So Sick of Debt

I did - I was bad … but I’m not sorry! I spent $115 on a gorgeous felt rabbit toy and baby blanket for a friend, who is due to deliver any day now. For that princely sum, the gift will be wrapped (as per my wrap selection) and arrive by courier in two days time. I feel like it was worth it. What often used to happen was that I spent days searching the shops for something to give, before struggling down to the post office and trying to find a presentable way to send the item. Often I would never get it done and the special time would come and go with nothing done on my behalf. I don’t sned many gifts - I don’t give my girlfriends one every birthday or anything like that.

But now and then I like to splash out on something really special for my friends or family. I have made room in the budget for this and to do it online meant it was done in a jiffy. To me, this is the aspect of carrying low and/or no debt that I like most - the ability to allocate funds to be extravagant or generous when I really want to.

My friends went through a lot of heartache to get pregnant and this is SUCH a momentous occasion. I am so, so happy for them :).

Unfortunately, I have a daily transfer limit from my everyday account of $500, so I’ll have to do the other $50 tomorrow. So my car debt stands at $3550. It’s nice to see such a significant jump down, after the dodgy month I had in May.

If everything works out, I could be debt free by Thursday next week! Or payment for my uni work will be late and I won’t be :(. At least I know it’s just this week and next week left, where money towards the car actually has to come out of our paycheques.

On Thursday this week I’m going to be paying $700 off the debt, instead of my usual $500. I did an extra shift at work last week, so that will help, and I was able to crunch the buddget a bit more. So this is how the last of the debt should pan out:

• tomorrow - salary ($50) - new balance $3500
• Thursday - salary ($700) - new balance $2800
• Next week - health insurer cheque ($2100) - new balance $700
• Net week - salary ($300) - new balance $400
• Next week - tutoring ($450*) - new balance -$50
• Next week - monthly interest ($50) - new balance $0

* I’m actually going to get paid more than this, so I need to figure out where that should go - I suspect, it will be straight into the empty emergency fund.

Of course, the interest will vary a bit from the amount above but I can deal with that. This is all pretty exciting! I WILL SOON BE DEBT FREE!

 And with that, it’s time to move on to day 2 of the abundance challenge with Millionaire Mommy Next Door.

Day 2: $200

How I would spend it:

• cushions for the Balinese day bed my mum gave me - $100
• cushions for the bed in the spare room - $100

How I could make it:

• sell some of my boy’s baby things, including a kids’ dresser we no longer need

What I’m grateful for today:

• having a safe place to live
• the way my mum, dad and I call each other every day
• enjoying my work and study

This is fun! Maybe I’ll even act on some of these early wants - but only if my method of paying for it is above and beyond my budgeted income!

Millionaire Mommy Next Door has invited readers and other bloggers to participate in a 30-day abundance exercise. The basis for the challenge is the same principle that guides The Secret, the bestseller that talks about creating abundance via the Law of Attraction (ie that you attract what you want into your life, whether that be good or bad things).

I don’t think I’m much of a fan of The Secret, if only because it doesn’t really say anything specific. But reading it does create a good feeling in the reader about what’s possible in life, and that can be a strong motivating force. I have long believed that your attitude can make a big difference to what you attract into your life (though I’m not sure it works as specifically as really wanting a diamond necklace so much that you will eventually have it!).

That said, not long after I read The Secret, I decided to give its principles a go. Specifically I wanted to attract more money into my life. I regulate my money very tightly, so I couldn’t see where some random cheque was going to come from. Three nights in a row, I spent 20 minutes in our spare room - I picked a very specific number based on the plans I had and basically I meditated positive feelings about money. I imagined having that $55,000 and the things I would do with it.
After three days, $125 appeared in my account. I had no clue where it came from. I checked with the bank, and it turned out it was a sweetener the government gives to parents who have fully immunised their children. I usually am well aware of such things, so this was a nice surprise. So I kept the meditation up for two more nights. On the Friday, we received an unexpected cheque in the mail for $55 from a lottery syndicate. We didn’t know we’d won anything until then.

Now I’m not saying those things wouldn’t have happened anyway, but it was pretty mindblowing that both things happened in just those few days I was asking the universe for money! 

