The unknown consumer choice that we’re never sold and totally unaware of! (A tale of jumping off the consumer bandwagon and choosing the staygrade)

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The unknown consumer choice that we’re  never sold and totally unaware of!

(A tale of jumping off the consumer bandwagon and choosing the staygrade)

 

We’ve all experienced that moment, even as a minimalist, when a gadget, or other domestic appliance, ceases to function as it did when first purchased and you have to begin the time-consuming, life sapping process of finding a replacement. Finding a replacement you would think, especially due to the world wide web, would be an easy task, but the consumer industry never makes things easy, especially if by doing so it can encourage you to spend a little more than you had at first thought.

 

In previous days the search for a replacement would have involved a swift look through your latest Argos book, or other alternative shopping catalogues, before jotting a 7-digit code on a back of an envelope and whipping off to your nearest branch. Occasionally, due to lack of stock, you might have been offered a substitute product, along with the opportunity to sign-up to yet another high interest store credit card, but this would have been as difficult as it got.

 

Nowadays there is choice overload, not only do you have a host of high-street stores and supermarkets where you can shop at but there is also a plethora of internet companies also vying for your interest. Then there’s the products themselves, all marketed with their own unique selling point (USP) which all need some of your own unique mental energy (UME) to decide if it’s actually something you’ll ever benefit from or use. For example, if you were shopping for a  digital camera then a popular high-street store currently offers an amazing 25 compact digital cameras, between £50 & £70, for you to choose from. Not only do you have to wade through this choice of almost-identical cameras it’s likely then that you’ll then spend more of your precious leisure time comparing the price of this item from alternative sellers before finally completing the transaction. If you want to watch an engaging video about the problems with choice click on the link at the bottom of this article.

 

In the age of austerity the term staycation was coined. A staycation being a frugal alternative to a vacation by enjoying a holiday in and around where you live. Equally frugal, and an alternative never suggested by either the salesperson in the shop (or the one in your subconscious), is the staygrade. The definition of staygrade being the like for like replacement of stuff that you are replacing.

 

Take for example my own recent quest of searching for a new DVD player to replace my ill-functioning 13 year old Phillips player. Having not looked at the industry for over a decade I was staggered by the choice on offer, not only did I have to consider the brand and price bracket within which to make my choice but there was the added question of whether I wanted; HDMi output, memory card reader, USB stick, Blu-ray, SMART TV functions, recording functions, surround sound etc.. and that’s all before I read reviews (to support my decision) and decide where to purchase it from (price/location/guarantee etc..). It’s exhausting just thinking about it. So here’s what I did…. I simply bought a DVD player (it even had the same brand name on it as my T.V), after all that’s what I ACTUALLY needed! I didn’t Google it, I didn’t compare the prices of it, I didn’t even look at the functions, I just went to a supermarket and purchased it along with the rest of my weekly food shop.

 

Not only can the staygrade save you a lot of time and effort but it also comes with some other positives. First, technology, and this applies to almost every daily appliance, progressively becomes cheaper over time. Take for example the current Playstation 3, just 6 years ago when first launched it sold for a staggering £425. Compare this to today when you can buy the same, if not slimmer and less power-consuming, game console for just £125….an almost 70% reduction on it’s initial price! The story of my DVD player mirrors the same pattern, originally costing £199 yet the replacement, albeit 13 years later, costing an incredible £26, over 85% cheaper.

 

Another benefit of the staygrade is that the snowball effect, the need to further replace a gadget due to the increased technological prowess of the item you have just replaced, comes to an abrupt end. I’m sure you’re all familiar with this, you come home with your new gadget, for instance a 16 megapixel, HD video recording, digital camera only to find that the laptop which you use to store and process all your digital media can no longer cope with these processor-intensive, memory-filling files. Suddenly you need to purchase a brand-new £399, 320gb, Intel i5, Windows 8, touch-screen laptop….all because you needed a new £69 digital camera!!!

 

I’m not anti-upgrade, new technology is amazing and the things it can do are at times incredible but the pace of change now is so fast that we are rendering millions of gadgets obsolete before they’ve actually reached the end of their useful life, all because they are not packed with the very latest up-to-date features which are on the gadgets being consistently thrown in front of our face via magazines, the web, TV commercials and even secretly placed in films & TV shows (via product placement). Updating your gadgets for these small, incremental improvements is mindless, both financially and environmentally. Put very simply, our earth’s resources cannot continue to provide for the upgrade hungry western (and increasingly eastern) consumer. In addition to this it is financial suicide to be spending huge proportions of our income, especially when laden with consumer debt, on stuff which while bringing to your life a short-term boost of pleasure, will contribute nothing to your long-term happiness or fulfilment.

