So Sick of Debt

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!).

You might have noticed I’ve not been posting as much. As well as the turmoil at home, I have been trying to be a little less `debt-focused’ because I think it was starting to get me down. I stopped having fun, which I think is NOT the idea of debt reduction. It wasn’t so much that I was trying to avoid spending money, just feeling like everything I do is so regimented - work, uni, household … I need to be a bit more spontaneous. And it doesn’t really take money to do that.
When we decided to move out I felt conflicted … being so `full-on’ about paying off debt meant we were in a much better position to move out than we would have been otherwise. Yet, now I was looking at having less available spare cash than ever! And I wouldn’t even be paying off debt with the money! Did this mean having even less fun?
If we do end up staying, I can still pay off big amounts of debt, yet still learn not to structure my WHOLE life around money. If we leave, I have to see going out less as the `price of freedom’. Chances are, we’ll enjoy being home more than ever. It’s all a matter of perspective.
In the meantime, I’ve been making an effort to go walking every day, I’ve also gone out and bought some jeans and shirts, because I was sick of looking like a homeless person when I’m not in my work clothes.
I’ve also planned some nights out eg a comedy act next week for me and my hubby to go and see. This all comes out of planned `fun/miscellaneous’ spending of $150/week. Living here, we can still put $3-400 on debt, and this money also acts as a `catch-all’; if something uinplanned comes up.
Part of the deal here at home under the `trial arrangements’ is a switch-around of bedrooms. Suddenly we all have a bit more privacy, and my mood has lifted a lot - even staying home is a bit more enjoyable now.
I don’t really know what the way forward is - the trial here is running really well.
A commentator suggested I get my EF up to $5000 before continuing the debt pay-off (in case we need to get out fast). That is the logical thing to do, and I will keep extra money aside in the short term instead of putting it on the debt (for the bond, rent in advance, moving costs etc). But if we decide to stay, I know I will move that cash over to the car loan. I just want to get rid of that debt so I can save that $5000 as a next priority.

On another matter, I checked my EF balance yesterday - it is sitting pretty at $1017. For the first time I am realising that receiving interest on money in the bank actually can and does add up over time. I am seeing compounding at work. Eg when I put the $1000 in originally, there was already about $3 in the account. After month 1, I received $4.20, for month 2 I received $4.50 and after month 3 I received $4.80. I know the interest is paltry when compared to what we are charged for our debts, but it is nice to see that balance just sitting there, doing nothing but making me a little money. It makes me think about what could be achieved with a bigger balance and better interest rate!

Well I’ve been quiet for a week … so you know there’s been so much upheaval that it isn’t worth doing updates because everything could change at any moment.

However, I can say that we have been trialling new living arrangements while we wait for the house we like to come available. We’re still saving to move, but we are already over the moon with the effort my FIL has made. I don’t think he’s ever been forced to consider other people’s needs before in this way. But he has made a huge effort to give us some privacy (one of the big problems before) and has been stellar in his attempts to reconcile the situation.

However, there are 4 weeks to go till we can sign on to move into the house, so there is plenty of time for the honeymoon period to wear off.

If things stay like this? …. I’d be more than happy to stay.

I’m not getting my hopes up yet though.

Negotiations broke down again a few days ago, so we are definitely leaving. Suddenly now (ie today), my FIL has realised we are REALLY seriously leaving and now he is `distraught’. However, I’ve seen this before and once we settle in again to stay, I suspect things will go back to normal.

I have contacted an agent about a house we like and are waiting to see if we will be accepted as tenants. It’s time to return to the land of the living (though we will also be somewhat less financially free!).

Oh, well. Them’s the breaks!

Well, a few days have gone by and the storm has blown over, though our resolve hasn’t. We are still very sure we will be moving out in the near future, though it looks like my hubby and those around us have brokered a short-term deal.

We sat my FIL down and explained the lay of the land. We laid it all out on the table - and I think it was the first time he realised we were serious about what we need … and that we really were planning to leave.

Then my sister-in-law dropped over and took him for a drive. She laid it all out on the table too, about the few options he has if we can’t stay. And I know a few of his friends have gently nudged him to think about what we’re asking for and why we might feel the way we do.

Then finally my husband sat him down again and outlined once again everything we thought, but this time we focused on why we thought the changes could actually be good for him.

It sounds like we may be getting somewhere. However, we’ve been at this point before and - partly becuase we didn’t keep the pressure on - it all fell in a heap.

So in other words, my FIL has agreed to the changes we had sought, but we have not yet agreed that this means we will stay long term. If it all works and he sticks to his end of the bargain, we will seriously consider staying. But if everything just goes back the way it was, well, we know we did everything we could but it’s time to go. We’ll probably give this 4-6 months, and see how it works out. It’ll be a lot less than that if it becomes clear it’s not working.

The other thing is,  we have convinced him to start planning for the future. We may have to move for work in the future and so, he needs to start looking around now at the retirement home options regardless of whether or not we stay for the short term. That way, if things do end up needing to change drastically, he has somewhere to go.

