuff answer to a question about my wrestler name.

5:13So I wasn't thoroughly checked into gear. and you have distributed that answer very well and I will not deny you the service of giving you a correction. Very good. Thank you so much. But let's get into the proper meat. What are we going to start with? Let's start with a question from Yasmin Martin. She's emailed her question in, martinnewspodcast.bbc.co.uk. She says, hi, Martin. Happy New Year. Happy New Year. She probably sent this a few days ago. Well, I'd just like to say, I am still a believer that you can still say it up to the end of January. as long as you've got a reason for doing so. Okay, so you haven't seen the person since New Year?

5:49No, obviously if you've seen them before, you shouldn't be saying it. It'd be ridiculous. Anyway, Yasmin says she's got a question on prioritisation. That's a hard word to pronounce. Me and my partner bought... Only for you, prioritisation. Me and my partner bought a house two years ago. Since then, we've renovated the property and welcomed our first child in 2025. Congratulations. We used our savings on the house and getting ready for our new baby and now we're in a position to put money aside again. What should we prioritise? Savings, investments, she says she's very interested in investing, but have none at the moment, overpaying their mortgage, saving for their daughter, she says she's opened a junior isofura after the podcast on children's savings accounts, so thank you for the guidance, or reducing the small amount of debt that they have on credit cards.

6:40Well, they're all wonderful options and huge congratulations to you. The one that first comes out to me is the small amount of debt on credit cards. If those are at a typical credit card interest rate of 24.9%, that's the obvious priority. The next thing I would say is to make sure that you have a cash emergency fund. So this is money in savings that could cover three to six months worth of bills in the event that you were to lose income and you had to pay them. And I think that's always important. That should always be in savings. After that, paying off your mortgage depends on the rate of your mortgage and how much.

7:10If you've got a high interest mortgage, then overpaying that will tend to be a really good use of money. Otherwise, I mean, my temptation would be investing and it would be investing both for you and for your child. And it's interesting that you opened a junior ISA for your child. I would probably argue with junior ISA that, you know, the investing rule is this. If you've got money you can put away for more than five years that you're not going to touch and you've got a cash emergency fund, then investing tends to be the right outcome. So when it's your daughter who is less than a year old, I would think, unless she was born in the very beginning of January 2025, you've got at least 17 years before she can access the money in a junior ISA.

7:54So this is definitely A, money you're putting away for the long period, and B, money that you don't need for that time. So you really want to be looking at investing for her. And you can go on. There are lots of different sites out there a nice, we're not talking about money in one share, you want it in a fund and a broad spread of investments. So I would think that's a priority and similar for yourself if it's money you don't need to touch. Now, so putting some away, drip feeding it each month is a great way to do it because that helps you move against the vagaries of markets move up and down.

8:25It's called pound cost averaging so that you're spreading it as you put money in. How much you want to do that and how much you want to save is your choice. It's the toughest one. And the one I'm sort of wrestling with as I talk is overpaying the mortgage versus savings is a really simple equation. If the interest rate on your mortgage account is higher than the amount you can earn in savings after tax, you are better off to overpay the mortgage than save, assuming there's no early exit penalties and you've got a cash emergency fund. But when we start to look at overpaying the mortgage versus investment, it is trickier.

9:01So first of all, we're only talking about overpaying the mortgage if it's a relatively high interest rate. It sounds to me like someone who has been saving up money for this while actually has enough to do a little bit of everything. Get your cash emergency fund, put some money in a junior ice for your daughter, stop drip feeding money into investments, and then look at overpaying your mortgage if it's a high interest saving if it's not, if you want a little bit of extra cash. I think you've got a bit of money to do everything. But if it's spare cash, investing tends to work, as long as it's for the long term, as long as it's in the broad spread.

9:40We'll take this as official second contact of the pod, because you did have your DDoS contact, but I'm not counting that as official. So this must be in the custodian of the questions format. You've got a caller for me, Matt. Yes, I do. I've got Craig in Harrogate for you. Hi, Craig. Hello, how are you doing? Hello, mate. What can we do for you? Okay, so in the middle of last year, I was fortunate enough to be able to decide that it was time to stop working. I've consolidated my various personal pensions and got everything where and how I want them to be, but I'm not so sure about my future state pension.

10:14The HMRC app assures me that based on what I've already paid in across the last 40 years, I should receive a full state pension. I think it talked about£236 a week. And it won't get any higher, which is great. My question is, as I'm unlikely to make any further contributions via national insurance between now and that state pension age, will that impact the level of the state pension when I come to take it? In essence, do I need to continue to make some kind of contribution in order to maintain that maximum state pension level? OK, so I know you understand this, but just because we are a podcast, I need to explain it to everybody else listening to start with and then I'll come in to answer specifically.

