Fighting Debt

By now, I was really hoping to have cleared all my credit debt from the last few years but I seem to be stuck in a bit of a rut lately and the total is just not going down at all. Of course Christmas doesn't help, but even so, I should have been able to clear the debt by the end of last year anyway.
The graph on the left shows how the majority of my debt has reduced over the last few years (green line) mostly through transferring into interest-free accounts and using any windfall payments to reduce the debt. Annoyingly, I no longer have an interest-free account and all the debt is on my regular credit card (pink line). I think I will have to employ my previous tactic of placing it all on a 0% card again and making sure I pay off my regular card every month. This all goes to show just how disciplined you have to be to pay one of these darn things off. Looking at my graph, there was a point last year when the green and pink lines crossed - this signifies a point where there was just £300 on each card - happy days...
Writing this has just decided me - I will get a credit report done first as I probably have a couple of extra accounts open that should be closed especially as I have opened three new 0% card accounts in the last couple of years. I learned early on that a prospective lender will look at how much potential credit you can draw down off your existing cards before they will consider extending any credit to you, so it is important to ensure that you close all your old defunct accounts. When I have closed all the accounts I don't need, I will look around for another interest-free credit card as that seems a really effective way to pay off debt without accruing any more interest - and then by the end of the year, I am sure I will have paid it off....finally...

Munny for Nuthin'

I have embarked on the final leg of paying off my credit-card debt this week. My method for paying off my debt (as I have documented on this blog previously) has been firstly to STOP SPENDING, and secondly to transfer my credit-card debt to a '0% for balance transfers' credit card.
Now these offers usually last for around 12 months, so if you have more debt than you can pay of within 12 months, you may have to do the same again. Bear in mind that a small charge (usually about 3%) is charged for the transfer, apart from that every penny you pay comes straight off your debt - no interest!!
I have done this twice already over two years and I have just opened my third account this week, with a view to paying off ALL the debt within the next 12 months. I will admit that I use a different card for emergency purchases, but pay this off every month.
It pays to ensure you close down accounts that are no longer in use otherwise you may find that you are potentially exposed to too much credit for you to obtain another card. I got refused when I first tried to get one of these cards, and when I got my credit report, I found that I have five or six unused but still open accounts. These accounts all had large credit limits meaning that potentially I could run up a massive debt overnight, under those circumstances it would not have been wise for the credit card provider to allow me to open another account. I closed the unused accounts and have closed off any of the new 0% accounts as soon as I no longer require them. The graph on the left shows the decline in my debt over the last two years, you can read more about it here..

Getting out of Debt

I have posted on debt and controlling your finance on several occasions as it is a subject that I feel quite strongly about. In many cases a few adjustments to spending patterns should be sufficient to bring finances under control and make them manageable. However, the longer we go on spending without budgeting, the worse the problem can get until an exterior solution is required. When things have reached the point where even with strict self-imposed controls, the interest you are paying is pushing your spending beyond the reaches of your income, it may be time to consolidate debt. Debt consolidation is basically a loan that will cover your existing debts under one account. This loan effectively pays off the individual debts that you have leaving you with a single payment which is hopefully within your budget. If you are considering this route, please note that this does not mean you can carry on spending more than you earn otherwise you will end up in even worse trouble. This type of step must be only undertaken if you have reached the point where you are ready to change your spending habits for the better.
Using a service like No Debt Today allows you to get a free consultation to discuss your debt problems and find the best way out of them. This website is clearly laid out, easy to understand and provides helpful advice about debt. Any expert can tell you that you need to pay off the most expensive debt first, but how do you work that out? No Debt Today will take care of working out the best approach to get you debt free at your pace.

Interest free credit card offer from Mint

One of the steps to overcome credit card debt that I blogged about in my 5-part series entitled ‘the quickest way to make money’, is to get yourself an interest free credit card. Having an interest-free period is a prime opportunity to pay off some of the capital of your debt. Currently ‘Mint’ credit card are offering 0% interest up to August 2008 on credit transfers with another opportunity to extend beyond that period. If you have a credit-card balance that you are finding it hard to get on top of and you haven’t yet got a 0% credit card, you should definitely consider this deal. If you do switch credit-cards don’t forget to close your old account as having open but unused credit card accounts on file can negatively affect your credit rating. That tip is from personal experience!!

