So Sick of Debt

Well, today we hit $16,165 in our home deposit account and in so doing, we jumped over the end of our savings ticker ($15,000). This was always a bit of an artificial goal because we want to save way more than this, but it is still a bit of a milestone for me.

I look back and smile on the old days. I don’t think I’d ever had even $2000 in my bank account before I started paying down debts, and any time I did, it went somewhere the very same day. And I usually still owed someone else the same amount or more.

So it is a red letter day for my husband and I.

So what are our plans? Well, I don’t think we are going to make it all the way to a 20% deposit before we buy. But I have recently talked to a finance company specialising in finance to professionals (ie doctors, vets), and they tell me that even without the 20% deposit, we will be eligible for a loan  without having to pay Lenders Mortgage Insurance. This potentially cuts about $7000 from the potential loan costs and is great news. It also means that the First Home Owners Grant of $14,000 can all go towards our deposit.

So with our $16,000 currently saved and that $14,000 grant, we essentially have a $30K deposit already.  If we can find another $15,000 cash and at least $2K for costs of buying, I’ll be pleased with our progress and ready to buy.

Let’s see how we might do that. The $14,000 grant reduces to $10,500 at the end of September, so that is our deadline for saving the rest of the deposit, getting the loan and signing a contract.

Already, we have $3000 stashed in an account that we had intended to use to buy some shares, and I had already planned to use overtime to save another $2K towards that. So all of that cash could instead go towards the deposit.

We also expect to get about $5000 back from overpaid tax and child care rebate at the end of this year, so that should also boost our deposit up.

By September, the natural progression of our house deposit saving will mean we have about $9000 more in the bank (at $1300/fortnight).

So the deposit will comprise:

Current savings: $16,000

Continued regular savings by September: $9,000

“Shares” money: $5,000

Tax refunds: $5000

First Home Owners Grant: $14,000

TOTAL: $49,000

(including $2-4K for buying costs).

Sounds pretty good!

  I really don’t want to touch our emergency fund account, so somehow I need to make sure that money is sacred NO MATTER WHAT!

By then it should be about $7,500 or so and will be a good amount to have ready as home owners. It will also be important to keep that money coming out so that we have $10,000 by the end of the year. Naturally, we will need a loan with an offset account that subtracts that amount off the overall amount owed for interest purposes.

I feel like doing one of those evil laughs – “mwah, hah, hah, hah! My master plan is finally coming together!”

Well, thanks for all the feedback given our recent issue with the friend that didn’t pay up. I’m happy to report he has handed back $250 ($100 to go) and has finally apologised. He admitted he didn’t mean to take so long, and he hadn’t wanted to bring it up to us and apologise till he could bring over all of the money, instead of an excuse. Finally he realised he’d really messed up and decided that giving us most of the money was better than none at all. He declares he will bring the rest this week, and I do believe him. I was pretty annoyed for a while, but now am happy to say that he has shown himself to be honourable. Obviously this is a good thing for our friendship!

Anyway, the other news is that I had my fortnightly pay, my Aussie stimulus cheque ($900) and my child care rebate ($1460) all arrive in my account on the same day! A good day!

This means we have been able to:

1) make the voluntary retirement contribution of $1000 – this means at the end of the financial year the goverment will add $1200-$1500 to my retirement account! If I get the full amount, it will mean that over two years I will have added $2000 of my own money with a return of $5000 overall! This is probably especially important given how much my retirement fund dropped in value last year (at least 1/3, or about $10,000). It has helped offset some of that.

2) create a debit account of $2000 – this means there is $2000 at the ready for flights that need to be bought at short notice, or to buy appliances that have blown up suddenly (I don’t want to use the emergency fund for a new TV!). This is to pay for the stuff we would otherwise have placed on credit card and `paid back’. Now we will be paying ourselves back instead of a credit provider.

3) Remaining is about $2200 which has not been allocated. This was going to go towards a purchase of some shares, though it would probably be better used towards our home deposit. I do want to make it a regular thing each year to buy a share parcel, and part of me knows that if I don’t make it a priority some time, years will go by and we still won’t have done it. While I understand that we should maximise our home deposit, I also want to invest at some point and don’t think the two goals need to be exclusive. I also think this is a great time to buy shares and we might kick ourselves if we don’t jump in soon.

We could buy some blue chips like Woolworths or one of Australia’s big four banks. We know these are probably safe bets and are pretty much `on sale’ right now. I talked to my husband and he agrees we should go for it. Taking the plunge is kind of scary though. It’s so much easier to sit tight and do nothing!

