Troublesome tooth causing pain for my pocket

When I was in debt I found that there was always some big expense that would crop up when I could least afford it. I used to feel like this only happened to people who were struggling financially – because some of the time, it seemed like everything was working against me. However, I’ve learnt this is not the case after a large portion of my tooth broke off in August, the night before we were due to fly to Auckland.

I managed to get an appointment the next morning after my dentist had a cancellation, $200 and a rebuild of my tooth with a filling, and I was on my way. Two weeks of severe toothache later I had to go back to the dentist to have said filling removed. It was replaced with a temporary one, while we waited to see if the tooth would settle down or if I needed a root canal (my third one!) The tooth couldn’t make up its mind so gave me pain on some days, then was pain-free on others. The dentist sent me home for another 10 days to see if it would settle – it didn’t and once again I returned to the dentist in agony.

The temporary filling was removed, and the first stage of a root canal was done. However, the canal is too narrow and the dentist couldn’t get all of the nerve out of the tooth so the root canal was stopped and the tooth covered with another temporary filling. While it seems like things haven’t really progressed at all, it’s gone from fixing a broken tooth, to whether or not I need a filling or a root canal, to I need a root canal, to the root canal may not work in which case the tooth will have to be removed.

The verdict will come on Friday at what will be my fifth dentist appointment since August for that one tooth! I’ve had numerous injections, a couple of X-rays, a filling, two temporary fillings, a lot of pain and a partial root canal but I’ve only paid $200 to date. I won’t know how much the total bill is until the tooth either comes out or the root canal is finished, but I’m certainly not looking forward to it! Luckily my dentist is through Lumino, who offer payment options, otherwise with the absence of an emergency account, I’d have been in trouble!

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The 10 biggest money mistakes

An article on stuff.co.nz today by Nicole Pedersen-McKinnon states the top 10 money mistakes are:

1. Letting time-poor mean a poor time

You will be able to save on every bill and every premium – unless you signed up for the product yesterday. Companies rely on us to be too busy to chase the best deal … but they’ll happily offer a new customer far better terms. Even if you just get a better rate on your mortgage, you’ll secure in a couple of days what it would take the average person a year to earn. Move a $300,000 loan from the average to the best deal to keep $56,000 in interest.

2. Using credit to spend more than you earn

This short-sighted behaviour probably has the greatest potential to sabotage your future. To be a financial success, you don’t need to be particularly clued up, but you can’t be clueless, either.

3. Having no emergency fund

You should have an emergency stash of three months’ salary, or – safer still – six months. This will give you a buffer if there’s an unexpected cost impost, or half a year’s grace before you get worried about a fall in income.

4. Not teaming up

There’s no point doing your utmost to make savings if your spouse or partner increases their consumption to absorb the extra cash. The pursuit of prosperity needs to be a partnership.

5. Falling for ‘generous’ banking offers

The banks set traps left, right and centre to try to get you paying more. A “thoughtful offer” to reduce your repayments if you are ahead on your mortgage is designed to recoup the lender’s lost interest. An enticing introductory or honeymoon rate will come with a sky-high revert rate. Ever-so-reasonable minimum monthly repayments on your credit card may well keep you in debt and paying interest forever.

6. Making matters worse with debt consolidation

Consolidating your debts – rolling all your debts into your lower-interest mortgage – has become almost a mantra when it comes to debt reduction. But let’s say you have personal debt of $9000 at a rate of 12 per cent. If you stayed the course, you would end up paying $1777 in interest. Extend your home loan, though, and you would ultimately pay an enormous $11,840 in interest. Instead of paying off the loan more quickly at a higher rate, you will pay it off at a lower rate over 25 years. You need to maintain your payments at the level required by a personal loan for debt consolidation to work for, not against, you.

7. Indulging in ‘retail therapy’

Like eating, there are often psychological reasons behind excessive shopping. If you can recognise any personal factors that drive you to flash the plastic, you are far more likely to be able to stop doing it. Far better to address the issue that necessitates the therapy than opt for the expensive and temporary Band-Aid that is shopping.

