If you’ve been following our Journey to Becoming Credit Card Debt-Free, you’ll know that we’re huge fans of Dave Ramsey and the advice he has to offer. We have been following his 7 Baby Steps to becoming credit card debt-free which has worked for us, although by no means was it a quick and easy way out of credit card debt! It was anything but that! I’m sure that everyone who has been in a similar situation will pretty much tell you the same thing.

Your journey to becoming debt free will be a bit easier if you have a small, starter emergency fund in place before you begin paying down your debt, as Dave Ramsey suggests. His advice is that we should first save $1,000.00, which is the equivalent to about R13,500.00, and then start paying off your debts. This emergency fund will stop you from using your credit card to pay for unforeseen expenses, or emergencies, while you are paying down your debt. You can read Dave Ramsey’s Quick Guide to Your Emergency Fund.

Dave Ramsey also suggests that your emergency fund money should be kept someplace where you will be able to access it immediately, should you need it in an emergency, but it should not be so easily accessible, for example via a debit card, which might tempt you to spend it on a non-emergency such as a good sale! Dave Ramsey suggests using a high-yielding Money Market account.

Money Market accounts at banks are a type of account which give you a higher interest rate than ordinary savings accounts. While the interest rates are higher, they are usually not above inflation, but pretty much on par with the inflation rate. So while you may not be earning money, you are at least safeguarding it against inflation.

So in South Africa, what are some of your options, what are the costs involved and what are the pros and cons?

Standard Bank’s Money Market Call account requires a minimum deposit of R20,000.00 while FNB’s minimum deposit for the same type of account starts at R5,000.00 and Nedbank offers two options – one with an opening balance of R5,000.00 and another with an opening balance of R20,000.00.

In each case you would be required to maintain this opening balance in order to maintain an active account. This is something to think about in case you need to use up a chunk of cash from your starter emergency fund. Perhaps a smaller opening balance of R5,000.00 would be more easily accessible.

Bear in mind that the FNB Money Market account offers a small interest rate for amounts up to R19,999.00 (3.50%) which increases to 5.25% onwards for higher amounts. The Nedbank Money Market deposit account offers 5.50% on amounts up to R10,000.00, which is a useful comparison in this case. And a Capitec Savings account offers pretty competitive and similar rates, requiring no minimum deposit, but for a small monthly fee.

If you feel you would be more comfortable stashing your starter emergency fund in a savings account instead, then it would still be worth your while to shop around for the best terms and interest rates. Perhaps you can open a secondary account where you currently bank and which would incur no monthly fees but would allow you to transfer money as and when needed into your cheque account?

A savings account would definitely give you a much smaller interest rate but it would, at the same time, allow you to start saving from a smaller amount which might just be ideal for an emergency starter fund. Once you have the required amount saved it might then be a good idea to take advantage of the higher interest rates offered by Money Market accounts.

You might, at this stage, be wondering why I haven’t mentioned fixed deposits or unit trust investments as an option for stashing your emergency fund. I have come across quite a few blog posts online and opinions by personal finance gurus who suggest that the bulk of your emergency fund should be making you money and not simply catching up with inflation in a Money Market account. This, to me, kind of defeats the purpose of having an emergency fund. You either have it or you don’t, and as you would more than likely use that money in an emergency it should be a bit more easily accessible than a fixed deposit or a unit trust investment.

A fixed deposit might yield a slightly higher interest rate than a Money Market account, and you could still access your funds before maturity, you would need to give notice and there would be penalties involved in withdrawing your money before term. And while there wouldn’t be penalties involved in withdrawing money from your unit trust, you would still need to give at least 24 hours’ notice which may not be an ideal situation to face if you need to access your money in an absolute emergency (I always think of medical emergencies here, and over weekends or public holidays!).

