So Sick of Debt

There have been a few changes on the sidebar over there on the right this week.

The best one is the presence of two `PAID OFF’ labels, though I really felt I had to leave the garden labour portion visible as a reminder to myself of the work ahead this summer.

This leaves us with only the car loan to go, which is pretty exciting and I still don’t know if we will aim to pay that off quickly (within 6 months) or get back on track for home ownership instead. That decision wil stay on the backburner for a while as we just accumulate some funds again (today, I have a feeling we will aim to pay the loan down first but this tend to change on a daily basis!). This is the only downside of paying off that family debt -we depleted our home deposit funds to do it.

However, otherwise I feel pretty good at the moment.  I have a LOT of work to do for uni, and my `fun’ time is popping on line to check my fave PF blogs and write a post.

Next week I have a friend coming up from down south for 4 days, which I can see will cost a bit in dinners out etc. However, I am on a bit of a health kick at the moment so I won’t be spending up too much. And I have already let her know that I’d rather spend a fair bit of time catching up with her at home. I will need to leave her to her own devices a bit because of the study I am trying to get done, but luckily she already let me know she would like to do some exploring on her own anyway, so that’s great as it works out well for both of us.

On a final note, it’s not finance-related but I want to share anyway. I have started my obstetric rotation at the hospital and the reason I haven’t blogged in a few days is that I spent from 8am Tuesday till 4am Wednesday in the birth suite, most of the time with a lovely young couple having their first baby. I was lucky enough to be present for the birth of their beautiful daughter, a magical experience that I will always remember. On a sadder note, my rotation involves spending some time in the neonatal intensive care unit at our hospital, which involves caring for some of the tiniest premature babies. One of the bubs in there at the moment was born at 26 weeks gestation - in case you didn’t know, babies are usually born at 39-40 weeks. The 26-week old is smaller than a tub of butter and her skin is still translucent, so you can actually see many of the blood vessels and organs inside her. Sometimes I feel so lucky to do what I do - sharing the best and worst of times with people can be difficult and emotional, but it is ultimately very rewarding!

We received our final government payment this morning and though it was a little less than expected (by about $100) we now have enough for a full (baby step level 1) emergency fund of $1000.

Sine my post yesterday, I’ve decided to do my best to make the billpaying account stretch to pay for the car repairs to leave this fund intact. I can’t bear the thought of reducing it now. It feels great to have reached the next stage!

OK, so this is my latest issue.

JW at Need to be Debt free recently blogged about his wife’s car breakdown. I couldn’t believe the number of people who gave him a hard time about not getting the car repaired earlier, as though keeping the family financially above water and working two jobs somehow wasn’t enough to be `fighting the good fight’ of debt reduction. It’s worth remembering sometimes that though everyone is sharing their situation in this kind of forum, the way you deal with your debt is, in the end, up to you ….

Anyway, I know we need to get some work done on both our cars eg new brake pads, replace a tyre etc. Traditionally I put money away in a billpaying account to cover this kind of stuff, but recently the outgoings from this account have been keeping the balance so low that I know there’s not enough to pay for the repairs we need. Here’s the thing. We do have some more money in our emergency fund.

However, I have resisted the urge to use that. I guess the reason is that if I use that money everytime I need car repairs I’ll be forever topping up the EF. When do car repairs actually become an emergency? I know it shouldn’t be when the engine overheats or the car gives up completely, but where’s the happy medium.

One way to deal with this would be to just use the money in the EF to get the repairs done and repay it once there’s enough in the billpay account. But I always hate mixing up funds like this. It makes everything so messy.

I guess it’s stupid to leave money in the EF when you need to use it but mentally, I still hate the idea of spending it, even before I get to my target.

Well I don’t know about you but sometimes I get sick of focusing on what I need to pay off, to whom and in what order … sometimes I like to look at things in a `glass half full’ kind of way.

