Bankruptcy or Bust! Difficult Conversations

By benparis | Published: July 27, 2010

I’ve been putting off having a “serious” conversation to T about how tight sh*& is. There is just $7 separating me from impending financial doom each week. That’s not even a large McValue Meal! (it’s called a McValue meal I assume because it’s relatively inexpensive). It’s not that I haven’t been saying anything I have but have been dismissed as some sort of financial worry wart. (Now I know what all those climate change scientists feel like. The being dismissed as some sort of fiscal crack pot didn’t exactly make me jump at the chance to have said conversation. I think you could say this is safely in the NOT GOOD category.

The fact that, all that stands in the way of me and ruin is the cost of some deep fried potatoes, high fructose corn syrup and a Big Mac (maybe a soft serve cone if it’s a special) has not exactly been good for my stress levels. So I’ve been reflecting on what to do. I brushed up on my “guide to getting to yes” and realized that I hadn’t really been conveying the cold start facts, so it’s probably easy to dismiss me as some kind of financial doomsayer.

The “guide to getting to yes” talks about “principled negotiation”, basically if you know what the facts are (what it’s worth, what you can afford to spend of clothes, what we can afford to spend on take away) then you know where to dig your feet in, it’s easy to say “no we can’t afford to eat out” because you know if you don’t you lose your house. It’s not you believe this, I believe that. I have to say it’s an approach I like. I sent through the budget I’d been working on and I got told there wasn’t enough money for hair care. All I had to say was “that’s ok you just find the money somewhere else.” “I wasn’t being an a$%hole.” I was just telling the truth.
It’s not done, not buy a long shot.

But it did get me thinking about difficult money conversations. Any of you had them? Any of you have advice?

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Budget Evaluation

By Bankruptcy Ben | Published: July 16, 2010

I’m running through my expenses looking for area’s to cut.  Here’s my list of expenses to cut.

  • Car – I rode to work 4 days this week.  Next week I’m mothballing the car!!!   I’ve discussed become a single car family (selling my car) with my partner but it’s a politically sensitive issue at the moment so I’m just going to moth ball it and try to save money on fuel and ware and tear. (any of you found this to be a hot button issue?)
  • Hobbies- I spend money on toys (basically building my dream bike so I can ride to work? but I’m already riding to work. Tools for DIY second area overspending DAMN YOU BUNNINGS!)
  • Gifts- Oh man, I know I over compensate with gifts because I have all kinds of guilt about not  spending enough time with people (any one else got this problem?)

Next will be having difficult conversations about finance.  Better now than latter right? Any advice on that frugal scholars?

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First Budget Done, Need to make some hard decisions.

By Bankruptcy Ben | Published: July 13, 2010

T or the first time in my life I’ve done a budget (wooo I’ve finally grown up!).  Well, to be honest I’ve done budgets before but they were based on hopes and dreams rather than cold hard facts. After recording my expenses since March I have a reasonable idea what my expenses actually are.  I’ve also taken the razor to most of the discretionary expenses.

Sorry family don’t expect anything amazing this year.  Sorry GF the present cutting  goes for anniversaries, and valentines day too.  Eating out has become a monthly affair.  Holiday budget is also cut, so it’s camping from here on in!

And I’m still insolvent. I spend $7.81 MORE than I earn. It doesn’t sound like much but cash flow is king.  It doesn’t matter if you earn $1 less or $200 less than you spend, your still going under it’s just the speed that changes.

My mortgage is what’s killing me. I can’t bring that down with out some extra money and I don’t have extra money because of the mortgage.  The other area that’s slaughtering me is my car, or ute for the Australia readers.  I haven’t allocated any money towards replacing the vehicle either because I don’t have any money!  Which means at some point I’ll have to get a car loan which would put me even further behind the 8 ball or under the 8 ball as the case may be.

So that leaves discretionary expenses and my car.

The car is looking like in might be on the chopping board.  Which would me great for my wallet and my fat ass.

Have you had to make any hard choices?  Any advice?

Posted in Financial Freedom Journey | 5 Comments

Budgeting apparently I need to do it!

