So Sick of Debt

I noticed that there was $101.90 left in our account today so I snuck an extra $100 towards our debt tonight. Our weekly pays start rolling in tomorrow so we should be fine, as we both have some cash on us.  We didn’t do a big grocery shop last week so the trade-off is a big shop this week. I just thought it was best to get rid of that $100 before it got eaten away on something frivolous (`eaten away’ is probably the operative term, given our habits!).

Another budget alteration I’ve made means that on the last pay day in June - the week we are all set to pay off our debt - we should have $200 available in order to do something nice to celebrate. Until now, I’d figured it would take every single spare cent to achieve debt freedom before the year financial year was out. Mind you, I’d be surprised if we did spend all that money on celebrating, but it will be nice to have enough cash available to have some options about what we do.

After all, this is going to be a momentous occasion, one which deserves a memorable celebration. It’s not like a couple becomes debt free every day.

At the moment, I’m just thinking we’ll enjoy a dinner out - a very rare treat - at a nice restaurant. However, it doesn’t sound very original, does it? If you have any ideas on some more original ways to celebrate, let me know. (I know I’d love to add a movie on to dinner, but not sure how much of a reward the Sex and the City movie would be for my husband!) 

I keep track of my net worth on networthIQ, but have never been able to make it public because I opened it with a name that is a bit too … well, public.  One day I intend to transfer the data to my debtfretter moniker but haven’t gotten around to it recently.

Suffice to say, including our retirement accounts, our net worth is $68,195. I have to say, we’ve had a stellar run this year. In January, our net worth rose $3116, and in February it rose $1780. In March it went up about $900 and in April, the amount was $2110. This progress has mostly been due to our efforts to pay $500/week off debt, which is more successful some months than others.

However, we are facing our first ever month where our net worth might drop. When I say `the first time’, I of course only mean since I started keeping track! Before June 2007, our NW dropped all the time - that was the problem!

But this month, car repairs are likely to rob us of most of our emergency fund - our billpaying account (which isn’t included in my net worth figures) just doesn’t have enough to cover it. As well as that, I won’t be contributing to the car loan for the next two weeks as I save for our party costs instead. And clearly, that money won’t contribute to our long-term future!

That still leaves 2 weeks of (hopefully) $500 car loan payments for the month. Plus hopefully I can redo some of the damage to the emergency fund before May is over. I’d like to at least stay stable in our net worth and not go backwards, but I don’t know how possible that is.

One thing I have noticed - as soon as I pay off any debt, I like to update my sidebars on this site. But now that our EF is taking a hit, do you notice I haven’t touched the sidebar to `report’ the damage. Hmmm, pretending the money’s still there doesn’t change reality! I’ll get to it … soon!

By the way, did I happen to mention that I’m SO SICK OF DEBT????

As soon as our debt is paid off, we’re actually planning to take a short break before launching into active saving, but don’t worry - we’ll still be needing discipline to achieve the short-term goal we want to achieve first. And then we’ll attempt gazelle intensity again.

As I’ve said before, we care for my father-in-law in his home. This mainly just means being around and taking care of his personal business - things like paying his bills, preparing dinner so he eats properly and staving back the charities that seem to call him 6 times a day. Generally, it’s not a big commitment.

But sometimes the situation isn’t easy. For one thing, he pretty much `owns’ the lounge room zone at night ie every night he watches old movies and sits in the dark. About 7.30pm, he turns all the lights off to save money on the electricity bill, which I should applaud. But he is really wasteful in other ways - like leaving his bedroom airconditioner on with the door open all day - so it drives me crazy that we can’t leave the area for 5 minutes without the light going off (he assumes we have gone to bed). In fact, sometimes it feels like we are being `put to bed’, though I know that is not his intention! Generally, once we’ve had tea, my hubby will watch TV in our room and I’ll do some computer work/study in the office, and/or one of us puts our son to bed.

Anyway, this can mean we end up with `cabin fever’ - confined to one of two small rooms night after night. This just means that we really do have to make the parts of the house that are `ours’ comfortable, otherwise we are going to end up hating it and moving out - not a good financial move for us until we have a home deposit and not a good social move for my FIL, who needs help to live at home.

