The Ugly Truth – Day 428

Debts

• Personal Loan: -$19,877
• Credit Card 1: -$5,412
• Credit Card 2: -$5,485 ($5,000 transferred to Card 8)
• Credit Card 3: (transferred to Card 4)
• Credit Card 4: -$16,105
• Credit Card 5: (paid in full)
• Credit Card 6: (paid in full)
• Credit Card 7: (paid in full)
• Credit Card 8: -$4,875

Savings

• Emergency Fund: +$2,000
• Car Fund (Maintenance & Registration): +250
• Short Term Goal Fund: +$1,000 (Current goal is new bedroom furniture)
• Home Deposit Fund ($60,000 Goal): +$1,000
• UK Tour Fund ($10,000 Goal): +$750

Total: -$51,754
Debt reduced from last month: +$615
Debt reduced from Sep 2007: +$5,018

Not a huge change this month, but I’m OK with that as I had a lots of bills come in that needed to be paid, I managed to pay them without dipping into my emergency fund, and factoring in the monthly interest I’m paying it’s still a win to have the total go down.

Not all the balance transfers had been processed as of today, I’m still waiting on the balance of Credit Card 1 to go over to Credit Card 2, and then I’ll have my new snowball in place.

My personal loan is now under $20,000 which is great, and now I’ll be throwing $1,000 at it every month from now on (it’s got the highest interest rate of all of my debts), that should see larger debt reductions each month ongoing.

My focus card is now Card 2, so any extra snowball or snowflake money will be going on to that card from now on.

I also managed to add another $250 to my travel fund, as I’m looking to go in May 2009; I really need to get cracking on building up that fund now. Especially considering the exchange rate, Aussie dollars to pounds Sterling is never a pretty exchange, but it’s even worse at the moment.

Roll on payday.

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Who Do You Read

I'd looking to expand the blogs I read on a daily/weekly basis, as the last week or so I've been so hungry for online readin that I've been coming back to an empty feed reader. It's the busiest time of the year at work, so reading about something other than my own life when I can is a great way to relax.

Gentle readers, I'd love to know your must read blogs, so I can add them if I'm not already reading them. Let me know in the comments, and please include your own too if you have one.

They don't have to be personal finance related, I'm interested in pretty much everything!

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Government Handouts Don’t Always Help Those Who Need It

The Australian government's recent first home grant policy change is shameful. Don’t get me wrong, this isn't entirely sour grapes as I’m not in a position to take it up myself, it’s simply a short sighted, bad idea.

For the non-Aussies, the government announced they will double the first home buyers grant from $7000 to $14,000 between now and June 30 2009. First home buyers get a further $7000 for new build houses.

This will only encourage those who can not afford it to take on excessive debt and invest in an asset that is fundamentally overvalued here in Australia. At the same time property owners and investors who hold significant equity in their homes following years of above average returns are given a free ticket to exit the property market before it really starts to fall. It’s well known that the grant isn't actually for first home buyers; it’s actually a bonus for those selling to first home buyers.

Property values at 7-8 times annual income are unsustainable and need to fall. Other countries who had over inflated property markets are currently falling back to averages around 3-4 times income, so why is Australia an exception?

The government is trying to engineer the fall in Australia to be more extended and less severe than other nations like the US & UK, but by doing this all they are doing is passing the losses from those that can afford it and who are sitting on large equity in the properties, and passing it on to the young and so called future engine of the Australian economy who can almost certainly not afford it.

Why isn't the government actively trying to promote people to save some money? Their original proposal of First Home Saver Accounts is still an excellent idea, so why did they all of a sudden change their minds and promote people to skip saving and go straight for their first home?

In 4 years time when people have proven they can save some money and house prices have fallen they will be in a perfect position to buy a house and pay for it over the long term. The banks must have a bug in their ear as they’d rather make money handing out loans, rather than pay interest on savings.

So that’s still the path I’m going to take. Save my money, live within my means and buy a home when I can afford to do so. It seems crazy that I earn as much as I do and can’t affords to buy a home on my own, but that’s the way it is here at the moment.

The process of trying to spend and borrow our way out of every economic hiccup is destined for failure. We can not keep increasing debt levels happily ever after, I know this even without a mortgage, my original debt load was exactly the amount I’d need for a house deposit, and I feel this keenly.

At some point of this financial crisis we’ll all have to take some pain, and I’m glad I started peeling off the band aid in September 2007.

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Mum's 2 cents On The Financial Crisis

I got this email from my Mum today:

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Following the financial crisis on Wall Street uncertainty has now hit the banking sector in Japan.

In the last seven days Origami Bank has folded, Sumo Bank has gone belly up and Bonsai Bank announced plans to cut some of its branches.

Yesterday, it was announced that Karaoke Bank is up for sale and will likely go for a song, while today shares in Kamikaze Bank were suspended after they nose-dived.

While Samurai Bank is soldiering on following sharp cutbacks, Ninja Bank is reported to have taken a hit, but they remain in the black.

A spokesman for Haiku Holdings was lost for words over the financial crisis, while according to rumours Nippon Bank was starting to feel the pinch.

500 staff at Karate Bank got the chop, the Judo Bank has been thrown out of the system after their stranglehold over the market was broken, and Tae Kwon Doe Bank executives kicked out at their critics. Further, a Kung Fu Bank CEO is reported to have said 'it is time for them to leave', while the Reiki Bank is now at full stretch after a long period of relaxation.

Analysts report that there is something fishy going on at Sushi Bank where it is feared staff may get a raw deal. Meanwhile Geisha Bank has bowed to the inevitable and shut.
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Thanks for that Mum, you know things are starting to come around when people are making jokes about it.

Is this a particularly Australian thing, to make jokes when a situation is bad?

'You see, that's another thing that my parents gave me: an enormously great sense of humor." - Liza Minelli

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Making Some Changes To My Snowball

I spent some time last night looking at my remaining debts (who am I kidding I look at them most nights), and how I can reduce the total minimum payment I have to pay each month and reduce the monthly interest bills overall.

So what I’m planing to do is:

• Apply for a balance transfer of Card 3 (15.99%) to Card 4 (10.22%)
• Close Card 3
• Confirm $5,000 balance transfer of Card 2 (15.99%) onto new Card 8 (6.99% for life of balance transfers, $5,000 limit)
• Apply for a balance transfer of Card 1 (11.79%) to Card 2 (11.79%)
• Close Card 1
• Increase monthly payment on loan (14.89%) to $1,000 a month (was $700)

I’m still snowballing, but if the minimum payment is reduced then there’s more of my debt payment amount to actually snowball/flake? Confused yet?

I've worked out this will save me almost $1,000 in interest if I can manage all the changes with the various companies, and still allow me to save enough for my UK trip in May next year, plus get the $5,000 I need to put into my First Home Savers Account before June 30 2009 (once I open the account of course).

Am I crazy here, or does this make some form of sense?

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