So Sick of Debt

Well, as predicted it is the end of the financial year and I’m not quite out of debt. I still have $2500 remaining to pay: $2100 from a cheque being sent out tomorrow and $400 from tutoring work I’ve done.

But this does mean that from next pay (thursday), I can start thinking about where to put the $500 or so a week that we were putting to debt repayments.

I do have a lot of things planned but the first thing I need to focus on is rebuilding the emergency fund! I would like to get $5000 in there by the end of the year, and - instead fo having the $1000 cushion in there - this time I’ll be starting from scratch again.

Some of our expenses - such as childcare - will go up markedly in July, so at present we won’t have that $500 a week anymore. Instead we’ll be looking at about $300/wk. That’s because I am allocating a little more towards lifestyle and a bit more each week towards billpaying too. We need to rebuild our wardrobes a bit after our year or so of living `poor’, partly because our wardrobes weren’t great to start with!

 And we have to get some work done on our vehicles.

I need to get creative about how to make up the $200 `shortfall’ in savings each week, and I’m sure if I just use my head, I’ll be able to do it. I just need to really think. Spend less in some areas? Or just bring in more?

We’ll get there

OK so I have a couple of updates that will mean I definitely won’t be debt free this week, nor probably next week! According to the website, the cheque we’re to receive from our health insurer won’t be posted until June 30. I’ll have to receive it, bank it and transfer the money before it hits my actual debt, meaning we will be well into July before we’re actually debt free.

Similarly, my last tutoring pay cheque (which is covering about $200 of the debt remainder) won’t be paid till next Thursday. So … it’s just not happening yet.

I’m strangely OK with that. I’m still happy because I just have to come up with $300 from my salary this week and that’s it from our regular income! The rest of the debt can wait until the money is here. I’ve budgeted some money to celebrate debt freedom this week but I may have to delay spending that for a few weeks. Perhaps I could hide the money in the billpaying account for safekeeping.

I’ve also been rethinking how we might really celebrate debt freedom. I was thinking of doing something more romantic and less spending-oriented than dinner out to celebrate (seems appropriate).

We have this beautiful bottle of red wine that a friend gave us - maybe we should go for a picnic somewhere nice. We have our little boat so maybe we could find a beach somewhere nearby and stop in together with a picnic basket. It could be fun. Or we could go for a drive up to the mountains nearby. There are drink-driving issues with both of those scenarios though ….

Hmmm … this will need a bit of thought.

Meanwhile, I’m running behind on the abundance challenge. We had gotten to $3200 and I had been struggling to think of how to pay for it. Notice inmy last post,  I actually trailed off mid-sentence and forgot to fix it!!

Anyway, I’ll move on to $6400. I would spend this on the Australian must-do experience: A trip to the Melbourne Cup at Flemington Racecourse. I love racing and especially glamming up and putting my ($5) bet down in the betting ring. I’d buy a divine hat to complement my outfit and we’d have a fantastic time watching the race that stops a nation.

How would I pay for it? This is starting to get really hard (and it’s only early). Trying to think  of a way to cram more activities into my already over-the-top schedule is a bit depressing. I’m going to continue to post what I want and what I’m grateful for each day, and if I manage to think of a brainwave about how to pay for it, I’ll add that too!

So … what am I grateful for today?

• my supportive friends from uni
• my mum, who always jumps to help me any way she can

I’ve got that song from Flor Rida in my head - well, just the important part - `Low, low, low, low’.
My debt is looking positively teensy these days thanks to an overnight injection of funds - it now sits at just $2600 - YAHOO!!

I can’t believe it’s nearly here. If everything goes to plan we’ll be debt free this time next week. Even if it doesn’t, I’ll be debt free this time next fortnight. I wonder if I’ll shed a tear?

I know I live in Australia so I can’t go on The Dave Ramsay Show but I might just have to yell `I’m Debt Free!!’ from all the way over here - maybe you’ll hear me.