So I guess the best answer is to bite the bullet and spend a little money while we’re here. I’m mostly talking about buying some furnishings that we can take with us when/if we leave, but which will make life more comfortable in the meantime. For example, I have a study, and often I like to be able to get comfortable to read a long passage from a textbook or even a novel. I can’t use the lounge chairs because there’s always a TV blaring there (and the lights are off!) and my office chair is a bit of a back-breaker. So I think it would be good to invest in an armchair that I can keep for years, recovering it when necessary.  I could even buy it cheaply secondhand and recover immediately. Whatever I buy, I am going to test it out fully, because comfort is going to be key!

I would also like to make my study look a little more inviting. Sometimes at night, I take one look at that room and just go to bed instead. I need some storage and organisation in there, plus a few little touches to express the fact that I do, actually, have a personality. These little touches don’t have to be expensive but I think they might be necessary.

In our bedroom, it would be good to buy a cabinet to sit the TV onn - it would help tidy up all the DVD wires etc (I find that mess of wires so depressing).

Finally, we are often left with the situation of having no space to have friends over and talk to them in privacy (without old movies blaring in the same room). So we would like to pave an area out the side of the house, so we could put our outdoor setting to good use and use this as a place to have a cuppa or a glass of wine with our friends.

Doing some of this stuff would be a nice reward for getting out of debt and I think it might improve our bottom line in the long run because we may be able stick it out her longer and save a better deposit + emergency fund.

I’ll just have to make sure I stick to my (new) rules before I go shopping:

• have the money upfront before I buy
• ask for a discount if buying multiple items in one store and/or paying cash
• look around for the best price, but don’t let price be the ONLY factor - I need to make sure I do end up with what I want or a happy medium

This just makes me want to pay the debt even faster!

can you pay my bills
can you pay my telephone bills
can you pay my automo’bills
then maybe we can chill
I don’t think you do
so you and me are through

Well, things might work that ways in the realm of Destiny’s Child, but in my world, we pay our own damn bills! So how can you do it with a minimum of stress? This is what works for me.

One evening in 2002, while planning my wedding, I realised I was finding it hard to balance wedding saving with the stuff that gets in the way. You know, a car rego would fall due just when I wanted to put a deposit down for our reception. Or I’d have a big phone bill that was going to cut into wedding savings. I had already steadfastly calculated how much we needed to save to have our wedding paid for outright, and then it was just a matter of dividing the total by the number of remaining weeks. But that doesn’t work if you suddenly need to see a dentist urgently.

So how to manage my bills into easy expected and manageable chunks? I tried to think of all the monthly or annual bills I could expect in the coming year. Then I assigned a dollar value to them all. Some I had a fairly good idea about ie by averaging my most recent phone or electricity bills. Others - such as car repairs or dental expenses - were a total guess. I did not include credit card or loan repayments, or even rent, as these were weekly and I did not want them to be thought of as `just another bill’.

When I added it all up, I was shocked at the total, and the amount I needed to save each week to pay these bills alone. I think the total was something like $12,000. That necessitated me saving $230 each and every week. It seemed like such a lot of money. How had I been paying these expenses before?

Well the answer was that I would end up having to put things on my credit card. Or have a big week or two with one big bill paid but no fun money and no other bills paid. So I was often just paying the bill a little late, or cutting things fine.

Once I thought about it, that weekly amount wasn’t so bad. It eliminated all the fear I had about what was around the corner. I made sure to include $1000 for Christmas expenses, likely (and unlikely) medical expenses, every phone and utility bill, student expenses such as text books and union fees, car repairs, registrations, insurances … and on and on. This means I never freak out anymore when a big bill arrives.

The biggest problem was getting it right. I didn’t think of half my expenses on that first attempt. It took a while to think of everything, and even then I would budget too much for one non-fixed bill, and too little for another.

Six years on and my weekly billpaying amount hasn’t changed much. It’s still only $235/week. However, the categories have adjusted to reflect changes in our living situation ie shared bills with my father in law. Probably one disadvantage of this system is that you tend to get a little blase about reducing your bills, because `you have the money ready anyway’. That’s not a good approach and I intend to rectify this soon.