10:56So you generally need 35 years ish and it is a huge capital letter ish to get the full state pension. 35 years ish of national insurance contributions and then you get the full state pension when you hit retirement age. but there are so many different factors in here what you do is you rely on the forecast that you can get on gov.uk that will show you both any missing national insurance years and it will also you can look at that there and it will also show you what you're projected to get now you've done this obviously by the way that you're there when you've looked at your forecast you should have got two numbers you should have got an estimate of where you are to date and an estimate if you continue to pay in future i'm presuming the estimate of where you are to date said that you have enough to get the full pension?

11:42Correct, yes. Well, what I would say to you at that point is it all sounds good. The reason for the mild hesitation in my voice is it's said there are only two people who truly understand the state pension and unfortunately one of them has died and the other person now isn't really sure they do actually get it because it's that complicated. So, you know, I can't do cast iron guarantees. But the easy thing to say to you is this, if you stop work now you can always buy back up to six years of past national insurance contributions so stop work carry on with your life and then make sure you put a note in your diary send yourself a delay email however you tend to do it in about five years time for five years time to go and check this process and see where you are again and if at that point something has changed so it looks like you're no longer on for the full state pension, then I would buy back one of these missing years.

12:41What I certainly wouldn't do with what you've told me is be buying years just in case now because you don't need to. Does that make sense? That's fine. That makes perfect sense. Thank you very much, man. Pleasure. Right. Caller done. Time for a read, surely. Question from Robert on student loans. He's asking about his postgraduate student loan And actually, I saw you in a post-grad hat recently. Yeah, well, I did. Yes, I was very kindly. The University of Sheffield decided to give me an honorary doctorate of letters. And I went and I got to make a speech at the graduation ceremony there. And I wore a big red gown and a mortarboard hat on the top.

13:21And it was very nice. So you could call me Dr Lewis if you like. It's a D-lit, technically, a D-lit, a doctorate of letters. I mean, you'd have thought a doctorate of numbers for me, but I'm very happy with either and it was a wonderful honour and I'm very grateful that they choose to give it to me. What's your question? Move on from that. It's from Rob. So he starts with Hi Matt and Martin. What? Hi Martin and Matt? Hi Martin brackets and Matt. I think Matt and Martin is the best way to do it. Anyway, he has a question. Or at least not doing it correctly. He knows that you call student loans a graduate tax but his postgraduate loan has a 6 % interest rate and only has 11 grand left.

14:01He earns£54 ,180 a year gross pay. Should he pay it off? So I actually don't call student loans a graduate tax. I say it works more like a graduate tax and should be named a graduate contribution system because technically it isn't a tax, but that isn't what the question is about. So he's got£11 ,000 left. He earns£54 ,180 a year. Should he pay it off? I'm going to assume that it is a relatively recent postgraduate loan so that he's still got a long time left to repay. Postgrad loans, you pay 6 % of income over£21 ,000. So that is the lowest repayment threshold, which means a lower repayment threshold means you're paying more a year.

14:43And the interest rate is currently RPI plus 3%, which is 6.2%, which is pretty heavy, to be honest. I mean, I have to say, I'm assuming that you're on an English and Welsh postgraduate loan. It is different. The interest rate's lower, and the repayment thresholds are different in Scotland and Northern Ireland. So this is for England and Wales. because that interest rate is quite hefty and because you are very likely on your income to clear the loan in full before the loan wipes, then it is a real interest rate. 6.2 % if you've got the money is higher than you would earn in savings. So there's no point in saving rather than overpaying this.

15:19So if you have the spare money, then yes, you should pay it off. The one risk of paying it off is if something were to happen to you in future so that you aren't below the threshold and you wouldn't be able to pay it off and this loan would later be white, then you would have paid it unnecessarily. But if you've got good foreseeability that you're going to continue to be earning at that mid-high level that you are earning at the moment, then assuming that you've got 15, 20 years left on the loan, it's relatively expensive and I would be looking at paying it off. There is, however, the baboon, the big but.

15:52If you think you're going to need to borrow for other reasons in future, car loan, mortgage, then it becomes more questionable because while the interest rate is high at the moment, if inflation drops, as we're expecting it to do so, the interest rate will get lower. And also the terms of your postgrad loan, when it's income proportionate and it will wipe if you don't repay it, are better than any other form of commercial debt. So it may be what you don't want to do, certainly, is to pay this off only to have to get a car loan at 10 % in two years' time that you're having to borrow for, where effectively, once you pay this off, you can't get the money back.

