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 Post subject: Demolish that debt
PostPosted: Wed Sep 07, 2011 11:46 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
On the 10th of August I sat down after spending some time reading GRS, the GRS forums and joining the forums themselves and worked out our current financial position.

These are tentative figures, i.e. the house value is what we paid for it in 2008, so whatever value it would have increased by was absorbed by the GFC and local prices stagnating, the car is fully owned, in good nick and an approximate, as you never really find out what they’re worth until you sell them, though redbook comes in handy for rough evaluations. The Other is a small amount for hobby items that hold their value, and Super is an approximate, as it is always growing and our statements aren’t regular enough for me to remember the exact amount. There’s also what’s in the house, in the way of furniture and other odds and sods, but they’re not really an asset in my mind.

Assets:
House: $575,000
Car: $15,000
Other: $5000
Super: $90,000
Subtotal: $685,000

Much more accurate figures on the Debts, gotta love financial institutions ability to let you know how exactly much you’re in debt to them. The house, is our second, we sold the first as we’d outgrown it, thus the loan amount is below the price we paid for the second house, due to being in front on payments for the first one and because we sold it for a profit. The Gold Visa is for my wife’s work, for when she can’t use her work supplied and paid for Diners, plus about $300 of monthly bills that are automatically charged to it. The Once credit card is a 24 months interest free credit card that paid for our replacement solar hot water system when the old one died. The CUA personal loan was for house repairs that needed to be done before our Insurance company would fix some storm damage. The GE finance is a 24 months interest free loan for our couch.

Debts:
House Loan: $522,413.48 of $535,198.16, variable rate, currently 7.15% interest, $2000/fortnight
Gold Visa: $4861.24 of $5000, 19.5% interest
Once Credit Card: $5184.68 of $8,200, 0% interest, $150/fortnight
CUA Personal Loan: $28,698.42 of $30,120, 10.5% interest, $251.82/fortnight
GE Finance: $1255.00 of $3800, 0% interest, $50/week
Subtotal: $562,412.83

My wife and I are paid ~$11,500 monthly and our current outgoings, according to our August budget are ~ $11,000.

As I mentioned in my post in the Introduce Yourself Here thread, we have applied a debt snowball and it’s working well for us. I took the extra $500 that was going into the CUA Personal Loan and stuck it on the GE Finance debt and it will be all paid off in this months pay, knocking 5 months of weekly payments off. That will then be rolled into the GE Finance (saving 10 months of payments), then the CUA Personal Loan is next (saving 7 months).


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 Post subject: Re: Demolish that debt
PostPosted: Thu Sep 08, 2011 7:33 am 

Joined: Thu Jun 09, 2011 12:13 pm
Posts: 13
Sorry for being so blunt but I have quite a few questions / statements.

First the house: you said you owned one previously and were ahead on the payments and sold for a profit so why did you still end up taking on a mortgage for 535k out of the 575k value at the time for the house, thats a very high ratio mortgage considering your income of 11.5k monthly?

Secondly you carry a very high ratio of debt on all of your credit cards, which I should mention must be killing your credit score. Although I assume you already have most of the major loans already in place so you don't have any more in the foreseeable future.

Third, what other expenses do you have monthly besides the mortgage? How did you manage to rake up so much revoling debt on the credit cards with the large income?

Fourth, What is "Super" under your assets is this a savings / investment account because I highly doubt its making more interest that your gold visa or the personal line of credit. You should look at eliminating those for a very quick and high interest return on your money.

Fifth, you should be setting so much aside monthly for your housing repair fund, this would have helped with the amount of that personal line of credit. Also please set up and emergency fund of 3-6months expenses. It seems that things are already super tight as they are and that losing one of the incomes would destroy you financially.

Chris


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 Post subject: Re: Demolish that debt
PostPosted: Thu Sep 08, 2011 5:08 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
chriscabob wrote:
Sorry for being so blunt but I have quite a few questions / statements.


No dramas with being blunt, it gets you the answers you’re looking for. Also I’m a blunt person myself, so I appreciate it.