Though it might seem crazy to some, I sometimes like to make a list of exactly how much money I’d need to find/make/win to to be debt free and comfortable, but not go too crazy. It’s kind of like playing `if I won lotto’ but retaining a sense of reality (eg I’m not looking for a $5m mansion and a luxury world-trip):

To be comfortable and have a little fun, I’d want/need:

- $6500 to pay off debt to family (the whole hog, in cash)

- $14,000 to pay off car debt

- $350,000 to buy a modest home outright

- $10,000 to furnish the house 

- about $15,000 to cover my final interest-free student debt once I finish uni

- $4000 for dental work

- $5000 to fix our clothing crisis

- $15,000 to go on our dream trip to Italy and France

That sounds pretty good, doesn’t it?

So, added up, we’d need about $420,000 to feel like the world was ours, to feel like I imagine a millionaire does. This kind of money would mean we’d still need to save up for our next car, put money away for our retirement and pay the bills as they fall due, but it would be an amazing head-start in life.

It’s not going to happen but that doesn’t mean I can’t dream! And to be honest, it doesn’t seem like that much to shoot for (much easier to achieve than $5 million).

I know it’s stupid but I always feel good when I play this game so I thought I’d share it! Indulge me a little!

Have a great week everyone.

Well I’ve recovered from my spend-up and am ready to tackle debt reduction again. It’s payday again today, and in updating my totals in the sidebar on the right, it got me thinking: We have come so far in just a few short months (both economically and personally).

I update my NetWorth at NetWorthIQ too, and I was amazed to see today that our net worth is more than $10,000 better than it was in June. We have received quite a few payouts in this time, which means over the next few months our debt reduction will slow down drastically, but this is still an amazing motivator. I showed the figure to my husband who was mightily impressed (though he was a little disappointed to see our life’s work reduced to a relatively small number!). I told him that things would only get better from here … and they will.

 Also, as a couple I feel we have found a new level of cooperation. I think this has brought us closer together. I always try to find a way for my husband to get what he wants (and for me to get what I want, for that matter!), and I appreciate that he doesn’t pressure me to find more room in the budget for extras. This has also made us really think about what we want to purchase, instead of buying on a whim. While I didn’t originally think of this process as being frugal as such, we have gotten rid of so much stuff we don’t use, and we aren’t accumulating stuff like we were before. Our home looks tidier and roomier somehow.  And we seem to enjoy simpler meals without a lot of expensive extras. Cutting out the junk in our grocery bill might even be helping our waistlines.

While I’m in a reflective mood, this seems to be a good time to thank my loyal following of readers. I have seen (on Sitemeter) that though many of you are from the US, there are others in Israel, Malaysia and Singapore, as well as the UK (plus other places). Though I don’t have a huge following by any means, it is great of you guys to come back visiting regularly. I really appreciate the support. It keeps me posting and keeps me motivated, that’s for sure!

PS: I thought I’d also clarify for US and other overseas readers: as you probably know, our summer in Australia is December to January, so the work we will be doing for my father-in-law - in lieu of part of our debt - will be worked off from October-November. Some of you may have thought it was further away than it actually is!

OK, so we share the good and the bad stuff here, right?

I went shopping ….

… and I bought a few things ….

I’ll start by saying I only spent what we actually had available in `spare’ cash ie the remainder for the week’s salary (and the week is up). We had a little unexpected extra overtime … and I did initially intend to go shopping for clothes.

But here’s what I actually bought:

- A good work shirt $40 (about right, it’s linen)

- 2 sets of beads that both match the work shirt (not really essential) - $25

- some perfume (ckOne) - love it, love it, don’t really regret it - $40

- the really bad one … eyebrow wax and brow/lash tint … (i’m afraid to type it) … $43!!!!

In my defence, this last one was supposed to cost $16 but when I got in there and laid down, the beautician suggested I should get the tint done for ` a little extra’. I nearly died when I walked outside and she told me the price, but that’s what you get when you don’t ask up front. I was trying to pretend price doesn’t matter anymore. That was a wake-up call.