16:29So yes, I would be paying it off unless you have a likelihood that you're going to need other worse commercial lending in future, in which case I'd just put any spare money you have into a highest interest rate savings that you can to offset the interest on this in the meantime so that you don't need more expensive debt in the future. So if I didn't do that quite as cohesively logically in telling the story, something flipped into my head as I doing it, but hopefully that makes sense. Just a quick extra note on that. The answer to the question of should I pay it off is very specific to the loan you are on and the plan type you are on.

17:03And the answer I've just given is for an England and Wales postgraduate loan. You cannot read across the same answer to people on other loan types. Right, Matt, what have you got? Another read for me? A read, a fun read, a funny one. Putting the fun read at this point. Yeah, why not? Still going a bit woo, breaking the format somewhat. I wasn't expecting it. Going rogue. Well, you are the custodian of questions. It is your call. I mean, I do not have the power to overrule. So we're going to go to Kate. She's in Devon slash Cornwall. I don't know if she's on the border or something, but she has emailed in.

17:38She says, hello, Martin and Matt. My silly question for Martin to lighten things is, as you appear on TV, YouTube, et cetera, it might be that you have to be a little bit vainer than you might otherwise be. So what's your beauty regime, please? But she does go on to say thank you for all the serious bits, though. Seriously, you are the fifth emergency service, police, ambulance, fire, Coast Guard, in case you want to query the numbers. All the best to you. Oh, well, thank you very much for the kind words at the end. Yeah, look, I am on telly. So you do, when you're on telly, you do have to, first of all, it does put pounds on, so it does make you more conscious about your weight.

18:16And I know I need to weigh 12 stone seven. And when I weigh a little bit more than 12-some-seven, I manage myself to get my weight down to 12-some-seven. That is my ideal weight for doing what I do. What do I do as my beauty regime? Moisturiser. I do do moisturiser. I'm going to tell you something I've never said before, but I think is pretty obvious. I don't think this is shocking, but you need to hear the explanation. Matt? Uh-huh? I have my hair dyed. Bum, bum, bum! But I need to explain to you why. So, as a 50-something man, my hair is thinning. And as my hair is thinning, if my hair is not dyed, it starts to, and I think my wonderful red-headed grandmother, this is from her, it starts to go red on the top.

19:02Which means it's red on the top, dark black on the sides, and grey at the bottom. So I have three-toned hair. And I used to get to the point where people would start putting on social media why are you dyeing your hair red on the top? And it came to that. And in the end, I made the decision that I was going to dye my hair on the top, my natural unreddened colour, not to get rid of the grey. I'm very happy to be grey and I keep the grey at the bottom at the sides. But because just so it doesn't look this weird and there's nothing wrong with being a redhead, but there is something wrong with being a redhead, a darkhead and a greyhead and just to give a little bit of homogeneity.

19:44and so you could argue there's a bit of vanity in there but it's also when you do what I do on telly you'd be amazed people asking I mean I just think why are people asking about my clothes but they will where are your clothes coming from what are you doing what you know all of it so I think that's probably the biggest bit of my beauty regime and it also makes your hair look thicker which is great when you're dying on the top so there's an added advantage there is that I think just for and question time listeners this should not be said outside the question time room. This is only for regular question time listeners and not to be discussed elsewhere.

20:19Fair? I think you've said it now. It's out there. Okay. But in all seriousness, SPF, you do use SPF, don't you? I don't use SPF. I use SPF when I'm out of the country. You should use it every day. Well, I use it in the summer. I don't use it in the winter. Okay, fair enough. I mean, to be fair, you know, I'm walking everywhere. I put my hood on and I use it when I play golf because often you're out in the sun that way. But I don't do it in the winter, I'll be honest. But as soon as it gets to summer, I have a little suntan lotion by the door that I put on when I go out. Right. So after that, after the bombshell about my beauty regime, you've gone wild, you've gone rogue, you've thrown the funny in earlier than you normally would.

21:03Please tell me we're going back to format and you've got a caller for me. Of course. Robert in Glasgow is here. Hello, Robert. Hello, Martin. Hello, Matt, our lovely curator of questions. Oh, yes. Well done. It's stuck. It's stuck. Yeah, it is stuck. That is who you now are. And Robert, a Robert with a Scottish accent. As a pun man, I'm just going to try and grit my teeth and not say anything. What's your question? Thank you. There's always been a focus, quite rightly, on reducing costs of debt. But my question is about what to do once you're out of debt. I'm 42 just now. I live with my wife and my 10-year-old daughter.

21:44I work in the civil service by day and have done so since I was 18. Now, during that time, I've been promoted a few times and I could probably say that I earn a reasonable salary when compared with some. Good for you. However, when I was 18, I made quite a few poor financial decisions, I'll say, and debt began to build up. I refinanced this several times and things just got worse and worse. I then got used to living in credit and having that revolving credit and never actually having access to my full salary. And that situation continued until my mid-30s. And really around about then I began to get sick of it and I decided to do something about it because I was really struggling quite significantly.

