6. The tale of 3 deadly debts.

On ‘Financial Planning for Dummies like me’ I shared how I planned to reduce my commitments by 50% by prioritizing my top 3 debts. Here I would share how I executed the plan and put in play a system to clear my Credit Card, Personal Financing and Motor debts.

WARNING! : This post includes lots of numbers! This would be the last I hope

The value of the Top 3 debts(Credit Card, Personal Loan & Motor Loan) were approximately RM68k 😨😭.

Debt Consolidation
This were all the debts

To clear the debts I needed money! I could sell weed or cocaine or anything illegal (don’t let your imaginations go wild) to make some quick money.

I called the 3 different banks to know whats the outstanding and learned that that if I am making a full settlement on my Personal and Motor debt, I would be getting some rebate (This was not applicable for my Credit Cards). Example if I made a full settlement for my

  • Motor loan I would need to fork out RM22k instead of RM24k
  • RM29k instead of RM34k for the Personal Loan

So now instead of RM68k I need (RM22k for the bike, RM29 for the personal debt, RM10k for the Credit Card debt) I needed RM61k.

SHOW ME THE MONEY!!!!

I just had to share this!

Natural Instincts: First thing to do was to dig into my savings.

My one bad habit would be irregular savings. I would randomly wake up one morning and declare to start a savings plan! 3 months down and i’ll loose motivation. In the process I ended up trying a few investment strategies. A few investments strategies I tried were

Of all the savings or investments strategies I tried, Real Estate and Shares Dividend payouts with Rakuten Trade were my favorite. (I need to stick to the topic, will share more on this on another day). Moving on….

Breaking the bank to clear debts

I dug through all my savings and was surprised that my bad habits paid off in a way (Would have been better if it was done regularly). So each time I put in some money in those savings plan and once I stopped investing in those accounts, I never looked back at them. The best news was that their values appreciated.

Example 4 years ago I used to buy a few grams of gold every month for a few months with an average purchase price of RM171 per gram. and their value

Gold Price trend for 5 years taken from https://goldprice.org/

At the time I was trying to clear my debts the value of Gold was ranging above RM200 per gram. That was an average of RM30 per gram of gold. With all my blessings I saw the same growth across all my investments except for my Amanah Saham Unit Trust🤬.

Clearing the first debt

With all the savings I would certainly would be able to clear up all my debts forget about top 3. But since the thought that ‘I MIGHT’ still be alive tomorrow I needed something on another rainy day. So I decided to maintain a balance I broke on some of investments which does not generate continuous value and retained debts which can generate continuous value.

Some investments that I felt were not generating continuous values were

Although the Value of Gold and Silver shot up high, unlike my dividend paying stocks it was not paying me any positive income and appreciating in value at the same time.

By using up this I raised up ~RM35k which would not have still not been able to clear up all 3 debts, instead I had 2 options.

  • Option 1 : Clear up Credit Card and Motor debt
  • Option 2: Clear up my personal debt

I took option 2 and cleared the personal debt. With a balance of RM3k balance from my investments I dumped it on my Credit Card bringing the debts value from RM10k to RM7k.

Clearing the Motorcycle Debt

The monthly Installments I used to make on my personal loan I shifted them to my bike, this helps to reduce the principle value of the motor loan by RM850 a month on top of the current existing ~RM400 (bringing a total of RM1250 paid to the principle value compared to only ~RM400 before) . This helps reduce 3.5 years on the actual duration remaining to pay the full debt. If this payment style is maintained it would take me 18 months to clear the debt.

I did not want to be in this Rat Race for even another day, so 18 months was just too long. So by dumping in whatever balance I had at the end of the day after all unavoidable expenses and not taking and major holidays I managed to clear this off in 6 months. SHE IS ALL MINE NOW!!! 😈

Image may contain: motorcycle and outdoor
Kawasaki Vulcan S with modified sissy bar added leather pannier and modified handle bar

The Credit Card Debt

Long ago I took some suggestions from some friends to clear some of my credit cards by taking a personal loan. This only lead me to added loans and paying more (for the interest rates).

This times I decided to the fire fight fire approach. As the value of the debt was now RM7k after I dumped in some of my savings in it. I took another Credit Card with a 6 months balance transfer program. During this 6 months you do not pay any interest to the value and save up a month of freedom.

MonthCredit Card DebtMonthly PaymentInterest Rate per Annum Monthly Interest 
Month 1 RM         7,000.00 RM            1,166.6718% RM                 105.00
Month 2 RM         5,938.33 RM            1,166.6718% RM                    89.08
Month 3 RM         4,860.74 RM            1,166.6718% RM                    72.91
Month 4 RM         3,766.99 RM            1,166.6718% RM                    56.50
Month 5 RM         2,656.82 RM            1,166.6718% RM                    39.85
Month 6 RM         1,530.01 RM            1,166.6718% RM                    22.95
Month 7 RM             386.29 RM                392.0818% RM                      5.79
Total  RM            7,392.08  RM                 392.09
Sample Calculation of credit card payment without balance transfer
MonthCredit Card DebtMonthly PaymentInterest Rate per Annum Monthly Interest 
Month 1 RM         7,000.00 RM            1,166.670% RM                           –  
Month 2 RM         5,833.33 RM            1,166.670% RM                           –  
Month 3 RM         4,666.67 RM            1,166.670% RM                           –  
Month 4 RM         3,500.00 RM            1,166.670% RM                           –  
Month 5 RM         2,333.33 RM            1,166.670% RM                           –  
Month 6 RM         1,166.67 RM            1,166.670% RM                           –  
Month 7 RM                      –   0% RM                           –  
Total  RM            7,000.00  RM                           –  
Sample Calculation of credit card payment with balance transfer

Finally

With some weird plans and strategies I managed to reduce my monthly expense by over 50%. But this was entirely only possible with

  • Savings (1 regret is I did not do this regularly).
  • Proper planing.
  • Disciplining your expenses.

After clearing 3 major debts, bringing down my monthly commitment while maintaining expenses for a few rainy months. I packed my stuff in a car and drove down to KayHell!

Those are actually everything I owned except my bike and 1 small bag of clothes.

Next on the agenda is how to survive, yes I stored up a little to sustain for a few months but how do I go beyond the few months.

I guess it is now when the fight against the Rat Race Cycle starts.

RacingTheRat.com

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