When I got home, I must admit I didn’t regret any of the purchases. I’ve been feeling a little lifeless and dull, and embarrassed about wearing the same work shirt every 3 days. I used to express myself wearing beads and earrings (nothing expensive) but now I go without. I feel like a boring version of me, staying home studying all the time, not expressing myself in anyway, not doing anything. Am I trying to `buy’ a more interesting life?

Of course,  I feel better about myself when I smell nice and look professional too, as most people do. But on balance, 3 of those 4 purchases weren’t really warranted … and I didn’t plan to go out and buy them.

So, in the wake of paying off our credit card, have I learnt my lesson?

For the most part, I still think so. I didn’t use the CC to make these purchases, and they came out of money we had in the bank.

Also, though some of these aren’t essentials, sometimes it is nice to remember you are a woman and that you do deserve something nice occasionally.

But I do think I will have to be very careful about my credit card behaviour for some time to come. Certainly, I intend to keep on leaving my CC at home … and perhaps ensuring I don’t get back in the habit of visiting the stores!

Further to yesterday’s post, we still haven’t made any decisions, though to be truthful I am angling towards paying off the remainder of the family debt. This has been further backed by an update to our budget (I do this every few months to see if what I have projected we should spend is actually accurate).

I have looked back over the past few months and noted that we have overspent on petrol and groceries most weeks over the past 3 months. This is mostly because we buy a lot of fresh fruit and vegies, and the drought down south has added a lot to the cost of these. This is non-negotiable to me though, because it is the healthiest part of our diet.

As for petrol, it has gone up and down but generally the price is huge compared to six months ago. So I need to allocate a little more to these. Added to this, there has been a small price rise at my son’s childcare centre, which will add about $10 all up to the weekly bill.

When I rework the figures, adding up food, petrol, childcare, home saving, bill paying account (a set figure each week to cover yearly or irregular bills), a car payment and family debt repayment, there is $50 left for the week.

It makes me wonder how we were putting away $110 a week on the credit card bill, and shows me I can’t afford to amass another CC debt!

The variables here are the car repayments and home saving. We are trying to pay double the minimum car repayment now because our loan term is over 7 years, which is way too long. Also, I was putting $300 a week towards home saving because that is the minimum we could expect to pay in rent for a modest home, so it doesn’t seem right to save less than this.

If I can get rid of the family debt, we will have $150 a week for general expenses, fun, clothing, charity etc. I actually expect we wouldn’t spend that much, so I was thinking that I could `sweep’ the general account on the night before payday each week so that whatever is left goes on debt repayment to speed that process up.

As for the next step - whether to keep putting the home savings money away, or use it to pay off the final debt (car) more quickly, we still haven’t decided. I guess we’ll see how things go in the next few weeks.

On a final note, I expect one more government payout this month. I am hoping this will boost the emergency fund up to $1000. It is an election year and the government here has decided to use its massive surplus to return 30% of each family’s out-of-pocket childcare expenses. Since we spend at least $100 a week on childcare, we should get a reasonable amount of money back. 

Don’t worry, I recognise how fortunate we have been over these past few months and hope to keep us on the right track so that the good luck we have had does not go to waste!

Well, all the excitement of paying off the CC debt has settled and we are certainly feeling we have achieved something. In fact, my husband is more focused on our finances than ever and I think he is starting to really see the possibilities of moving towards a more stable financial position.

As part of all that we have been talking a bit about how to approach our other debts, our saving plan and home ownership goal. This was stimulated, in part, by the decisions we have been making about what to do re: family debt. We have agreed that doing the the garden work is a great way to deal with the $3300. (BTW, thanks to Frugal Chick and Lynnae for their feedback about this plan!)

However, this projected change in our debt ratio has left us with an interesting scenario. Removing the $3300 leaves us with a family debt of $3300  … and guess how much we will have in savings (for our home deposit) by next week? That’s right, just enough to pay it out!