 

The mobile phone market is the worst offender, subconsciously persuading consumers into the idea that they need to upgrade their perfectly-capable phones at the end of every 24 month contract. So hoodwinked are consumers, they don’t realise that the staygrade is a real alternative to this constant upgrading, but salespeople are the last people in the world who are going to start selling you the idea of a staygrade, keeping your current phone, along with a contract which is £200-£300 cheaper than they are currently paying.  For more about mobile phones read my previous article, ‘Is the iPhone such a smart phone?’.

The debt-free minimalist approach: Newer, cleverer, feature-packed gadgets and appliances can have their benefits but upgrading is not the only choice when it comes to the time when replacement is needed, or in some cases not needed but is simply on offer (as in the mobile phone industry). The staygrade is an essential tool in the debt-free minimalist toolbox and the sooner you apply it’s principles the sooner you will find freedom from the continuous, and ever shortening, cycle of upgrading/replacing stuff. All appliances come to their natural end of life, discarded with millions of other similar items at your local recycling centre, but for most stuff this comes too-soon, only rendered obsolete in the eyes of the user whose head has been turned by the latest, greatest, do-it-all, piece of kit. Upgrade where necessary, large CRT televisions, VHS recorders and 35mm cameras have all had their day and their next-generation HD LCD, DVD & digital counterparts are all excellent industry revolutions of popular household gadgets but do we really need, already, to upgrade to their slightly thinner SMART /3-D glassed/4k, Blu-ray, mass megapixel evolutions….or is it time to stayput, be happy with what you have…is it time to staygrade?

To watch The Paradox of Choice copy and paste the following link into your web browser: http://www.ted.com/talks/barry_schwartz_on_the_paradox_of_choice.html

The debt-free system: Part 5: Making plans for old-age… when you’re far from it! (A tale of the haves and the have nots)

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‘The question isn’t at what age I want to retire, it’s at what income.’ 
— George Forman

The debt-free system: Part 5: Making plans for old-age… when you’re far from it!

(A tale of the haves and the have nots)

For those of you who are thinking ‘what happened to Part 4 of the debt-free system?’ don’t worry, you haven’t missed a thing! Just like the film industry, it’s o.k to have the sequel before the prequel…just think Superman/Star Wars etc.. As I wrote both Part 4 and Part 5, simultaneously, it struck me that I couldn’t possibly emphasise how important retirement planning is, especially in the middle of your life when much of your financial focus will be on mortgage debt (and quite possibly consumer debt), without writing about it, at considerable length, first. So that’s what I’ve done, and this article will do its best to explain why.

How much income you will need in retirement is obviously a subjective question, an answer which varies from person to person. I personally would like to imagine that in retirement I would be able to maintain the same standard of living, or even slightly higher, as I currently enjoy…but without the current long, exhausting hours slogging away at work! The good news is that the current government (U.K.) currently give a generous helping hand with this via an annual state pension income of £7,488, although who’s to say what the government will be able to provide in a further 30 years? If I’d were you I’d make sure you’ve got a Plan B because the murky world of finance and government has a tendency to implode on itself every so often and it’s usually us, the citizen, which has to pay for it in some way.

So how much will I need? Now the time to dust off that high school scientific calculator (don’t worry we won’t be using the scientific part!), or just grab yourself a pen and your finest arithmetic skills, and make sure you can access, or accurately guess, your annual incomes/outgoings. First you’ll need to add up your net annual household income, take away the annual of servicing your mortgage and also be able to guesstimate the cost for each dependent in your child (the cost of this will vary greatly from family to family…..think costs of education (fees) age (nappies), hobbies (sailing) etc..). Once you have this divide the sum by two (if you live as a couple) and take away the state pension amount (£7,488). My own figures looks like this; £31,000 (joint net income) – £8,500 (mortgage costs) – £1,500 (child associated costs) = £21,000 divided by two = £10,500 – £7,488 (state pension income) = £3,012.

