Hard to believe …

I think today I just realised that we have more than $16,000 ready to buy a home, nearly $5000 in an emergency fund, and at least $6000 in other accounts for a range of purposes!

I know I posted these figures recently, but today I really just looked at them properly and really thought about how much it took to get here. It might not sem like a lot of money to some people, but to us it is like reaching Everest!

After so many years of struggling financially, this just seems hard to believe. Our difficulties started about 10 years ago when my husband sold his business and the new buyers defaulted on the purchase – after they had started renovations and left the building looking like a bomb site. Without that money or the business income, we had just my (office junior) income and a big bunch of final costs and legal bills to pay.  My husband’s plans for a new business had to be shelved because there was no start-up money, just bills. He had put all of his money into his business and like that, it was gone. Now he had to find a job, and to his credit he took what he could find. He went from a successful business owner to initially being a cleaner at a hotel. He didn’t let his pride get in the way of bringing in a wage (I’ll always be proud of him for that). He knew it was only for the short term, and it needed to be done.

Then we had a protracted court case, resulting (nine years later) in a paltry sum that didn’t even cover the cost of the legal bills. I think it worked out at about $1000 per year! Luckily, we had just kept on plugging on with our lives as best we could, and worked through paying our creditors. Many of them had been business associates and friends, and many were very good about waiting for their money. Again, I’m proud we paid them back and didn’t run away from it. 

Then I went back to university for 8 years and we survived on one income – initially it wasn’t a very good one either. But we knew that my studies would be worth it in the future.

Over the years, hubby’s income got better. But we watched the price of homes in our area more than double, all the while listening to friends tease me for worrying about money because `when you get out of uni, you won’t have to worry about money anyway’! (Yeah, right! While thing are better, we are far from not worrying about money.)

Eventually things did get better. We started being generally more responsible with the little money we did have and started getting rid of the `dumb’ debt we had, like credit cards and the like. Eventually we got rid of all the debt … after a few years of absolute bare bones living.

And now, as of this year, we are on two quite good incomes and our lives have started to change. Not because we have made our lives any more fancy, but because we are starting to move forward.

This is more than just having more money. Going through this has made us into fundamentally different people.  We are so much more cautious with our spending, and value security much more than just making sure the bills are paid (which is what we used to emphasise).

I don’t ever want to be in that situation again, and maybe that is one of the blessings in what we have been through. The fact of being in big debt without a quick way out made us `wake up’ in a way that some people who don’t ever face big financial worries never do. Instead of just paying the bills and spending the rest, we want to move towards a life where we are relaxed and moving forward financially each month. Let’s hope we stick with that, and reap even more of the associated rewards.

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Over and above …

Well, today we hit $16,165 in our home deposit account and in so doing, we jumped over the end of our savings ticker ($15,000). This was always a bit of an artificial goal because we want to save way more than this, but it is still a bit of a milestone for me.

I look back and smile on the old days. I don’t think I’d ever had even $2000 in my bank account before I started paying down debts, and any time I did, it went somewhere the very same day. And I usually still owed someone else the same amount or more.

So it is a red letter day for my husband and I.

So what are our plans? Well, I don’t think we are going to make it all the way to a 20% deposit before we buy. But I have recently talked to a finance company specialising in finance to professionals (ie doctors, vets), and they tell me that even without the 20% deposit, we will be eligible for a loan  without having to pay Lenders Mortgage Insurance. This potentially cuts about $7000 from the potential loan costs and is great news. It also means that the First Home Owners Grant of $14,000 can all go towards our deposit.

So with our $16,000 currently saved and that $14,000 grant, we essentially have a $30K deposit already.  If we can find another $15,000 cash and at least $2K for costs of buying, I’ll be pleased with our progress and ready to buy.

Let’s see how we might do that. The $14,000 grant reduces to $10,500 at the end of September, so that is our deadline for saving the rest of the deposit, getting the loan and signing a contract.

Already, we have $3000 stashed in an account that we had intended to use to buy some shares, and I had already planned to use overtime to save another $2K towards that. So all of that cash could instead go towards the deposit.

We also expect to get about $5000 back from overpaid tax and child care rebate at the end of this year, so that should also boost our deposit up.

By September, the natural progression of our house deposit saving will mean we have about $9000 more in the bank (at $1300/fortnight).

So the deposit will comprise:

Current savings: $16,000

Continued regular savings by September: $9,000

“Shares” money: $5,000

Tax refunds: $5000

First Home Owners Grant: $14,000

TOTAL: $49,000

(including $2-4K for buying costs).

Sounds pretty good!

  I really don’t want to touch our emergency fund account, so somehow I need to make sure that money is sacred NO MATTER WHAT!

