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The Afternoon ShowRTÉ One, Weekdays, 4.00pm

Debt Busting with Liam Croke

Thursday, 20 May 2010

Financial analyst Liam Croke will be answering your questions so get in touch by phoning us on 1850 71 71 11 or emailing the afternoon show

Many people are having difficulty managing their debt as they are faced with a reduction in their income or redundancy. Liam has some expert advice that may help them manage their finances and reduce the pressure.

Liam Croke: Money Expert

Liam has worked in the financial services industry for the past 21 years and seen by many as an expert in the field of personal finance. He is a qualified financial and mortgage advisor.

In the past he has held senior management positions with two well known financial institutions along with one of the "top 5" accountancy practices in Ireland.

Liam gives his advice and wisdom on a daily basis to those who are just starting out to high net worth individuals. He currently works for a financial services company based in Limerick.

He is frequently asked to contribute and comment in all areas relating to personal finance on both national and local radio stations. You will have heard him for example recently on RTE's "The Mooney Show" and on Newstalk's "The Right Hook."

Liam was invited to make a presentation to the Joint Oireachtas Committee on Social & Family Affairs on trends and levels of personal debt in Ireland. He made his presentation to the committee on the 24th June 2009.

Liam is author of 4 personal finance books:
. The best selling "The Mortgage Maze Explained" published by Currach Press in 2006.
. The best selling book "Your Money Your Life - Managing your finances in today's Ireland" published in 2007.
. "I'm Broke! A teenagers guide to Money" - Published by Crabtree and distributed in the UK & USA in 2009
. "Stash or Splash" which is being released in Ireland and the UK in September of this year.

. Liam previously wrote a weekly personal finance column for The Sunday World entitled "Mr. Cash - How to Save it, Spend it, Earn it" and has also written articles for the Sunday Business Post, the Evening Echo, the Sunday Independent, the Irish Sun, Prudence Magazine to mention just a few.

Increase your Income and Decrease your Expenditure

Debt Busting Week One Recap:-

Last week Liam discussed how to tackle your debt head on by listing your debts in order of priority and making a budget. He then gave an example of a letter that you can send to your lenders in order to decrease your repayments. Next he suggested making a spending diary so you have a more detailed understanding of what you spend your money on.

Now we are going to be analyzing those spending diaries and seeing where changes can be made to your income and expenditure so that you can make easy and practical changes to your spending habits.

Make a commitment.

Do not decide that you are going to tackle your debt if you are not 100% committed to do so.

You can start immediately, particularly at this time of year by not living beyond your means, that is:

. Pay with cash as much as possible
. If you don't need it, don't buy it
. Watch out for "bargains" or "reduced items"

A client bought a couch that was reduced from €1200 to €1000 for one day only.
The credit agreement was over a 4 year period at a rate of 15.8%. The total pay back therefore for this loan was going to cost them €1,350.

So, the item they bought for €1,000 was in fact going to cost them €1,350 which was greater than what the cost of the item was before its reduction. Not such a "bargain" after all.

Analyse where you are spending your money.

Once you have completed your budget and spending diary have a good look at it and see where you are spending unnecessarily.

If your income is less than your total outgoings then you have a problem.

You may have too many loans or you are just spending too much each month and are just not managing your finances properly or possibly a combination of the two.

You are now going to decide on how to tackle this debt and take action.

Your existing debt may not even be the problem, it just maybe that you are not managing your income properly each month and spending too much on luxury items.

List your debt starting with the highest interest rate.

Write down your debt again starting off this time with the debt that has the highest interest rate charged against it, now find the next highest rate and so on.

Your plan of attack is to start tackling the debt with the highest interest rate first and not the highest amount outstanding. The loan that is costing you the most each month is the loan you need to get rid of quickest.

For example, if you have two loans, one with €3,500 o/s costing you 8% and the other with €1,000 o/s but it is costing you 18% then deal with this smaller loan first.

How are you going to deal with your debt?

The money is going to come from three places:

. Surplus income
. Existing savings
. Consolidating all of your debt by re-mortgaging

Increase your Surplus Income:

You can increase your surplus income in a number of ways.
Getting a second job is an obvious one but what if you don't even have a first job! Suspending pension contributions for a period of time could be another one and so on but you can increase your income by simply altering the way you manage your outgoings each month. This may mean some tough decisions will have to be made by you but this was never going to be easy.

How to decrease your outgoings?

Stop unnecessary expenditure

. Change supermarkets
. Make your lunch
. Quit gym/golf memberships
. Cheaper Insurance
. Cut back on coffee
. Cancel your digital TV

All this will help increase the amount of income left over each month that will help towards eliminating your debt.

This is very much a personal decision that you have to make and you have to decide what your number one priority is i.e. being debt free as fast as possible or continuing to spend your money on items each month that support your current lifestyle.


Having existing savings that are earning little or nothing in interest against paying 8% to 18% on borrowed money makes no sense what so ever. For example, if you have €6,000 on deposit earning 1% in interest and you have €6,000 on your credit card which is being charged at 18% then use that savings to clear your credit card debt immediately.

I would however always recommend and encourage people to have some level of savings on deposit which is known as an "emergency fund". This fund would be called upon in the event of an unforeseen event such as losing your job, suffering an accident or illness, money that can be called upon to replace your income in the event of you being unable to work or during a period of you looking for a new job.

Consolidate your Debts:-

If you have a property and you have sufficient equity in your home you could consolidate all your debts into one loan, secured on your house. This means rolling all of your loans into just one. The advantage of this is that your expensive loans are now in just one, much cheaper loan and can be spaced out over a longer period of time, thereby reducing your monthly outgoings significantly. This is much more difficult to do nowadays as banks are reluctant to finance short term debt over a long period of time!

If you keep to the points outlined above then you can get that debt under control, however if you cannot increase your income, if you are cutting back as much as possible, you have little or no savings, you have no equity in your home or if you do but your income is not enough to qualify you for a top up loan from your mortgage company etc. and you fell your debt is getting out of hand then it is time to take another form of action and ask for professional help and assistance.

You need to start talking with the companies/banks you owe the money to and advise then of your current predicament, remember honesty is the best policy and lenders will respond to you and will want to work with you. You can come to some form of agreement that is acceptable to all concerned whereby they may offer interest only repayments for a time, suspend repayments for a few months, reduce your monthly repayment by extending the term remaining on the loan. If you are not confident enough to speak to your creditors yourself then ask someone like MABS to act on your behalf.

When an agreement is reached with a lender, remember to stick to your side of the agreed plan and do not miss any of the revised repayments.

Liam will be answering your questions so get in touch with us by calling the low call number 1850 71 71 11 or send us an email:

Additional / Misc' Info:

For more information please contact (Money Advice and Budgeting Services) (Free Legal Advice Centre)