I was laughingly saying to my husband, `wouldn’t it be nice to use that cash to clear our family debt?’. To my surprise, his answer was `yes, it would!’. And then he got quite serious about it.

Now there are lots of reasons why doing this would be silly. This family debt is a no-interest loan. If we were going to do anything like this, it would make far more sense to put this cash towards our car loan and pay that off more quickly. But as far as mental imagery goes, there would be nothing better for our motivation than essentially wiping out two debts in two weeks. And I think it would be a nice gesture towards my father-in-law to pay him in a lump sum now that we have made that deal. In any case, family debts can be trouble and I think it would be good to be free of it.

Stick with me here, because we are just talking out an idea at this stage, not actually planning to do this yet ….

We talked a bit about the idea of not only paying out the family debt, but then contributing ALL our spare funds towards our last remaining debt … our car loan. We’re talking about ALL spare funds, including that currently allocated to savings. If we added the weekly funds that we had been putting towards a home deposit and the family debt, we would be putting more than $500 a week towards paying off the car. When I projected this, I calculated we could pay off the car in just over 6 months if we did it that way. Now, THAT would be cool …

Debt free in six months? Wow!

But there are some big negatives. In some respects, this plan will delay home ownership even longer for us. But given that we are acting as carers for my father-in-law, even if we had the money for a home tomorrow, leaving wouldn’t be as simple as just buying a house. Us being here is part of what is keeping my father-in-law in his own home, so doing up his garden isn’t much good to him if he can’t stay here (though I’m sure we’d find a way to ensure he could stay). In many respects, I can’t see us leaving here before I graduate anyway, as things are going to be too tight financially to pay a mortgage before then (thank God in my line of work there is 100% employment!).

And there are other factors. We recently talked about when and if we will have another child, and we are expecting it could be straight after graduation. Perhaps I will take a year off work? If we commit to a house in the short-term, I might be putting my ability to stay at home for that year in jeopardy … and I really want to have a year without stress to enjoy my children. I’m going into a career that is demanding, and though my hubby will probably go part-time to ensure they have a stable home life, I want to be very hands-on too.

On another level, one of the things I love about amassing savings is that if we HAVE to leave, because we can’t stand to stay here anymore, we actually can. It makes me tolerate the difficult parts about being here a lot more easily, knowing it doesn’t have to be that way. That probably doesn’t make sense. I have alluded before to some of the difficulties here but won’t go into it right now.

Also, I expect that when we finish paying off the car, we’ll immediately need to start putting savings away for another one (eg to buy a replacement cheapo car a few years after that), so even after this car is repaid, it doesn’t change that we will still have to set aside some money each week towards `car saving’.  

Anyway, it’s all very complicated and probably very hard for you to follow. At the moment, all this is just a thought. And I don’t expect anyone to tell us what to do, but comments and thoughts are always welcome!

Well, I’m feeling pretty motivated at the moment and wanting to reduce debt further, though I don’t think there’s much else we can do …
I guess that’s not true. I’m sure we could cut our grocery bill back a  bit if we tried, and there are always places that we tend to `leak money’ (ie the chemist shop).

Mostly at the moment I’ve been thinking about my post regarding our family debt and the offer from my father-in-law to drop part of it. I read back over some of my old posts yesterday and realised that we actually were aware that my father-in-law was giving us the $3300, instead of lending it to us … I alluded to that in one of my posts. However, we had decided to ignore that and pay him back the extra $3300 on top of a loan he had given us for a separate item.

Anyway, to make a long story short, we haven’t made any decisions but we do think we might have come up with a happy solution (my father-in-law still won’t budge that we are not to repay the extra $3300).