Also note my location, some things will be different from the majority of what you see here on GRS due to me being located in Australia. That’s why our interest rates are higher and I will refer to things a little bit differently, but I will try and compensate as best I can.

chriscabob wrote:
First the house: you said you owned one previously and were ahead on the payments and sold for a profit so why did you still end up taking on a mortgage for 535k out of the 575k value at the time for the house, thats a very high ratio mortgage considering your income of 11.5k monthly?


House 1: Purchased for $349,000 in 2006, mortgage after deposit, first home buyers grant, stamp duty and related costs was $346,475. When we sold the house in 2008 for $417,000, the outstanding mortgage was $317, 934.45. So we’d paid down quite a lot of it in the first two years.

House 2: Purchased for $575,000 in 2008, we extended our mortgage by an extra $210,808.50 to pay for it. There were a couple of rebates in there for us that were due to us using the same agent to buy House 2 that we used to sell House 1. Also we paid off whatever outstanding debts we had at the time with some of the profit from House 1.

chriscabob wrote:
Secondly you carry a very high ratio of debt on all of your credit cards, which I should mention must be killing your credit score. Although I assume you already have most of the major loans already in place so you don't have any more in the foreseeable future.


In my experience, the credit score is not as big a deal in Australia as it appears to be in the US, from what I’ve read. And yes the CUA Personal loan is there to prevent us loading up our Gold Credit Card. We see the Once Credit card as an interest free loan, same as the GE Finance. Both of them will be paid off before their 24 months interest free period is due to finish, and before the interest rate that would be applied to the amount borrowed comes into effect.

chriscabob wrote:
Third, what other expenses do you have monthly besides the mortgage? How did you manage to rake up so much revoling debt on the credit cards with the large income?


The usual; groceries, fuel, insurances, medical, phone/s, power, rates, pets, water, internet. Was planning on breaking down our budget into specifics in a future post. I did a quick check online and Brisbane, where I live, has the equivalent cost of living as Los Angeles, if that helps put it into perspective.

We racked up the debt on the Gold Credit Card due to medical issues, my wife just went through some unexpected surgery and after health insurance and Medicare coverage, it still sucked us dry. Every other debt was explained in the first post, some not awesome reasons i.e. GE Finance for the couch, but with the 24 months interest free we see it as lay by with the goods in our house. It’s an attitude we’re working on changing. As for the large income, it’s been growing, as they do. When we bought House 1, we were on a combined income of ~$110,000. My wife has since graduated with an MBA, changed jobs and is now bringing in a lot more, so our combined income now is ~ $210,000, but that get’s slaughtered by our Pay As You Go (PAYG) tax rate.

chriscabob wrote:
Fourth, What is "Super" under your assets is this a savings / investment account because I highly doubt its making more interest that your gold visa or the personal line of credit. You should look at eliminating those for a very quick and high interest return on your money.


Super is our Superannuation, I believe the equivalent would be the 401k in the US. It is government mandated 9% of our wage that the employer has to pay to ensure that I don’t become a burden on future generations. I.e. if I earned $50K a year, I’d get to take home the $50k, minus PAYG tax, and the employer would have to stick $4500 (9% of the $50K I earn) into my Super account ever year. We generally can’t draw on our Super until we hit retirement age, and I believe that’s changed recently from 65 to 67 years, so a long way off.

chriscabob wrote:
Fifth, you should be setting so much aside monthly for your housing repair fund, this would have helped with the amount of that personal line of credit. Also please set up and emergency fund of 3-6months expenses. It seems that things are already super tight as they are and that losing one of the incomes would destroy you financially.


Since starting this revision of our finances on the 10th of August, I have instigated the start of an Emergency Fund, taking the cash left over from filling the car up, and our groceries and sticking it into an ING account every Monday. It’s currently sitting on $130.98. That’ll eventually cap out at $2,000, base on most of our excesses for insurances are in the $400-500 range, so if a couple pop up at once, we’re covered. Then I will be working on the 3 month out of work fund.