Disclaimer: Please remember that I’m not a professional financial advisor and the opinions expressed in this blog post are purely my own. I simply share the little bit of knowledge I have in the hope that it might be useful to others. Please consult a professional financial advisor for more detailed advice suited to your specific circumstances.

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As we welcome the New Year, I thought it would be a good time reflect on my top 6 posts that have been viewed, liked, shared and commented on the most in 2016!

Thank you to everyone who has visited my blog, subscribed to my Newsletter, liked my page on Facebook and followed me on Twitter in the past year. I look forward to interacting with you even more in 2017.

For now, here are my top 6 posts in 2016!

1. Make Sushi at Home: It’s Much Cheaper

If you’re a fan of sushi but not quite the fan of paying for sushi takeaways, which can be a bit heavy on your budget, then this is the post for you! Watch my video tutorial and learn how to make sushi at home. The ingredients you need are affordable and all it takes is a couple of fun (and messy!) practice sessions until you get the hang of it! But when you do, I promise you’re going to enjoy making sushi and afterwards savouring the delicious taste of homemade sushi on a budget! Read the post here…

2. How We Reduced Our Monthly Expenditure

‘Beware of little expenses; a small leak will sink a great ship.’ – Benjamin Franklin

In order to find “extra” money in our budget, we had to reduce our monthly expenditure. We wrote down all our expenses on a piece of paper so that we could see very clearly how much we spent, where, when and on what exactly. Once we had these figures on paper, it was easy to see how much was too much and where the leaks in our wallets were! We then had a better idea of which leaking tap we needed to tighten or close for good. In this post I share with you how we fixed those expenditure leaks so that we could find “extra” money in our budget. Read the post here…

3. Homemade vs. Store-Bought

Have you ever wondered whether it would be cheaper to buy something or to make it at home? I know I have. In fact, it’s something that’s almost always on my mind. I love to do things at home – to cook, bake, sew, crochet and I enjoy all sorts of DIY projects. So I always have to ask myself whether it would be cheaper to buy something or to make it at home. Let’s look at the pros and cons. Read the post here…

4. Becoming Credit Card Free: Our Journey

Proverbs 22:7 ‘The rich rule over the poor, and the borrower is a slave to the lender.’

Becoming credit card free and living life more frugally hasn’t been an easy journey for us. But the option of living life as borrowers, ‘servants to the lender’ and to credit card debt certainly didn’t feel that great for us either. This post details the beginning of our journey to becoming credit card free and living live more frugally and more economically. Our journey inspired me to start my blog. Read the post here…

5. Stick to Your Grocery Budget

South Africans spend, on average, 12,8% of their income on food and beverages per month, making this one of the top 3 expenditures in South African households along with transport and housing. We used to spend roughly the same amount of our income on food, and sometimes even more than that, if truth be told. We now spend about 10% of our income on food and beverages each month, and in this amount I also include all the food and treats for our 4 doggies as well as all our household cleaning items and our toiletries. And we pretty much stick to our grocery budget each month. This post tells you how we do that. Read the post here…

6. How to Save Money Grocery Shopping

Statistics show that food is the 3^rd highest household expenditure, after housing and transport, in South Africa. As I do most of the grocery shopping in our household I pay attention to the prices and it seems to me that each time I go to the shops something else has just gone up again. I try my best to be as frugal and careful as I can be when it comes to grocery shopping and here’s how I save money on our monthly grocery shopping. Read the post here…

I hope you’ve enjoyed reading these top 6 posts and thank you again for your support in 2016! I wish you all a very Happy New Year.

If you’d like to stay in touch in 2017, and beyond, consider subscribing to my Newsletter to receive an email when I publish new blog posts or like my page Frugal in SA on Facebook or follow me on Twitter and Instagram. I look forward to staying in touch and hearing from you, my lovely readers.

Happy Frugal Living in 2017!

