Debt-free (very nearly)
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Quality of life and personal growth go hand in hand with financial stability. We can’t live on a negative or subsistence income, with no emergency fund, compounding more and more debt, and also compounding the stress and in-authenticity that goes along with that lifestyle.
Add to that the fact that women tend to be less financially literate than men. Well, we do tend to make the daily spending decisions for our families, but we also earn less compared to men and have interrupted careers due to having and raising babies. We also tend to work in more casual and part-time jobs that see us ignoring or under-paying superannuation, yet having to make those meagre savings stretch because we live longer! Famed Aussie financial advisor and Chairman of the Financial Literacy Foundation Advisory Board, Paul Clitheroe, wrote in his 2008 report Financial Literacy - Women Understanding Money that while women tend to be good at budgeting and saving, they lack confidence in their ability to manage money long term and plan for their retirement. I count myself in that category too. When my husband wants to talk financial planning my eyes glaze over and I hear blah, blah, blah. It is only through his persistence that I dare to blog about it now.
Yep, money is a biggie, and I’ve blogged about it before. I’ve come a long way and we now live very nearly debt-free and there is real peace of mind in knowing that no matter how bad the economy gets, we have a roof over our head and a means of sustaining our family that, excluding natural disaster, cannot easily be disrupted.
For us, it all began at the age of twenty-one, with a one-week money diary that helped us identify just how much we were spending on takeaway food, alcohol and entertainment! Once we identified the imbalances and discerned luxury from necessity, it became possible to pare back, reallocate our money and define some goals.
We knew what we wanted. We were about to get married and even though my dad was old fashioned enough to want to pay for the wedding, we had to finance our own honeymoon and start saving for a place of our own. In 1992, with a combined 38K income, a 150K mortgage for a dilapidated fixer-upper in inner-city Brisbane was well beyond our means - yet doing the sums now, if we’d found a way to stretch, we’d have made a very tidy profit indeed! But we were risk-averse, and so was the Department of Housing, our first lender at a whopping 13% interest!
We settled on a run-down 110K flat on the wrong side of the tracks that wasn’t stretching our purse too much. That price looks quite ridiculous now that the area has boomed into a yuppie cafe district, but the 100K flat still isn’t worth much more than we paid for it. It has been a fabulous renter though, and a financial stepping stone, since any asset, in the eyes of the bank, renders us credit-worthy.
Within six years of that first budget we had achieved our goals: to buy some motorbikes (clearly luxury items), have a decent honeymoon (for a whole $2000 - it was a lavish expense then but the motorbikes were part of the adventure), pay off a sizeable chunk of the mortgage, and to travel overseas. It was time to reassess and set some new goals.
We decided it was time to tenant the flat and find a humble 140K suburban home where we could start a family. Suddenly things like life insurance, wills and appointing a power of attorney took priority, along with obtaining adequate household and car insurance, maintaining car payments and superannuation - not to mention all the usual bills and living expenses. For some time it felt like we were standing in the flow of a waterfall with a sieve, trying to catch our entitlement of water before it cascaded over the cliff. The budget was tight, but fortunately we’d beaten our bad habits to keep a tight reign on the spending. All our debts were manageable and paying them got us slowly, slowly, closer to our goals. They are Americanisms but these days people talk about snowballing and snowflaking as a means of managing their debts. That’s how we did it and we haven’t looked back.
We’d never previously been worthy of the fantastic plastic but suddenly the bank was our friend and we used credit cards to streamline our finances. Putting all our living expenses onto a credit card made them easy to track and budget on a monthly basis. It also enabled us to reduce the number of transaction fees which the banks had introduced, and prevent over-use of the automatic teller machine and cheque book. There was also the added bonus of accruing mileage points on money we would be spending every month anyway. Nothing like a free holiday! Of course, the essential part was to pay the debt in total at the end of every month. This method worked really well for us, though it may not suit everyone. Naturally, the first step is to completely free yourself of credit card debt in the first place, but because we never let the debt accrue, we knew exactly how much we were spending.
So with tenants paying off the last of the mortgage on the flat for us, and by pouring every last cent we earned into our domestic mortgage payments, which could be redrawn if required, we began to make significant headway. We utilised automated bank payments as much as possible so that utility bills could never be forgotten and damage our credit rating. In 2005 when we accepted my husband’s overseas job transfer and sold our house, which in four years had appreciated more than twice the purchase value, our debts were comparatively small and the bulk of the revenue was ours to turn over to a block of land where we dreamed about building our future family home. Selling a few well-timed investments allowed us to go ahead and build that dream home and pay out the mortgage in full, in next to record time.
So here we are today, nearly forty and happily debt-free - or very nearly. We still have car payments and we have a negatively geared investment, neither of which impact on the security of our home and both liquid enough to off-load in a hurry if our situation should suddenly change for the worst. But we have achieved the stage where we have enough and need nothing more to live well. We don’t have the very best or latest of everything (as much as I’d love to buy that Dyson!) but what we do have serves our purposes perfectly, without want, or envy, or excessive waste. We still put money towards investments, and the kids’ trust funds, because it’s wise to have a contingency plan. And I no longer shut down and tune out about money. Which is why I’m prepared to bare all in a blog, in the name of HERevolution.
June 28th, 2009 - Posted in gratitude, partnership, consumerism, sustainability, beliefs, wisdom, money, self-care | |
4 Responses to ' Debt-free (very nearly) '
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on June 28th, 2009 at 11:53 pm
Brilliantly written - love it!
on June 29th, 2009 at 3:09 am
OH my goodness you are so so so so organized. I’m so embarrassed to say I’m still in the glazed over stage. Eye opener.
on June 29th, 2009 at 9:57 am
Glad you liked it! Hang in there Deb, it does get better.
on July 3rd, 2009 at 1:23 pm
I admire your ability to stick with the plan. I admire your having a plan in the first place! A fascinating read. Thank you.