So Sick of Debt

I forgot that the Federal Budget was being released this week. It’s all pretty good for people in our position. Here’s what may be of particular benefit to my family in the financial year ahead:

• a tax cut of at least $30 a week (based on our income) - that money will help offset changes in our circumstances that will make our finances tighter from July to December (I will earn more money over the whole year, cuttng me out of some benefits, but I won’t get any of that extra money till the second half of the financial year).
• an increase in childcare rebate from 30 per cent to 50 per cent - boosts money in our pocket over the year by at least $1500.
• a move to pay child care rebate quarterly, instead of at year’s end. This will help with our likely cash flow difficulties projected for later in the year.
• baby bonus of $5000 to new mothers remains in the Budget - not sure if I’ll have more children but if so this money will help. It will now be paid in 13 weekly instalments of $385, a bit like a maternity pay arrangement. There is a new means test but we are not in danger of being affected by it.

So overall I can’t complain about the Government’s plans for the upcoming year. It was reported to be aimed at helping `working families’, so I guess that’s us.

A little while ago I mentioned that our health insurer was being taken over by a larger company, and if the takeover went ahead, it would result in a cash payout for us. Well, the deal is done - the policyholders have voted for it to go ahead and the Federal Court has given approval, meaning  the insurer (MBF) will be taken over by BUPA.

When I first posted about this, I didn’t understand why we got paid if the deal went ahead - after all, we would remain members and our policies would remain intact. This is it in a nutshell: MBF is a `mutual’ organisation,  so it is essentially owned by its members. When it is taken over, it is the members who divide up the takeover proceeds (in this case, $2.4 billion).

Some policyholders are disappointed because MBF was previously planning to list on the sharemarket, instead of being swallowed in a friendly takeover. In that scenario, each member would have automatically become a shareholder. That would have made me a first-time investor!

But I’m happy to receive the cash, which will probably be used to finish off the last of my debt. Why do I say that? These payments are set to be made in late June, by which time we should owe just under $2000 on our vehicle.

So YAY! An unplanned windfall is now definitely coming our way.

EDIT: Holy crap! I just realised June is next month. That means we will more than likely be consumer debt free by NEXT MONTH! This is so exciting!!

So I have some time to spare so I thought I’d update you on a few fronts. I’m nearly half way through the uni year now so I am nearly a graduate! It is starting to become more real now and I feel a bit more ready to get out there and see if I can do it too. One of the last things I need to do before graduation is an 8-week clinical stint in a small town, working at the hospital there. My family will come with me, meaning we will need to rent somewhere. That’s going to be costly, but we have just gotten some good news that might balance that cost out.  I just found out that my son will be able to `leave’ his daycare centre and come back when our 8 weeks away are up - without having to pay a holding fee. That’s because by then he will be around the age when kids move up to the next level of care. So the director of the childcare centre will allow him to leave the toddler room, and on his return he can `rejoin’ at the kindergarten level (he will be nearly 3 by then). That will save us about $175/week in fees while we are away and is going to make things so much easier. Considering I won’t be working for 8 weeks, that will be really helpful!

Also, I started going to yoga classes about three weeks ago. I received a 6-week beginner course from my husband as my birthday present, and I am enjoying it more each week. It has surprised me to find that I’m relatively strong (more so than you might think by looking at me).  I intend to continue when the course is done, but it will cost $12 a lesson (once a week). It’s probably worth it to have some `me’ time though.

Also, the party that we were contributing to (on behalf of a  relative) was on this week. We had allocated $550, and we ended up placing it on the bar tab. Because it was a 21st, we didn’t know how long it would last (how many people were coming, how much would they drink), but it was actually quite a small function and this amount was just right. The money ran out just as the restaurant started packing up tables and chairs (the universal hint that the night is over!). It was a lovely night and we were really happy to be able to contribute in this way.

Our own party is coming up very soon and happily, the money is ready. The breakdown is as follows:

Party hire: $250 - tables, chairs, linens, glassware

Alcohol: $250 - enough to supply some wine and midstrength beer.