8. Failing to think defensively

Smart money management is not simply about building wealth but protecting what you’ve already amassed. What would become of your family if – perish the thought – you died? Life insurance is vital to cover debts, living expenses and more. Also, bear in mind that your ability to earn money is actually your most valuable asset, so income-protection insurance is a must, too.

9. Buying a car with credit

This is among the worst uses of “very bloody bad debt” – my term for non-mortgage, non-tax-effective debt. A car is a depreciating asset – if you buy a $20,000 vehicle with a three-year personal loan at 12 per cent interest and the car loses 12 per cent in value in each of those years, you will have forked out $23,914 by the time you have paid it off but the car will be worth only $14,069. And the total cost/residual value situation is even worse if you use very bloody bad debt to fund a holiday – all you’ll have to show for your debt is photos.

10. Believing the hot tip

We all want to believe there is a short cut to building wealth. And if you get in just before a boom, you certainly can make a lot of money quickly (assuming, that is, that you sell before any bust). But ordinarily, wealth accumulation is a slow, steady process. The easiest way to recognise either a dodgy financial product or a higher-risk financial scheme is a headline rate of return above what you can get from an online savings account. If it seems too good to be true, it is probably a scam.

I’d like to add one mistake, which I made myself, that helped me get into as much debt as I did.

11. Turning a blind eye

If you can’t see the bills, they’re not there. If you don’t answer the phone when the bill places ring, they’ll forget about your overdue payments. If you’re not home when the debt collector comes knocking, he won’t come back. This was the mindset I had, the things I kept telling myself when I was in way over my head and felt like I had no options. The reality is, avoiding the bill places, pretending you have less debt than you actually do, is the worst thing you can do. Once I laid it all out on the table, added up exactly what I owed and to who and started making those difficult phone calls to admit my finances were so bad that I was up sh** creek without a paddle OR a canoe, things started to get easier.

This wasn’t because the debts were wiped or I was gifted money, it was because once the bill places were made aware of my situation, extensions or payment options were put in place until I got out of the red, when I could afford to pay more on my debts. The bill places took the pressure off, they called less, there were no more letters in the mailbox with that intimidating fluorescent “overdue” sticker on them. Instead there were letters detailing the arrangements we had put in place along with a gentle reminder of the conditions of that arrangement.

The biggest thing I will stress to those who find themseles with a mountain of debt and no way to get the other side, is to be honest. Be honest with the bill places, be honest with those close to you but most importantly be honest with yourself. The debt won’t go away by itself, you need to make a conscious decision to address the situation then take the necessary steps to get out of it.

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Money Week 2013 – make a date with your money

Money Week logo

It’s mid-way through Money Week (1-7 September) so if you’re interested in getting your personal finances in check, head along to one of the many free events throughout the country or phone the financial advice line, run by the Institute of Financial Advisors, to make an appointment for an hour of free financial advice. This kind of advice usually comes with a price tag so if you have some burning questions around debt, Kiwisaver, insurance, budgeting or anything financial, get in touch with these guys!

Stuff.co.nz has a great collection of money-related articles this week, including a live chat from 12-1pm each day.

If you miss out on the opportunities provided during Money Week, Sorted.org.nz gives you access to free financial information, planners and calculators year-round that can help get you and your finances – well – sorted!

There’s plenty of resources out there, so if you’re struggling financially, feel burdened with dumb debt, want to start a budget or are saving for the future, take the first step and take advantage of some of these free resources today!

Disclaimer: This sounds a bit like an advertisement but I’m not being paid, I’m just passionate about helping others find their way to financial freedom!

 

 

 

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Breaking the silence!

So, I was going to stop my blog altogether as I have reached my intended goal but to be honest I’ve been feeling a little lost without it!

I’m out of debt, aside from my student loan, which is being paid off at a slow but steady rate of about $130 a fortnight through tax. So now my focus has shifted from paying off debt to saving.

