After announcing on here last week that I was getting another credit card, I subsequently received a letter saying I didn’t `fit the lending criteria’.

I think this is actually a good example of my bank not lending to people who really shouldn’t be getting credit cards. And, on paper at least, I probably shouldn’t be getting one. This bank also knocked me back for a personal loan when I was in my early 20s. I had wanted to buy a car that really was a little expensive for my needs, and I’ve never regretted their decision not to give me the money. Well not after the first day anyway!

In this case, the bank initiated the contact. They rang ME up and told me why I should have the card and all it’s advantages. They caught me off-guard for a start, and I should have said no to anything marketed by phone. Anyway, in the application process I only included my casual income (I didn’t mention my husband’s at all), and disclosed that I have a dependent. I also mentioned that I have a $7000 limit on my other card (though no money is owing).

I know, I really don’t need any more credit at my disposal! As regular readers will know, I only thought the card would be ok to try out these rewards programs everybody is always talking about. I wasn’t going to charge anything I couldn’t pay off the same day.

The only thing that grates on my nerves about this is the way the bank framed the letter, going on about how they were `unable to approve my request at this time’ and how they `appreciate my interest’.

Hey guys, you rang me! You told me what a great customer I was and why YOU thought I should have a shiny new card. I didn’t exactly go grovelling for it. But that is the way banks are, and always will be! In the end, I think it’s for the best. I have heard that you have to spend an awful lot of money to make rewards programs worth it.

I have had lots of ups and downs over the past day or two. I’ve spent too much of my precious time trying to figure out how I can afford another car.

Regular readers will know about the costs associated with returning our cheaper little car to an aesthetically appealing exterior - projected to be about $3500 on a car worth only about $4000 once the work is done! I also currently have a water leak in the engine, causing it to overheat (I have a bill-pay account with enough in it to cover that work though).

The simple answer is that we’ve worked too hard over the past 8 months to return to old habits. I am not going to buy a car with a personal loan, or an extension of my current personal loan (for the bigger car). Or a credit card on a balance transfer, or any other purchase method that involves me not having the actual money in the bank to do it.

I can NOT watch our car debt climb again. I just can’t do it.

So we’re going to `live like no-one else so we can live like no-one else’, as Dave Ramsay says.

I’m going to keep the car, fix the overheating problem, keep the car looking as neat as possible and ride out the year without fixing the exterior. In the meantime, I’m going to save and work an extra shift here and there so we can buy another (but nicer) used car outright.

Every morning when I drop off my son to kindy, we arrive about the same time as this other mum. This woman works at the same place my husband does, where he is in a relatively high-profile position. We say hi to each other now and then.

She always looks at my crappy little car with a truly horrified expression. I’ve seen her stare a little too long multiple times! She is about mid-twenties and drives a beautiful black SUV. I don’t know what she and her husband make but I don’t think it would be that much. I think she wonders why we wouldn’t trade up, given that my husband earns a decent wage, probably a lot better than hers.

I have been a bit embarassed over the state of my car, especially because of the peeling paint (not the age of the car), and seeing her each morning has probably worsened that. But then I think, this is us! This is our decision. She’s not even a friend of ours! We drive an old car to improve our financial future. Get over it!

A lot of people tell me I should get a new car because `you’ll be earning money soon’ and we’ll be able to pay it off quickly.  However between student debt and lack of savings power over the past 6-8 years (and missing out on buying a house in a booming Australian market while I studied) I don’t think my family will be splashing out on a Porsche any time soon!

Anyway, now it comes to the point of this post. I am going to come down hard on this car debt. I want it gone.  That’s because I am SO SICK OF DEBT!

With interest accrued yesterday, the debt currently stands at $10,545. So I am scrounging $600 from our earnings this week to get it down under $10,000! A milestone if ever there was one.

My next goal is to get it under $8000 in one month. Watch us get there!

