Need to assist my sibling resolving a personal debt conundrum

[Jonathan Mudoni]

I have a younger sister in her early forties whom i've managed to get interested in real estate. She sees the sense in the whole thing and in life she has a senior job as an associate director in the civil service. It comes with a very busy lifestyle which includes a fair dose of business travel.

She is interested in partnering with me on deals in the foreseeable future but the elephant in the room is that she is over-geared in terms of personal debt, credit card debt to be precise. Can someone please point me out to a resource, a book or whatever. I need something that I can buy and literally put into her hands that has proven strategies on how to get out of the personal debt prison. Links to a website etc wont help because I know she is too busy to look at that sort of thing.

I have a feeling that with good plan and some grit she can be out of this debt situation in 24 - 36 months after which she says she will be ready to start her investment journey. I will wait in anticipation of your input - Jonathan, Johannesburg.

[Kerry Baird]

I used the Debt Snowball method.  It is quite common, but I will explain anyway.  This is from memory, and is loosely derived from Dave Ramsey and his Total Money Makeover.

We set aside savings until we had a sizeable Emergency Fund.  That was not meant to be used except in dire need. 

We stopped using credit and debit cards.

We used any extra savings to make a larger payment on the credit card with the highest interest rate, while making the minimum payment on the other cards.  When we got a birthday present, or a bonus at work, or any other surprise sum of money, it went to the highest interest rate card.  Once we paid it off, we rolled all the money we earned to the next card, until it was paid off.  And then the next.  

Our family set all of our budgeted money into paper envelopes.  We used the cash for groceries, for clothing...for everything.  It was "harder" to spend the cash and easier to spend using a card, so we mentally leveraged to spend less overall.  And we told our money where to go at the beginning of the month.

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Once debt is paid off, we switched over to saving up for deposits for moderately priced real estate.  We saved up from our salaries until we had the deposit for one house.  And then we did it again, but this time using the rents from the first property.  And we saved up again, using the rents from the first and second property.  And we continued.  

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In the first scenario, we had to save up our salary, which was pitted against the interest that is charged on cards.  In the second scenario, the tenants helped us to save up the deposits, so it wasn't all saved from our salaries.  Once we have a set number of houses, we line these up and do the debt snowball again.  We use all available rents to pay off the first house.  Once all ten houses are paid off, we can borrow a modest amount against them again and buy ten more.  Debt snowball again...