By then it should be about $7,500 or so and will be a good amount to have ready as home owners. It will also be important to keep that money coming out so that we have $10,000 by the end of the year. Naturally, we will need a loan with an offset account that subtracts that amount off the overall amount owed for interest purposes.

I feel like doing one of those evil laughs – “mwah, hah, hah, hah! My master plan is finally coming together!”

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Still a learner

Gosh, you know, just when I think I have this money thing down-pat, I realise how far I have to go. Well, you know how I formulated a debit acount that we would pay money back to instead of our credit card? Well, this month … when push came to shove … I was so wary of actually taking the money out of this account that suddenly the end of the month arrived and I got charged interest on the credit card purchases! So I’m out $20 and might as well be back in the old days of revolving credit card debt!

Money is such an emotion-laden thing. Why do I have trouble raiding an account to pay for things like our car service, yet I can easily lay down the plastic for the same thing? It’s certainly an anomaly. Needless to say I have transferred the balance from the debit account to pay off $550 worth of purchases on the credit card.

So what happened? Well we got a bunch of bills at once and there wasn’t enough in our billpaying account to cover it all. I kept hoping that over the last few weeks I would just be able to pay the credit card directly from the billpaying account (instead of using the debit account money) but there were too many other bills. Then I just waited too long and the credit card bill hadn’t been paid!

I have to learn that the purpose of this money is to avoid paying interest and if I use it for that, then it has done it’s job. Luckily, as we keep putting $300 a week away for regular bills, eventually I will be able to replenish the debit account and put this whole thing behind us.

I have so much still to learn about myself when it comes to money …

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A good day

Well, thanks for all the feedback given our recent issue with the friend that didn’t pay up. I’m happy to report he has handed back $250 ($100 to go) and has finally apologised. He admitted he didn’t mean to take so long, and he hadn’t wanted to bring it up to us and apologise till he could bring over all of the money, instead of an excuse. Finally he realised he’d really messed up and decided that giving us most of the money was better than none at all. He declares he will bring the rest this week, and I do believe him. I was pretty annoyed for a while, but now am happy to say that he has shown himself to be honourable. Obviously this is a good thing for our friendship!

Anyway, the other news is that I had my fortnightly pay, my Aussie stimulus cheque ($900) and my child care rebate ($1460) all arrive in my account on the same day! A good day!

This means we have been able to:

1) make the voluntary retirement contribution of $1000 – this means at the end of the financial year the goverment will add $1200-$1500 to my retirement account! If I get the full amount, it will mean that over two years I will have added $2000 of my own money with a return of $5000 overall! This is probably especially important given how much my retirement fund dropped in value last year (at least 1/3, or about $10,000). It has helped offset some of that.

2) create a debit account of $2000 – this means there is $2000 at the ready for flights that need to be bought at short notice, or to buy appliances that have blown up suddenly (I don’t want to use the emergency fund for a new TV!). This is to pay for the stuff we would otherwise have placed on credit card and `paid back’. Now we will be paying ourselves back instead of a credit provider.

3) Remaining is about $2200 which has not been allocated. This was going to go towards a purchase of some shares, though it would probably be better used towards our home deposit. I do want to make it a regular thing each year to buy a share parcel, and part of me knows that if I don’t make it a priority some time, years will go by and we still won’t have done it. While I understand that we should maximise our home deposit, I also want to invest at some point and don’t think the two goals need to be exclusive. I also think this is a great time to buy shares and we might kick ourselves if we don’t jump in soon.

We could buy some blue chips like Woolworths or one of Australia’s big four banks. We know these are probably safe bets and are pretty much `on sale’ right now. I talked to my husband and he agrees we should go for it. Taking the plunge is kind of scary though. It’s so much easier to sit tight and do nothing!

Two years ago I could not have imagined dealing with issues as fun as these. I had never even considered what it might be like to not have to use a lump sum to pay off some kind of personal debt. Believe me, those who are working to pay off debt or who have recently done so, the benefits do eventually show themselves. Just work hard and get rid of it for good!

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Friends and money

My husband recently travelled south for a birthday party for a friend he’s had since high school. A large number of his buddies also went down, and my husband organised the flights for one of them, since he saw some good deals online, knew the guy was intending to go and wanted to let him know about the deals. Well, he must have booked the flights five weeks ago, and the actual weekend for the trip came and went two weeks ago. They went and had a great time. But guess what? Not a cent has yet been forthcoming!

I asked hubby about it when they got back. He said his friend had told him that he hadn’t been paid correctly and so didn’t have the money yet, but that he would get him the cash `in a couple of days’. It’s not a small amount, at least not to us – it’s $360 for his flights that we are waiting on.