So all this means I will keep up the debt repayment effort but will also need to boost our EF a bit faster in case we need to move. I guess that’s all we can do.

It’s been a very bad day. To cut a long story short, my husband and I have realised we can not continue to live in this house with my father-in-law, certainly not without a firm exit date and strategy anyway.

In brief, my FIL went back on an agreement we had made about the living arrangements in the house. This is typical of his attitude, which is one of saying this is our home (as a group), but using his actions to show he sees it very much as `his house’.

Of course, it is his house (of course we recognise that), but he is now physically and mentally incapable of living here on his own. So if we go, so will he … most likely to a nursing home. This is not what he wants or what we want, but what can we do?

I know he wants everything to remain the same as it was (he’s lived here for most of his life), but the reality is that it can’t and we can no longer keep our lives on hold to stay here with him, especially when we feel so disrespected by his attitude and actions.

It’s a shame for us too … living here has helped us change our financial situation, and we are moving back into a housing market that is at its peak. Rent and house prices are obscene right now.

But I’d rather rent a `crappy but happy’ home than live in one where my family isn’t comfortable and we don’t have a voice in what goes on.

It’s unfortunate but true. On the upside, we are at least going to see through our debt repayment schedule and ensure we move without borrowing for bond or moving costs. But then we’re out of here. Perhaps it is for the best.

Much is made in the PF blogosphere about patience. The need for patience to get debt free, the need for delayed gratification before you get your `toys’ and the need to get past the desire to be debt free NOW, working instead to achieve it over time. Of course, unless your debt is tiny, slow and steady is just the way things go.

I am realising that I am fundamentally impatient, which is probably why I was in debt to start with!  I’m constantly trying to dream up ways to get rid of this debt RIGHT NOW and move on to the next in a long line of financial goals this year and into the future. My current plan will see us doing the hard yards for another 18 weeks to become debt free.

That is great, and I should feel lucky that the goal is so close. But my financial goals have moved so far ahead of just being debt free now that I am impatient to get to them. (look, there’s a perfect example: I wrote `just being debt free’, like it’s nothing.)

I am impatient to get on to the next steps: building a bigger emergency fund, saving in advance for my next vehicle and saving for a home. But the reality is, this financial responsiblity stuff is a slow and steady process that will not `go away’ when the debt goes.

Right now, as I look forward to our post-debt-free existence, I can only see more financial `mountains’ ahead: the emergency fund, the car saving and the home deposit etc. Each of these are massive goals, which will take significantly more time, effort, PATIENCE and DELAYED GRATIFICATION to achieve. It’s like I can’t see the forest for the trees, because it just looks like more `work’.

But a change of attitude is required here. For a start, if we are smart in the future, this is the LAST TIME we will ever have to pay off useless consumer debt. If we are lucky in the future, saving for our emergency fund will be a ONE-TIME effort. Even if we do need to use it, having it will, in itself, save us the heartache of paying off debt. And if I can stick to my goal of buying my next car outright, I can continue to put a small amount aside each week and always be `one car ahead’. This way, my money will be working to build interest for me, and not for the bank.

As for the home deposit, achieving this goal will help us achieve immediate equity in our future home. So we are hopefully never in the position of being `upside down’ on a mortgage or feling pressured to sell. This will bring some financial relief in what could be some tough economic times ahead.

I guess what I’m trying to say is,  I do feel overwhelmed by the financial tasks ahead of me, but I have to remember that each of these will require work in the short-term to put our family in the box seat in the future.  

I try to look forward 3-4 years and imagine what my family will be like. When I close my eyes and do this, I see us enjoying simple pleasures, like sitting together at a football game or hosting a barbecue at our new home. We have a mortgage, but we’re a little in front on repayments.  We own our cars, have a 6-month emergency fund and no debt. We also have a small amount of savings for travel and our next car. If something special is coming up, like a ball or day at the races, finding something to wear and allocating some spending money isn’t too tough. And we’re not worried about our son’s education because we have a small nest egg in place to cover it.

It’s not an overtly glamourous life but we feel secure and, best of all, we’re happy. Most of all, once we reach this point it will be such a great position to go forward from, in terms of investing and slowly improving our lifestyles.

When I am feeling particularly sick of debt repayment and the prospect of several more years of hard financial work, I think of my `future family’, smile and know I am on the right track.

So after my little `poor me’ whine, I am feeling more OK about our position again. I must admit I can check out our Net Worth (which we are tracking at networthiq.com) and though it is not high (by ANY means) it is at least heading in the right direction. When I think about it, each week we pay $310 off our debt and put $300 away into savings. That’s pretty cool. We are working hard to do that and paying the price in terms of effort (caring for my father-in-law), privacy (=none) and lifestyle (=none). However, that really looks good when you chart it on a graph. In fact, I am considering publishing our Net Worth graph on here (but another part of me isn’t ready for that).

I wonder if it is true that as you amass a pile of cash it seems to grow faster and faster. I hope so. I would love to have $10,000 towards a deposit by Christmas. As things stand we have $2500, with 17 pay-days till the end of the year. That adds up to a total of (17 x $300) + $2500 = $7600. To make $10,000 I need to amass another $2400.

