I have been a fool…
I have always considered myself to be good with money, I have even given financial advice to my friends on how to save and budget but I have not listened to my own advice. I currently have two credit cards – a Barclaycard and an American Express card and have had them for a number of years, originally I would use them during the month and pay them off in full when the bill came along – I suppose getting a little extra spending power, then something happened and I can’t really put my finger on it I assume some large expense came up and it was put on the one of the credit cards and I was not in a position to pay it off.
I ended up paying the minimum amount while I concentrated my efforts on saving, a rather backwards way of doing things but I suppose I rationalized it as being better to have savings so I could become less reliant on credit cards for unexpected expenses.
In fact I took out a loan a few years back and used some of that money to pay off what I owed so it is alarming to have found myself back in a position where I had racked up credit card debts and was only making the minimum payment each month. I should point out that the total debt has never been more than about £2000 over the two cards (I know that others would have debts a lot higher than this).
Each month the minimum amount was being paid which was about £21 per card and of this only half was actually paying off the debt as the other half was essentially only paying off the interest. I have had the money to pay off both the cards for some time but had been reluctant do to so.
Every month I have been able to squirrel away over 10% of my wages into various savings accounts, I needed to get a new car so checking what I could afford I took out a loan and was was lucky enough to have some money gifted to me from my grandparents, the car was purchased in February and it was also around this time that I made the decision to move from my £60 a week bedsit to something bigger. Purely coincidental that I met a woman at the end of last year as well.
Speaking to friends I knew the move would be expenses and maybe at that time I should have considered my finances and looked to amend things but I did not and moved in and have generally been able to manage the bills. In May I did make a decision to use savings to take a bite out of my credit card debts and paid £600 off the American Express card – which had the desired effect of reducing the minimum payment each month, however I should have continued to pay the higher amount – hindsight is a wonderful thing.
So today as I know I need to find £277 for my water bill I took money from my “car” fund and have paid over £300 off the American Express card which leave a balance that can be easily paid off next month.
This was my top priority debt to clear but still leaves me with the Barclaycard and the £1000 owed on that which needs to be cleared at the same time as ensuring I have enough money to live and that money can be put away for Christmas etc.
I suppose the poor interest rate here has helped me come to my sensible decision to pay off the credit and save on interest charges.
So next to look at my finances and reduce the amount I am saving each month to ensure my debts can be paid off quicker only then can I put all my efforts into savings.