So some bills are on autopay, and others I’ll pay by manual direct debit. Sometimes I’ll pay for sometjing on a credit card then transfer the balance immediately from the billpay account. It generally works. When I do occasionally find that a bunch of bills fall due and there’s not quite enough in the billpay, it doesn’t take much to cover the excess, but this is rare.

I’ll finish up with a complete list of the items included in my billpaying account:

• Car registration, repairs and insurance
• Automobile association membership - for towing and roadside assistance
• Boat insurance - I should include the service costs - see, I have room for improvement!
• Private health insurance
• House contents insurance
• Life insurance (husband) - I’ll need this next year when I earn a decent income
• Mobile bill x 2
• Home phone
• Internet
• Electricity
• Pharmaceuticals - a fixed fortnightly expense for my husband
• General medical - appointments, new glasses, dentist visits
• Internet security (McAfee) - an annual expense
• Printer cartridges - always a pain, always expensive
• Christmas - for presents, food, alcohol etc

There’s a million more items I could add but I find this takes care of the big stuff and fights any feelings of panic when I see that the mailbox is full. I hope you find a system that works for you. If you have one, please share it!

Well, it’s been a big week. I’ve felt unable to post because so many decisions are being made for us at the moment. The end of uni for the year has brought with it a bit of breathing space and time to think. It has also brought a lot more questions about our short and medium-term future.

The next year, my final at university, will bring some changes. Of all things, there should be less stress than there was this year because we have no exams. At the same time though, I need to make sure I am ready to practice medicine the year after, so this is the time to be sure I know what I’m doing.

Financially, I may be able to work a little more regularly. Though I theoretically worked once a week this year, I often missed work because of uni-related issues. This festive season I am working extra shifts in the lead-up to Christmas, and this will probably help us pay for Christmas. Even though we do save in advance for Christmas through our bill-paying account, this year it has been a bit depleted by extra expenses and with only a few weeks to go, there is only $550 in there. Considering both our cars need servicing almost immediately , this money will probably go on that alone. I am confident I can cover the rest of Christmas with additional income.

That leaves an interesting New Year situation.

My priorities will be:
1) Replenish the EF to boost it from $650 to $1000

2) Save throughout the year for a home deposit

3) Pay $130 a week towards car repayments (1.5 times the actual repayment)

4) Any extra income to go on car repayments.

On this basis, we will have saved a decent deposit by this time next year. The thought of holding out on buying a home is very upsetting, but I realise we just can’t afford it. We would be in such a precarious position and it isn’t worth it until I go full-time. We would have no life and no reserves. This way, we can plan ahead and ensure we can pay for all the added extras that go with home ownership (insurances, etc).

I am also focusing a little more at the moment on ways to save money week to week. We are buying a lot of vegies that aren’t getting used, so I need to plan how we can shop for veggies more regularly. We also buy a fair bit of takeaway food, and this has to stop (as much for our waistlines as anything else). I will consider how this will work and implement some strategies after Christmas.

Well, as I alluded to yesterday, control of our finances has been on hold while I finish my studies for the year. Now that I’ve actually dared to look at the figures, it’a not good … our money situation actually went backwards! It never ceases to amaze me how the moment I take my eye of the ball with our money, it all just seems to fritter away on not much at all.

To be fair, there are a few things going on at the moment. Here in Australia there is a sudden and nationally recognised trend in terms of the rising cost of living expenses. In a BAD week we used to pay $160 for groceries. In the past 6 weeks, it’s been just over $200 every week. Fresh fruit and vegetables have undergone the biggest rise, and these are a big part of our food budget. Fuel is also going up quickly, and I am finding that my budgets are probably lagging behind reality on this front. It seems obvious I need to start afresh with our budgets.

Excuses, excuses … well with that out of the way, now it’s time for the reality … Basically, our net worth seems to be about $400 LOWER after this three weeks that I have been off the radar. While I acknowledge I haven’t been working, I haven’t been paying extra repayments or saving any money either, so this is a bad outcome.

Luckily our EF is in place and we can use that to cover the shortfall. But that of course just means that the emergency fund needs to be rebuilt. As well as that, both of our cars need maintenance work and it’s nearly Christmas time. There’s no way our billpaying account will accumulate enough to cover all three of those expenses by December 25, so we can either put off the car servicing till January or have a very lean Christmas.