22:34so I took your advice and contacted StepChange who then helped me through some things and basically for the last five years or so I have been using a significant proportion of my salary every month to pay down my debts and next week is my final payment oh your debt free day my debt free day yes will be next week and I'm very much looking forward to it thank you so really I will have I don't have just now any credit cards, any car payments, any loans, anything like that. The only thing that's there now is my mortgage, which is fine. So really, my question is, what now? What do I do when I have no unsecured debt?

23:18How much should I save or invest? How should I allow myself luxuries? I know that these might, to some people, sound like some kind of silly questions. But literally, at no point in my adult life have I worked and had no debt. and perhaps my family background money was always a problem as a child for my parents and so I've never really seen that positive financial situation so how do I go about living the rest of my life enjoying this kind of newfound freedom whilst building a future for my family and perhaps most importantly for me being a positive role model financially for my 10 year old daughter for the future so that she doesn't have to go through what I haven't through.

24:02first of all if it's not patronizing to say well done you're you're at a wonderful part now but i know it won't have been easy to get there and it takes discipline and self-control and a change of your brain set and i think that will already make you a good role model for your daughter and i would be honest and opener with her i would go next week and i you know i think the three of you should mark this as an occasion and you should actually say and you should explain to her what debt means and what it was and you made mistakes young and it's and now and that this means life is going to be better for all of us so huge huge congratulations from me i genuinely my eyes watered when you said you were going to have your debt free day because i know just how big a moment that is and my ultimate philosophy about money i mean people always think that i'm about being tight it's absolutely not that i am about getting the most happiness out of your life by looking after your money in the right way and being in debt is a misery and it's a misery that is so much bigger than whatever you materially buy with what you've borrowed from especially the unsecured debt so getting out of it is is a real joy and it's a joy to hear but you're right those are important questions now so it sounds to me like it's almost like someone who's been on a diet and when you finish on the diet you still feel nervous about eating things because you've trained yourself so hard not to eat and that you're in that brain set at the moment is that fair i think it is and actually it's funny so i'm um we have it at my car just now it's been paid off and paid off for about a year because that wasn't part of the arrangement um when i when i first made it and i'm now thinking it's now getting to the point where i'm having to pay significant amounts of money to keep on the road but i'm too scared to actually go and buy another car on credit because i don't want to have that over me i've enjoyed not having the car payments so really i don't mind paying relatively large repair bills for the car because that's maybe only worth two three four months of a car payment and so i'll end up better off in the long run but at some point the car the car will become unrepairable and so really there's things like that which have um kind of get in the way of my mindset now i'm scared to want to go and do anything now so the first thing i'd say to you is that actually genuinely when we look at the psychology of money one of the problem money cast is miserliness.

26:20Now, I'm not accusing you of that. You've done exactly the right thing. But it's important to understand that money and the money that you earn has a purpose. And that purpose is to give you the best life possible. Now, if I were looking at it and saying you've been putting away£850 a month, you need to make a decision. I think you certainly, because you've got that wonderful discipline that you've set up, you could still be putting aside£400 a month and using that to build or 500 pounds a month and using that to build a sound financial future and the rest of that money you need to and i'm not made only you can make the decision of where you are on that so you know you might decide it's 600 pounds a month 700 you want to put away but the rest of that money you need to actually give yourself permission to spend to enjoy and to improve your quality of life now because you're doing very well on it so you know and And if that's going well, maybe I can put that to a new car payment.

27:16Then you can put it to a new car payment if that's what would give you the maximum amount of utility, the maximum amount of happiness in your life. And I think you actually need to sit down, do a budget and work through what am I allowed to spend and what am I not allowed to spend. And funnily enough, for someone with your mindset who's had to rigidly put themselves into that mindset, I think a budget would be really helpful. so that you i don't know if you do do you do piggy banking or jam jarring where you have separate accounts for different things yes right so that's still fine and then of course the the advantage of that is if you have if you give yourself a discretionary spend account yeah and you have one an account which and then you look in that and it's got a thousand pounds in then you can spend a thousand pounds guilt-free on something that makes you happy i mean you do all the money mantras is it worth it will i use it all of those things but on something that's going to enhance your life you have to give yourself permission to do that and you can still do that and be a good role model to your daughter because you're going to be saving a lot for her future and for your future so i think it is time to do a budget but from a good reason to give yourself permission to spend and to have an account where the money in it is it's almost your guilt-free spending account yeah because would that help absolutely it's very exciting even the thought of it because what we've tried to do with my daughter so far is to show how you get money by working, you know, and you get hopefully a good job by studying well at school.