We plan to do some work in his garden. In fact, we already did at least half the work last summer but there is still a significant amount of work to do. We laid the groundwork for some lovely garden beds and planted out some of these months ago - it probably totaled about ten 2-day weekends of work for us both to get this far. We now intend to pave an entertainment area, and plant out the beds. We may also install a shade sail over the top of that area, and we plan to build steps into the undulating hilly section with a rail. This will allow my father-in-law to enjoy his garden a bit more, and I expect it will take 9-10 weekends to do this second half  of work. We will also continue to do all the labour to keep the yard in shape on a weekly basis (pruning, planting out, weeding etc). His yard takes up a second house block, so it is a sizeable area of lush grass and plants to care for. It’s beautiful, but hard work!

It sounds like he might accept these hours of work as an `in-kind’ repayment deal. While I’m not sure the `cost’ of our labour is $3300, there’s no doubt that the professional labour required to get the job done would be around this dollar amount. We might be a lot less effficient than a landscaping team though! This way we feel like we are repaying him, and he feels he hasn’t hindered our savings efforts (not that this would really be the case but that is how he thinks).

This type of repayment plan would obviously suit us, as we enjoy gardening and its a healthy family activity. And of course any deal that reduces our monetary debt suits me! But we shall have to talk about it some more and make sure we are not taking advantage of his generosity.

OK, so first of all … this is not my cat … but this IS how I feel!!

I checked my savings account today, and … there was almost $3000 more there than there was yesterday! Our family payment for last financial year had been paid!

This is largely money we didn’t know we were entitled to last year, so we are receiving it now as a lump sum, instead of weekly then.

Needless to say, I was pretty excited!! 

Just like my tax return last month, I hightailed that cash out of there and into my credit card account. It’s now PAID IN FULL … in fact, for now they owe me $2!!!

I will actually still have to pay a bit of residual interest for this final month, but I obviously won’t be too worried about. It should only be about $20 or so. 

Interestingly, right on time, the bottom half of our TV screen went black. We had half a picture. It actually looked like the image had `rolled up’. However, I gave the TV a good bang and it went back to normal. It’ll last a month or two yet! There’s no way a new TV is going on that credit card. (The timing is amazing though, isn’t it?).

This feels fantastic and the next thing to do is to plan what to do with that $110 a week that we usually put towards the credit card debt. Much as I love the idea of a debt snowball, I’m probably not going to use all of the money we were paying into the credit card debt to get to work on our car debt. Instead I have worked things out, and if I increase payments on the car loan by $30 a week, we will pay it off in two years. That’s pretty cool. As for the other $80, I’m going to leave it unbudgeted for a few weeks, because we do have some added expenses coming up in coming months, and there are a few things we need to do to improve our lives (which I will go into in a future post). We have been doing nothing and buying little for quite a while, and I need to get some work clothes as I only have three suitable shirts at the moment.

As a special treat, this weekend my hubby and I are considering taking our little boy to a nearby wildlife sanctuary to see the koalas, kangaroos and crocodiles. He loves animals at the moment and I think we all deserve a special outing.

Life is good!

Funnily enough, I actually have had some more good news. I rang up my bank yesterday to see if I could get internet banking access to my car loan account. The girl was really friendly and though I was having some trouble hearing her, I got the message that it was her birthday, so of course I congratulated her. While she was getting my internet access organised, she asked me if I was ringing to get a payout figure. I said I would love to be doing that, but I couldn’t afford to pay it off just yet. She said OK and just asked me to hold the line for a sec while she finished obtaining the net access. When she came back, she told me the net access would now work, but also she said she had also talked to her supervisor and they were going to drop the interest rate on my loan by 1.5% for the life of the loan!

I was flabbergasted and all I could say was `why?’. I’m up to date on payments and wasn’t threatening to pay out the loan, so I couldn’t figure it out. She just said it would help me pay off my car loan quicker …

I’m not sure why or how it happened but I wasn’t complaining! Maybe she was in a good mood. She had told me her workmates gave her a bottle of champagne for her birthday … surely she hadn’t gotten a little `happy’ at work? Anyway, I got the paperwork in the mail today, so I am very impressed.

Needless to say, it is probably well worth it to them because I am likely to do a heap more business with them in the future.