 I know I need to rework the budget because stepping back from this for a few weeks has made me realise that I have something of a pattern - full on saving for about 4 weeks, followed by one week where the reality hits and all the bills/expenses I pretended would be lower actually have to be paid. This leaves me feeling like I’m constantly on the debt treadmill, never actually achiewving much and having no life as well. I am going to really need to find a balance. I am going to rework the figures, with a bigger focus on saving money on expenses, and will let you know what I come up with.

I have to say that I’ve been trying to keep track of my little `day to day spending’ and I’ve figured out that it’s terrible!

I realised I was spending $9-$12 a day on `stuff’ - thats $80 or so a week! I don’t have that kind of  money to throw around!

I was buying:

- lunch and a drink at the hosital: OK so food is necessary but usually I have a leftover meal sitting at home when I do this. At the very least I could buy the drink only at $2.50.

- a pack of mints or fruit lollies - nearly $2 more

- a gossip magazine: this is usually when I am in a procrastinating space - this is bad for my study habits and my budget

- alcohol: again, not good for study. This is usually a weekend thing only but with all the rugby league and AFL football finals in the past month, alcohol has made a dent in our budget. Luckily this has cut down to zero for the next month or two.

I know there’s a bunch of other things and while I recognise everybody needs some fun money, I could be using that to get my hair done or buy some new clothes. I am going to make an effort to switch to leftovers, cut out my sweet tooth and avoid a beer (or wine) belly until December! Bring on Christmas!

 On another note, you’ll be glad to hear that we have commenced work on my father-in-law’s garden. My hubby spent the past two weekends and a few rostered days off to prep the garden for the landscaping. He also did the big biannual mulching, replanting, weeding and cropping effort. Already the garden is looking so much better, and hubby’s dad is already very pleased. It will be great when we are done and I am able to take off the `qualifying statement’ that I have left on the family debt label (on the right).

I wrote yesterday about how you should include things you want in a budget to ensure you stick to it, but I know that that sounds unlikely to anyone that doesn’t use them. Basically a budget just means (at the very least) knowing what you’re going to spend your money on before you get it. The other side of that equation is knowing where your money is coming from and how much it will be. A personal finance book I once read captured the issue of financial organisation perfectly for me when it pointed out that every company in the world - know matter how profitable - has to have a budget. It correlates that most of the people in the world who have real personal wealth - I mean the Warren Buffets and Rupert Murdochs of the world - have a budget of some kind. Granted theirs would look a little different to mine but it can be comforting to keep this in mind. The other thing is that anyone who goes to the teller on payday and grabs $150 for a takeaway,  cigarettes and groceries still has a budget … it’s just not a planned one.

The goal of a budget should always be to get the things you want! The surprising thing is that sometimes it can be tricky to know what that is.  For example, I recently started lusting after an LCD TV. I wanted a nice slimline TV to go on the wall to create more space in our bedroom (so I wouldn’t keep hitting my hip in the gap between the bed end and the TV cabinet. Then, once I started looking at a slimline TVs (about $600 AUS), I start thinking it would be silly to get one that doesn’t have an inbuilt high definition tuner. These START at $1400 but then you need to pay to get it attached to the wall etc etc. So I started working my budget to afford that TV. Once upon a time, if there was room on my CC, I would have just bought it and started the repayment cycle. The interesting thing is that about 3 weeks after I came up with my grand plan, I realised I didn’t really want a HDTV after all. In fact, I was willing to put up with the crappy TV we’ve got for as long as possible. That’s because my husband and I decided we really needed and wanted to save for our own home. The thing I realised later was, if we’d gone out and bought that TV on credit, we’d be $1400 further away from putting away savings for our home. And that’s the problem with credit … the things you want, you often can’t afford because of the debt already hanging over your head.

So, the upshot is that we have put our first $250 into savings for a home in our first week of trying. We saved $150 from our salary/s, put $50 worth of coins in the bank and found $50 from interest we made in a high yield account over the past year. I am so glad we didn’t buy that TV!