Archive for February, 2008

A year to become debt free?

Well there’s only a day to go and it doesn’t look like we’ll hit the $8000 mark on the car loan (barring an unexpected windfall tomorrow). Still, $8265 is a good achievement, given that if we hadn’t made the extra effort over this past month, our debt would stand at $9044 right now.

It has inspired me to continue to set specific goals with our debt reduction.

Perhaps the most ambitious is to become consumer-debt free within a year of starting this blog. My first post was on July 7 last year.  It is possible for us to make it, but only if we work hard. Really hard.

It would probably entail me working an extra night a week, and us curtailing the entertainment for a bit. Thanks to this big effort we’ve made in February, we have already brought forward the car pay-off date to September 4 (from September 23). However, our efforts currently need to go into putting the money aside for our birthday party, which is going to cost at least $1000. We also have made a $500 commitment towards another family matter. This means our ability to put money directly on the debt is going to be curtailed for a bit, let alone trying to make extra payments.

I don’t know how realistic all this is. However, just like February’s $8k challenge, even if we don’t quite get there on deadline, this continued intensity will get us debt-free so much faster. And who knows what’s around the corner that might nudge us that little bit closer?

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Extra job?

Some opportunities have come up at the university to tutor other students, mostly in small group scenarios. Some of the opportunities include regular weekly hours, while others are one-off teaching events of three hours or so. This kind of work has so many benefits:

1) helps me build links to other year groups and builds my teaching skills

2) helps me get to know medical and administration staff at the university – always good

3) Gives me a chance to revise stuff I should know – and get paid for it!

4) It looks good on my CV and counts as me having completed extra professional development requirements on this year’s assessment (= better marks!)

5) It’s a job where I can more legitimately be away from the wards during the day because it is the university employing me to tutor students

and lastly …

6) EXTRA MONEY!

I’ve done tutoring before for the university so I have a good chance of being selected. I think the pay is about $30/hour, with at least a couple of hours’ work a week or more. Every bit helps!

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Bills, bills, bills

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!

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So Sick gets a makeover

Well, here is my new look. I’m not sure if I like it yet but I do like the fact that each section of the blog is more well-defined than it was in the old design, and perhaps a little easier to read. I’ll stick with this for a while and see what I think in a month or so.

We’ve had a little budget meltdown this week. After getting paid on Thursday, it only took till Friday afternoon for our account to be completely empty! Of course all the bills had been paid, and food and fuel had been purchased but still … normally our fun money gets strung along a little longer than that. I had bought a few little items and so had my husband … we just didn’t realise we were both doing it! Says a lot for communication, doesn’t it. Not sure if we will get through the week without clawing a little back from the billpaying account. However, it interests me how little of a `big deal’ this is. While I never like to go over budget, the fact is we have an emergency fund and a billpaying account, both of which have just over $1000 in them. So we can definitely juggle a bit and pay back the money over the next few pays.

In fact, this gives me an idea for my next post. In the coming days I’ll discuss my billpaying account, how it works and what it includes. We have operated this account since before we got married in 2002, and it has always been a great way of keeping us out of trouble.

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One payday to go … my $8K challenge

Well, with one pay week to go till the end of the month, my debt stands at $8695. Not bad at all since it was $10,750 this time last month.

But my goal was to cut it from $10K to $8K over the month of February. This was always highly ambitious but I thought we should go for it anyway.

So as things stand, how likely are we to hit the $8000 mark by the end of the month?

Well, I expect to devote $525 towards debt reduction next week, cutting the balance owing to $8170. However, that’s before the interest kicks in. I’m predicting that will amount to just under $95, meaning that as things stand, we will be about $265 off our goal.  

Am I disappointed? Not yet. For a start, we haven’t reached the end of the month. Anything could happen to help us get to our goal yet.

Secondarily, I’m already a lot closer to $8000 than I would have been without this challenge.  As I’ve said before, I’m naturally a bit all-or-nothing about things, so it’s easier for me to just go hard on paying down a debt than to keep money aside for small pleasures at the same time, so though I’ve missed out on some fun money over the past few weeks, looking at that rapidly diminishing debt does wonders for my psyche. And my husband has been too busy with work matters to notice the lack of funds in the bank account, so the timing has been good on that front!

Let’s see how we go in the coming days. I’m learning that having a little faith goes a long way sometimes.  

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Out of debt for 72 hours

No, the title of this post is not about me.  I’m not out of debt at all! But on the Dave Ramsay Show on Saturday night, a guy called in to say he had been outof debt for just 72 hours when he and his wife decided to finance a car.

Somewhat cryptically, he described it as being for his son, who was just a toddler! Dave was confused and sounded him out on whether or not it was a real car, but the guy said it was (with that price tag, it would want to be … but how then could it be for his son?).

Anyway, Dave was pretty unimpressed. He couldn’t see how you would work so hard to be debt free just to change your whole philosophy in a matter of days.

But the chilling part is, I can see how it could happen. Already, as I near my debt free goal, I start thinking more and more about the stuff I can `afford’. The fact is, I can’t afford anything as I don’t even have any savings. I know there is a difference in me these days, as I am able to steadfastly refuse these impulses. But that doesn’t mean they go away.

I worked really hard to pay down my credit card and a couple of other small debts a few years ago, before caving and paying for an ill-fated holiday on credit. I know how easy it can be to just drop all your good work and go back to square one. I guess the only good thing is that I didn’t let myself slide so far the second time around.

There’s no doubt, a lot of our decisions about credit have been poor (or this blog would not exist). However, I’m also thankful, in some respects, for having to go through this journey. I don’t think I would have learned so much about money and good financial sense without having to pay down this debt and make every dollar count. I expect that the change in us is going to extend to life after debt.

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Back pay … priceless

In my slightly maniacal bid to get my car debt under $8000 by the end of the month, I’ve made some unexpected extra progress. I received about $100 in backpay from a payrise – just a small amount week to week but it will be applied since October last year. I had noticed the extra money hit my bank account but assumed it was a mistake by the pays department. Yay! So it’s a bit extra straight on the car loan. I’m getting closer to that goal! Taking a bigger debt and dividing it into smaller chunks is something that really helps me make that little bit of extra effort.

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