Time to ‘fess up: My total debt is…

$49,058.

$29,384 of this is my student loan and the rest is made up of a car loan, a bank loan, a personal loan, a bank overdraft, one hire purchase, one finance card, two store cards, a neglected phone bill, an equally neglected power bill, a work and income bill (from when things were REALLY grim) and a bill from a budget advisory company. (More on that later).

I am paying off my student loan (and have been since 2006) through my tax, which works out to be just under $150 a month. A small amount, I know, but for now, that’s all I can afford. I’m not too concerned about that portion of my debt as long as the government keeps wiping interest on student loans, I will continue to pay it off through my tax until the rest of my debt is clear.

What does worry me though is the amount of interest being charged on some of these debts. When you’re young, stupid and at times, desperate for money, your eyes tend to skip over the interest rate being charged by the company you are ever-so-carelessly signing your life away to. That is why I am now paying $291 a month in combined interest on these bills. Just to reiterate, $291! Do you realise how much faster I could pay off my bills if I wasn’t paying so much interest? Of course you realise that, as do I. I just wish I had realised it back then.

Out of the eight bills I have that I pay interest on, five of them have an interest rate of over 20%, one of which is 27.5%! Now I’m not usually one to put an exclamation mark after a percentage sign but in this case I feel it is justified.

Is anyone else paying loans, credit cards or other bills with crippling interest rates, or am I the only one silly enough to be sucked into such a “deal”?

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About Renee

I'm 26, currently living in Invercargill with my partner. I have a good job as a Communications Officer in the public sector but my bills still exceed my income. The way I have always dealt with my problems is to talk about them. My debt has been a problem for so long, yet I kept it private. I don't know why I didn't do this sooner!
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14 Responses to Time to ‘fess up: My total debt is…

  1. Fraser Ray says:

    Hey; your not alone there! My wife and I got something from Harvey Nornan on a GE differed payment interest free period. Once the interest free period was over, GE are charging us 22.5% interest.

    It doesn’t help, that weeks we were short on $$ we used the GE card at an atm – little did we know, we get charged 26% interest from they day its pulled out.

    • Renee says:

      Isn’t it terrible how we get caught up in these seemingly great deals and then we forget all about them and the interest-free period runs out? I have a bank overdraft of $2200, it was interest-free whilst I was studying on-campus but they started charging me interest a year ago and since I no longer bank there, I just pay off my overdraft and loan, they didn’t tell me interest had started accruing. I only found out a few weeks ago, when my loan payment defaulted because my account was over the overdraft!

    • 26%?! . It is such a trap. We paid off our GE card after many years and then cancelled it. I swear we will never use it again. I know several people still in bed with the GE money genie and being financially “raped” at 26%. Even the interest free is not REALLY interest free at all as the GE card fee has a $48 esatblishment fee AND a $48 annual fee, so there’s your interest over 3 years $48 x3 Plus the establishment fee….

  2. Hamish says:

    One option is a debt consolidation loan. Some of them are as low as ~13% interest (Kiwibank is 13.10%). Do that, cancel your credit cards, and put as much money as possible towards the loan until its paid off. I did that when I had around $5000 of overdraft and credit card. Meant I was no longer spending credit – I was only able to spend what I’ve earned. I got a Visa Debit card for online purchases.

    For bills I try and make them as consistent as possible (eg a phone plan that caters to my needs, my rent and expenses are fixed) and then estimate a pro-rata amount to pay towards them each pay day (or use fortnightly direct debits where possible), and then pay them that pro-rata or fixed amount every pay day, on pay day. This means I cost my self a little in lost interest (ie is now in the company’s account, not mine) but it helps me to be on time with bills, and means I dont get caught out by spending bill money before the bill arrives.

    I’ve created a spreadsheet of all my pay days spanning out several months with all my income, expenses (fixed and estimated where not fixed, and an allowance for some amount of entertainment etc – you have to live) for that 2 weeks, debt repayments and loan/savings/credit card balances. Its quite hard to stick to as things always come up, but at least it gives me an idea of what I need to stick to, and how much progress I have the potential to make if I am disciplined – ie a decreasing loan balance and/or increasing savings balance.

    • Renee says:

      Unfortunately I’ve already tried that but the banks won’t touch me because of my high level of debt. It might be an option a bit further down the track. I like the thought of a lower regular payment and one low interest rate but will that mean my debt is stretched out over a longer period? I don’t have any credit cards anymore, I have three store cards though, two of which are cancelled. I also use a Visa debit card, so I’m working on it. A spreadsheet is a great idea, I’ll definitely look at doing this!

      • You DO end up paying more with a consolidation loan, but it makes payments easier over a longer period. The extra trap is people go and get into MORE debt with that extra bit of momey available…What about transferring your Visa debt to another banks card or mastercard on one of these balance transfer deals? Play their silly games. We transferred back and forth two or three times to get very low interest deals. Some are for only six months, some are even better, for the “life of the transferred balance”. You’ll need to research further online but they look to be sitting at about 5.95% right now. This can save you a great deal in interest and it can be worth jumping through the hoops of applying etc.