The positive side of this equation is that  we are finally in a position where we don’t owe this money to our credit card, as I used some of our week-to-week cash to pay it back pretty quickly. But part of me feels like he’s not that concerned because we have a double income and I think he figures that we don’t need it. Not that he’s checked that with us. Every dollar we have is going in to improving our financial situation at the moment. That means I haven’t bought lots of things that I’d love to get.

I guess I’m just mostly annoyed because it’s something I would never do. That is, I would never allow friends to book a flight for me if I knew I couldn’t pay the cash back to them quickly. And believe, me, for most of my life that’s exactly the position I’ve been in, where I’ve had to say no to group activities because I didn’t have the cash. I studied at university for eight years while my friends travelled the world, meeting up with each other in exotic locations and pressing me to come too. I know it’s not easy to say no when friends get together.

I guess we should probably just let it go, on the understanding that you don’t lend friends money if you expect to get it back. It just seems that `lending’ wasn’t what I believed we were doing when we ordered those flights.

What does everyone else think? Am I being unreasonable? Should I be more understanding that he just doesn’t have a lot of cash and miscalculated what he could afford?

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Time for a new look

Well, I haven’t posted for a while, and to be honest, the reason is that I was bored. Not so much with saving and tracking our money, but with this site.

So a new look was in order – hopefully, that’ll clear out the cobwebs and hopefully you like it and it remains easy to read.

I’m back at work now and very focused on our goals at the moment, due in part to the imminent arrival of two cheques.

The first is the money coming to us from the stimulus package , which should total $900 each. This money has already been earmarked to create our `debit account’. Remember how one of my financial goals was to create an account that we would draw on (and repay!) instead of our credit card? I don’t want this account to handle emergencies. Instead it is for things that have to be paid for immediately, even if the cash for them is not yet in. Some recent examples included the money I had to outlay for travel for my last elective - the refund of $900 took three months to finally arrive. A similar example came when we decided to go on our houseboat trip. The stimulus cheques were paying for the trip, but as you have just heard, they are yet to arrive. Luckily, we have underspent lately and we managed to pay off the trip with money intended to start our debit account. In any case, I do feel we have fulfilled the intended aim of the stimulus cheques (by going on our houseboat adventure), even if it does look like we are actually squirelling the cheque itself away. I also hope to use some upcoming rostered overtime to bounce that $1800 up to $2000 neat. And that will mean another of our financial goals for 2009 is met. Here’s hoping all goes well!

The second cheque will come from child care rebate for the previous quarter (ending on march 31). That should come in the next few weeks and will total about $1300. We intend to use $1000 of this to put into superannuation, because this may be the last year I am eligible for the government co-contribution. I hope to be eligible for the top rate of $1500, but I guess we’ll see when the tax year is over. In any case, if we do this another 2009 financial goal will be met.

Then we will be in an interesting situation … I had said that in a perfect world we would put any more extra savings or lump sums towards 2 `secondary goals’ - $5000 worth of shares, and then a much-needed new-to-me car. But I wonder if I will feel able to do either of these in reality. We probably can expect at least $2500 at tax time (since I have only been working for half the year), plus about $1500 in rostered overtime for me in the coming couple of months. Should this money go towards a home deposit, instead of either of these `extra’ goals?

I feel like there might not be a better time to get into the sharemarket than now, but maybe we are better off meeting one goal at a time. Maybe it’s silly to try to buy stocks when all our money should go into maximising our house deposit … I guess I’ll know when the money is actually in our accounts. Until then, figuring out what to do with this money is a bit like counting your chickens before they’ve hatched!

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Back from paradise

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So we survived our houseboat adventure … in fact, I think we flourished as a family! We actually enjoyed each other’s company (most of the time!) and worked together to keep everything running well.  Of course, there is a fair bit to do each time you put down and raise the anchor, so hubby and I had to listen to each other, plus watch our little one. But it was definitely worth it.  Above is a photo of our 3-year-old drinking in the view. I think he had a great time too.

While it’s always lovely to be back, we had a blast on our trip. Cruising around the islands, dining on freshly-caught crab, squid and fish, swimming at the odd well-protected inlet … it was like paradise.

I must admit though that I have `sea legs’ (or is that `land legs’) – I’m still detecting a bit of wave action whenever I stand too still!

I definitely think it’s good we went and did this but my focus has immediately returned to boosting our finances wherever I can.

Two jobs for today:

1) Rework our billpaying account to ensure that enough cash is being held each week to meet our regular bills; also I will investigate whether any of these (pay TV/internet) can be reduced.

2) List my financial goals for 2009 on the sidebar so I can scratch them off once achieved.

We’re aiming to build up a 20% deposit, which will take at least two years (from January ’09) so there’s a lot of work to do and I’d like to cut that period down as much as possible.

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