My hubby and I had a little chat about the future yesterday, discussing how our finances will change when I begin working full-time. Granted, that’s not due to happen until just less than a year’s time (49 weeks but who’s counting?!?) but it may have implications long before that.

My starting salary is about $55,000 in Australian dollars, plus overtime. This will be like pennies from heaven for our family, which has existed on 1.2 incomes for some time!

But during our discussion, when my husband said `remember, well be more than $50,000 better off next year’, I was quick to remind him that it actually wasn’t that simple.

For a start, I currently work a part-time job, at which I earned $12,000 last year. I’m currently on track to do the same this year, meaning the coming increase in funds is more like $43,000. Still great, of course.

But then we need to consider the financial help we will no longer be eligible for (and rightly so):

- Family allowance: we currently get $85/fortnight but this will drop to around $25. This cuts just over $3100 a year from our income.

- Child care - we currently get a subsidy to pay for child care but will have to pay full fees when I start earning money. The difference is about $65/week, adding up to an extra $3400 a year! Again, it is not so simple because all people who pay for childcare get a 30% rebate on childcare costs from the government. However, this is paid once the year is over and can’t be factored into a regular weekly budget.

Those are just the things I can think of right now. 

The other thing is, because the financial year extends from July to June, we may have to reject receiving family payment in the second half of this year (when we aren’t yet earning any extra) because the amount I earn in the second part of the year might make us ineligible over the year as a whole. That would mean we would have to repay money, which of course I am not keen on. So our finances will be a bit rocky in the coming year or so. After that, however, I expect things to even out and for life to be a little easier. We will remain frugal but at least our finances might not keep me awake at night!

As you can see I am $10420 in debt for my car (which my husband drives). The car that I drive requires $3500 in aesthetic repairs, plus as of yesterday it appears to be overheating.

(*sigh*)

I so want to be out of car debt but I am also so over the car I drive. If I don’t finance another car within the next 6 months, I know I will (at least) have to make saving for another car my next priority.

So investments seem to be going back down the list …. again.

This sucks!

It’s Saturday night here in Oz and after watching The Suze Orman Show earlier tonight I was just flicking through the pay TV channels. I saw the words `Dave Ramsay’ flick by, so I went back. Well, I never! I don’t know how long he has been on TV here but I certainly have never seen his show before.

It was quite good. He doesn’t have the rapport with his listeners that I think Suze does and when he chastised some of them I think he came off sounding a little negative, but still, it’s good to finally see `the man’ of the PF blogosphere at work!

 It has occurred to me that I really want to get my emergency fund to $5000, so I have updated this goal on the sidebar. Damn, that $1000 goal is so last year! I’m high-kicking my way to $5000 now.

My current plan is to use tax returns and a child care government rebate to do this, though none of that money will arrive till the second half of the year. However, my weekly debt repayment of $320 remains focused on our car loan only, and nothing is going to get that out of my line of sight!

Some more good news: I have also figured out how to pay for our joint party without reducing our car loan repayments. I have arranged to work a second shift for the next 6 weeks. This is probably the only time of year when this will be manageable within my uni workload. This will help us save $1500 for the party outright, without touching my weekly car repayments. I had planned to stop car payments for 5 weeks to meet this goal, but now I won’t be doing this I can change my projected payoff date on the vehicle back to September (from October). I still have a way to go before I get it back to my original pay-off goal  of June, but I don’t regret my decision to try to spend a little cash each week on myself. This is the tortoise’s race, not the hare’s!

Still, I reached my baby EF goal, and now I want to take this savings thing further. I can not imagine having $5000 in the bank with no attached purpose - just `just in case’ money. But I also know that I am a bit up and down with my goals at the moment, and can’t seem to settle on a plan. At least I keep moving forward financially each month.