The quickest way to make money - part 5

The quickest way to make money is to SAVE money - this has been the theme here for the last 5 days, you can see the previous posts here or by selecting the quick search term 'debt' in the sidebar:

Part 1, Part 2, Part 3 and Part 4

the final offering in this series will talk about other ways of saving money other than the major theme of the previous 4 days (abandoning the credit card).

My starting point for money-saving has been the Money Saving Expert website - this is geared towards UK money savers, but the content here is priceless to anyone. Martin has all sorts of advice to offer, and for the UK market, comparisons of all utility services (gas, electric, phone) to give you some pointers as to whether you should think about changing service providers.

You don't need to do too much research because Martin has teams of researchers doing it all for you. If you are not based in the UK, then you should take steps to investigate how much you can save on your current outgoings for these type of services (where there are alternatives). In the last 6 months I have changed my Gas and Electric provider, my telephone and internet services provider. I have continued to search for bargains and have found how I can cut in half my already very low website hosting bill.

The message of this series has been:

1) by all means seek out new income (from paid to blog or whatever scheme you choose) but

2) don't forget to make sure that you are not spending money that you don't need to as this could easily wipe out your extra income.

I may make $100 in May by blogging, but by changing four of my service providers I will also SAVE $100 in May, and by transferring my debt to a 0% credit card I will actually saved another $100 in just one month. there is no reason why you too, if you employ some of the priciples in these 5 articles cannot be $200 better off each month, and if you start blogging like me, you will easily be able to make it $300 a month.

The quickest way to make money - part 4

This post follows on from Part 1 , Part 2 and Part 3

(See all 5 posts by clicking on the 'debt' quick-search link in the sidebar)
The truth is this, there are a very significant proportion of people in the Western world who are simply overspending. When you sit down and calculate realistic income versus outgoings, too many households will discover they are literally spending more than they are making.
So how does this happen? Credit cards and loans are the simple answer, the solution is not to consolidate with more loans – the solution is to STOP SPENDING…. However, there is another closely related truth, the Western economies would be dealt a huge blow if everybody did actually stop overspending. This is not hyperbole, a downturn in spending on ‘gadgets’ and non-essentials would bring some industries to their knees. However, as long as controlling ones spending does not become a major trend, we can probably rely on the debt-ridden population to prop up the economy.
If you are seriously considering taking control of your spending, then I applaud you – you don’t need to take the exact steps that I have, just employ some resolve, take control of your outgoings and watch the debt fall. I was inspired to write this whilst reviewing another blog, and would like to suggest that you check out the tips and advice at http://financial-independence.net/

I also found some very revealing facts whilst researching this subject which I have copied here:

Total UK personal debt

-Total UK personal debt at the end of March 2007 stood at £1,318bn. The growth rate increased to 10.5% for the previous 12 months which equates to an increase of £116bn.
-Total secured lending on homes at the end of March 2007 stood at £1,104bn. This has increased 11.5% in the last 12 months.
-Total consumer credit lending to individuals in March 2007 was £214bn. This has increased 5.9% in the last 12 months.
-Total lending in March 2007 grew by £10.8bn. Secured lending grew by £9.9bn in the month. Consumer credit lending grew by £0.9bn.
-Average household debt in the UK is £8,833 (excluding mortgages) and £54,452 including mortgages.
-Average owed by every UK adult is £28,024 (including mortgages). This grew by £168 last month.
-Average outstanding mortgage for the 11.6m households who currently have mortgages is £95,170
-Average interest paid by each household on their total debt is approximately £3,525 each year.
-Average consumer borrowing via credit cards, motor and retail finance deals, overdrafts and unsecured personal loans has risen to £4,550 per average UK adult at the end of March 2007.
-Britain's personal debt is increasing by £1 million every 4 minutes.