By Bankruptcy Ben | Published: July 9, 2010

Everyone remember the four habbits of people who have low financial stress.  We’ll I’ve done the” write down how money is spent”  thing since March (it now being July) and I’ve got to say it freaking terrified me.  Particularly when I realised how much I was spending and that this finance blogger was actually spending MORE than I earned.  I’ve got to say it didn’t do much for my levels of “financial stress”. Now it’s time to start on habit number 2 and in no particular order I’ve chosen to “use a written budget”.  I guess because it’s the hardest step.  If I can get this out of the way then I’ll have something to “evaluate my spending”  against and I’ll be able to “make plans on how to use my money”.

I’ve never used a budget before in my life.  I’ve never sat down and written out all my expenses.  I’ve never seen my parents write a budget either this just wasn’t part of my financial education at home.  Frankly my financial education at home was limited to “get a good job” and “study hard”.  Which is probably similar to most of you guys? No?

The only budget I’ve ever learnt about is a cash flow budget when I did my Accounting Cert IV (I think I’m now qualified to be an admin assistant at an accountancy firm:)).  Basically in business it doesn’t matter how much money your making, what matters is: can I pay my bills tomorrow? If you can’t your dead.  Hence “Cash Is King”.   So I’m going to use a cash flow budget.   The main problem with a standard budget is that you record your expense  and then divide them evenly but expenses aren’t distributed evenly accross the year! ( ever noticed that the rates, the insurance and the electricity bill all come at the same time).  When you do a normal budget you fail to account for the correct amount of savings required to meet your expenses.

I’ve done this before.  I look at my bank balance there’s a large amount of money in there. I go “that’s awesome” and buy the (insert desired whatsit here) I’ve been wanting then a bill comes up and I’m in trouble.  Sound familiar? Well hopeful this should help me.

And now I’ve got some figures on my REAL spending I’ve got something to base it on.  The areas I want to focus on are my grocery bill, specifically my alcohol bill, my take away food spend and my DIY spend.

So who’s got some budgeting tips for me?

I’ve come to realise that knowledge doesn’t matter, it’s the implementation that’s key.

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$10 for free!

By Bankruptcy Ben | Published: July 8, 2010

How often do you get a chance for a free $10.  Not very often in my experience! Well the Queensland government is giving away GO Cards loaded with $10 in credit for free. We’ve already paid for it with our taxes so you should definitely get one! You can get the free Go Cards by going here and filling out the webform www.gocardgiveaway.com.au

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The sweet taste of financial freedom, eBay liquidation and bankruptcy musings

By Bankruptcy Ben | Published: July 2, 2010

I’ve started to liquidate my possessions on eBay.  My stuff is just sitting there taking up space, mocking me for buying it in the first place.  It’s not liquid (cash) either and at some point most of it will be worthless and outdated.  So my logic is I might as well sell it and get some cash for it rather then letting it just sit there.  So I’ve liquidated 25 dvds and I’m about to sell over 100 cds.  It’s not much money a couple of hundred dollars but the less stuff I have the less space I need.  Australians spend millions of dollars every year on storage for stuff they don’t need that’s depreciating.

I need less space because I think I’m going to have to move to a small place with a smaller mortgage. I got a big place to fit all my stuff but it’s just stuff and it’s costing my dearly.

However my first batch of “Brisbane Bitter” :) just came of the line and it was delicious.  Every glass saves me $3! or based on the Dietitians Association of Australia’s recommended alcohol intake that’s a saving of $36/week or $1872/year.  Winner!

bankruptcy beater

Bankruptcy musing for the day. 25,000 people a year file for bankruptcy. 2500 get breast cancer, 3000 get prostate cancer.  I’m not saying that bankruptcy is anything like cancer.   However given that 10 times more people go bankrupt than get breast cancer it’s surprising that there isn’t greater awareness about bankruptcy. That say that everyone knows some or has been affected by breast cancer.  Do you know anyone affected by bankruptcy?

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Government Should Leave It Alone!

By Bankruptcy Ben | Published: July 1, 2010

The government, well more specifically the Attorney Generals Department are having a review into the Debt Agreement System at the moment.  They have these things every so often.   The big news is that there a changes being considered to the bankruptcy act to “encourage” people to do Debt Agreements (a payment arrangement with creditors). The things they’re looking at implement are

  • Mandatory Counselling before you can go bankrupt and before you you’re discharged from bankruptcy
  • A means test for bankruptcy, if you earn too much to bad
  • Raising the amount you have to repay under bankruptcy
  • A “junior” or a “mini” bankruptcy for people with no assets and very little debt eg  aged pensioners, disability pensioners, etc. There would be reduced consequences but it would be a one time only deal.

