living together - how to budget

ktgil

matiz1 wrote: »

Basically, you make a list of all your debts from smallest to largest.

So, for example:-

Credit card €1,000
Car loan €5,000
Personal Loan €7,000
Student loan €10,000

You pay minimum payments on all loans, but pay extra off the smallest debt. Every spare penny should go to paying off the smallest loan. When that one is cleared, you move onto the next smallest debt and pay everything onto the next smallest, and so on until they're all cleared. It worked wonders for me.
There's lots on the internet about it, just do a search, you'll find tons of stuff.

Hi, I understood the snowball method to be about paying the extra to your debt with the highest interest rate, rather than to that with the smallest balance. Otherwise, you may be paying off a lower rated debt while costing yourself with a higher one. Psychologically, knocking off a smaller debt might give money repayment a boost, but you may end up paying more...

I though it worked like this:

Credit Card 1 £1000 17% APR
Credit Card 2 £ 343 12% APR
Loan £4500 14% APR


So you would be paying off Card 1 with the highest APR first, then the Loan and then the Card 2.

By paying off the lowest first - the £343 - you'd be paying longer on the 17% and 14% agreements.

edinburgher

Just wanted to pop in again to congratulate you on being listed as the thread of the week on MSE Martin's regular e-mail update. Hopefully lots more folk will pop in to offer tips as a result

Woodsylou

wahoo! haha

i am going to read up on the snowballing thing, makes sense.

debtmuncher

ktgil wrote: »

Hi, I understood the snowball method to be about paying the extra to your debt with the highest interest rate, rather than to that with the smallest balance. Otherwise, you may be paying off a lower rated debt while costing yourself with a higher one. Psychologically, knocking off a smaller debt might give money repayment a boost, but you may end up paying more...

I though it worked like this:

Credit Card 1 £1000 17% APR
Credit Card 2 £ 343 12% APR
Loan £4500 14% APR


So you would be paying off Card 1 with the highest APR first, then the Loan and then the Card 2.

By paying off the lowest first - the £343 - you'd be paying longer on the 17% and 14% agreements.

it gives you the choice of doing it both ways does it not? some people like to see the smaller balance being knocked out others like to see the one with the higher apr going. could be wrong but when i looked at it last year you had a couple of choices of which one to go for first

knitpippa

I earn about 500 a month (take home) more than my boyfriend. I've worked hard to get the job I have whereas he's happy coasting in his, which is fair enough and is his choice. But I think if we both had the same amount of play money at the end of the month I'd be a bit put out really.
The way we've worked it is that we pay the rent as a proportion of each others take home salaries, all bills are split equally (if you saw how much he eats, beleive me, he's getting a good deal out of that! Not to mention the leaving lights on...), and we sort out our seperate social lives. Obviously that leaves me with more money left over, but I'm an avid saver, so most of the extra that I have goes into an account, and then if we do nice stuff together like going to restaurants etc, I pay. I don't want to NOT do nice stuff together, I can afford to pay for both of us, so that's where we even it out a bit more.
I think if we did the equal money at the end thing, he'd spend it on going to the pub with mates, which I'd resent as it'd in effect be my money. This way the spare money is in a savings account that'll eventually go towards our house deposit (hopefully!), and yes I suppose I live more frugally than I need to, but because our spending pretty much matches each others there's no arguments about someone doing something the other can't afford (or if there is a bit of hesitation and I want to do it, then I pay for both of us), and the savings stack up.
Having said all this, we've been living together for less than a year and are a few years away from the whole "buying a house together" thing. I'm sure by that time we'll have changed the arrangement, and our salaries may have evened up etc.

TotallyBroke

ktgil wrote: »

Hi, I understood the snowball method to be about paying the extra to your debt with the highest interest rate, rather than to that with the smallest balance. Otherwise, you may be paying off a lower rated debt while costing yourself with a higher one. Psychologically, knocking off a smaller debt might give money repayment a boost, but you may end up paying more...

I though it worked like this:

Credit Card 1 £1000 17% APR
Credit Card 2 £ 343 12% APR
Loan £4500 14% APR


So you would be paying off Card 1 with the highest APR first, then the Loan and then the Card 2.

By paying off the lowest first - the £343 - you'd be paying longer on the 17% and 14% agreements.

debtmuncher wrote: »

it gives you the choice of doing it both ways does it not? some people like to see the smaller balance being knocked out others like to see the one with the higher apr going. could be wrong but when i looked at it last year you had a couple of choices of which one to go for first

It does give you the choice of doing it both ways. In this particular instance by paying off the smaller one OP will be having a lot of interest added onto the bigger amounts. So in affect they will not have reduced by much.
If OP made the set amount on the small debt and overpaid on the £1000 the smaller debt would have been paid anyway. Getting a lower amount of interest on a relatively small loan will not impact too much on the length of the loan.
OP then has the choice of using that spare amount each month on overpaying the 1000 one or overpaying on the £4500 if that is permitted.

jojitsui

debtmuncher wrote: »

out of interest how old are you?

You should never ask a lady her age :rotfl:

debtmuncher

jojitsui wrote: »

You should never ask a lady her age :rotfl:

:p:shhh::D

bryonyhines

I earn twice what my partner does, but I have debts equivelant to my share of the house.

The house is 50/50, as if I was living with a flat mate, debts are mine, and if he doesn't have enough to last him the month, I pay for drinks/going out etc, out of the kindness of my heart!

It works well because he is no worse off than if I didn't exist! lol :cool:

Woodsylou

yeah i think we're going to have to re-think things to be honest. I have been trying to ensure that we've both got the same disposable income at the end of the month, but that basically means im supplementing him by about £400 a month and it's not really my fault he has debts etc. i don't mind paying more, not at all. and i don't mind paying the full mortgage as the property is mine, but i think that's being generous enough.

although i am having a bad day today and my change my mind tomorrow!

fingers crossed we win the lottery tonight!