As you can see from the figures above, retirement for a debt-free minimalist (dfm) is not a frightening prospect. Having learnt to live a simple life in which personal happiness and flourishing does not correlate with increasing amounts of expenditure, the dfm system creates a viable business plan, not just for your working life but way beyond it as well. For others though, the figures may not be so comforting! To create just £8,000 of income in retirement, you will need an astonishing £200,000 pension pot! For a 35 year old starting their retirement planning now, that would require you to begin making a monthly pension contribution of £350, for a couple that would be a seriously deep, £700, black hole in your monthly expenses column. However, if you can begin thinking of life when you’ll be old and grey whilst you’re still in the very prime of your life, at 25 years of age, that figure comes down to a more manageable, but still sizeable, £250 p.m.

Personally I’m not a fan of personal pensions. I’m all too aware of the financial middlemen taking away, more than their fair share, of your contributions/investment along each step of the way and also whilst we all hope to live long into retirement, the risk of this happening, in my opinion, is not outweighed by favourable returns on annuities (the product that you buy in retirement to give you an annual income through it). In the U.K. you do benefit from tax relief on your monthly contributions but as it currently stands later on down the line when you’re receiving your pension income you’ll be paying income tax on all but the first £2,000 of any additional (on top of the state) pension income. The dfm suggests the alternative pension, the alternative whose capital sum won’t die with you, will always produce a reasonable income…even when you’ve long gone and is most people’s greatest hope of ever creating generational wealth. If you haven’t worked it out already then I will share it with you now….it’s a second home.

A second home for many is an asset only suitable for the well-off or the rich, but this is not strictly true and by following the dfm approach to retirement planning it could be one of the best financial decisions you’ll ever make. In Stage 4 of the Debt-free system I recommend a 25 year mortgage timespan, not that 20 years is financially out of reach, but for the reason that the system is designed to ensure you have the available income to create solid plans for retirement. And whether you invest in a personal pension or take the alternative in buying a house you’ll need every penny to make it work.

Just as in the article, ‘It’s all about marshmellows’ and any other articles I have written on this site, buying a second home will take time, patience, willpower and long-term vision but the future payback this time is monumental and, for future generations of your family, life changing. It certainly won’t happen overnight but what truly successful approaches to creating real wealth actually do?

Your first step in this journey is to save a lump sum which will be used to put a deposit down on a home. Currently a buy-to-let mortgage requires a 25% lump sum, a sizeable sum but it can be done. On a home costing the national average, £167,000, this would mean a deposit of an eye-watering £41,750. At this point you might want to run to the nearest personal pension provider and sign on the dotted line but stay with me. As it’s possible that rising prices will require this amount to be a little larger I have calculated, prudently I have to say, figures on saving a deposit of £50,000 (20% higher). For the 25 year old setting aside £250 p.m that would take 13 years of contributions, for the 35 year beginning planning for retirement late that would take a 9.5 year wait. Not meaning to wish away time but this would leave the 25 year old still only 38 years young and the 35 year old late-comers, still revelling in their mid-forties.

Deposit saved, and avoiding all temptations to blow it on a ‘once in a lifetime’ trip abroad or your mid-life crisis sportscar, you will now have the money to buy a suitable house for rental. As it stands your money will purchase a house capable of producing an income of £800 p.m, against a monthly repayment mortgage cost of only £650, for 20 years. The surplus £150 income, for all other intentions of purpose should be ignored and kept aside to deal with future costs associated with owning this property. You may have recognised that you will still have your monthly pension contribution amount to invest elsewhere, we’ll come back to that later.

Fast forward a further 20 years, and with no further funding, not only will you be the outright owner of a second home, with your buy-to-let mortgage completely paid off, you’ll also have created an income stream of £9,600 per annum. This income, whilst open to the variances of the rental market, will be paid to you not only throughout the rest of your life, but potentially, being held in trust, throughout every generation of your family there after. Not only that, in the form of your second home there’s a very attractive capital-rich asset that could be re-mortgaged or even sold should the family ever desperately need an immediate large sum of money. If, as a couple, you both follow this route then this future generational wealth is simply doubled, tap it into your calculator the money amounts are simply staggering!

Leaving assets to your children/grandchildren when you have left this earth is all well and good but speaking from experience it is highly likely that they may require, and appreciate, your financial aid long before you’re on your work to becoming part of the churchyard’s compost. This is the point at which you redirect the money previously designated pension contributions, to a pot called family support. I know first-hand how important financial support is from relatives, without it the big moments up to now in my life would have either been delayed or missed out on completely. It was with support from my wife’s dying grandparents that we were not only able to buy our first home, in which my family still live, but also pay for our wedding, which whilst planned with a budget, still cost far more than we could have ever of afforded alone.