Hope that helps clarify things for you.


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 Post subject: Re: Demolish that debt
PostPosted: Sun Sep 11, 2011 5:37 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
Earlier I mentioned I was going to put up our Budget.

Here’s how the breakdown looks on a weekly, fortnightly, monthly, quarterly and annual basis.

Image

Here is our planned outgoings for the month of September, based on pay days being monthly for the both of us, mine on the 15th and hers on the 16th.

We luck out this month in having 3 house payments. One of those twice yearly occurrences that reduces our spending money for the month.

Image


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 Post subject: Re: Demolish that debt
PostPosted: Tue Sep 13, 2011 11:46 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
Managed to find the contact and login details for my Super account, and it is an extra $4823.36 higher than I thought it was. Nice. Just need to do the same for my wife.
We did our taxes last month for the last three years. We had been lazy. :oops: Because I had changed jobs in that time I ended up owing $187 due to an increase in pay and my payout from the old job being taxed at a lower rate than it should have.

My wife on the other hand appears to have paid off her PELS debt (government student loan for post graduate studies, in her case the MBA) and the payout of extra money that had been deducted at the same time as her PAYG was more than required to finalise the debt, so she received a handy recompense of over $7k. We dropped it straight into the home loan on the same day it appeared in our account to keep it out of trouble and to work out how it could me more wisely distributed amongst our debts.

Just waiting on the paperwork from the Tax Office to come through and confirm our suspicions as to the PELS debt being paid off. We can then resubmit PAYG paperwork and have the PELS deduction no longer removed from her PAYG. That’ll mean some more cash available on a monthly basis, also the extra cash that had been paid off so far this financial year will turn up in next years tax return.


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 Post subject: Re: Demolish that debt
PostPosted: Wed Sep 14, 2011 6:25 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
So it’s payday today and after some quick manual transfers the debts are looking like this:

House Loan: $516,319.07
Gold Credit Card: $3,803.29
Once Credit Card: $4,739.63
CUA personal Loan: $28,257.29
GE Finance: $5

That’s a $9,138.55 reduction in debt in just over a month, that Tax payout made a big dent in it.

Asset wise they’re looking like this:

House: $575,000
Car: $15,000
Other: $5,000
Super: $94,823.26
Cash: $175.03

That’s an increase of $4,998.39 in just over a month, mainly due to clarifying the amount of my Super.

I do have a question though, how often would you worry about valuing something like your house? We’re coming up on 3 years in this house, and the value I use is the amount we paid for it. We’re never really going to know what it is worth until we sell it, and that’s not likely to occur. So what do you do, just increase the value by the amount the land valuation goes up by each year? Our land valuation, which determines our local council rates, has only gone up once since we bought the place, and that’s with three valuations. So if I included that then we’d be at $600,000 for the house.

Alternatively our Net Worth has risen $14,136.94

The GE Finance will be paid off next week, after which the account will be closed and any excess from the automatic payments will be refunded.

The day after the next Once Credit Card automatic payment goes through I’ll be bumping up the amount to $250 from the current $150, and the next month that’ll get bumped up to $500 a fortnight. Unfortunately manual payments to that debt incur a $1.95 processing fee per transaction, so Direct Debit is the only way to go without shooting myself in the foot with excess fees. And I need to juggle the increments so that I don’t short myself this month.

Aiming for $2,000 in Cash, as our EF. Once that’s in place we will be building towards a house/car maintenance fund of about $5,000, that’s more than enough for any car issues, and a good step towards any house issues.


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 Post subject: Re: Demolish that debt
PostPosted: Thu Sep 15, 2011 3:23 pm 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
I don't value my house because I am not selling it, BUT you could look in the newspaper and see if there are comparable houses for sale, and see how much they are asking.

What is your $5000 'other' account? Maybe you can use that to pay your debts, since you have an emergency fund also. Or use the other as your emergency, and build your cash.


