Pay ALL your debt off by Xmas 2014!

Pablosammy

argomatt wrote: »

I have decided this time to have a try at the debt snowball method of becoming debt free.
The theory is to clear the debts from the smallest first, instead of from the highest interest rate.
I checked and I have about £700 outstanding on my student loan which I am repaying by direct debit instead of out of my salary. So despite this being a really low interest rate, I have made an overpayment of £340 today.
My idea is that the sooner I have cleared this, then the sooner it's £128/month payment can be allocated to overpay the car loan.
I hope to have the student loan cleared by the end of this year

The cheapest and fastest way overall will always be to pay the highest interest loans off first, assuming they allow penalty-free overpayments. HOWEVER... it takes more discipline, and doesn't appeal to the psyche quite as much!

Overall, the difference in cost will be minimal unless the difference in interest rate is massive, so I'd say just go for whatever feels best. Clearing small debts really appeals to a lot of people who are sorting out their finances, and it's a quick hit. If that keeps morale up and keeps the momentum going, then go for it! I have to admit, I prefer the way you're doing it, it just feels better :beer:

Pablosammy

amr547 wrote: »

Whatever I have left this year will be carried forward to next year and will be my final target! Can't wait. I never want to have debt again, well except for a mortgage.

Then you'll be on the Mortgage-Free Wannabe board :money:

kirstydriver

argomatt wrote: »

I have decided this time to have a try at the debt snowball method of becoming debt free.
The theory is to clear the debts from the smallest first, instead of from the highest interest rate.
I checked and I have about £700 outstanding on my student loan which I am repaying by direct debit instead of out of my salary. So despite this being a really low interest rate, I have made an overpayment of £340 today.
My idea is that the sooner I have cleared this, then the sooner it's £128/month payment can be allocated to overpay the car loan.
I hope to have the student loan cleared by the end of this year

I thought snowballing was paying off higher interest debts first, I do not always do this as like to clear the smaller ones to keep the accounts closing

Pablosammy

kirstydriver wrote: »

I thought snowballing was paying off higher interest debts first, I do not always do this as like to clear the smaller ones to keep the accounts closing

Snowballing can mean lots of different things! :rotfl:

Longships

I decided not to include my regular monthly catalogue payment as a reduction in debt as it is roughly the same as the interest being charged on the credit card, catalogue and bank overdraft.

However, I did overpay by £5 today plus made an extra payment to the credit card of £10 - not much I know but still chipping away (2015 is going to be my year to conquer these debts forever).

So this makes £15 off the debt today.

Congrats to everyone who has made progress this year!

argomatt

Pablosammy wrote: »

How does everyone account for cash in their current account at the end of the month (if any!)? Do you offset it against your debt on your spreadsheet, or make an overpayment? .

Anything I have left in the current account on the day before pay day gets transferred to whichever debt is my current target!

GunWharf

Pablosammy wrote: »

I've only joined recently, so 2015 is my year too. I've already got my 2015 target in my sig

How does everyone account for cash in their current account at the end of the month (if any!)? Do you offset it against your debt on your spreadsheet, or make an overpayment? I don't want to overpay until I can pay in full, as the interest difference is fairly negligible (4% loan vs 3% credit interest) and I'd rather have the funds as a safety net.

Make an Overpayment at the end of the month. If you want to reduce your debt, just pay it.

happybunny86

I find my best months are always where I make a budget and pay off the most I can at the beginning of the month. When I leave some of it until the end it always ends up being spent on something else

Pablosammy

happybunny86 wrote: »

I find my best months are always where I make a budget and pay off the most I can at the beginning of the month. When I leave some of it until the end it always ends up being spent on something else

That feels like a leap of faith to me! What if something unexpected comes up? :eek: I think what I'm going to do is wait until payday, and any money that was in my account before my pay landed is getting sent to my loan account as an overpayment.

Spoke to First Direct today and they're happy with me sending overpayments whenever without notice, so it's full steam ahead.

happybunny86

Pablosammy wrote: »

That feels like a leap of faith to me! What if something unexpected comes up? :eek:

I've been using the You Need A Budget method so I have smaller buffer built up for unexpected payments. I was concerned I should be spending this money on paying off debt at first but I've found it helps me to relax and the possibility of unexpected costs and to be more confident budget all of my wages into a bucket so they all have a job to do. Previously I'd budget and leave behind money for 'what ifs' but some how they always got spend on something.

Completely each to their own though.
Everyone has a different system.