Babysitting: $60 - one of the young women from hubby’s work is a professional baby sitter by night. She will be there to put my son to bed at a reasonable hour and keep an eye on him. Though we will be at home, I think this is a good idea.

Food: $300 - we are making most of the items but this amount includes $100 for some sushi to be made for us. This allows us to offer something hearty for the vegetarians too (and I love sushi!). We are making mini quiches, satay sticks, chicken wings etc.

Miscellaneous: $140 - we need to hire some lighting, buy serviettes, etc. This should be more than covered by the remainder. However, it’s always important to build in some contingency money. I’m starting to get excited about seeing everyone!
 

Meanwhile, I’m also looking forward to Thursday, when we will get to put the next $500 towards our debt!

Since I paid off my credit card debt, I haven’t paid any interest. But funnily enough I have used my credit card almost as much as before! I remain focused on paying it off within days of any purchase, but I find that purchasing with the credit card is quick and easy. I know, I know … that’s the idea!

Basically, I don’t use the credit card without having planned to do so, and I am always confident that I can control my behaviour with it. But sometimes my money attitudes seem a bit strange.

For example, say I need to buy an item that will cost $300, and I’ve saved the money in a high-interest account (without debit card access). I can either pay for it with the credit card, then go online and pay it back, or I can transfer the funds from the online account to out working account.

However, if I do the latter, then manage to negotiate on the price, or get a better deal than expected, I have to send some money back to the high-interest account, meaning I have to do everything twice. I might have transferred $300, spent only $230, then had to go and send the $70 back to the high-interest account.

Instead what tends to happen is that the $70 seems like free money to me, and we spend it on something else! Sound familiar? I know, it’s classic credit card behaviour, but using money I’ve saved! How’s that for weird. So I prefer to use the credit card and pay it back. It works for me, but I understand why for others it might not.

At the end of last financial year (June 2007), my retirement balance was $29,662. I was pretty pleased with that. I hadn’t paid attention to superannuation in years, and back when I was in my late teens - and my balance was only around 2K - it seemed like fees often were higher than any growth my accounts attained. Perhaps last year wasn’t the time to start watching them.

After 4-5 years of apparent fantastic growth, it seems like my retirement account might end in negative territory this year. Thanks to share market volatility, my account was down in 25K territory at one point. This is pretty much hitting everyone at the moment. Currently my balance sits at $27,992. So it seems if I do match last year’s position, it will be thanks only to the government’s co-contribution scheme. Because I have made an after-tax contribution of $1000 and I am a low income earner, the Federal Government will give me $1500 to boost my fund. This is a great system for people who will never earn big bucks, because if you can manage to find the 1K, you get a 150% return on investment. And then you have $2500 more than you would otherwise have had, and then that keeps growing. If you do this every year for 10 years, the difference could be phenomenal! I guess the only issue is finding the initial $1000. I think it probably works best for people who have higher-earning partners. But it can really help, for example if a woman works part-time for 5-10 years while she raises her kids, her final retirement balance can be massively improved.

Because there is a no-choice retirement saving system in place here in Oz, it doesn’t seem painful to save for retirement. But that doesn’t mean we will necessarily have enough. I am looking forward to putting in some extra contributions when I start earning next year. Anyway, I’m not at all worried about the balance. My access to super is preserved till age 60, so this is but a blip on the account’s overall performance. I just find it fascinating to see how these things fluctuate.

For nearly a year I’ve enjoyed spending Thursday nights (pay day) updating my net worth and the sidebars on the right of this page. Tonight*, because of the upcoming party, there’s nothing to report. It feels weird. I know it’s okay, I planned for this and I will enjoy this use of funds, but it irks me not to be saving anything this week. I might just sneak the $100 extra my husband earned this week (for taking a short-term supervisory role) and put it in the account from where our son’s managed fund contribution is drawn. That way we’re ready when it’s due. Even though that’s 3 weeks away, this allows me to feel we at least did something financially `virtuous’ this week!

* If you’re reading this in the States and it’s only Thursday morning, we’re way ahead of you on this side of the world!!