Interestingly enough, I stopped doing the meditations that Friday. Who knows what that says about my feelings about money. Needless to say, I haven’t attracted a $55,000 lump sum into my life. But then that wasn’t what I meditated or asked for (ie a lump sum). I just asked for the amount. What would have happened if I’d kept going each night? Maybe I would have been snowflaked $55,000!

In any case, I’m always one for imagining how I’d spend my money, so I’m going to participate in MMND’s latest blog challenge. The idea is to blog daily about an amount you’d like to attract into your life, and what you would spend it on. The amount doubles daily and you can’t repeat an item you’d like over the course of the month.

Next the plan is to mention the things you are grateful for on that particular day.

Thirdly, MMND is going to document a novel idea for how to make the amount of money, and I’ll see how I go with that part of the challenge too.

I’m running a day behind MMND, so here goes:

DAY 1: $100

What I’d spend it on:

• a comfortably cuddly new doona to wrap my family in each morning

How I could afford it:

• Do an extra shift at my part-time job (a bit of a cop-out but it’s going to get harder so I’ll start with an easy way!)

What I’m grateful for today:

• The staff at my little boy’s non-profit kindy, who came to help at a working bee today
• My husband’s kind nature
• Being able to wear just a shirt and jeans at this time of year (winter in Australia!) because of our beautiful sunny climate

So thre you go. Join in if you feel like it by posting a comment at Millionaire Mommy Next Door or by blogging about it. By day 30, the amount to spend is $53 billion! Sounds a bit ridiculous - I thought of changing the starting point to make the end point smaller, but why not plan how to spend $53 billion? I’m sure together we’ll be able to think of a lot of good things we could do for ourselves and others.

PS: MMND admitted this experiment might challenge our usually frugal habits. I mean, many of us avoid the stores to avoid temptation. Will it do more harm than good to think of all these things we can’t afford (yet!)? Maybe, but I’m willing to give it a try anyway.

Hubby went grocery shopping this morning and I just happened to check our balance just now. Yikes, we spent $235 on our weekly food shop (though admittedly we didn’t shop properly at all last week)!

I’m sensing (based on other bloggers’ published food bills) that for a family of three adults and a kid, $235 seems very high. And it is, even by my regular budgeted $200 max standards. But even that $200 figure seems much higher than other people’s.

For one thing, I’m not sure that the currencies/food prices in the US and Australia stack up in a similar way. Also, from what I’ve read and seen, in Australia we generally don’t seem to buy as much cheap, processed food as some Americans (not all!). This focus on lots of fruit and vegetables, and fresh meat or seafood, might account for our higher food budget. Or we might just be a family of piggies!

The other thing is, we don’t eat out at night except on very special occasions, so we spend a little more on making nice meals at home. And in Australia, we don’t have a coupon system. We just check catalogues for the specials if we want to cut our food budgets.

Am I just justifying our food spending? Well yeah, a bit. I keep meaning to work on a way to cut our grocery spending but it never seems to happen. I think my focus is on other ways of cutting debt, and at the moment this is in the too-hard basket. That’s OK, because my hubby is going to step up to the plate. He is going to watch the budget a little more closely next week, and also says he wants to start planning meals a week in advance to ensure we only buy what we need (he’s the cook in our house). So I really am happy to leave this part of our budget and lifestyle in his hands.

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!).

 I just received some really exciting news. Because I am doing Honours as part of my degree, I’m completing a medical research project. A few months ago, my supervisor sent an abstract (or summary) of my work for presentation at the annual conference of the international organisation for this particular medical field.

Well, I just heard back this week that my abstract was accepted for a poster presentation. This means I put the details into a poster and it is displayed with hundreds of others outside the conference meeting rooms. As author, I will be there to discuss my research with specialist doctors and researchers.

And guess where the conference is being held this year? China! This is so exciting!

The second bit of news is the important one. I separately heard this week that my medical school has awarded me a prize to pay for $2500 of the cost of attending this conference. That includes flights, accommodation and registration fees. So I can actually afford to go!  

So I will be away from my family for a few days in September, unless we can figure out a way to afford for them to come. We’ll see what happens there. But in the meantime … YAY!