One thing I do know is that buying a home is way down the list at the moment. It just isn’t the right time in our market and I am no longer interested in rushing the decision to buy something I can’t really afford. Before we buy a home these are the criteria I now feel must be met, as far as I am concerned:

• we need a dual incomes (or adequate income-producing assets to keep us comfortable with just one income … this is unlikely to happen anytime soon :))
• $15,000 emergency fund in place
• 10 per cent deposit (preferably 20%), plus all costs of buying covered
• First Home Owners Grant ($7000) to cover our furniture needs. This will be the fun part! And we will need it as living with our relative has depleted our own household items.
• I also want to live in a home that suits our environment, has nice outdoor spaces and is light and airy. It does not need to be (or look) expensive. But I won’t settle for something I don’t like. If we have to live in an ugly box, I’d prefer to wait longer.

 I have a few current concerns too, which I still haven’t worked out how to deal with:

• I haven’t figured out what to do about my $3500 car bill. I fear that I will pay off the car hubby drives, only to turn around and need to finance one for me.
• I haven’t factored in how we will pay for the clinical rotation of 8 weeks that I have to do in another town. Though my hubby will get holiday pay, I won’t be earning money for 8 weeks and I will also have to figure out an accommdation option for all of us that won’t break the bank!
• Graduation - There will be a lot of costs associated with parties and functions when I graduate in December, nearly a month before I start earning a full-time wage.
• Our planned trip to Melbourne in the second half of the year. It’s looking more and more unlikely, to be honest. But let’s see - I can work miracles, can’t I?

I was talking to a patient today and while I examined her I couldn’t help but notice the three gigantic diamond rings on her right hand. They were eye-poppingly big, so I couldn’t help but comment on how lovely they were (read: expensive).

`Yes’, she said. `They’re my smoking rings.’

Well, this had me intrigued. I mean, I’ve heard of smoking jackets but …

She continued, obviously used to telling the tale. `When I quit smoking 11 years ago, I vowed to put every dollar I saved into a big diamond ring. We’d never been able to afford a nice one before.’

Two of the rings had five large diamonds in a row, while the third had one big jawbreaker in the centre. She clearly had been saving a long time, so I asked her what kind of ring she was saving for next.

She just looked at me. `Oh no honey, I managed to save enough to buy these in the first year.’

I was dumbfounded. There was no doubt these jewels were real, and even though cigarettes are hugely expensive in Australia, she must have been one heck of a smoker to pay for those rings in just 12 months.

I couldn’t help but think: By all means, I would have bought the first mega-ring (hey, it’s better than puffing your money away!). But after that, I would have moved on to a share portfolio, or maybe some travel. Hey, maybe she had enough free cash to do these as well. However, my choices are not hers, so good on her for kicking the habit. I just hope she doesn’t get mugged!

Well, I certainly wouldn’t want to be retiring this week. Another $260 billion was wiped off Australian share markets today, on the 11th straight day of losses. This has not occurred since 1982. It can now officially be called a `crash’, according to analysts. The market had already dropped more than 15 per cent in the past two weeks (and that was before today’s results). Yikes!

Of course, for someone like me, years from retirement, it is a good thing, especially because one of my $500 pension plan contributions was being allocated today. That money willl buy a lot more units than it would have 6 weeks ago. Similarly, units in the managed fund for my son’s investment were being purchased this week, so we should get them for a good unit price. Hopefully the market doesn’t keep falling but we don’t plan to touch the money for years anyway, so we can’t be concerned if it does.

Wonderfully, my hubby is getting really interested in personal finance too. His first words (when the stock market crash stories came on the news) were `We should find some money to invest a bit more right now’. I don’t think we can stretch things any further but I was proud and pleased to see his newfound interest.  

 I don’t know what I’d feel if I was retiring in the coming month or two. I guess it would depend on whether I felt I still had enough invested to keep me living comfortably off the income. However, I guess another way to look at it is that, even though the market has fallen 15 per cent in the past two weeks, this probably really only represents the rise in the general market since last year alone. Investors do, unfortunately, have to take the good with the bad.

Now before you smack me upside the head I will first admit that the bank got me when I was pre-occupied and tired. They rang me while I was doing an assignment and for some reason I let the customer service staff member rattle on even though I don’t like or agree with phone-based marketing, even from my own bank!