The figures stack up quite impressively too, your £250 per month , not needed now for retirement planning, over the remaining 7 years of your working life (after paying off your second home mortgage and assuming the dfm retirement age of 65), earning a realistic 4% interest, would amount to just over £24,000. Unfortunately for the late retirement planners there isn’t the time between paying off your second home and retirement to begin creating this nest-egg although I’m not one moment thinking that there won’t be other money, either in the form of yourself receiving some inheritance or potentially higher-than-expect income, from which to create a pass-me-down fund.

The debt-free minimalist approach: So there it is, a complete financial plan, all the way from the prime of your life to the days you’ll be pushing up the daisies, all in five simple stages. The two objectives of this final article is to make you, the reader, ponder A: Have I truly considered the cost of retiring? and B: Are there are other options to the traditional pension? I think you’ll agree that yes retirement can be expensive but only if you leave it to the last minute, the earlier you begin to plan for it then the cheaper it will become. Along the way you’ll encounter the types who’ll claim they simply can’t afford to put away, but behind the excuses I guarantee they will be the all too familiar tales of consumer debt, overspending and excess! Don’t be part of the over 50% of the U.K/U.S population who have either none or too little in their retirement plans, because I guarantee that the day you retire and put your feet up, there will be a lot of people admiring what you have achieved, all whilst they serve up cold dog food for dinner, wishing they hadn’t blown all which they had earned on iPhones, designer clothes, cable t.v, holidays in the sun and a shit load of other stuff which they really didn’t need! Live simply, live happily, live long.

 

http://www.yourwealth.co.uk/pensions/pension-calculator

 

The debt-free system: Part 4: Even the good has its day (A tale of effectively eliminating good debt…forever!)

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The debt-free system: Part 4: Even the good has its day

(A tale of effectively eliminating good debt…forever!)

‘People are living longer than ever before, a phenomenon undoubtedly made necessary by the 35-year mortgage’, Doug Larson.

So the good news is that if you’ve joined me in your journey against debt on part 4 of the debt-free system then the gruelling work is done, your financial feather should now be gliding in the breeze, as light as the air itself, seemingly unaffected by the laws of gravity (debt) whose main concern is to drag us all down to earth.

The bad news however is that the hard work is not over, now is not the time to begin feasting again on the tasty cake of consumerism. You’ll know from previous experience where that temptation leads you to. There are no presents to celebrate, no new car, no lavish holiday abroad and no 50” LED TV, they’ll all have to wait because what we’ve done up to now is to focus on building the most solid financial foundations you could ever wish for. Now is the time to start finishing the job off and to secure your financial future…for life.

Up to now the financial focus of the debt-free system has been on reducing non-essential expenditure through changing spending habits and mindsets. The consequence of this was to lighten the load, to create a positive monthly cash-flow to enable and to increase the speed at which you can eliminate consumer debt. This would leave us with two final financial goals to achieve; to reduce ‘good’ debt in a time span which allows enough money for you (and your family) to live flourishing lives and to also plan for later in life.

A recent trick of the mortgage industry is the 35 year mortgage. In years gone by 25 years was the norm but in an effort to make mortgages more ‘affordable’ banks considered it a good idea to thin out those debt repayments over an additional ten years. Not only does this artificially affect the general rules for supply and demand in the housing market, stoking up house prices even further, it’s also a very profitable idea for the mortgage providers as well. Check it out for yourself on the mortgage calculator link below and you’ll discover that on an average £200,000 mortgage those extra 10 years will also cost you a staggering £55,000 more in additional interest charges, a 50% profit increase for banks!!! That £55,000 has to come from somewhere though and unfortunately, as is always the case, it’s directly from the Bank of You. Maybe it’s time that bank products started coming with cigarette style warnings. ‘This product will seriously damage your financial health!’, as these debt vehicles, with prolonged periods of debt repayments, and the interest which is accrued along the way, is a financial disease which is unwittingly affecting millions of homeowners.

With this you may think the debt-free minimalist approach might be to go hell for leather and wipe out your mortgage completely within 10-15 years but here, once again, the slow approach is recommended again, the aim being simply to clear your mortgage in a 25-year mortgage span, with a view of leaving a good 5-10 years of your working financial life completely free of all forms of debt, which, oddly, is quite likely to be the first time that you are in the whole of your adult life…a scary proposition don’t you think? To ensure you can afford the additional payments, which are the difference between a 25 and 35 year mortgage term, the cost should be met by the surplus income made by having reduced unnecessary monthly expenses and from eliminating the costs associated with having to service consumer debts, it should not be made affordable by having to forgo even simple human pleasures or working even longer hours at the cost of precious family/leisure time.