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I haven’t done an update on our credit-card debt free journey in quite a while. It’s been nearly 3 years since we first started our journey to becoming credit-card debt free and we paid off our first credit card debt in November 2014. We are now almost completely debt-free on the second credit card debt which was much, much higher and as a result, much, much more difficult to pay off. Yet, here we are now, two more months, or two more payments, away from credit-card debt freedom so we are nearly there! This is the final stretch!

The reason I’ve been a bit quiet about this on my blog is because I think we’d probably hit the debt-payment plateau over the last few months, financially as well as emotionally. We’d reached our maximum stretch. We’d cut down as much as we could and wherever we could (read more about How we reduced our monthly expenditure and 10 ways we save money everyday). There was nothing more to cut down on so that we could find extra room in our budget for additional payments. We made the same, steady, monotonous extra payments each and every month.

We were working as much as we could and there were literally no more extra hours left in the day, Monday to Friday, or the weekends, for us to earn extra money. While we haven’t lost heart, and we are still as focussed as we can be, we’d just flat-lined a bit. Now that we are two more months, or two more payments, away from credit-card debt freedom, it feels a bit surreal. I almost didn’t even want to write a blog post about it in case… well, in case, something went wrong.

Can we relax a bit now? I think so. There are going to be no more crazy working hours and working over the weekends, at least not for a while and certainly not for me. Working non-stop is not fun, especially when it carries on for a bit longer than what your body can take. I’ve been walking around exhausted for months now, and this has affected my health and general well-being. This month, for example, I got my second bout of flu in less than 3 weeks and the second time round I was literally ordered to stay in bed for several days (which I did) so that I can recover completely and get some of my energy back.

But despite hitting the debt payoff plateau, so to speak, we still made the same additional payments every month for the last few months and it’s now down to just two more of those payments, and at this point, it doesn’t even matter that we cannot increase those extra payments. What matters, and what sounds awfully good as I say it to myself, is that those two extra payments will get paid. Saying that to myself, I actually feel lighter. Happier. Less burdened. Freer. Not yet completely free but freer. I even sleep better, and I’m not exaggerating when I say that.

So what’s next for us? The first step I’m looking forward to is seeing a ZERO balance on the second credit card very, very soon. The second step I’m looking forward to even more is closing that account for good. And after that? All I can say is – stay tuned, frugal friends…!

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If you are on a journey to becoming debt free, and you’re finding it difficult to stay motivated during the long months ahead as you watch the balance go down very slowly in spite of all those extra payments you’ve been making each month, you are not alone. Staying motivated was probably the most difficult part on our journey of becoming credit card free and especially for me, this is something I struggled with very often.

Whatever the circumstances and whatever the reasons one may have for accumulating credit card debt in the first place, the bottom line is that one has used money they didn’t have at the time but assumed they would have the same amount, and more, to pay it all off later. Strangely enough this is not something one thinks about at the time of making a purchase or withdrawing cash on a credit card – I know we certainly didn’t. And I also know that situations can be dire – sometimes one has no choice but to use a credit card. For a lot of people, credit card debt doesn’t come from shopping sprees and lavish purchases but rather, from genuine need. This is what makes credit card debt such a burden.

Paying the minimum payment due each month, however, doesn’t really put a dent into any debt – the bulk of what we end up paying with our hard earned cash goes towards interest and fees and charges to the lender. That’s why it’s so hard to pay off any kind of debt with just the minimum monthly payments. If you plug in the amount you owe on a credit card into any online debt calculator along with your minimum monthly payments you would see how long it would actually take you to pay off your credit card debt – in many cases, this would take years and you would end up paying double the amount you originally borrowed, if not more. For us, our one credit card would have taken us 8 years to pay off with just the minimum payments and the other one, well, actually 18 years, believe it or not. Shocking, isn’t it?