Two years ago I could not have imagined dealing with issues as fun as these. I had never even considered what it might be like to not have to use a lump sum to pay off some kind of personal debt. Believe me, those who are working to pay off debt or who have recently done so, the benefits do eventually show themselves. Just work hard and get rid of it for good!

One of the things I haven’t been proud of since we finished repaying debt is that we have not yet made a concerted effort to work out our charitable giving. While we were getting out of debt, I cut back on our giving because I knew we needed to help ourselves in order to get into a position where we could help others more in the future. But with our business and the change in our lifestyles, we hadn’t gotten around to this.

In the wake of the horrific Victorian bushfires, in which almost 200 Australians died, my husband and I decided we needed to get past our inertia and donate. Lots of Australians felt the same, with company and individual donations topping $100 million in a few days. For US readers, this is a huge amount in our nation of just 20 million people.

I didn’t give straight away as I don’t give `on credit’ anymore. But today we transferred $50. This is as much as we can afford right now, but I intend to get us a to a position where we are regularly giving 5% of our regular income away. Eventually I would like to make that 10% (once our emergency fund is a bit more secure perhaps).

I guess we need to talk about how best to deal with giving away this 5% in the future.  I hate that when you decide to give for a specific appeal, you get so much junk mail in the aftermath that it must inevitably cancel out the value of your original donation.

I wonder if there is some way this can be avoided. I’ll have to do some research, I guess.

Is it OK to be just 5 weeks into your career and completely over it already?
Hopefully I’m just having a bad day…
On a good note, I got my fortnightly pay and officially have more money in an account than ever before in my life (not counting that fraction of a second when I’ve received the money ready to pay the seller when getting a car loan (just before I wrote the bank cheque as payment!).
Nuh-uh! This is our cash, baby!

I also have to see a financial adviser this week to learn about salary packaging. I will post with the details after my appointment on Monday.

I can’t stand it! I have more bills than cash coming in and most of them are one-off bills!

Academic gown hire!

Graduation ball tickets!

Frame for graduation certificate!

Shoes to go with grad dress!

Aaargh! I wish that elusive financial fairy godmother would make an appearance. In her absence, we’ll have to make do.

The path from debt freedom is a slippery slope, that’s for sure.

Today is the one-year anniversary of my blog! I am so happy to still be blogging after a year, and am proud and somewhat dismayed to report that my family and I will be debt-free this week, almost to the day since I became a blogger. How’s that for timing?

I took a look back at that first post and I have to say, it was very uncharacteristic for my style since. You can read it here. I basically set out my intentions for the blog and for debt reduction before settling into a list of the basic tips I could give to someone trying to cut their debt. The tips were fine but I soon realised I wasn’t a `10 reasons/10 ways’ kind of blogger. I just wanted to tell my story.

Since then I’ve found some amazing blogs, and learnt so much about what I really want out of money and our future. I realised that becoming debt free was going to be only part of the journey. I also had to overcome feelings of being trapped in the living situation my family was in, and feeling that scrimping together a tiny deposit for a home was going to turn that around.

It took me a while to realise that what we needed was to stop buying crap and to build an emergency fund, before we could even think of buying a home. Turns out that was a good move because here in Australia, interest rates have risen right along with house prices. We would have bought right on the peak of the market, with maximal interest rates and no equity. Now I’ve seen and learnt so much from the subprime crisis in the US, I am glad to say I am lucky I did not buy just yet.

The hard part of learning more about finances is the bit where you figure out how much work still has to be done before you can really reap the benefits. We still have to save a reasonable emergency fund and – at least – a 20% home deposit. This is going to take us years, and is a formidable goal.

But I am finally starting to feel good about our financial future, and why not? We are proud to call ourselves debt-free (well, this coming Friday at least!) and I think mentally we have come so far in just one year.

Before I stop rambling, I want to acknowledge some great bloggers who are regular commentators on my blog. Without you, I would probably not feel accountable and who knows if I’d still be here? So thanks especially to:

- Fabulously Broke in the City

- Dolly Iris

- Louise at Eliminate my Debt

_ Debt Dieter

- Ugly Debty

- JvW at The Good Life on a Budget

- Saving Diva at Saving for a Home of my Own

_ Lynnae at Being Frugal

- JW at Need to be Debt Free

There are many more and I may have missed some of you, but I do really appreciate all your kind words and support, and I look forward to our future shared successes .