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 Post subject: Re: Demolish that debt
PostPosted: Thu Sep 15, 2011 4:24 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
peachy wrote:
I don't value my house because I am not selling it, BUT you could look in the newspaper and see if there are comparable houses for sale, and see how much they are asking.


Yeah, we've been keeping an eye on that, and it's pretty much the same value as we bought it, due to the GFC and associated property crash. In fact I read in our local paper the other day that houses in our suburb had dropped ~12% in the last year. IIRC it had gone up the years prior to that, so overall it's balanced out.

peachy wrote:
What is your $5000 'other' account? Maybe you can use that to pay your debts, since you have an emergency fund also. Or use the other as your emergency, and build your cash.


As mentioned in the first post, it's hobby items that hold value. If they were to be sold, we'd get about that much cash but then we'd not be able to do our hobby's. So really, we look at them as assets, just nil growth ones.


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 Post subject: Re: Demolish that debt
PostPosted: Tue Sep 20, 2011 3:31 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
As of today the debt to GE Finance has been demolished. :) That saved 5 months of weekly payments.

Closing out the account tomorrow to ensure payment has gone through and that the account will be in credit.

I’ll also be contacting the Once Credit Card company tomorrow and asking them to increase their repayments on that debt to $250 for next fortnight (a payment of $150 is due out today). That way the cash from the GE debt will be snowballed into the Once debt. And then after that fortnightly payment of $250 I’ll be increasing that repayment again to $500 per fortnight. I’m a bit pissed that the company charges $1.95 per non direct debit transaction for repayments, would have been easier to keep it at $150 a fortnight and then drop the extra $700 in once a month, would have given me extra control over what went out when.

Currently looking at the budget for next month at the moment and adding in some automatic withdrawals to ING Savings accounts for both Car and House Maintenance. Tossing up whether to start them or throw the extra cash at the debt. It’s that situation where it’d be nice to have the cash paid off the debts quicker vs actually having money put away for events you know are coming up. Dilemmas, dilemmas.

Paying extra off the Once Debt will reduce a debt from originally finishing in December 2012, that’s currently going to finish in Feb 2012 due to snowballing to finishing in December 2011 if we throw the extra maintenance cash at it.


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 Post subject: Re: Demolish that debt
PostPosted: Wed Sep 21, 2011 8:38 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
And confirmation has come through from my wife that the GE account (which was in her name) has been closed and we're getting a refund cheque of $139.55. More than I thought, so I'm guessing someone's maths is wrong somewhere, but seeing as it's in my favour, I'm not going to be digging too hard to find out where.

Also have been in contact with the Once CC company and have increased the next direct deposit payment for that to be $250.

It's all going roughly to plan.

Still need to determine whether saving some cash for car/house maintenace is a good idea vs paying down the debt quicker. It's an extra $500 a month. Save? Pay of debt? your thoughts?


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 Post subject: Re: Demolish that debt
PostPosted: Wed Oct 05, 2011 7:28 am 

Joined: Mon Jan 11, 2010 9:06 am
Posts: 160
Location: Texas
geoff_tewierik wrote:
Still need to determine whether saving some cash for car/house maintenace is a good idea vs paying down the debt quicker. It's an extra $500 a month. Save? Pay of debt? your thoughts?



Okay - came over here to look more directly at your figures - advice is roughly the same - use the $500/mo to get your EF up to your initial $2000 target. Then throw it towards debt.


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 Post subject: Re: Demolish that debt
PostPosted: Wed Oct 05, 2011 7:03 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
So, today is working out to be a good day.

The increased $250 payment onto the Once CC came out as scheduled yesterday. I’ve spoken to Once today and increased the next payment, due on the 19th, to be $500 on a fortnightly basis. That’ll incorporate the extra $500 per month we were putting into the GE Finance debt and knock that debt back from being paid off in December 2012 to February 2012.

The cheque from GE Finance for over payments came in the mail yesterday and has been cashed at the bank today. So that’s finalized that part of our life.