Now imagine if you actually had your credit card debt hanging about for all those years. Wouldn’t you get sick and tired of having to pay and pay and pay only to see the balance on your credit card go down just a little bit each month? That’s sure to destroy anyone’s motivation along the way. Even with the extra amounts we were putting towards credit card payments each month, we still became discouraged more often than not. Why? Because it still took such a long time. Even a year can seem a pretty long time. And all the while you’re busy paying off credit card debt, life still happens. Murphy does indeed come knocking on your door and expect you to find even more money to pay for burst geysers and punctured tyres and doctor’s visits.

Eventually all you want to do is – give up, forget the whole thing and go back to this state of blissful ignorance before you started paying off your credit card debt and before you became so obsessed with paying down the balance. This was the time when you kind of knew you had credit card debt but you were still hoping for that lucky break in life – perhaps a raise at work, a big bonus, an inheritance or a great lotto win – which would help you wipe out that whole lot of debt in an instant! Sadly, for many of us, this kind of an instant fix never comes and we have no choice but to simply trudge along. If you’re one of the lucky few and you managed to wipe out your credit card debt in one or two very large payments, then consider yourself very lucky indeed.

Because here’s the thing: once you start paying down your credit card debt you know there is no going back to the way things used to be before. You know you have to pay off your debt and so you keep traipsing along. Some months you would be able to put more towards your debt while there will always be those months where you just cannot put that much extra towards the repayment. It’s at those low, low moments that I always said to myself – think about how far you still have to go but never forget how far you’ve come.

I kept a visual reminder of this in a very simple table with the outstanding balance and all the payments we’d made. Each time I would start to feel discouraged about our situation, I would go back to this table, look at our starting balance and how much progress we’d made thus far. So even if we’d only managed to make a small extra payment that month, let’s say R500, I reminded myself that it’s R500 that we wouldn’t be paying interest on. There’s definitely some comfort in just looking at the balance going down, and not going back up. This actually motivated me to stay on track, not make any extra purchases or payments on that credit card and just keep moving.

I also kept reading personal finance blogs during this time. I probably searched for ‘get out of debt’ online at least a million times and I’m hardly exaggerating here. That’s pretty much all the bedtime reading my husband and I did for a very long time. We found inspiration and courage in other people’s stories of success in surmounting very large amounts of credit card and other debt, in fact, much larger debts than ours. The truth is, I just needed to hear that being debt-free is possible, and to stop doubting ourselves into thinking that it was impossible and that it will never happen for us.

I also tried my hardest to keep focussed on our goal of becoming credit card free. At one point all I could think about was seeing that light finally shine at the end of a long and dreary tunnel that we’d been fumbling in for so long. I knew that there were possibilities out there, waiting for us, and that’s really all I wanted – a possibility, a chance at a very different life once there was no more credit card debt hanging around our necks. Staying focussed wasn’t always easy but I held onto our goals and wanted us to be debt free so much that this was the biggest motivator of them all. At least for me.

If you are on a journey to becoming debt-free, what do you do stay motivated?

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Proverbs 22:7 ‘The rich rule over the poor, and the borrower is a slave to the lender.’

Becoming credit card free and living life more frugally hasn’t been an easy journey for us. But the option of living life as borrowers, ‘servants to the lender’ and to credit card debt, can’t feel that great either, right? It certainly didn’t feel that great for us. Despite the hardships we faced, we have learnt so much from our mistakes over the last few years and I feel it in my heart that we have become stronger in faith and in character.

We got our first credit card years ago out of absolute ignorance, as unbelievable as that sounds. And yes, we did use it. We also got a second card a few months later. Why? Well, we didn’t apply for the second card: it was offered to us and we accepted it. We knew that interest would accrue on the balances owed but we had no idea how much or how long it would actually take to pay off balances on credit cards by paying the minimum balance each month. We never really bothered to look at the statements much and we continued to rely on the card for emergencies.