Firstly, an update on my emergency account progress – I had barely got started on saving in my emergency account when I had a dental emergency and had to use the money! The good news is I had the money so I could pay my dentist bill on the spot, and the bad news is I haven’t replaced the money or saved anymore in my emergency account since then!

I have a number of big ticket items I will need to pay for in the next 12 months to ten years and I want to be prepared so I get into as little debt as possible in the future. For this reason, I have decided to forfeit the emergency account (I realize this goes against everything I have said in previous posts), and instead build up my savings for those inevitable (but exciting) big ticket items. If an emergency does happen, then I will have savings I can use, albeit with a different intended purpose. The big ticket items I’m saving for are as follows:

A new car: And by “new” I mean “used” but new for me. I’ve had my trusty car for seven years and now the odometer has ticked past the 250,000 mark, it’s starting to get a little worse for wear. There are numerous dents and a white panel on the outside (my car is silver), the interior has the fabric ripped on the driver’s seat, the middle console is damaged as is the driver’s door, the interior lights and clock don’t work, the air conditioning doesn’t work (which is not really an issue living in Invercargill) and I can’t unlock my car from the driver’s side. (This proved to be a problem when I got out of my car, locked and shut the driver’s door, only to realize my skirt was trapped in the door! The middle of town is not the most appropriate place to remove your skirt so I had to wave down an extremely amused passer-by who kindly unlocked my passenger door for me, but not before telling everyone else who walked by!) I can live with all these things, even the skirt incident; however, my car is getting increasingly more stubborn when it comes to starting, it’s chewing through the oil, the fan belt has started shrieking and it generally feels like it has less get up and go. This leads me to believe that one day it will refuse to go, leaving me without a car. I plan to continue driving my car and maintaining it with regular services and repairs where necessary but I need to be prepared for the day it gives up. For this reason, I have a savings account dedicated to saving for a new car.

New car!

Migrating north: As mentioned in previous blog posts, the BF and I are planning to move up north to be closer to family. This is still the plan, but when we move will depend on a number of factors including whether or not my contract is renewed at work, when the BF finishes his apprenticeship and whether or not we can secure jobs up north before we move. We have been slowly putting money away for the move for quite some time now and will continue to do so right up until we move so hopefully when the time comes we’ll have enough to pay for our transport costs to get there, pay bond, letting fee and rent in advance and furnish our new place.

House deposit: This is the big one! Most people would like to own their own house one day, and we’re no different, in fact we’d like to build our own house one day, but perhaps that will be our second house. Because we’re planning to settle in the North Island (Auckland is looking quite likely, despite some reluctance from yours truly), we’re going to require a fairly substantial deposit. When I was in so much debt I did some damage to my credit rating so I want to wait for that to clear (5-7 years apparently), but that’s not necessarily a bad thing as it gives us more time to save, meaning a larger deposit and less debt. The closer I get to 30, the more I realize I should have started saving for a house a long time ago; however, my debt situation meant that wasn’t possible, so I’m starting now – well, soon anyway.

First home

Travel fund: The BF and I would like to do the big overseas experience thing one day, but we’re in no hurry to do that, we’d prefer to focus on the marriage, house and kids deal and luckily we’re on the same page with this. However, there is an overseas trip planned for next year to Fiji for a wedding. This trip is looking like it will set us back a pretty penny but given the BF is Fijian, it’ll be well worth it to experience not only the tropical island escape but the cultural side of it too. We’ve been given plenty of notice so I’ve set up a savings account especially.

Tropical Island

My wedding! Yep that’s right, something very exciting happened during my absence from blogging – I got engaged! Now I have a super fancy, super sparkly accessory weighing down my left hand and I need to start planning a super fancy, super sparkly wedding! Ok so it probably won’t be an elaborate affair, more like frugal but fabulous. We’re starting to save for it now, even though we won’t get married for a couple of years because we don’t want to start our married life in debt. Plus I absolutely LOVE this wedding planning business; that said, there are a few aspects of it that I’m not looking forward to but I have at least a year to keep my head in the clouds and blissfully ignore the finer details. So if anyone has any handy hints on cutting wedding costs (and no we don’t want to elope or go to a registry office), please share!

