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My Financial Timeline
In my post: Eliminate Debt: Where do I start? I recommended doing a financial timeline, listing all the events that have lead up to your current financial position. Doing this exercise has helped me a lot so I have decided to share my financial timeline with my readers.
Teen years
I paid cash for what I wanted, earned money from doing markets with mum
Early 20's
Teen years
I paid cash for what I wanted, earned money from doing markets with mum
Early 20's
Had a good job, the first thing I did was save $1000 'running away from home money'. I always had this amount in my own account up until 7 years ago. I have been with my husband for nearly 30 years so I now know I won't ever want to 'run away'!
I bought a car and paid it off in 3 years.
Had my first credit card, paid off the balance most months in full.
Had a managed fund and savings.
Got married at 20. We saved 25% of our wage for a home deposit and bought our first home at 22.
So far so good, all very responsible! Ahead of all our friends financially.
Having babies! (here it comes!)
With the birth of baby no 1 I stopped work and we lived on one wage. This was harder than we expected! My husband took a second job to make ends meet.
After baby no 2 things got a bit more difficult. We sold the second car which was a big mistake! I was even more isolated and felt very depressed. I decided to go back to work but had no access to childminding. I spent money to try and 'keep up with the Joneses' so the credit cards went up.
We decided to move back to our home town where I could get work and had childminding with grandparents.
We decided to build a house. I would Never do this again! This really tipped the scales.
Interest rates when we started were 9%. We had to pay rent as well as the loan repayment while we were building. The building was delayed by bad weather and stretched out to over 12 months. The excavation works had problems and added another $10,000 in unplanned for expenses to the costs, so the loan was increased and a $3000 overdraft was added. By the time we moved in interest rates were 18% !!!
We were stressed and struggling!
Kids are expensive!
Nothing prepares you for the cost of children! Any other parent out there knows what I am talking about. They attended private school (not that expensive) until high school, Then one went to private (very expensive) & the other went to public ( almost free). The one that went to private just would not have survived public school.
Health problems.
About 2 years after moving into the house I started to have some health problems and had to reduce my workload. This added to the financial pressure a lot. We now had 2 credit cards and were struggling to pay them each month. The overdraft was constantly at it's limit. But we always paid extra on the mortgage, even just $20 every month.
After about 2 years a good career opportunity opened up for me full-time. I took it and the wages were great. We felt that we could now get on top of things. We took a family holiday that cost about $5000.
We got back from the holiday in early December. On Christmas Eve my husband was laid off from a job he had for 18 years. No payout, no redundancy.
We were shattered.
We should have pulled in our belts straight away but never having been unemployed we assumed that he would get work easily. He didn't. We worried a lot but we still spent as usual, increasing credit card limits. And getting a consolidation loan for the car that I 'needed' for my new job. (BIG mistake! Never consolidate.)
Six months later I became quite ill and had to leave my job. I couldn't work for the next four years. This was easily the most stressful time in our marriage. We were two people who had always worked in professional jobs, had great referees and good qualifications and we were about to lose our home. It still upsets me if I think about it.
For 6 months neither of us had a job. I cashed out my superannuation and ended up with a $9000 overpayment bill as a result (the super was only $12000!) so we then had an extra bill. We consolidated this also.
I went to the school (a church school) cap in hand to ask for fee relief and a reduction in our church donation. They refused to help us. I remember saying to the Principal " I'm about to lose my home, my children don't need to also lose their school and their friends".
"I'm sorry, we can't help you".
We struggled to pay the fees, a few times we got notices it was going to debt collection. But that was the day I stopped giving to a church. I give, but I will never give money to a church again.
Employed!
My husband got a job 6months later and we set about paying off our debts. We paid off the credit cards and cut them up, we paid off the overdraft. We were frugal.
Eventually I returned to study and we felt optimistic about the future again. My husband was injured in a work accident. He received workers comp payments and after several months off work went back. We thought that was the end of it. It was for about 5 years.
I graduated college, returned to work full time, and made plans for my own business.
Health knocks us sideways again.
The kids have reached university age by now. My husbands injury flared up and required more surgery. He had it and went back to work. My career was going well. Redundancy's were offered at my husbands workplace. we talked about it and decided to wait one more year so I could really get my business established first.
I planned a holiday to coincide with a conference and we had our first holiday away from home since the one mentioned earlier.
We came home from holidays and decided that with everything going so well we would use some our savings to do some work around the yard. We got the backhoes in, ripped up our backyard and some of the retaining walls, and put up a pergola. All paid for by savings.
My husband went back to work and then arrived home shortly after. I will never forget his face.
" I've been put off work because of the injury"
Over 5 years later (that way we could not make any legal claims for compensation) they just wiped him. No payout, just on workers comp benefits. Our income dropped by almost 40%overnight.
This time we cut back our spending immediately. I increased my workload and take on a 3 day a week position as a back up to my business.
Who wants to hire an over 50 year old worker with an injury ? (even though it's minor).
