Debt Reduction Strategies?

Mine get converted into unnecessary kitchwn applicances.

 

We were using the CC interest free period as a strategy and it was working well for us. Almost at the same time my partner was made redundant, my work was cut back to about 1/4 of what I normally do (casual fifo) and one property had a really long vacancy, suddenly we had a CC debt that we couldn't pay off and it snowballed from there. Now we have decided that any thing gained using a CC is very easily lost and we are working to get rid of it for good. Another expensive lesson for us was not having enough cash buffer in place for times when times are tough.

 

Username were you spending money you otherwise wouldnt hav?

 

I believe the stats on that are 70% dont bother telling clients to get a depreciation report done.

We have a button in our software that we press to activate an auto call from Deppro to our property investor clients.

 

You generally get best bang for your points using them for international travel in the premium cabins.

 

I just got off a 5 hr economy class ride and could have done with an upgrade.

 

We probably weren't the most frugal of people at the time as our combined income was very good, so with 55 days behind the eight ball and combined with minimal cash buffer and my work has been from swing to swing for the last 3 years it just compounded on us very quickly. I've never really known when my next swing would be its always never been more than about a month but after 2 months things got tight, then three months went by. Our goal now is to have the cash buffer and cut up the credit card.

 

But did the cc worsen the situation? Would you have been in the same situation now if you didnt have a cc?

 

hi Michael
I sell down, ie sell a few, keep a few, reduce debt, increase servicability and cashflow. Developing also helps with cashflow

 

I see your point.. ultimately our mistake here was the lack of buffer in place. Having the credit card just meant when our incomes were unable to meet the balance we had to go to interest only which has compounded against us while our costs were more than our income.

 

Probably the message I was trying to get across was that while the interest free cc does save some money as soon as you don't/cant repay it in time all those savings are gone almost immediately. Not for or against it, just doesn't suit everyone. I would advise that your card limit has to be significantly less than your savings to avoid this trap. Don't rely on income alone.

 

It also delays payment of expenses for a month and it can feel like you have more money than you actually do

 

Two reports done now and also changed accountants although the new one has taken three weeks to put my tax return together so far. I didn't expect it to take that long.

 

Anybody?

 

Just work out the interest saving for one month (loan amount less salary time interest rate divided by 12) and extrapolate from there.
For instance salary deposit of $10k on a loan at 4% means $400pa or $33pm. Plug that in as your permanent extra repayment per month and it'll give you a rough indication of the credit card offset effect.

Interesting the saving is roughly equivalent to most banks package annual fee.....

 

Agree. This strategy definitely does not suit everyone. My mate has a $35k credit card debt. He has increased his home mortgage to pay down the credit card and get some benefit from the lower interest rates.

I find the cc strategy works for the very disciplined. Basically very frugal and extremely cautious about spending money. It's worked great for me, for example

 

Debt recycling can certainly be a potent strategy - I don't necessarily think going that extra mile by utilising a credit card is always what it's cracked up to be, especially in post APRA constrained capacity environments. Unless you're a dedicated point chaser, having that extra serviceability in the back pocket can be the difference between a deal being done or not.

 

Correct.
To work out the 'actual balance' remaining in the offset you may need to account for timing of all other loan repayments, credit card auto clear, pending bills due that month, salary & rent being deposited.

This can be quite difficult for those new to this strategy, especially when trying to work out how much they have actually saved during 'X' period..

 

I think cashback is a better option compared to interest free credit card. The instant 2% rebates from ING Direct, which sadly will be terminated soon, is super awesome.

 

Your making it much more complex that it needs to be. Just work out how much your average credit card bill amount would be and multiply that by your investment interest rate. Thats your yearly saving....

I feel like you stole my avatar.