Quickest way to get out of debt?

graham08 · #1 (**permalink**) 02-15-2008, 10:41 AM

Hi everyone

I've been a student in the UK for the last 4 years. Asides from my student loan which has worked itself up to a lovely 5 figure debt. My bank accounts have also taken quite a hit too, so this question is kind of two-fold.

First what would be the best way of getting my bank account out of the red fast (legally of course!) and secondly what would be the best way to pay back a student loan instead of having it come out of my pay check every month. I've heard that if you invest some money into a bank account with a decent savings rate such as an ISA that you can quickly earn enouigh money to pay off a student loan easily. Has anyone got any ideas that may be helpful?

phrank · #2 (**permalink**) 02-24-2008, 01:58 PM

Graham,

The fastest way to get out of the red, is to pick up a second job, or get more hours at your first one.. The High Yeild Savings account you speak of will not return as much interest as you think! I have 1k in one and i get about 1-2.00 a month in interest! Get your income up , start budgeting your incoming and outgoing and really look at where your money is going.

vacationofwealth · #3 (**permalink**) 03-01-2008, 05:07 PM

Negoitate rates, settle some debt that can be settled. And find other income streams. So much in this industry is focused on how to not lose money instead of HOW to make money. Some debt is great if it opens up income streams for you. Most debt though is bad debt used to find items that are not needed. When you learn to invest in yourself to get ahead and not invest in possessions is when you learn how to get ahead in life. All the best!

rachael24 · #4 (**permalink**) 03-11-2008, 11:47 AM

Savings accounts do not do as much as people think. The interest rates are always extremely low.

david007 · #5 (**permalink**) 03-13-2008, 04:02 AM

Quote:

Originally Posted by rachael24

Savings accounts do not do as much as people think. The interest rates are always extremely low.

IMO, instead of putting money in savings account, better to go for fixed deposit (if dont want to take risks) or to invest in mutual funds. (Risk involved in this case).

szbair · #6 (**permalink**) 03-13-2008, 05:43 PM

Yeah but she probably can't afford to invest in mutual funds because she is paying her debt with her paychecks, she doesnt have any savings. You should work somthing out with the bank you borrowed from. get a night job like working as a bartender or somthing.

realworldknowledge · #7 (**permalink**) 03-14-2008, 11:32 AM

Have at least $500 available in the bank/savings account should you need emergency funds. Start paying off the debt in a scheduled and focued way. Look into getting another part time job

maat55 · #8 (**permalink**) 03-23-2008, 02:59 PM

Quote:

Originally Posted by realworldknowledge

Have at least $500 available in the bank/savings account should you need emergency funds. Start paying off the debt in a scheduled and focued way. Look into getting another part time job

I agree, get a second job and get on a tight budget. Try to live on much less than you earn at this time and work on your debt first. You have plenty of time to invest after your debts are gone. But get real focused on being debt free, like a quest.

A Path Together · #9 (**permalink**) 04-01-2008, 03:27 PM

Spend less than you earn and every time you make a purchase, ask if you really need it. I still spend money on things I shouldn't but I don't buy coffee by the cup anymore, make my lunch, eat more beans and rice and have really made an effort to appreciate everything I have and not what I want.

maat55 is right - it is a quest. I don't use a budget but I do have a spreadsheet of credit card debt and my payments that I use to keep me focused.

Whatever you decide to do - I hope it works!

planner · #10 (**permalink**) 04-08-2008, 12:56 AM

I agree with them that maybe you should get a part-time job. It may really help you earn extra money. Budgetting is also essential especially if you are living on your own.

You should also ask for other options about the loan from the bank or from the offices in school.

maat55 · #11 (**permalink**) 04-09-2008, 12:19 AM

I personally did not learn to properly manage money until I reached forty. I thank God It was before I turn fifty. I can't stress enough to you to learn basic money management skills. Budgeting, having an emergency fund of 3 to 6 months expenses, living on less than you earn and investing for the future. Here are a few good books to read.

The Total Money Makeover and Financial Peace by Dave Ramsey.
The Millionaire Next Door.
Rich Dad Poor Dad.

These books will change your life. I wish I could have read them when I was twenty.

GarySpicuzza · #12 (**permalink**) 04-09-2008, 07:21 AM

The Millionaire Next Door is a great book and sooooooooo true.

Also I would recommend, The Richest Man in Babylon.

maat55 · #13 (**permalink**) 04-10-2008, 12:28 AM

Quote:

Originally Posted by GarySpicuzza

The Millionaire Next Door is a great book and sooooooooo true.

Also I would recommend, The Richest Man in Babylon.

I ordered this book a couple day's ago from half.com, I can't wait to read it.

You should check out SavingAdvice.com forum

jonny0000 · #14 (**permalink**) 04-14-2008, 11:03 AM

Quote:

Originally Posted by maat55

I ordered this book a couple day's ago from half.com, I can't wait to read it.

You should check out SavingAdvice.com forum

I have ordered this book too, i hope it lives up to the hype

pants711 · #15 (**permalink**) 10-21-2008, 10:19 PM

Quote:

Originally Posted by graham08

what would be the best way to pay back a student loan instead of having it come out of my pay check every month. I've heard that if you invest some money into a bank account with a decent savings rate such as an ISA that you can quickly earn enouigh money to pay off a student loan easily.

Isn't the money to pay off your debts going to be coming from your paycheck one way or the other???

I suggest that you live VERY frugally for a while. Put as much money as you can towards your debt NOW. A 2nd job or more hours at your current job is a good idea. If you are working a lot, you spend less. It can be difficult, but many of us have done it. When you are out of debt, you will be much happier.

I can speak from experience that trying to pay the minimum on your debt and save in an average to above average (0.25-3.00% interest rate) savings account is pointless unless you have some crazy low interest rate on your loans, i.e. 0%. In the extreme scenario that your ISA is paying the same interest rate as you are paying in interest on your debts, they are, at best, cancelling each other out.

I doubt that is the case.

You will probably be losing/paying even more money in the long run, making savings pointless until you take care of your debts.

Debt 1st, savings 2nd.

Sponsors

Sponsors