Move 12 months down the track and we were managing. But Dad is not well so I go down to stay with him. He collapses and is not expected to live. After being care flighted to Sydney I spend 5 weeks there with him while he undergoes numerous surgeries. He doesn't know who I am, they tell me to expect the worst. The family crap was an added stress.
After two weeks I had no paid leave left. I now have no income because I had to cancel all my clients. Our savings are used up.
Information starts coming back about Dad having run up bills and debts that need paying. I contact my bank and get a credit card (which is now at $13000) and I invoke a power of attorney over Dads affairs. I feel like I am living a nightmare.
Dad has no savings, no home (he signed this away in his confusion), no insurance and a huge financial mess to sort out.
Dad improves but there is no way he can live alone. We bring him home to live with us and start packing up his home, paying for rubbish removal, paying outstanding debts, paying for day care, medications, travel away to specialists, travel and accommodation for 4 more surgeries in Sydney.
My leave from work was all leave without pay. Each time I tried to start up my business I got notified we need to travel away for more surgery.
When I was up at night I started looking online for ways to make money...Big BIG mistake, just take it from me and skip all those IM schemes. i hate that I did that and wasted so much money.
I started my blog.
My husbands payments stopped and I finished up my business for good and went back to a full time job.
Dad is now in a nursing home and I still get the occasional letter demanding payment of a bill he has incurred.
Well there you have it. My financial timeline.
Here what I learned:
- It is the unexpected that derailed us financially, health and job loss
- We have both spent money just to try and cheer ourselves up, it doesn't work
- Have a power of attorney and a health guardian order set up Please do this for your family
- Don't spend your savings, that's why they are called SAVINGS!
- It is my responsibility to take care of my family's finances, don' think you can rely on others in a crisis, often you can't.
- The only job security there is is two weeks notice, don't think because you have a job you will be fine, it happens to lots of people
- always pay yourself first
- Don't consolidate!
- Don't build a home, this was one of the major impacts on our finances, there is too much that you can't control
Well if you read this far thanks for sticking with it! I feel better writing it all down like that. If it can help someone else avoid a problem then that's worth sharing. Hindsight is a wonderful thing!
I know that we can and will turn it all around.
Posted at 4:54 AM | Labels: financial crisis, How to Eliminate Debt |
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21 comments:
Wow! You've really had a tough run. Good luck with it. We were quite responsible too in our early marriage - until we had a baby and I gave up work. Unfortunately we still spent like we had 2 good incomes :(
I couldn't stop reading that post! That is one tough journey and good on you for getting through so many tough times. I complain when my kid gets sick and I have to take a day of work, yet it pales in comparison to what you have been through! Thanks for the advice as well, I will take in on board as I make my journey through life.
Wishing you the best for your blog, job and husband's business - you deserve some sucess and here's to you breaking your financial shackles.
Andy
What an incredible trip! I find it quite inspirational after reading that post.
Those advice at the end of the post are very wise. I shall try to take some on-board, especially the one about job security. The days of starting and retiring your career at one company are long gone.
So many debt problems surface after things we least expect come into our lives. I think the fact that you've weathered this difficult storm of financial misery to help others by sharing your experience is a bonus that otherwise will not appreciate as much as they should.
Think about this. The reason these unexpected situations are called accidents is because if we knew they were coming they would be called on purposes.
Wow, that is a very moving story. You've been through a lot. I'm so happy for you that things are looking better now!
By the way, it would be interesting to read a post about how the Australian health care system works.
Hi everyone, :)thanks for your comments,
I suppose I thought I'd share this so that people might see that even if you start out with everything looking great, most of us never expect to get sick or lose a job.
We certainly never expected it to happen to us when we were young. It's one of the reasons I think paying down the mortgage is important.
If we had not been ahead with out payments, we would have lost our home for sure, but we were able to NOT make payments for six months as those little extra payments over the years had put us ahead.
get out of debt squirrel, I really like what you said about accidents & purposes!
jon I will do a post on the health care system for you soon
Hi Louise
Now I see that you really knew what you were talking about in your comment about my family-related troubles! Though your story make mine pale in comparison. Thank you for sharing it - I've probably learnt something from it in terms of making sure I do all I can to be ready for the unexpected.
Thanks again.
incredible what a tough time financially and emotionally you have endured.
I am in awe of your strength and ability to stay on top of it all then and now.
I agree it is very inspirational and yes getting it off your chest is liberating.
As well as sharing and warning tohers to give them the benefit of your woes and hindsight.
Your Dad must be so proud of you.
Firstly, thank you for being so open about your finances. Funny that so many people tell you to build, that it sometimes turns out cheaper. And keeping up with the Jones is where most people fall, including myself. Secondly, you're so right that never rely on another in a financial crisis. Children are expensive.
I know in this post you wanted to shed some light about your finance and by so doing help your readers make better choices - you've achieved that. After this I'm going to sit down and draft some goals. You'll be happy to know that I have an interview on Tuesday and I used the CV your drafted. Thank you.
hi debtfretter, yes the unexpected is the problem!
hi trish,thanks, I try and look on the bright side most of the time and I believe that things are only mistakes if I don't learn from them, so may as well pass it on.
Wow Tondy!!!