Wedding!

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Bankruptcy – can you keep your KiwiSaver?

The courts will soon decide wether creditors have a right to the contents of KiwiSaver accounts when a person goes bankrupt.

The Government’s Insolvency & Trustee Service (ITS) has been successful in persuading trustees of many KiwiSaver schemes, to release the personal and employer contributions from the KiwiSaver accounts of bankrupts to pay their creditors.

Since KiwiSaver began, the Official Assignee (part of the ITS) has clawed $440,000 out of KiwiSaver accounts in the cases of 165 bankruptcies. But that has been largely a result of bankrupts aged 65 or over.

Most trustees do not believe that the KiwiSaver Act 2006 empowers them to release KiwiSaver funds to pay creditors of bankrupts, when the Official Assignee applies under the scheme’s hardship provisions.

Read the full story.

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Savings mode – emergency funds

Apologies for the silence on my blog, it’s taken a while to switch my mind from paying off debt mode to savings mode. Now that I’m debt free there are so many things I want to save for, purely so I can avoid getting into unnecessary debt in the future.

A new car is on the cards because I’ve had my car for almost 7 years and it has more than 250,000 on the clock so I’m not sure how much longer it will last. Having said that, I’m going to save for a new car, but not going to buy one until my current car decides to pack up – I’m hoping that’s later rather than sooner.

However, at the very top of my list is building up an emergency fund. There are a couple of reasons I have put this as the most important. Firstly, I have never had an emergency fund before, which gave me nothing to fall back on when things went wrong. If something broke and needed repairing or replacing (for example my car or a household appliance) or if an unexpected bill came my way (dentist, doctor etc), I had to rely on credit to get by resulting in even more debt. Secondly, I am on a 12 month contract at work to cover maternity leave and my contract ends mid-November. Anything could happen come November but I need to have some aside just in case I leave my job and can’t find work straight away.

I know an emergency fund may not be as important to everyone but it’s certainly a good thing to have. There is no set amount an emergency fund should have in it, so I will be making regular contributions to this fund (which I have in a separate online account) and I don’t really have a plan to stop making contributions. I’ve read plenty of finance books in the past 18 months and most of them suggested an emergency fund should have enough money to cover your bills and living expenses for three months, but even better if you have enough to cover six months.

I’m aiming for six months but I’m taking it one step at a time, putting away an amount each fortnight and not touching it unless there is an absolute emergency! I’ve started by working out how much I pay for rent, food, power, petrol, insurance, warrant of fitness and car registration each fortnight, then multiplying it to get a monthly, three-monthly and six-monthly amount. In a separate table I’ve done the same for what my expenses would be if – heaven forbid – the BF and I were to go our separate ways. It’s not exactly something I like to think about but I’m trying to be realistic so I’m covered for whatever comes my way.

In order to keep myself on track and stick to the regular savings (and so I don’t touch it), I am crossing out certain expenses once I have that much in my account. It’s a bit difficult to explain so here’s an example:

1 month 3 months 6 months
Rent 360 1080 2160
Power 228 684 1368
Insurance 50 150 300
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From the beginning

My blog is set up so the most recent posts are at the top, this makes it difficult for people who have recently come across my blog to see where I started and how I got to where I am today. For that reason I’ve put some links below for a few of my first posts that show where I started, a breakdown of my initial debt and an explanation of how I got into this situation.

My very first post on 10 June 2011 talks about why I started my blog after hitting my lowest point. The next post tells you exactly how much debt I was starting with, $49,058. $29,384 of that was my student loan and the rest was made up of consumer debt from various places. The next post gives a breakdown of my initial debt, the $19,675 I focused on paying off and documented through this blog. The last post gives an explanation of how I got into so much debt with nothing to show for it, basically a public admission of the financial mistakes I have made.

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