Living Almost Large recently asked some questions about cash equalling affordability. The post is mainly about whether or not we can really afford something just because we can pay cash for it. I guess we are really talking about 1) the opportunity cost of putting, say, $50,000 into a car, instead of paying $15-20K and investing the rest; and 2) whether or not we can afford the add-ons that go along with that more expensive item (eg more expensive parts and repairs + extra fuel etc).

I guess this is really relevant for me because only over this past year of paying off debt have I really realised how much work is ahead of me, financially speaking, above and beyond the debt. I agree with LAL that you read PF books and you start dreaming of all the money you’ll have when your debts are gone. But the reality is that the money may:

• be used to repair/replace things that you may have let run down while aggressively paying off debt eg you might buy a more reliable car that you then must be able to afford to service more often than your old dodgy one;
• be used to buy the wants and needs you went without of when you were aggressively paying down debt
• third and most importantly, be used for advancing your financial wellbeing

On that third point, I think I did get a bit down when I realised that even when I start working full-time, we would still be struggling to do all the things we knew we should financially. We will be saving for a home, saving an emergency fund, trying to boost our retirement accounts and investing a small monthly amount in a managed fund. It doesn’t leave much to kick up our heels, let me tell you (I’ve already done the maths).

I guess I am lucky that I can expect my wage to rise a fair bit annually, so after the first year or two of doing this we will have a little more room to breathe. I won’t rush to boost up all these categories with each pay rise either, because I think the important thing is for us to start ASAP, even if it isn’t that much that we put away each month.

I guess I’m saying that I agree. It does seem like you decide to get debt-free for one reason, and then you really get serious about your situation and realise that you actually aren’t even close yet. It does seem that there is no real `pay-off’ for being debt-free. But there is. It’s peace of mind. It’s just hard to remember that when you can see such a lot of work stretching forward and you’re still paying off the canoe you used twice in 2005!

Well, it looks like I’ve just managed to avoid paying interest on the credit card by using my last two `car payments’ to finish off the CC (again!) instead. Meanwhile, the $550 cheque has been deposited and will be used to make up for missing last week’s car payment. Likewise, I’ll be paid for my uni work within 2 weeks, and that will make up for missing this week’s car payment. I’m really looking forward to Monday when the cheque clears, and to next Wednesday when a car repayment will actually get made `on time’ (ie my time) for a change.

By the way, I’ve held off on the straightener. My hair looks frazzled but I’m still holding out!

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!) 

… and I think I’ve undone most of the damage. I’m not sure what really happened there in May - apart from those few big expenses - but the upshot is my emergency fund is no more. Whatever was left is gone. It’s okay - we’ll build it back in no time.

But on the upside, my money is back to being managed. We’ve dipped in to fun money this week and covered the shortfall. I’ve got a cheque to cash on Wednesday for $550 which covers the last of the overspend, then the pay for my uni work this semester - plus my regular salary - will keep us up to date on car payments.

That means that by next week, I should be able to get the debt under $2700 - on target. By then the $2100 from our insurer should be through, and we will have just $600 to find to get rid of the debt by the last pay wek in the month. Just in time for the end of the financial year.

What are the priorities then?

• Get our $5K emergency fund happening
• Save for our trip south later in the year
• Try to figure out a way to make more money so we can buy a safe, reliable used car outright before I start work in January - haven’t figured this bit out yet!

Some of this is going to come from tax refunds and other government payments that start being paid out once tax returns have been submitted (due after June 30). The rest is just going to come from hard work.

Nowadays, I’m not so freaked out about reducing the debt. Isn’t that weird, given how close I am now? I used what would have been my car debt payment to cover the other expenses on Thursday, and there was a time when that would really have upset me. I think I’m starting to emotionally leave the debt behind. I now just make decisions that are more based on what makes the best financial sense, instead of what will reduce the debt fastest.

On another tack, reading around the blogosphere this week I was impressed to read on Fabulously Broke in the City’s right-hand column that she has accumulated $18,000 in retirement savings since 2006! I thought that was a super effort, so go and have a look for yourself. Thanks for linking back to me about that, FB!