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!

I keep track of my net worth on networthIQ, but have never been able to make it public because I opened it with a name that is a bit too … well, public.  One day I intend to transfer the data to my debtfretter moniker but haven’t gotten around to it recently.

Suffice to say, including our retirement accounts, our net worth is $68,195. I have to say, we’ve had a stellar run this year. In January, our net worth rose $3116, and in February it rose $1780. In March it went up about $900 and in April, the amount was $2110. This progress has mostly been due to our efforts to pay $500/week off debt, which is more successful some months than others.

However, we are facing our first ever month where our net worth might drop. When I say `the first time’, I of course only mean since I started keeping track! Before June 2007, our NW dropped all the time - that was the problem!

But this month, car repairs are likely to rob us of most of our emergency fund - our billpaying account (which isn’t included in my net worth figures) just doesn’t have enough to cover it. As well as that, I won’t be contributing to the car loan for the next two weeks as I save for our party costs instead. And clearly, that money won’t contribute to our long-term future!

That still leaves 2 weeks of (hopefully) $500 car loan payments for the month. Plus hopefully I can redo some of the damage to the emergency fund before May is over. I’d like to at least stay stable in our net worth and not go backwards, but I don’t know how possible that is.

One thing I have noticed - as soon as I pay off any debt, I like to update my sidebars on this site. But now that our EF is taking a hit, do you notice I haven’t touched the sidebar to `report’ the damage. Hmmm, pretending the money’s still there doesn’t change reality! I’ll get to it … soon!

By the way, did I happen to mention that I’m SO SICK OF DEBT????

Well, it turns out my hubby’s car needs more work and there is now way we will avoid eating in to our emergency fund. Funnily enough, after being so adamant I didn’t want to use that money no matter what, I finally realised that it’s OK to do so. That’s what it’s there for! I had been thinking I would rather put the repairs on the credit card and pay the bill off quickly - how weird is that?

Anyway, things are a bit tight - there’s been a lot of little niggly items lately that have eaten into our budget, and despite only working one shift on my last pay cycle, last week I was determined to pay the full $500 off. We actually ended up going into the red by $7.70 in our operating account because of that (the account fees came due when I wasn’t expecting them) so I probably shouldn’t have pushed things so hard. However, what was worse was that we had our usual $6 monthly account fee, but there was also $18 in non-bank ATM fees! That’s terrible and we will have to get our act together - infact, I’m the worst culprit at this, so it’s my new challenge - ATM fees must be no more than $4 this month.

Anyway, hopefully everything will keep going well. Our home situation is SOOO good now. We are definitely staying and even my FIL is enjoying the new system. We all have our space and we all seem much happier!

My husband has just informed me that two front tyres for his 4×4 vehicle, plus repair/replacement of something called `cv boots’, is going to cost about $500!!! Yikes! Luckily, we do have a billpaying account but it is pretty low already this month and I also have annual car registration due! Something has to give … not sure whether I’ll be able to cover all bills this month without breaking into the emergency fund (at least for a while) but if so, that’s what it’s there for. The other alternative is to cut into debt repayments (but in my mind, this isn’t really an option :).

It’s taken a lot of effort to make our usual $500 debt repayment this week because I only did one shift at work (not my usual two). But we just had a quiet weekend at home to allow us to use our fun money towards debt. This is one reason I maintain a pretty substantial $150 fun/miscellaneous section in my weekly budget - it helps sometimes when other parts of the budget fall shorter than I’d like.

As for money generally, I am really trying hard to stay focused on my goals for this year and not worry too much about what will happen next year.  I already know my goals for 2009: I really want to boost our EF substantially, and begin our home deposit savings. I’d also like to start contributing a small amount to a managed fund, with the goal of slowly increasing the monthly contributions over time. My husband and I both also plan to begin salary sacrificing a bit extra into our retirement funds.  And I intend to get our wills sorted and invest in some life insurance for me.

All this will mean our lifestyle won’t change much when I start working, but it will be very exciting to move forward anyway. But for now, I must just focus on this last debt!!