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22 Jul 2013


I decided to start a series on Dealing with Debt, because of questions I get lately. There are two very popular ways of paying debt.
Firstly, you have to list ALL your debt with interest rates charged. Credit cards, personal loans, store cards, car loans, etc. You have to know the interest rates you are charged in each account. The rates will be in your account statements.

NB: You are not buying any clothes, not dining out, not going on holidays, not buying lunch or coffee, not indulging on luxuries whatsoever for a few months at least. You are not going to die, I promise. It took me and hubby and our kids at least 10 years to take our first proper holiday outside family visits. We now go on a holiday all the time.

For ease of this demonstration I will give an example of a hypothetical case:
Edgars R1000 (R200 minimum payment required), Woolworths R3000 (R400 minimum payment), then credit card R5000 (R600 minimum payment), then personal loan R15,000 (R800), then your car R120,000, etc.

The Snowball Method: Made popular by Dave Ramsey. It is not a smart way but most people stick to it. It’s more psychological than cheap/ smart. One pays the smallest debt first.

Pay minimum required by all the companies you owe and whatever money you have left before luxuries like restaurants and buying the next pair of shoes, goes to the Edgars account. OK, say you manage to have R300 left (after paying the R200 instalment). You pay the R200+R300 and in 2 months you are done with Edgars.

Next is Woolworths. Remember you now have the R500 extra, which was going to Edgars in the past two months. You continue paying the minimum you had to pay to all accounts. Pay the R400 instalment to Woolworths and then add that extra R500. You will be done with the Woolworths account in probably 4 months. That’s 6 months of no’s so possible and EASY. By this time you WON’T want those luxuries anymore, but if you want them so badly you may take a small amount and go out for a cheap meal, but absolutely no holiday and no new clothes, no furniture and Edgars and Woolworths cards are cut into pieces and thrown in the bin.

Now you have an extra R900 which was previously going to Edgars and Woolies. Pay that to the credit card adding to minimum required (R600). In a short 4 months you will be out of the credit card debt. And sitting with an extra R1500 (Edgars, Woolies, Credit Card). You’ll probably finish your personal loan in another 10 months or less. You do this until you are free of the consumer debt.

The cheaper way to pay debt: You save on interest
Same as above but instead of small debt you start with the HIGHEST interest rate debt first. Leave the car out and deal with all your consumer debt first. Cars are too expensive in South Africa. Then attack that car loan if you want out of that too. But you will also need to build some emergency fund in the process.

Next, we will look at how you can use your homeloan to pay up debt. Probably the cheapest way of dealing with debt if one can. That one is for disciplined people.


  1. Wow! This is soooo informative! Thank yo so much for taking the time to educate lay-people like myself. It is much appreciated. Is there one central place where one can find all your blogs?

  2. Pleasure and Thank you Anonymous. I'm glad you found this informative.

    My blogs are very much unrelated. This is my only Personal Finance blog.

  3. Today im writting with teary on my eyes met Mbini few years ago preaching on Facebook about finacial freedom ,decided to friend her learn more such an inspiring person she is .Anyway cut long story short i was black listed no hope owing everything and every bank dediced to supplement my income with another business as NEtwork Marketor today im debt free paid all my debts including reposses cars,loans etc i dont have debt looking to buy propperties cash now.Mbini thank you sis for all your teachings and motivation she became my sister now my mom i consult her before doing financial things ...Thixo akusikelele uyimbewu ..WHAT A NICE FEELING TO BE DEBT FREE.

    1. Thanks Ndesh. I'm very proud of you.

    2. Thanks Ndesh. I'm very proud of you.