Thank you for your advice !

blunomore

blunomore

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If you have additional money, which debt would be better reducing first -
-the homeloan; or
-the credit cards (since the interest rate on these is so high)?
 
Funny I was just posting the exact same thing. My example was :

Owe R100,000 on the car and R100,000.00 on credit cards, loans, overdrafts etc. I've just received R500,000.00. What do I kill?

His advice was the short term (credit cards, loans, overdraft) but not the car. Rather keep paying that monthly as I have been and use the capital for investment.

Going by this, I'd guess kill the short term high interest and leave the home loan.
 
blunomore said:
If you have additional money, which debt would be better reducing first -
-the homeloan; or
-the credit cards (since the interest rate on these is so high)?
Click to expand...

The highest interest rate will be my deciding factor.
 
Dolby said:
Funny I was just posting the exact same thing. My example was :

Owe R100,000 on the car and R100,000.00 on credit cards, loans, overdrafts etc. I've just received R500,000.00. What do I kill?

His advice was the short term (credit cards, loans, overdraft) but not the car. Rather keep paying that monthly as I have been and use the capital for investment.

Going by this, I'd guess kill the short term high interest and leave the home loan.
Click to expand...

i agree, definately the short term debt first.

however, when deciding on whether to invest the extra of pay off the car (as used in your example) you would have to first consider how much your investment would bring in and compare that with how much you'll save on your car. generally the investment option is better as you've already included the car payments in your (hopefully) stable budget. this way you can keep living as you normally would and earn a bit extra on the investments, which you can either reinvest again or keep aside for unexpected expenses.
 
Dolby said:
Funny I was just posting the exact same thing. My example was :

Owe R100,000 on the car and R100,000.00 on credit cards, loans, overdrafts etc. I've just received R500,000.00. What do I kill?

His advice was the short term (credit cards, loans, overdraft) but not the car. Rather keep paying that monthly as I have been and use the capital for investment.

Going by this, I'd guess kill the short term high interest and leave the home loan.
Click to expand...


I thought the same, yes.
 
Franna said:
Have a look at:
http://www.news24.com/News24/MyNews24/Your_story/0,,2-2127-2128_2333355,00.html
Click to expand...


Our problem is this: we constantly - and by necessity - incur credit card debt which will take long to get rid of. We are consultants and in the line of duty, we fly, stay in hotels and rent cars. This we have to pay with credit cards, then claim it back from the clients as expenses and while we wait to get paid, we have to carry this debt. It is too much to pay in cash, because it would cause liquidity problems. So as soon as we pay the credit card, more costs are incurred !!
 
Dolby said:
Funny I was just posting the exact same thing. My example was :

Owe R100,000 on the car and R100,000.00 on credit cards, loans, overdrafts etc. I've just received R500,000.00. What do I kill?

His advice was the short term (credit cards, loans, overdraft) but not the car. Rather keep paying that monthly as I have been and use the capital for investment.

Going by this, I'd guess kill the short term high interest and leave the home loan.
Click to expand...

Rather pay the car off and then set up a stop order to invest that same installment amount. DON'T pay ANY interest if you can. Rough guestimate you will pay 14% interest on the car but you will only get 11% if you invested the money. 3% wasted! :D
 
blunomore said:
Our problem is this: we constantly - and by necessity - incur credit card debt which will take long to get rid of. We are consultants and in the line of duty, we fly, stay in hotels and rent cars. This we have to pay with credit cards, then claim it back from the clients as expenses and while we wait to get paid, we have to carry this debt. It is too much to pay in cash, because it would cause liquidity problems. So as soon as we pay the credit card, more costs are incurred !!
Click to expand...
Oh...thought you meant for individuals. If its for a business then you'd best read up on the basics of capital structure.

Trying to finance a debt that exists during the whole year via short term financing is a guaranteed way to run into liquidity troubles.
 
credit cards

the money you save on those you can then always push into the homeloan

rules to paying off debt is simple:

smallest debt first. if you only have small debts, smallest debt with the highest interest rate first.

Then go one bigger.
 
blunomore said:
Our problem is this: we constantly - and by necessity - incur credit card debt which will take long to get rid of. We are consultants and in the line of duty, we fly, stay in hotels and rent cars. This we have to pay with credit cards, then claim it back from the clients as expenses and while we wait to get paid, we have to carry this debt. It is too much to pay in cash, because it would cause liquidity problems. So as soon as we pay the credit card, more costs are incurred !!
Click to expand...

Credit cards have a 40 day interest free bearing on them usually. Try to pay off your entire credit card each month by settling the debt.

credit card debt in no way shape or form is necessary. Even if you're forced to use it to cover expenses you will later get back because of clients, there is no reason why you shouldn't just settle your entire credit card each month. But be careful, clients who don't pay within that month makes you lose out due to interest on there.

So I'd suggest trying to budget and plan for expenses like these beforehand and maybe, rather than cc debt, negotiate a better rate at the bank for an overdraft. Overdraft interest is usually less than cc interest (or better negotiated than).

On 45k you'll pay about R750 (if you didn't negotiate) per month interest. Keeping that in mind, charge the client for the travel costs + interest you would pay on this.

Your account shouldn't be in arrears for more than a month though
 
kill the cards kill the cards kill the cards kill the cards kill the cards kill the cards
 
blunomore said:
Our problem is this: we constantly - and by necessity - incur credit card debt which will take long to get rid of. We are consultants and in the line of duty, we fly, stay in hotels and rent cars. This we have to pay with credit cards, then claim it back from the clients as expenses and while we wait to get paid, we have to carry this debt. It is too much to pay in cash, because it would cause liquidity problems. So as soon as we pay the credit card, more costs are incurred !!
Click to expand...

My advice - open a margin/float account. Dont finance expenses as this will only serve to further decrease your GPs. Open a separate account with no financing facilities and deposit the profits from your next project into this account - rather suffer one month to make additional, residual profits in the next. This solves your debt requirement issue and increases your GPs - no brainer...
 
DJK said:
My advice - open a margin/float account. Dont finance expenses as this will only serve to further decrease your GPs. Open a separate account with no financing facilities and deposit the profits from your next project into this account - rather suffer one month to make additional, residual profits in the next. This solves your debt requirement issue and increases your GPs - no brainer...
Click to expand...


Very nice advice, except for the last bit.

Thanks!
 
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