  3. Angel says:

    Hi Renee,

    I once had a sprialling debt problem, but thankfully I managed to halt and reverse that trend before I hit the 20k mark, and now I’m debt free.

    My secret was finding out exactly where my money went. I started recording _every single transaction_ including cash, which account money went into & out of, all in an excel spreadsheet. I could even tell how much money was in my coin jar. It has to be that level of detail, or your money just bleeds out the cracks. Transactions were categorised by what it was spent on – groceries, other food (takeaways/coffee etc), alcohol, my car, bills, medical, hobbies, my cat, clothes & shoes, and other. I quickly found that I was haemorrhaging money on a lot of crap, and the very act of having to record that started me questioning whether I needed to spend it or not.

    The spreadsheet tracks things day by day, so you can start forecasting things that occur every week or month, you can build up fortnightly/weekly averages of how much you spend on groceries or eating out, petrol, etc. It became a game to come in under the average each pay cycle, which lowered the target for next time. Anything left in my cheque account the day my next pay went in was transferred onto my credit card. Once that was paid off it went into a savings account instead. My goal each fortnight is to make that transfer as big as possible. Since it’s excel you can set up formulas to work out how much interest you’ll pay each month. You can drop in a purchase and immediately see what effect that has on how long it’ll take you to be debt free

    I can easily email you (or anyone else) a copy of my sample spreadsheet so you can see how it works – seraphim at orcon dot net dot nz – it’s the same one I sent to Greer – dunno if she used it or not.

    • Renee says:

      Thanks Angel, the spreadsheet seems to work for a few people. I would be interested in having a look at your sample one. You can email it through to me at renee.goldup@gmail.com. I like your idea of being really pedantic about tracking your spending, I think that’s an area I need to focus on.

      • Angel says:

        I found that if I had cash I’d lose track of what I was spending it on – often you don’t get a receipt, and whoops $20 is gone – on something? Easier to pay using plastic, that way you get a receipt (I keep them until it’s entered in my spreadsheet) and you can check it against your bank statements.

  4. Kathryn says:

    Hi Renee,
    I just want to say a HUGE good luck to you!! I stumbled on Greer’s blog a couple of months ago and have since worked out mine and my partners combined debt number – almost $45k before student loans and the mortgage! We are both very much living pay to pay and want to be able to get to the point where we don’t need flatmates to pay the mortgage – we would like to have kids one day – but not with the flatties.
    I’m keen to hear how you go – and am also equally working on our debts (made up of 2 bank loans, 2 personal loans, 2 credit cards, money owning to parents and to family trusts). I look forward to hearing any new ideas from you (just I did from Greer!!).
    Once more – GOOD LUCK!!!!!!
    Kathryn

  5. Renee says:

    Thanks Kathryn, good luck for your journey too! Keep in touch and hopefully we can help each other along the way

  6. Sonia says:

    Wow, I’m very surprised this has happened to you. I hope you manage to climb out of this pickle you have got yourself in, it will be hard and possibly long but you’ll feel so much better once your on the other side. So keep smiling, like this 😀

    All I can say is who cares about the student loan as it’s not going to go anywhere, only start thinking about it when you have no other debt. Actually I still wouldn’t even think about it after you have no debt, cause once you have paid the debt off you should be opening a savings account instead to prevent this situation happening again. Your student loan will always be there and as long as you are earning money you will be paying it off, so don’t ever worry about this.
    Since you can’t get the debt consolidation loan, I would re-work my budget so that I was paying the minimums that the companies are requesting and putting my ‘extra money for paying off debt ‘ I had towards the debt that has the highest interest rate first & then work my way backwards. Sure you will still get charged interest by the other companies but they will just need to wait their turn, as it’s the highest interest rates your paying that is killing you.

    The more effort/money you put aside towards paying off the debt the quicker it will go. Who knows once you have completely paid off a company/debt the banks might start looking at offering you a consolidation loan, since you will be able to show them you can/will pay of debt. The more evidence you can show that you can/will pay off debt the better luck you will have with the banks.
    I would say that for any social life money you might want to spend you take it out in cash because once it’s gone it’s gone until next pay day and you will just have to use all of your will power to not use your card to buy anything that isn’t paying off a debt.
    That was a lot more than I intended to write, so I’ll stop there & will apologize as you probably wont find it helpful haha. Anyway best of luck. 🙂

  7. I’ve subscribed to your blog, eager to see how you go. I just turned 22 today and have stupid debt, no where near the amounts you all speak of but still a lot of debt. I am slowly but surely changing my spending habits and have set up automatic payments, the overdraft is the meanest thing, I just can’t seem to get it up and keep it up. I hate that im using borrowed money to pay back borrowed money. And then theres the student loan, don’t get me started on that. Good luck to you, keep posting anything and everything, following this is inspiring.

  8. Pingback: From the beginning | $50,000 in debt and only half-way to 50!

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