Beware the honey pot trap. Often spurred on by rampant house inflation, it is all too easy to be lured in to reborrowing against the value of your home to pay for big stuff such as a home improvement or a new car. However it is vital that you ignore the lure of this particular honey as inside this hive is one almighty sting. A financial tool with which to boost a flagging economy, recent governments like nothing better than making consumers feel ‘rich’ by inflating the value of their homes, by devaluing currency and inflating prices, as they know, all too well, that one of the consequences of increased house prices is increased consumer borrowing, and subsequent consumer spending, against the capital ‘stored’ in their homes.

The problem with using your house value as one big, mammoth overdraft with which to purchase lifestyle improvements is that, just like the smaller overdraft with your bank, it’s not your money and one day, if not soon, you’ll be paying it back to your bank with staggering amounts of compound interest (for more on this check out my previous article ‘A tale of opportunity cost…’. A close friend of mine is a victim of this exact behaviour, having been one of the lucky ones to have bought a property at the beginning of the millenium, opposed to anyone buying in the second half of the noughties, from good timing he has benefited financially (from rising house values) to the tune of tens of thousands of pounds, a benefit which if not frivolously wasted would have meant he was at least halfway through paying off his mortgage and set-up for a very rosy financial future. Unfortunately this is not the case for him and his family, for the capital in his home has been used to fund a lifestyle which costs in far excess of their natural income.

As with most rules there is an exception to the rule. Using value in your home to expand your current home, as an alternative to moving home, makes perfect debt-free minimalism sense. Moving home is a costly business, and if the move is only for a relatively small improvement in living space, then borrowing to expand your current home is usually the most cost-effective way of doing it. Switching homes will cost the average homeowner around £5,000 in estate agent fees, Stamp duty, conveyancing, removal and other associated costs. So before you move house why not consider the alternative and save yourself in the process a lot of time, money and stress!

There is a well-known saying that the rich get richer whilst the poor get poorer and this saying definitely applies to those who have equity in their home. Having 90% LTV (percentage of loan compared to the value of your house) on a £200,000 house will mean your debt is charged interest equivalent to £6,000 per £150,000 of debt, each year (£500 interest p.m), reducing your LTV to 75% LTV brings a dramatic reduction to just £4,300 per interest. As you can see from these figures, that’s £1,700 less interest on your debt if you maintain a high LTV, think of the lifestyle improvements that can fund, and as opposed to increasing borrowing against your debt, this method is also long-term sustainable….you’ve just got to get that high LTV point first! For a bit of increased motivation with this check out my article ‘It’s all about marshmellows…. a tale about deferred gratification’.

Whilst for some a 25 year mortgage span may appear on the tame side and a 20 year mortgage a much more headlining grabbing figure, I feel that to do this, on an average salary, an imbalance in your financial life is often created and the area in which this usually occurs is in financial plans for later in life….retirement. Have no disillusions if you’re not one of the lucky few who still have a final salary scheme pension plan then retirement is one hell of a costly idea and you’d better start thinking about it sooner rather than later because it’s not going to get any cheaper!

On the positive side, having embraced a life of debt-free minimalism, it highly likely you’ll be in the win-win position of having created a lifestyle which is both financially stable and long term sustainable. Add to that living without the strains of consumer debt, it is possible that you will have the money surplus each month from which to start making plans for a life in retirement, which with the fortunes of both good health and good luck, could easily last as long as your working life .  

The debt-free minimalist approach: There’s no doubt that your home is your biggest financial asset in your life so the way you pay for it will have a significant effect on your financial future. Your mortgage should be structured so that you can afford to pay it off in at least 25 years whilst also allowing you, and your family, the necessary disposable income for you and your family to live flourishing lives and also surplus income with which to build a solid, retirement strategy. Just as in many other steps along this debt-free journey there will be temptations all-around, all of which will be attempting to deviate you from the route of simplicity and happiness, so keep your guard up and remain focused because if you get this right then you’ll be completely debt-free and set-up financially for life!

P.S. Don’t forget to organise the ‘I’ve paid off my mortgage party’ and remember to send me an invite.

http://www.moneysupermarket.com/mortgages/calculator/

The debt-free system: Part 3: The good, the bad and the ugly truth! (A tale of killing off debt…for good!)

