Want to avoid slipping into debt

formz

Hi everyone, bit of a noob set of questions I know but would apprecitate some simple feedback if would be so kind!

I'm 25 and haven't ever really sorted my overdraft and ccard issues properly after university for one reqason or another and need to shift it basically before i get into any more trouble.
I'm currently about £1000 overdrawn and although its interest free, its only for another few months.
I've got about £900 on a credit card which I have been paying interest on for the last 2 months (I know!).
But... I do also have about £800 in savings which I've had for a while.

My question would be what is the best way of tackling my relatively small debt before it gets bigger so i can start saving?
I think I probably have a maximum of about £170 - 200 a month to pay off the 2 debts.

Thanks in advance people!:D
Thanks in advance!

debtboredom

Welcome to MSE!

I would say use the £800 to pay off the majority of the card as that will cost you the most. Next pay day finish the the card off then pay down the overdraft. You should have it paid off before the interest goes up. Will take well under a year! Might be worth phoning the bank each month and getting them to reduce the overdraft so that you don't spend the money again!

Oh, and cut up the card!

ss3n08

Are you able to get an interest free balance transfer? Definitely use your savings to clear most of the credit card, the interest you pay must be more that what you receive having the money in savings. You could have your other debt cleared in 6 months which will mean some interest but not too much. It's good that you are dealing with it now before it spirals.

slowlyfading

I agree with the other posters - use your savings to pay off most of your CC. It might seem scary to not have anything as a backup, but your CC is costing you more than your savings are earning.

You could pay this off well under a year, if you are serious about it! Try to sort this all out now while it's relatively small, rather than letting it spiral out of control

HeadAboveWater

slowlyfading wrote: »

I agree with the other posters - use your savings to pay off most of your CC. It might seem scary to not have anything as a backup, but your CC is costing you more than your savings are earning.

Exactly!

If you have the £170-£200 a month 'spare' to pay off debts, then reduce your overdraft by this amount every month. Or £150 so you've still a few pounds spare. Means you won't be tempted to use the overdraft as much as you'll go over your limit!

FinancialBlogger

First, cease taking out any more debt

Next, use that 170-200 to pay off the debt you have, it won't take very long.

Then get rid of all credit cards and never use debt again. Go cash only.
The best way to do this is to do a written budget every month and spend every dollar on paper before you spend it in the real world. When you have a plan and stick to it you can really prosper in the long run because you don't spend thousand every year on interest, fees, etc.

Since you're still young you can develop these good habits now and keep from getting yourself into a huge hole of debt that gets deeper and deeper as the years go by. You can read about some of the techniques I've used on my blog "Celebrating Financial Freedom" (you can search it on Google)

tealady

Hi
I would certainly set yourself a budget (theres a sticky at the top for statement of affairs which would be a great place to start). Then I would try to cut back as much as I could and throw every spare penny at the card then the overdraft. It might mean living frugally for a few months but the peace of mind will be well worth it.

badger_

As others have said the interest received on your savings will be a lot less than what you're paying on the CC so it's definitely worth paying it off
Here's a good budget tool http://www.moneysavingexpert.com/banking/Budget-planning
This is a great motivational tool http://www.whatsthecost.com/snowball.aspx
It'll show you how long it will take to clear your CC if you just pay the min payments and how much you'll pay back, you can then do it with what you can spare each month for additional payments and it will show you how much quicker you can do it.