Spreadsheets, meticulous budgeting and clever juggling of payments helped Fin24 user Sibusiso Molefe cast off his debt burden. He writes:
This is my story of how I got out of debt.
When I bought my house in 2010 I had to finance the 10% deposit plus other costs, and it all amounted to R200 000. I used up all the funds in my credit card (R60 000), took out a R120 000 personal loan and added R20 000 from my savings.
I battled with cashflow and as a result ended up using whatever little money was left from the credit card monthly repayments, which meant the balance was always zero though I was paying R3 000.
Fortunately, I had a bit of knowledge of financial matters so I drew up a spreadsheet of all my loans, including homeloan and car finance. It was basically an amortisation spreadsheet for each account. I drew up a thorough budget (very important – never underestimate the importance of a written down budget).
Then I started with the personal loan as it had the highest interest rate. I used whatever money was available after spending on essentials to pay it off. I communicated with my mom, who I support, that I was having problems and would reduce what I was giving her.
No more satellite TV, no more eating out, used the shuttle to work instead of my own car, did the laundry myself instead of the laundromat. I even changed banks as I wanted to downgrade from a platinum cheque account which charges more for pretty much the same service.
The personal loan was for five years from 2010 and I paid it off early last year. The credit card was still exhausted as I was living off it and had also accumulated a R20 000 overdraft. So when the personal loan got paid up, I took another one for R60 000 and used it to pay and close the credit card (the bank didn’t like that, even offered to give me six months without paying monthly fee).
The idea was that once payment goes to the personal loan, I have no access to that money. Then I used some of the increase I got towards the overdraft and every month I reduced the limit online. I finished the overdraft first and used the money I was paying into it to add to what I was paying for the personal loan.
Before the end of the year, I had paid off both the overdraft and the personal loan. I then used all those funds towards car finance. I paid off my car in February this year before the 60-month repayment term. And because at that stage I was so used to being broke, I channelled all that extra money into the homeloan and I used the annual increase, effected in March, to bump up my lifestyle.
Looking at the homeloan amortisation spreadsheet I drew up, I am now on course to pay off my bond in 12 years instead of 20. I was also inspired by an article I read on Fin24 on how to save thousands by paying off the bond earlier and then continue to pay (as savings) till the end of the term.
I never pass an article about debt, savings/investments and interest rates. It takes education, sacrifice, discipline and commitment to get out of debt. Forget what people will think of your downgraded status, it’s about the bigger picture.
I even have an endowment policy now, a savings account and an investment account, and have increased my mom’s monthly allowance!
That is my story, I hope it helps someone.
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