I am hoping the upcoming government rebates will add $500-$750 to that once the credit card is paid off and the EF topped up. In the best case scenario, that means I only need to find another $1650. And since I am doing some extra casual work at home on top of my regular casual job, that might largely be covered by the end of the year. I will still need to look farther afield to reach $10,000 though. Maybe I will work a few extra shifts in December once uni is wrapped up for the year.

Anyway, these are my financial goals by the end of 2007

• pay off the credit card completely (and not amass more debt!)
• reduce family-owed debt to $5100 (at $100/week)
• reduce car debt to under $13,000
• maintain an emergency fund of $1000
• save $10,000

  I think we can do it, so I am feeling so much better about things. Thanks to Lynnae at Being Frugal for the injection of sympathy. She rocks!

I am going to talk about the fact I have been feeling a bit down about my finances, yet I am acutely aware that I have things very good compared to a lot of people out there. I am really feeling for JW over at Need to be Debt Free, because he is working so hard to reduce his debt and outside circumstances just seem to continue giving him a really hard time. I admire that he continues to have the energy to get up and do two jobs. We’re all supporting you JW!

The thing is, we all know that we are lucky in a lot of ways, but it doesn’t stop us from having off days (or off weeks!).  I know, when I look back to where we were a few months ago, that we have come a long way. But part of me wants to be rid of the debt now. As in NOW! However, as a few PF commentators have said recently, it is this debt reduction journey that will teach them - and me - why we need to avoid bad debt in the future. It’s still hard sometimes to put in the hard yards though. I keep trying to think of ways to get rid of the debt quicker, but I know (for example) that no matter how hard I work it it is going to take me two years to pay off the car loan - minimum. I guess one way to look at it is that I could divert some of the regular contributions to home deposit savings to pay off the car sooner (probably makes better sense in purely financial terms), but we really want to be able to move eventually, so showing a savings history is important.

As Lynnae at Being Frugal said recently, I can see all this as a choice. And I have to admit that helps. But I see all my contemporaries looking fashionable, and part of me wants to say `who cares, let’s spend’. The other side of that coin is, I already did that and look where it got me.

I know that next week I’ll be a bit brighter. I watched the Suze Orman Show last night and instead of focusing on the people who had big dollars in their savings account I tried to be more objective. A noticed the other people, the ones who actually had bigger debts than me and we’re a lot older … and who wanted to put more stuff on credit.

I shouldn’t compare myself to others (especially others in another country) but sometimes it’s hard not to. I don’t like myself much when I get like this, so maybe it’s better if I log off and come back when I’m in a better frame of mind, and feeling a bit more thankful for all that I have.

Nesting, nesting … 

Well I’ve had a better day today, accepting that I can and will wait for our dream of home ownership. As part of that strategy (watchful waiting), we’ve decided to try to make our current home a bit more, well … homely. For a start, I’ve cleaned up my study room, removing all the excess junk and leaving only my coursework and currently relevant textbooks. Then I got out the TV wall bracket that we bought a few months ago, and started trying to figure out how to put it up. Having this done will mean there is a little more breathing room in our relatively small bedroom. I also put up the curtains that I bought months ago and figured out how to get the new hooks working on the curtain track (something I put off a few months ago due to utter frustration). I have to say it already looks more `liveable’. Now I am going to spend my small weekly allowance on a few touches to brighten it up. 

Hubby’s father-in-law is also getting a painter in because the paint is peeling from our walls, leaving ugly big patches of bare wall. I spoke to the painter about whether or not it would add to the cost to do something like a red feature wall behind the bed, and he said it would make no difference as the expense is in the wall preparation (mostly) and application of the paint. So when that is done I’ll take a photo to show you guys. I have to say that I’m sure we should be offering to paint the walls in the entryway and in the bedrooms ourselves as I hate that my father-in-law is paying someone to do it, but there is a LOT of preparation work and our lives are also ready so busy that I don’t think  I can add on an extra home project!

Otherwise, I fought off the urge to visit an open house today, though I did drive past after it was over (I’m only human!). But the need to move hasn’t been so strong. My mum actually asked me if I was confusing my need for my own home for what might really be my biological clock! I was surprised, but I could see what she was saying. My toddler is nearly two and a lot of people would be thinking about having another child. And also, she thought maybe that was why I was frantically `nesting’! Though there may be an element of truth in what she’s saying, I think it’s more about wanting our own space. Possibly the stress of final exams (which we have in our second last year of uni) is also a big factor in all of this. I’d love another baby but I am happy to wait till we are more settled before I worry about that.

Last night I found it helpful to focus on looking at how far we’ve come, instead of looking at how far we have to go. I made a list of everything we’d achieved in the past year financially. I also took the stupid things we did (like paying for a Pacific island holiday largely on credit) and looked at the advantages (we got the desire for overseas travel out of our systems for a while and can now focus wholly on financial responsibility!).

I’ll try to keep up the positive attitude over the coming weeks and months … I guess we’ll see how successful I am!