DebtStrategies #FinancialAdvice #MoneyManagement
Hey everyone! 👋 I could really use some tips on paying off my credit card debt. I’ve got a balance of around £2k and my minimum payment is £99 – yikes! I’ve got a tax refund coming in for £1,100 next week, but I really don’t want to see it all go towards bills.
Do you have a strategy for paying off debt that you swear by? Here are a few ideas I’ve come up with:
- Snowball Method: Start by paying off the smallest debt first, then moving on to the next one
- Avalanche Method: Tackle the debt with the highest interest rate first to save money in the long run
- Budgeting: Creating a strict budget to allocate specific amounts towards debt repayment each month
What do you think? How would you approach this situation? Any advice is greatly appreciated! 💡
I’d pay off the highest APR first. Once they’re all paid off I’d save an emergency fund, and then I’d never borrow money ever again except for a mortgage.
There’s no magic to it you just have to pay it.
there are two trains of thought
1. Highest APR first – this is the most mathematically efficient and costs less
2. Snowball – this is for people who are cashflow constrained and probably doesn’t apply to you. This is where you clear the small debts first in order to release their payments to the other debt. This costs more but can be the right choice for people with punishing monthly payments.
When I was in debt I preferred to pay off the smaller debts even when the APR was less.
I found it a lot easier to deal mentally with just one debt rather than three or four.
I understand it makes better financial sense to pay the higher APR ones first though.
>obviously I don’t want this entire thing to be going on bills
Why not?
I know it’s boring but it really is the best long term play. Once you’re debt free you can get yourself anything you like with the money you’re saving on interest.
https://ukpersonal.finance/debt/
The best strategy is to pay off the debt with surplus cash above what you need to live.
Controversial opinion but having been in a tight spot with debt myself. If I came in to a little bit of money, I’d split it and say maybe 70% of cash boost to clear debt and 30% to spend as I wish.
Obviously this would vary depending on how bad my debt situation was, you mention you have a couple of other debts that had smaller balances could you pay one or both of these off with the money and have some left?
I’ll await the downvotes as I know I should be saying rein in all non essential spending and use this small windfall to pay off the debt you got yourself in to.
If possible then try to find a zero interest card. Transfer all of your debt onto that card, and then pay off the minimum amount every month to fully pay it off before the interest bearing charge kicks in.
You also need to not spend anything more on cards or other types of credit until you’re debt free.
You need to cut out spending on other things. Little luxuries of any kind need to go until you’re free of the debt chains.
It won’t go away. Make a budget and stick to it.
Once you’re free of the “childish/impulsive” debt you can begin to actually save money.
If your balance is under 2k and you’re getting that back from tax, absolutely put all of that against your debt. Then you’ll have more back in your monthly budget, and this is basically a free hit at this debt.
Edit: I just read your post and not just the title… Pay off your credit cards, you are paying interest on that balance and will continue to do so until you pay it off.
I’ve got a lot of credit card debt, I racked it up due to poor decisions, periods of unemployment, and having to make emergency purchases for my house.
I’ve transferred it all to 0% interest cards, and I pay a lump sum every month to whittle it down, when the interest free period ends, if I’ve not cleared a card I juggle the balance to another 0% interest card, sometimes this comes with a transfer fee, sometimes not.
I’m currently paying off £1,000 a month on two 0% cards, and will be paying them off for a year or two.
I’m trying to solve the mistakes of the past as best as I can, once I’m debt free I’m hoping to never touching a credit card again, unless I get one where I can pay the full balance off every month in exchange for perks.
Pay it off starting with the highest interest rate, no savings until it’s paid off in full
Sacrifice my fellow debtor, you have to bite the bullet and manage your money.
Incoming and out going, bills always have to get paid first. Once you pay your bills then you can decide if you want Netflix, Spotify, all the pleasure and leisure should come after your bills.
0% Balance transfer cards are also good to spread out your payments
Spend £100 of your tax refund on something fun that you want. Dinner out, video game, merchandise of your favourite thing and use the other £1000 to pay off over half your debt. Look at what you would pay in interest if you didn’t do that.
If you can’t pay off your credit card in full every month, you need to use it less. The interest rates on credit cards are insanely high. You will be stuck in an endless cycle of debt if you use your credit card as a long term loan.
If you are in short term debt, you should use all available money to pay it off. Long term debt like mortgages and to a lesser extent car finance are okay to have running and are just a cost of living. Paying interest on every single purchase you make because you can’t pay off your credit card bill at the end of the month is just bad practice and will result in bad credit score (difficult to get long term finance) and long term debt.
Pay off your highest interest debts as soon as possible, when you are debt free you can start thinking about saving for fun stuff and investments.