Most of us have made an unwise financial decision or two in our lives. Money was not something that was ever really discussed in my house when I was growing up other than being told we didn’t have any. So when I first started working and needed furniture for my first flat I got a credit card. I soon discovered that I had no hope of paying it off and had to extend a personal loan to pay for it. That was a harsh lesson on the realities of managing my finances.
When Mr B and I first got together (almost 22 years ago now) we were both in debt – lot’s of debt. I was recently divorced and had come out of that with my furniture which I had owned prior to that relationship, my clothes, a car which I owed $24,000 on and $12,000 in cash. Mr B was in a similar position. He owned 3 cars, one of which he had spent a lot of money on and 2 jet skis. The total of his loans were in the vicinity of $32,000 and were with finance companies which meant much higher interest rates.
We knew we had to do something and fast if we ever had any hope of getting ahead. So with my money I firstly paid off my credit card, a mere $2000 in those days and paid the other $10,000 off the car loan. We figured we only needed one car and as mine was the newest model and also run on LPG we decided to keep that one.
Two of Mr B’s car’s were older models and we sold them for about $6000 and paid most of it off the loans. The 3rd car we were able to sell for the pay out figure on the loan – about $16,000 from memory. More debt gone. We then hunted around for a cheaper interest rate and combined our remaining debt into one loan which made the repayments more manageable. Consolidating our debt, in this case worked for us.
We realised after selling all the cars that we really needed a second vehicle so we took out a second smaller loan and bought a motor bike. This loan was over 2 years but we paid it off in one. Shortly after paying off the loan on the motor bike we found out I was pregnant. I had good job security and also good maternity leave arrangements – 18 weeks at full pay or you could take it at half pay to have income for a longer period of time. But we were still only renting a house and towards the end of that year our real estate agent told us that the house was being put up for sale. My first thought was ‘I’m not moving house when I’m 7 months pregnant.’
By this time I was fairly disenchanted with my job so I decided to resign. I had been in the same job (law enforcement if you haven’t read 5 Facts About Me) for 14 years so I had long service leave accrued and plenty of superannuation. I was also in a position where I could withdraw most of my superannuation provided I left a base amount in the account. We did this and I walked away with about $55,000. This gave us enough money to pay a 20% deposit which meant we didn’t have the extra expense of mortgage insurance. Our first home together cost us $110,000 – one of the benefits of living in a small country town in the late 1990’s! We also had enough money left over to pay out the car loan and shout ourselves a new lounge and a TV/stereo cabinet – mainly because our stereo sat on the floor and we didn’t think that would be a good idea with a baby in the house!
Our first house officially became ours the day after we bought Miss M home from hospital in March 1999. We stayed in that house almost 6 years to the day. Over the course of those 6 years we added heating and cooling, cladded the exterior of the house as the timber was in poor condition, fenced in a section of the backyard for the kids, turned the small single car garage into a home office and built a large 6 bay shed. This cost us a total of about $35,000.
When we decided to sell the house in 2005 and move to Queensland the real estate agent suggested setting the price at $240,000 but I was sure we could get more than that so I insisted setting the price at $280,000 and we ended up selling for $258,000 which gave us an excellent deposit on the house we bought in Queensland.
We now owe under $350,000 for that house. We borrowed against the house a couple of times to make some improvements to the property, namely the garden as it was a shambles. We subsequently bought an investment property in 2011 as well. In 2012 we made the decision to move out of our family home and it too became an investment property. We made this move in order to downsize to something more manageable and also because we were no longer in love with the neighbourhood in which we lived.
We now live in a two story townhouse which we rent. Part of our reasoning behind this was with Mr B away so much the upkeep of the gardens etc was just to much for us and it seemed as though all our spare time was being spent in the garden or cleaning the house. Now if anything goes wrong we just phone our real estate agent.
We have excellent tenants in both our houses and the rent covers the house repayments for the time being, thanks to the low interest rates.
Just over 12 months ago we also bought a new car – our first one ever. This was a need as well as a want. We needed something to tow our camper trailer and also a vehicle that was roomy enough for all of us to travel comfortably in.
We also still have a credit card which, unhappily has been hovering very close to its limit for the past couple of months despite us working really hard to reduce it down. In all honesty though I must say we live very well – we want for nothing and neither do our kids. But we could be doing a better job of managing our finances.
So you can see we have a combination of good debt – the houses and bad debt – the credit card and the car. I say that the car is bad debt because we will never get our money back on it, whereas we should make money on the houses when we choose to sell them.
As we move closer to our ‘life after kids’ plan we are giving serious consideration to selling one if not both houses and investing the money. Our plan is to buy a caravan and travel around Australia for an extended period of time, working when we can so we know we will need some money behind us to set up a van the way we want to. All this is still at least 3 years away, but we do want to have a plan in place so as we are not making decisions at the last minute.
****All information contained in this post is of a general nature and not intended to be taken as financial planning advice. Financial advice should only be sort from persons qualified and licenced to give such advice****