Congrats on the job interview! I am so happy for you!! I will be sending lots of good thoughts your way :)
Louise,
That's an honest summary!
What a zig-zagging journey to eliminate debt! I've made some of those mistakes, but health issues are something I've not really thought about.
I've always just assumed I'll find work if I need it.
But if I'm not up to it, then what?
I've already had a scare threatening the home.
I think I'll go back and read your most recent post about the apples - that made me smile. What a brilliant contrast to this!
But then again, isn't it the journey that makes it? Without the challenges life would be dull.
Most people like the thrill of a roller-coaster. Those who take no risks and don't live life when they can must have a dull journey.
I don't think you should regret the big holiday or the car. That proves you're the sort to jump on a roller coaster and have fun when you can.
I'm not saying we should be silly with money, but regret can take many forms. And NOT living life is one of them.
Louise,
These hardships that you have gone through have made you the wonderful person you are today.
As I have been going through my tough journey, I have been happy with the wonderful comments and advice you have given.
Writing this timeline was a great idea. It was nice to read where you were and how far you have come. I look forward to reading more.
thanks for writing all this Louise, it must have been tough for you but there is some great advice in there for people.
As you say hindsight is a wonderful thing but we can't change the past, all we can do is look to the future and that's exactly what you are doing.
I wish you all the luck in the world, you can and you will turn this around:)
As a young woman I find this story really inspirational - you've been through so much. You've stayed tough, you've kept it together, and you're through the worst of it *fingers crossed*
I hope that if I ever find myself in a similar situation that I can maintain the strength that you seem to have (I still have children, house etc to look forward to). Thank you.
As I was reading your post I was thinking about how my own life has taken a similar path. When I look back to my teens / early 20's, I didn't have any money then - if I was earning what I am earning now I would have been rich! It seems that no matter how much more money I have earned over the years, I have never felt like I have had any more - something else just soaked it all up. A bit annoying really. (Apart from the kids - they do soak your money up but it's worth every penny!)
Wow that's an amazing story. I surf the web a lot (maybe too much) and it's not often you come across an article as 'open' as that.
I hardly ever forward articles to my girlfriend, but this one I forwarded. We are in a pretty sound financial position ourselves, but the article really goes to show what can happen with a bit of bad luck.
Just trying to figure out what your consultancy is about ... !!!
Really sorry about your dad. Such things put everything else in perspective.
Anyway, you said to say "hello" so hi and good luck for 2009 fromthe UK.
8¬)
hi Russell, thanks for taking the time to comment, I should add an update that in August 2008 I quit my job and opened up my own business which is doing very well. So I hope to be debt free in the next few months.
I consult in health related area, sort of a cross between health, education, personal coaching and human resources. I work for companies and also have some private clients.
I'll take all the good luck I can get at the minute!
Thanks a lot for that post!
We're not doing badly ourselves, but I'm worried that our debts are running away from us - it wouldn't take many of the events you've experienced for us to go downhill very fast. So thanks for letting us learn from some of your mistakes!
One thing though: you twice say that consolidation is a bad idea, without giving an explanation. Is it a psychological thing? ("Phew - we have less loans now, so we can spend more!") Or is it a financial thing? Could you expand on this?
We have drawn down our extra mortgage repayments to repay credit card debt - 7% is much better than 20%! However, the credit card only seems to climb again; is that what you were referring to?
Thanks again for your openness!
Hi John :)
I think debt consolidation is a bad idea psychologically. Financially we saved money by lowering the interest rate. But psychologically we were less motivated, and there was a reduced feeling of urgency to pay it back faster than the minimum payment amount, and so you kind of just get used to having a new level of debt.
It is really easy each month to just pay the minimum on the loan and then feel that you have 'more' to spend. And unless excess spending and credit card debt stops being run up then you just create another debt problem that eventually can get consolidated a few years later.
I guess it is similar to constantly redrawing on the mortgage, so yes, the situation you describe of paying off the credit cards from the mortgage redraw and then they start going up again is what I mean.
I think sometimes consolidation can be a way of not really dealing with the underlying problems of expenses exceeding income.
Consolidation did take the immediate pressure off, but I don't feel that it really helped us financially at all. It just lulled us into a false sense of security.
I still feel that it wouldn't take much to derail us, and it is more concerning approaching our 50's as we just have less time to recover. As I mentioned in the post, if anyone had said to us in our 20's as young professionals that we would experience job loss and illness we would have laughed at the idea!
My best advice is to always pay a bit ahead on your mortgage so you have a buffer if there is a crisis, get rid of the credit cards, spend less than you earn and take out income protection insurance.
Time for an upate on this post!
My business has been going really well, so well in fact that I have one part time employee to do my admin.
But several months ago I got sick again :(
and it's taking me a long time to recover. Three months since getting sick I'm able to work about 20 hours a week only.
So, if I've learned anything it's that I have to roll with the punches and so I've set myself a goal to earn a full time online income in 12 months.
I have to face facts that I just can't work full time, and at almost 50 I've got to get serious about preparing for retirement.
You can follow my progress at http://earnafulltimeonlineincomein12months.com/
cheers :)
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