But after listening for a while (always a mistake!), the card sounded quite good. Not the interest rate, mind you … thats about 20%! But this card is linked to a rewards program voted Australia’s best in Money magazine. And it has quite a few features that I think could fit in quite well with our family.

This is how it works:

• up to 45 days interest free (if a purchase is made at the start of the monthly cycle), then 19.9 per cent pa
• two cards linked in one account - one is Amex, and you get double points for every dollar spent using that card
• points do not expire and can be used with any Australian Frequent Flyer or other rewards program
• you can link your savings account to the card and use it to withdraw your own funds instead of using the credit
• There was a balance transfer offer but I don’t remember it because it didn’t count in my decision-making (I don’t have a balance to transfer).

There’s a $100 yearly fee, but you can use your points to pay for the fee, so I will be able to use some of the 5000 bonus points I receive for joining to avoid that charge .

I see this as a chance to explore how I can make credit cards work for me now that I have spent 5 months maintaining a nil balance. My usual CC is a basic one - no rewards programs, just a low interest rate.  Anything I buy with it gets repaid online the same day. I don’t buy ANYTHING I don’t already have the money to pay for.

Perhaps this card would be good to use when I’m buying large purchases I can pay off immediately in exactly this way. It will be a little experiment to see if rewards programs are as worthwhile as everybody tells me they are.  I can only see them being worthwhile if their use doesn’t cost me anything. We shall see, and if this experiment fails I have no qualms about binning the card and cancelling the credit line.

I can’t believe I haven’t posted for so long! I apologise, I went back to my studies this week  so I have been focused on getting in a good start. I have also engineered some financial decisions this week that I have needed to get right (in my head) before I can post about them. And I have been mulling over the situation with my car, which needs $3500 spent on it to fix the paintwork (this would leave it valued still at only about $4000). I think all of this is why I haven’t said much lately.

My original goals for the year 2008 were:

1) Pay off car (our other one) - currently owe $10,750.

2) Pay for our joint birthday party - $2000 budgeted

3) Travel to see a friend in September - $2000 budgeted

4) Save for an investment/house deposit - $15,000.

Now a few things have changed since I set this goal. One is that we committed to save $100/month for my son’s investment. Another is that we decided to fund a voluntary $1000 to my pension plan in order to be eligible for $1500 extra paid in by the government. Finally, I now know about the paintwork repairs needed on the smaller car, which I only found out about in the past couple of weeks. I was planning to keep this car for another 2-3 years, saving in the meanwhile to spend about $8-9ooo for another one.    But I won’t be able to drive this current car around like this for 3 years, so I need to either pay to have it fixed or save for another car more quickly.

The other thing that has changed is that I am now resolute: I am no longer willing to sacrifice haircare and clothes for debt reduction. I’m not suddenly going to go and get pedicures and buy expensive stuff, but I think I got into certain habits because I always thought that if I went `all out’ paying off debt for a short time, I’d be rid of my debt and I could `restock the closet’ once that was fixed. Likewise with my hair, I’ve never been a really regular salon-goer but I used to make sure my hair looked good at least most of the time.

Now I have realised that actually, my whole lifestyle has changed for good. It’s not just a short-term debt reduction effort. Once I have paid off the car, I will be focusing my funds on investment or a house deposit. I’ll  also want to build a bigger emergency fund. In other words, I need to make room in the budget for the stuff I need or want now because my plan is a long-term one.

In the short-term, this means I have started allotting $100/week for `personal care’. That might sound like a lot, but both my and my husband’s closets are bare and we really need to spend some funds slowly building them back up.  Once we don’t need so much anymore, this figure will come down.

So the question is: what is the implication of spending more on `personal care’ for my 2008 budget? Well, less money going on car repayments, despite the fact I have at least $3500 extra to find! Not a winning combination!

I am slowly working this all out and will post tomorrow about how I plan to `have it all’!