The Insurance claim we had in from October last year for water damage to the house and contents has been paid out by the Insurance company today. So we now have money to replace the damaged bookcases and mattresses affected by the water. With some judicious shopping we should be able to save some of this payment.

And thanks to the feedback I received in another thread, and Panda’s post above, I will be setting up a maintenance fund for the house and car instead of putting an extra $500 towards our debts. By having the fund we are less likely to incur more debt on our Gold CC, allowing it to be paid off a lot quicker.


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 Post subject: Re: Demolish that debt
PostPosted: Sat Oct 15, 2011 10:52 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
Pay day has come around again.

I'm providing numbers based on end of month, prior to payday, as I believe it gives a better picture of where we are compared to what I did last month, which was get paid, make all the required transfers and then report the balances.

House Loan: $515,888.81
Gold Credit Card: $4,409.34
Once Credit Card: $4,344.58
CUA personal Loan: $28,056.39
GE Finance: $0

That’s a $425.16 reduction in debt in the past month. And a paid off debt :)

Asset wise, they’re looking like this:

House: $575,000
Car: $15,000
Other: $5,000
Super: $94,823.26
Cash: $263.56

That’s an increase of $88.53 in the past month, and that's just in the spare cash I've been saving from the designated budget amount of fuel and food.

We have located the information regarding Nicole's Super, and found the information about the two Super accounts from her past jobs. When we contacted her current Super provider and notified them of a change of address, from 3 years ago (she's real good at keeping on top of these things :D), we also asked for roll over forms, so we can consolidate all three of her Super accounts into the one account. We've tried in the past to get the older accounts to roll their funds into the new account, including sending in the correct forms, but they've not done what we have asked. Once this is done, a rough estimation would put the combined total at about $55K. Will update our Super asset amount when that's all done and confirmed.

With the Once CC repayments boosted (and the first of those payments to come out this coming Wednesday), money being put away for car/house maintenance and some for Christmas as well, a clearer view of our monthly budget is emerging. We've also picked up on occasional things that need to be in our budget as well.

We've bought replacement bookcases and mattress with the insurance money. With changes to room layout and requirements, we've broken even on that cash. With just the outstanding excess of $400 to be paid, sometime next week, when I make the call to the insurance company. That should then finish that saga.


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 Post subject: Re: Demolish that debt
PostPosted: Sun Oct 16, 2011 5:26 am 

Joined: Mon Feb 04, 2008 7:35 am
Posts: 1148
Location: Maryland
I noticed that your Gold balance went up by $600. Is that for the mattress that will be reimbursed?


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 Post subject: Re: Demolish that debt
PostPosted: Sun Oct 16, 2011 4:46 pm 

Joined: Mon Aug 08, 2011 9:13 pm
Posts: 168
Location: Brisbane, Australia
Hi peachy.

The previous monthly total for the Gold CC was after it had had its monthly $1000 paid off it. This time around the value given is before the monthly $1000 is paid off it. So if like was compared to like, it'd be $4800 last month and $4400 this month. So we've paid down $400 in actual debt on it in the last month, and kept it off.

There are ~$300 in regular bill payments that go onto the Gold CC. So that leaves ~$300 in items that went onto the card that weren't caught in our budget last month.

$105 - Sunday breakfast for 5 people that we paid for.
$12.97 - Nicole's iTunes purchases.
$41.80 - Business meeting.
$151.40 – Interest

Will be working with Nicole’s weekly fun money to compensate for iTunes purchases that go onto the Gold CC.

We paid cash for the deposit for the mattress. Well actually, as we had the cash payout from the insurance company, we put it on the CC to get frequent flier points and transferred the cash back onto it that night.

As for the Gold CC debt, it is slowly being whittled down. While not the most ideal method of dealing with a CC debt, i.e. pay it all off in one hit, we're finding it's the best way for us to deal with it. My rough Excel math indicates that if we keep knocking it down the way we are, it'll be paid off entirely by March 2012. Then it’ll be a matter of making a small monthly payment to it, to keep it in front of the bills that are charged to it.


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