Finances, what should I do?

[guest2013-1]

Hi guys,

My expenses now are pretty much set in South Africa. I don't use my credit cards (other than if I'm paying for something in SA I will be using, but that has only been my flight back now)

So seeing as it's "stabalized" I figured I could take a hit on my overdraft (note I am already in my overdraft) and pay my entire salary end of this month into one of my credit cards and close it entirely.

This obviously means I haven't covered my expenses and my overdraft would be used to cover those, so for the next few months I will be pumping my salary back into my overdraft (which should go down by about a healthy 4k a month) and once I can afford to take another hit on my expenses covered by my overdraft and then pay one half of that into my other credit card (which is half of the one I have now) and the other half into my personal loan (which is currently my biggest loan at the moment)

And then work my overdraft back down to where I can afford to not pay in my salary into that account and then hit my personal loan with my entire salary again.

What do you guys think of this plan? Will this save on interest? Am I being a bit dof? Missing something?

Let me know

 

[paulrr]

Debt reduction is always wise - but lending from Peter to pay Paul seldom achieves much. Unless the interest on the one is much higher than the other it is probably best to create a budget plan to settle each of the debts. I would see how much I could I afford to pay over and above the minimum payment into each of the cards and set about reducing the overdraft. Many personal loans are set up in a way that settling them early has no benefit to you i.e. they still charge the full interest amount. MHO.

 

[Ou grote]

Another school of thought is to pay off your smaller debts first.
Less admin, and u feel you're doing something.
Then worry about the others later, from highest to lowest interest rate.

Also try consolidating them.

 

[guest2013-1]

True, at the moment the personal loan is more like a credit revolving loan. I pay back a fixed amount each month but the interest is almost 2/3's of the amount I'm paying.

The credit cards as well. I'm paying about R670 a month on interest with my overdraft almost at the brim and figured I'd do more good with my entire salary going into a chunk of my other debt, save on about R1300's worth of interest on those and then move forward like that, but I'll have to think about it.

I'm just afraid I'll lose hope/focus on the entire debt reducing drive if I break up the extra I get into smaller chunks and pay that off over and above what I do now.

If I have to think about it I'll be able to pay off both my credit cards in the next 6 months if I do this. Erf.

Back to the drawing board I guess. Have to look closer at the interest charged to really be able to make a decision.

 

[Ou grote]

True, at the moment the personal loan is more like a credit revolving loan. I pay back a fixed amount each month but the interest is almost 2/3's of the amount I'm paying.

The credit cards as well. I'm paying about R670 a month on interest with my overdraft almost at the brim and figured I'd do more good with my entire salary going into a chunk of my other debt, save on about R1300's worth of interest on those and then move forward like that, but I'll have to think about it.

I'm just afraid I'll lose hope/focus on the entire debt reducing drive if I break up the extra I get into smaller chunks and pay that off over and above what I do now.

If I have to think about it I'll be able to pay off both my credit cards in the next 6 months if I do this. Erf.

Back to the drawing board I guess. Have to look closer at the interest charged to really be able to make a decision.

U have a similar problem to my ex.

Also try to get hold of microsoft money to keep track of things.
Has a debt reduction planner.

 

[cerebus]

There is such a thing as priority and non-priority debt. Priority debt is things like council bills and taxes - so called because you could be imprisoned or lose your house if you don't pay them. Non priority debt is loans and so forth - the problem is people confuse them because the loan sharks make a bigger noise than the government.

In your situation you haven't provided much information on the different types of loans that you have or the interest you are being charged on each. Personally there is nothing I hate more than being in my overdraft. I would rather build up my account balance and gradually pay my credit card (as long as you pay the minimum, most credit cards don't hit you with a lot of interest). I would rather not worry too much about the credit card and focus on the personal loan. But that is because of my personality. I hate to have any kind of overhanging debt. (thankfully I have practically zero debt at the moment).

 

[Ou grote]

There is such a thing as priority and non-priority debt. Priority debt is things like council bills and taxes - so called because you could be imprisoned or lose your house if you ...

Or as my mom always told us kids: "First u buy what u have to, then u buy what u want to."

 

[guest2013-1]

what if i have to buy what i want to?

 

[cerebus]

It's more about identifying which of your debts are more urgent. Credit card debt is not urgent unless you are at the point where they are going to up your interest rate to something really exorbitant. You can afford to pay it off on an as and when basis. Is your personal loan with the bank as well? What kind of size is it?

 

[Ou grote]

what if i have to buy what i want to?

Did that...
Then u get a slap upside the head and told that: "Nobody likes a smartass."

 

[Waaib]

I've been through a similar vibe to your vibe at the moment. What I did was (as suggested by alf101) pay off smallest debts first.

So you pay the minimum on all debt. Then pay any extra you have into the debt with the smallest total amount. As soon as it is paid off you move onto the next smallest amount.

The key is that you add the amount you where paying on the first smallest debt (the mandatory amount) to the next debt you are tackling plus the extra cash you have. So as you go you pay more and more into your debt. I was very surprised how quickly it compounded and was all paid off.

I ignored the interest amount on each debt because by paying more the idea was to pay it all off as quickly as possible so I would never pay all the interest anyway.

Also as each debt goes give yourself a small reward. What I did was skip one month in between debts and blew the extra amount on something for myself instead of paying off the next smallest debt. The next month it was back to debt reduction plan.