Today in the UK:

-Consumers will borrow an additional £318m today
-The average household debt will increase by over £13 today
-300 people today will be declared insolvent or bankrupt
-Bank and building societies will hand out £1bn in mortgages today
-Citizen Advice Bureaus will deal with 5,300 debt problems today
-The average car will cost £15 to run today
-The average home will cost £30 today to run
-Raising a child to the age of 21 will now set you back £23.50 daily
-The price of a typical house will increase by £46 today
-24.3m transactions worth £1.3bn will be spent on plastic cards today
-£82m will be spent online today
-1/3rd of all groceries we buy today will end up in the dustbin.

read the full article by Richard Talbot on www.creditaction.org.uk here

(extract used with permission of Credit Action)


I plan one last post in this series for other money-saving tips just to round off the subject.

The quickest way to make money - part 3

This post follows on from Part 1 and Part 2
This fundamental change in the way that we now view our finances (ie. get rid of credit cards and use a cash budget to control our weekly expenditure) has improved our financial status tremendously. When you consider that this change came about because our family annual income dropped by thousands (ie. my wife's wages), it is bizarre to find that our debt (well, to be honest MY debt) has more or less halved in less than a year. This is purely down to taking on board that all spending must be accounted for (a 'look after the pennies' philosophy) and controlling expenditure with cash. I have even walked the two miles to work on occasions to achieve 'non-spending' days and to exercise the discipline of only buying fuel when the cash is there to do it.
There is of course, a cost... My personal purchases have been severely curbed, I would like to have a nice new flat-screen for my PC at home, but for now, my ancient CRT will have to suffice. We have not been on a holiday for a long time, but I think we can live with that in the short-term. When you think of it, it is exactly this type of spending mentality that fuels debt: 'We must go on a foreign holiday...', 'I must have a flat-screen for my PC or wide screen HDTV' - these are the purchases which often end up living on our credit cards for far longer than a month...
In the next post, I will talk about the wider impact of this philosophy and provide some resources for those serious about saving money.

The quickest way to make money - part 2

This follows on from part 1 where I talk about reducing debt as the quickest way to make money.
Part 1 asked the question: How can we live without credit cards? For this you will need RESOLVE – ie. you need to recognise that you can no longer have the things that you don’t have the money for. This covers everything from a bar of chocolate to a new printer for your PC…if you don’t have the money for it in the bank, don’t have it! This is a tough lesson, but it’s also very logical and how everyone used to live before credit cards came along. Never do your food shopping on your credit card – use cash or a debit card instead (a debit card takes the money straight from your bank balance). In my quest to reduce debt, I devised a budget and put aside an amount every week for food and groceries. We take out this amount in cash every week and when it’s gone, it’s gone… we have halved our grocery expenditure by doing this (and we’re not starving either!). The amount we set aside is basically, the portion of my income that I can afford to allocate to our joint account less the monthly direct debits. All it takes to achieve this new manageable level of expenditure is RESOLVE (look it up…). If you don't employ reslove in large quantities, you will not escape the debt. In the next post I will talk about how this has changed our lives.

The quickest way to make money

In my experience, the quickest way to make money is to SAVE money. If you plan to collect water in a bucket, first you should stop up any holes in the bucket…Last year we decided that our little family would try to survive on just one income. I embarked on a plan firstly to stem the overspend and then to generate additional revenue streams where possible. So how do you stop the overspend that is endemic in our society? Two words: ‘credit cards’. The single most important factor fuelling our over spending and keeping us poor is what we have in our wallet. My primary aim has been to reduce credit card debt, and this is how I set about doing it. Firstly I tried to consolidate my debt onto one 0% offer card – failed because had too many accounts open but inactive. I then took steps to obtain my credit report and set about officially notifying companies that I was closing the accounts that were inactive. I successfully applied for another 0% card and transferred all my outstanding debt onto it. No interest means that 100% of my payments go to reducing my debt, but there is one more vital step…. ZERO credit card spending…. This is the hard part, but if you want to see immediate results, it is the only way. Extra income from investments and bonuses has been put to good use reducing this debt and in less than a year, the debt has halved. My strategy will be to pay off what I can and then transfer to another 0% deal when this one expires – watching the debt drop month by month is very encouraging and has given me quite a buzz. So how do you survive without using a credit card? That my friends, will be unfolded here in subsequent posts over the next few days….