Snowballing to save

If you have debts, have you tried ‘snowballing’ to pay them off as quickly as possible? This is a simple way to make sure your money is working for you in the best way possible. Simply pick the debt with the highest interest rate and pay that back first. Then, when that one has been repaid, move your money on to repay the next debt.

This way you pay the least interest on what you owe. It is also cheaper than consolidating your debt. Just don’t forget to make the minimum payment on each debt or negotiate with the lender to spread payments in an affordable way. And think about why you have debts in the first place too: try to spend less!

Are you saving or spending?

The BBC has just reported that Brits have lost the saving habit and are paying off debts instead. The recession has driven savings rates down so more and more families are seeing little point in putting money in savings accounts. At the same time the cost of borrowing has risen. July was the first month where, as a nation, we paid back more than we borrowed.

This means it makes sense to pay off debts as quickly as you can. Look at your outgoings and see if you can find some ways to make savings. If you stop smoking or cut back, for example, you could use that extra few pounds each week to repay a credit card debt. Walking to work when you might have got the bus or used the car is a winning option too. You win three times over: you are healthier, you save on the cost of the cigarettes or travel, and you save again when you have less interest to repay on your debts. Give it a go and let us know how you get on.