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The debt-free system: Part 3: The good, the bad and the ugly truth!

(A tale about killing off debt…for good!)

 

So you’ve decided that you want to live a debt-free life, a life without the additional stress of you (and possibly your partner too) of having to work all the hours that God sent us just to cover the bills, some of which are more unnecessary than others, and to pay for the stuff that, whilst still filling up precious space in your home, no longer deliver the satisfying glow with which it arrived.

 

Not only have you decided that it’s time to pay off your debt, you’ve also begun to balance the books, instead of adding to the debt pile like an over eager member of the US Congress, you’ve started winning the war against debt. You may have even noticed some changes already, the bank statements, which once brought you nothing but dread when they arrived through the letterbox at the end of every month, now actually bring a smile to your face because you can see from the decreasing figures that a little bit further on in this journey you’re going to be completely free of the pressures of debt.

 

You may of heard about debt being split into one of two camps; Good debt and bad debt. Good debt being either debt (a mortgage) connected to the purchase of your house or an investment in yourself, usually in the form of a college/university loan. It earns its ‘Good’ tag by generally accruing a comparably low rate of interest and being used to ‘purchase’ goods that are considered by the majority as a valuable asset/wise investment. Bad debt on the other hand is the complete opposite, accruing high to extortionate rates of interest and used predominantly to purchase assets with little future value such as a car, a holiday abroad or a home improvement. Whilst I generally agree with the two distinctions, it would be a fool who would take on an unnecessarily high mortgage (or expensive education), for a house which is far too big for their needs, based on the understanding that it’s o.k because it’s only ‘good debt’. Even ‘good’ debt accumulates interest and requires repaying, and the price to pay is usually in the form of additional hours of work, stress and the loss of precious leisure time.

 

It is more than just a funny coincidence that those who have debts have a habit of underestimating the true scale of their debts. So now is the perfect moment to take a huge sharp intake of breath and total it all up….warts and all. Whether your preference is a fully-featured spreadsheet or a scribble on the back of an envelope, once you know where you stand then there’s only place to go….onwards and upwards.

 

Now you’ve balanced the books, realised the true extent of your debts it’s time to prioritise which debts to start wiping out first. At this point you may feel like getting a few easy kills, paying off multiple low-level debts just to clear out half of the list of debts on your spreadsheet, but taking shortcuts has never been the debtfreeminimalist approach and now is definitely not the time to start taking them. Irrelevant of their individual balance, once you know what you can afford each month (the excess of your incomes in relation to your outgoings), you need to take a look at the rates of interest charged on each of your debts (add this to the back of your envelope as well) and focus on paying the highest of these off first, irrelevant of the time it might take to do so.

 

Debt by priority is by far the most effective way to clear debts although you may come across the counter argument that this is not as psychologically motivational as the balance approach which focuses on wiping out debts with the lowest balances.  My advice is at the end of the month to ignore the list of creditors, it really doesn’t matter who you owe money to, and to simply take a look at your total balance of debt each month because there is no greater motivator than seeing those figures tumble by more and more each month.

 

Prioritising debt is as crucial stage of debt reduction as any other, getting it right here could save you thousands of pounds in additional interest charges and months of debt repayments. Take the example of a £10,000 debt, 70% of which is made up of credit card/store card debts (25% typical APR) and 30% home improvement/car loan, which you can afford to service with £300 each month. If, just for the sake of a morale-boosting quick wipeout, you decide to focus on paying off the smaller, but less expensive (with regards to the interest it attracts), loan then yes you would pay off one of the two debts in less than 12 months in contrast to a 30 month wait taking the debt-free minimalist approach (highest APR first) but the total interest charges using the balance first approach are a staggering £2,531 MORE, meaning your £300 p.m payments need to continue for an additional 8 ½ months to pay off the exact same two debts. Convinced yet? You should be!

 

The debt-free minimalist approach: By; not taking on excessive amounts of ‘good debt’ (and needless to say no additional bad debt), facing up to the exact amount of debt which you’re in and then paying down debt by prioritising highest interest rate charges, you’ll have the most precise, effective plan with which to become pay off credit. Simply put, there is no quicker or better way of becoming debt-free, so that you can start to live the life of freedom which we all deserve!

If you’ve got multiple debts then click on the snowball calculator link below. Experiment for yourself the difference costs of prioritising your loans by either balance or interest, enter all the details of each debt and it will even give you a plan of action for wiping out debt in the most cost-effective way. http://www.whatsthecost.com/snowball.aspx