At the time, the car we had was really not the most reliable one. It was old and not in the best of shape at all. It pretty much needed spare parts, repairs and towing almost every single month. This was a huge drain on our finances, which we didn’t have. Yes, we owned the car but it was draining us financially every couple of weeks. As a result of that, we didn’t have enough money for a lot of other necessities so we had to resort to using the credit cards, oblivious to the horrendous amount of interest we would be paying with just the minimum repayments at the end of each month. By the time we managed to sell that car, and buy something a bit more reliable, but still second hand, we had credit card debt which we had to face.

We carried on paying the minimum balances each month, all the while thinking very naively that paying the minimum due each month would pretty soon make a dent in the balances we owed. After about 14 months or so, we got an absolute fright when we realised that after all those months of paying and paying, the remaining balance had hardly gone down! In fact, what had gone down was so small that it was laughable! We were horrified. In hindsight, we really were too young and so very naïve. Yes, we should have checked the statements more often and yes, we should have asked around for advice or at least read up a bit about it online. That moment was a real wake up call for us. Experience really is the best teacher, as they say.

And that’s when we started learning a bit more about how credit cards really work. We used an online debt repayment calculator, only to find out to our horror that paying the minimum balance on the one credit card meant that it would have taken us something like 8 years to pay off the total amount, with just about double the amount in interest alone. The second credit card would have taken a lot longer than that; in fact, so much longer that even now when I think about it, I shudder at the thought – 18 years.

It was then that we began to educate ourselves. We read lots of blogs with people’s personal experiences, watched a whole lot of videos online, read up on what financial experts had to say about saving money as well as getting out of debt. It took us a long time to see our situation for what it was. Both my husband and I really liked what Dave Ramsey had to say about the 7 Baby Steps to getting out of debt.

NOTE: I am not affiliated to Dave Ramsey or his products in any way. This blog post simply recounts the details of our personal journey to becoming credit-card free and is not intended to replace Dave Ramsey’s financial coaching or products or courses offered by the Financial Peace University in any way. You can read about Dave Ramsey’s 7 Baby Steps here and about Financial Peace University here.

So we thought we would give that a try. Moving on from step 1, which was setting up a very small emergency fund, we then started paying off the first credit card balance. We paid as much as we could over and above the minimum amount due at the end of the month. We scrimped and saved. We changed our shopping habits (you can read about how I save money on each month here and here. We sold pretty much whatever we had around the house that we weren’t really using. We also learnt, month by month, how to be more frugal in our lives and how to cut down on our monthly expenditure (read about how we did that in my post here).

All of this, and all at once, was a lot of hard work. It was exhausting. It was heart-wrenching at times. We lost hope and motivation so often along the way. Paying off credit card debt was HARD. But we wanted to be free. That was our goal. Large amounts owed on a credit card can be very daunting and the months ahead can seem very long. They certainly felt like that for us. But in spite of that, I can remember even now the biggest smiles on our faces each time we made an additional payment just so that we could check our balance and see the progress we were making! That’s what kept us going, I think (you can read more about how we stayed motivated while paying off credit card debt here).

We were absolutely overjoyed when we managed to pay off the full balance owed on the first credit card in just a year. I say ‘just’ a year because depending on how much debt a person has to deal with, it could take a lot longer than that. We closed that credit card account literally the day after the last payment went in. We just couldn’t wait a second longer to be rid of at least that one chain around our necks. I don’t think I’m ever going to be able to express in words how elated we were that day! It’s certainly a day neither my husband nor I will forget. We were convinced we could even breathe easier from that moment on. It was a small victory but it was a victory for us nonetheless.

Looking back at our journey of paying off our very first credit card, I realise that it was a lesson well worth learning for us. We needed more discipline in certain aspects of our lives: discipline with finances in general, our spending habits, and learning how to be less wasteful with our resources. But, you might be wondering: whatever happened to the second credit card?

Becoming credit Card Free: Our Journey Part 2

For the time being, if you find yourself on a similar journey of paying off credit card debt in South Africa, I would love to connect with you so please leave me a comment below.

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