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How much are you prepared to pay in interest?

June 2007 Newsletter

Hello and welcome to the second newsletter from whatsthecost.com

It's been about 4 months since the last (or first!) whatsthecost.com newsletter, so I thought it was about time I sent out another one with a few bits and pieces about features at whatsthecost.com and some general chit-chat.

First, I'd like to say thank you to everyone who sent me an email after the last newsletter. I was slightly nervous sending out a mass mailing, despite the fact that it was, of course, only going to people who had requested the newsletter, however I received several emails from people who liked the newsletter and thanked me for it!

As always, you're receiving this newsletter because you've either registered as a user at www.whatsthecost.com, or you've signed up for the newsletter. If you don't want to receive future (very occasional!) newsletters, please follow the link at the end of this email. I don't like spam and take your privacy very seriously.

On with the news:

Website

The last six months or so have seen a marked increase in web traffic at whatsthecost.com, so that's excellent news. Despite the fact that the current amount of debt in saved snowballs has now topped 100 million, people have reduced their debt by nearly 2 million, which is only good news (this only takes into account saved snowballs).

I keep considering various (cheap!) forms of marketing for the website, but to be honest, at the moment, word of mouth appears to be the best form. We get quite a few mentions on various forums which is excellent (MoneySavingExpert and Motley Fool in particular). Google obviously accounts for some traffic, plus we've had a few mentions in various blogs over the last 6 months. Thank you to everyone who mentions the site, and keep spreading the word!

New features

Reminders

As I mentioned in the last newsletter, I was planning to create an email reminder service at whatsthecost.com which could be used to automatically email you reminders on specific dates. This feature is now up and running (and has been for a few months). To use it, go to the "My Reminders" area on the site, where you'll be able to edit your existing reminders or create new ones. To stop this service from being misused, you'll need to verify your email address first. Just follow the prompts to do so if you haven't already.

You can then create reminders which are automatically emailed to you once, weekly, monthly or yearly. Obviously, with whatsthecost.com being a financial website, the primary use of this would be to remind you of important bills that need paying, or when introductory rates on credit cards expire, but you can use them for anything at all. I've got one set up to remind me every year of my wife's birthday! :-)

Download CSV of snowballs

Something I've been asked several times over the last few years is whether there is an easy way to print out snowballs. In the past, it's never been that easy, you could always set your printer into landscape mode and print the snowball page, but that wasn't ideal.

I've now added a "download CSV" option to saved snowballs. If you have Excel, or any other application which can read CSV files, you can now import your downloaded snowball and print it out in any way you'd like (you could probably use Google's on-line spreadsheet as well). The download doesn't include the calculations, so it's simply a snap-shot of your current snowball, but it's a start.

Public snowballs

Want to show other people how well you're doing in your debt reduction plan?! Well, now you can by setting one of your saved snowballs to "public". If you choose to do that, you can then give people a web address which will summarize your debt situation. It goes without saying that all snowballs are "private" by default, as I'm sure a vast majority of people don't wish to share their debt situation with others!!

If you're feeling brave, and run a blog, you can also add a small "debt free date" box to your blog which will tell your readers when your debt free date will be. Have a look here for full details about how to set that up.

Mortgage rate change

Interest rates are on the rise again, with the 4 rises in the UK interest rate over the last 12 months, and most experts expecting more before the year is out. If you want a quick and easy way of seeing how each increase (or, maybe one day, decrease!) will affect your mortgage repayments, take a trip to http://www.whatsthecost.com/mortgage.rate.change.aspx.

Even if you're on a fixed rate mortgage, it might be worth looking at. With many people fixing their mortgage for 2 years in 2005, there are a lot of people out there who are going to find they're having to pay an extra percent or so pretty soon.

Help!

I know the help in the members area at whatsthecost.com is lacking somewhat! - And this is something I hope to address soon-ish - However, I run whatsthecost.com as a hobby, and my proper, paid, job has to take priority, so time is always an issue!

However, I thought I'd quickly mention here the general principle behind saving your snowballs - I know a lot of you are already doing this, so if you know all this, just skip to the next part!

Basically, once you save your snowball, it knows about your "current" situation. Any future figures it displays are estimates based on the amount you are planning to snowball per month, and the interest you will be charged.

From time to time, you may find that you spend additional money on a credit card you have in your snowball plan, and this will affect your debt free date (likewise, you may find that you're able to pay more off than you expected). You also may find that the amount of interest estimated is not exactly correct (it's usually very close, but your statement and payment dates can affect it).

The idea is, once you've created your snowball, you then keep it up-to-date by occasionally logging back into whatsthecost.com, and using the "Add Transactions" buttons when viewing your snowballs to add extra debits or credits into your account. By doing that, your snowball should always be up-to-date, and you can see if you're on-track for your debt free date.

Consolidation

I've had a few emails asking why I believe debt consolidation is not the way to go. I should first point out that I'm in no way qualified to give financial advice, however I've been in debt, and I know what it's like. Everything below (and in fact, on the whole site) is simply my personal opinion!

Basically, there are two problems with consolidation. The first, and probably most dangerous, is by consolidating debts you run the real risk of thinking that your debts are somehow "paid off" - they're not, they've simply been moved from one place to another. Consolidation never pays off any debt. I get so irritated at those TV commercials which say something along the lines of "We paid off all our credit cards by getting a secured loan from <insert financial company here>, and we even had enough left over to go on holiday". No!! - Often the monthly payments will be lower, but I'm sure that in most cases, the total amount repayable is significantly more.

Quite often, what also happens is once you've "paid off" your credit cards, and found that you've got an "extra" £100 a month, it's not long before the credit card debt starts to build again. A few years down the line, you're in the same situation you were in before with credit card bills coming out of your ears, but this time, you also have the additional consolidation loan to pay.

That's not to say that consolidation can't work. But it only works if you've already had your "light bulb" moment (i.e, are aware of how much you owe, and want to do something about it). I don't think it works as a quick fix, or a panic response.

Sometimes, consolidation can be handy. I have to admit that about a year ago I consolidated a car loan into my mortgage, something which I usually say is a bad idea (especially as the car loan was unsecured, and obviously the mortgage is secured on my house)... Before you think I'm being extremely hypocritical, just hear my side of the story!:

The first point is that these days I'm pretty organized with financial matters. I know where my money comes from, and more importantly, I know where it goes. My car loan was on fixed repayment terms, which means that I didn't have the ability to over-pay. I had only two options, keep it going for the remaining 3 (or whatever) years and pay £x per month, or pay the whole lot back.

My mortgage is flexible, I can pay as much as I can afford each month without penalty. If I only want to pay the interest, I can do that, but if I want to pay more, I can do that too. By withdrawing money from the mortgage, and (this is the important bit), increasing my mortgage payments by at least the amount I was paying on my car loan, not only do I save money (because the interest rate on the mortgage is lower), but I also give myself the ability to pay off the car loan early.

That was my case, and I'm not suggesting it will be the same for everyone, but if you're sure you want to consolidate, then my advice would be to only do it if a) you've got to grips with your debt, and b) the consolidation loan is flexible. Always remember that it's not just the interest rate which is important, but also the length of time the loan is over. A £2,000 loan at 5% over 25 years, is far more expensive than a £2,000 loan at 10% over 5 years (about £1,000 more in fact).

Anyway, I've rattled on for far longer than I was planning! Keep the debt going down, the payments going up, and I'll hopefully get a chance to update you with additions to the website next time!

Regards,
Adam.
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www.whatsthecost.com


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