Help me start!

SunflowerMelissa · 8 August 2015 at 2:07PM

Hello

I am looking for some advice and help. I am 24, have no children and live with my partner. I earn 25k a year (plus bonus of around 2k at Christmas).

I have 3500 overdraft and 4500 credit card. So 8k in total

I really want to pay this off and I would love some advice about how to even start this process. Live in London so costs quite high. Rent, bills and travel is 800 pcm and minimum credit card is 150 plus overdraft interest of around 50. So left without about 550 a month to use. How can I save money and pay down debt most effectively? I am obviously hoping to use Xmas bonus to wipe out as much overdraft as poss but amount is not set and could be around 1k after tax.

Thanks so much in advance!

Movingon5464 · 8 August 2015 at 3:16PM

You could see if you could transfer the credit card balance to a 0% card and then focus on paying off the overdraft first as this is incurring interest. Now is the time to do this as you have a good amount to put towards this each month. You could probably be debt free in 18 months and be able to start saving for your future. I know it is hard to live frugally when you are young and see your friends spending lots having fun but you will be glad you did it later when you might want to have children, buy property etc

ChaotiC · 8 August 2015 at 3:49PM

Is the credit card currently interest free? If so how long until it starts accruing interest?

You'll want to snowball your repayments. Pick the highest interest debt (I imagine the overdraft) and start paying that down as much as you can before moving on to the next debt. The Snowball Calculator at whatsthecost.com might help you figure out what can be achieved.

If you can use £500 a month towards debts you should be able to clear the overdraft before Feb (if you use the £1k xmas bonus) then move on to tackling the credit card which would take 9 months @ £500 a month. However if you have a promotional rate that expires long before then you'll need to reconsider your plan.

fatbelly · 8 August 2015 at 4:11PM

You could use a money transfer card to clear the overdraft (which sounds like a high effective interest rate). There's a small fee and a long 0% period (details depend on which card you go for)

http://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs

Choose a Virgin card and get 6 bottles of wine

http://www.moneysavingexpert.com/news/cards/2015/08/virgin-money-offers-free-case-of-wine-on-its-credit-cards

Bobarella · 8 August 2015 at 9:59PM

Hi there
I'm sure it will come up so I will say it myself, rent is likely to be one of your biggest costs especially if you are in London
Do you think you old cut back there at all? Any temporary changes that would enable you to cut back on that biggest cost would all then be free for debt slaying.

Good luck

Bob

LavenderGrove · 9 August 2015 at 9:50AM

Hi Sunflower Melissa

You've taken the first step by coming on here to get advice. As most people will tell you a budget is the key to sorting your debt. I didn't learn about budgeting until 50+.

The biggest help I found was an app You Need a Budget (ynab) - need laptop+smartphone. You can get a 30day free trial and then decide if its for you (I got mine from Steam for £30) and I can honestly say its the best money I've spent, it's taught me how to spend/budget my money what an eyeopener that was. Once I'd input the information, which takes time, it allowed me to see where my money was going. There is an advice thread on here which is great too.

In my first year I paid off a about a quarter of my £10,000+ debt - my salary is less than half of yours so I know it can be done. Just to say, no I don't work for ynab or have any connections with the company - just love how it's transformed my thinking about money:)

I didn't want to get new credit cards so did a balance transfer between my cards and got 16months 0%. I pay cards by DD and always pay more than minimum payment.

Also, there is an SOA you can fill in and people will comment/advise on how you might be able to save - though that may not be for you just yet - worth considering maybe.

Hope that helps.

Good luck on your debt free journey.

LG:)

Help me start!

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