Well, with the good comes the bad. My financial tracking has clearly been down the tube this past month. I just worked out my money in/out for the month, and my net worth has fallen in real dollar terms. Here’s why:

• I paid the venue deposit on behalf of the graduation committee I’m on, because we hadn’t sorted out the account access yet and the venue had to be paid to hold the date. One month later, we are finally getting account access - and my cheque will be sorted out today. Of course the $550 came out of my e-fund. I won’t make that mistake again. I always knew my money was coming back, because only I had the account statements showing the current balance and I was the oly one with alll the items needed to access the account. But it’s taken a long while to get the signatories changed and has cost me a little bit in interest too. Not good. Worse, it left me without the resources to fix up my other mistakes (see below).
• We overspent on the party. I’ve alluded to this already, but it was worse than I thought. It was mainly due to miscommunication between my husband and I about how much he was paying for things he’d organised; and because I spent too much on alcohol we didn’t need or use. Drink, anyone? We’ll have a full fridge for a loooong time. But this can be good too, because we have a ready stock if we go to a dinner party, someone comes over unexpectedly, or we need a gift for someone.
• I haven’t billed the university for more than 24 hours of work I’ve done for them over the past semester! And it’s nearly the end of the financial year. At $30/hour, what’s wrong with me? I have to get a form to someone and then get a password to log on to do it. I think I’ve been more focused on the car debt and not taking care of the bigger financial picture. Consequently, I have about $800 on my credit card that I’m now getting close to having to pay interest on. In my defence, the vast bulk of that is the money for our relative’s recent function. So it was a budgeted expense that was going to be paid by my work at the uni. I’ll rocket that pay claim in today too.

So what am I going to do? Well, I’ve put my usual $500 car payment towards the credit card instead, and when the cheque comes from the grad committee, I’ll put that towards the car loan. I’ll use the money from the uni to pay off the last of the credit card debt, and then worry about whether there’s ANY left for the emergency fund.

I guess this is a lesson to me. Money isn’t money until it is in your pocket. And, DON”T TOUCH YOUR EMERGENCY FUND UNLESS THERE’S AN EMERGENCY (Duh!).

Another $500 was sent off off to car debt this week - it is nice to have just one debt to focus on. We have $4600 remaining on the car. Yikes! It is getting close. It seems like getting from $10K to $7K took FOREVER but now this last bit is going quite fast. I’ve heard people say you tend to pick up speed as it gets closer and now I know it’s true! 

Disappointingly, despite receiving some extra cash this week, it has to go on paying back an budget overspend from last week. It wasn’t just the party -  we had guests in the house and seemed to be cooking for a lot of people over the week as a whole. It doesn’t matter, but I would really like to try to improve my attempts at frugality in the future. Notice I keep saying that but never doing it? Maybe between full-time study, motherhood and part-time work, I just can’t fit it in. Or maybe, that’s just an excuse. All I know is, I’m happy to be nearly debt-free and I think it would be exciting to speed that process along by whatever means possible.

So I finally made a visual representation of my debts, savings goals and achievements, courtesy of Ticker Factory. Like it? Meanwhile I also updated the real state of my emergency fund (post-car repairs) and found it wasn’t as bad as I’d thought! I need to find  $470 to get back to where I was (closing in on $1020). Then I’ll change to my next e-fund goal of $5000. I’m feeling good again - I know it’s all in sight.

 Not sure if I am finally catching on about what it means to be frugal, but for the first time I am really thinking about whether or not I need some of the things I want to save for. I still want to do the travel stuff and things related to experiences (like celebrating my graduation) but I’ve been lusting after all this furniture lately, desperately trying to figure out how to afford it. Now I’m thinking: what exactly is wrong with what we’ve got? Sure it’s not my style and it is getting older, but it isn’t shabby and it isn’t awful. It’s probably a bit bland for my taste but there’s plenty of time to express myself in future, when I can afford it. I think I would rather think about doing stuff with my family than buying stuff. Hopefully this feeling won’t pass!