Personally I’ve always admired the fact that Australian Bankruptcy law isn’t punitive.  It’s always been a way for Australians with debt they can’t repay a lifeline.  It wasn’t designed as a punishment. You just can’t get out another debt for 7 years. If you got big assets they’re sold and and given to your creditors as a partial payment.  Doesn’t seem that bad right?  Seems kinda fair.

Very few people deliberately incur debt with the intention of filling for bankruptcy. Maybe 1 person a month out of 25,000 people every year.  Rather than punishing people who file for bankruptcy surely it’s better to reward people who choose to do a debt agreement. My suggestions for encouraging people to do a debt agreement are

  • Remove notation on credit history after the debt agreement is finalized

Actually that’s about it.  That’s all you need to do! Almost every single person we talk to wants to pay back their debt. The just need to be able to do it at a rate they can afford.

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How do I know if I'm in trouble?

By Bankruptcy Ben | Published: June 24, 2010

There is a world of difference between things being tight and being in trouble.  However a lot of the people I talk to don’t even know they’re in trouble.  Worse still they think they’re in pretty good financial shape.  All they need is a debt consolidation loan and life will be all good again. Unfortunately the reality of the situation is that debt consolidation isn’t an option.

I do simple test in the first 5 minutes of our conversation to get a gauge on the clients finances.  What are you earning – the pension = the maximum theoretical payment.  I say maximum theoretical payment because I don’t know many people who say they can comfortably live on the pension.  The pension is designed as a safety net it’s designed to just cover the bare necessities of life.  If the repayment for your debt consolidation loan is close to this, debt consolidation isn’t an option.  This is normally the bit where I get told “What do you mean I can’t afford a debt consolidation loan?”.  I”m sorry but it’s called unconscionable lending, you can’t put someone in a loan where they’re living on less than the pension.

The next step is to do a budget write down all your expenses (not including your debt); electricity, rent, groceries, insurance, Christmas presents, etc.  Subtract the total from your income.  What you’ve got left is your maximum repayment.  The important thing is that this is an average over THE WHOLE YEAR.  Ever get 5 bills at once? Me too. Turns out expenses aren’t evenly distributed across the whole year.   If your actual repayments are even close to your “maximum repayment” you’re in trouble, it’s unsustainable and the wheels will fall off. This is the main person I see who thinks there in ok financing shape.  They’re ok this month then next month their behind, then they catch up, then car breaks down and they’re permanently in trouble.

If they are in this situation I can renegotiate the debts with a debt agreement or a personal insolvency agreement.  I assess what is affordable based on your situation and make an offer to their creditors. Most of the time we can get it approved.  So there are solutions.

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Extra Income

By Bankruptcy Ben | Published: June 22, 2010

I signed up literally yesterday for market research and I have been called 4 times already for participation in focus groups.  I’ve been offered $60-$80 for 1.5hrs work.  It’s not alot but it’s all money in the bank or more to the point off my debt.

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FFJ-Earn Extra Cash

By Bankruptcy Ben | Published: June 18, 2010

I’ve been reviewing my expenses, I’ve taken the razor gang to expenses. Things are well starting to look a little inflexible now.  The only way I can see to reduce my expenses further is to get rid of my car entirely, get rid of my health insurance (consider you circumstances, etc, disclaimer), sell my house and get a cheaper one and that’s about it really.  The razor gang have gone as far as they can go as far as things that are easy to implement.  So the only solution is to EARN MORE MONEY!

Here my list of ideas on how I’ll earn extra money

  1. Mowing Lawns
  2. Cleaning Homes
  3. Tutoring maths or physics
  4. Ironing Clothes
  5. Deliver Pamphlets/newspapers
  6. Sell something at the markets
  7. Wait Tables
  8. Create Websites
  9. Dog Walker
  10. Selling my stuff on eBay
  11. Do some dietitian work on the weekend again
  12. Register for Market Research

So far I have started selling my stuff on eBay.  Not everything just stuff I’m never going to use again like; DVDs and CDs and books.  I’m not the type of person to read or watch something twice so I might as well sell it. I’m in the process of putting all my CDs on my computer and then I’ll get rid of them as well.

I’ve enquired about delivering leaflets in my area unfortunately they were full and I’m not driving to deliver leaflets.  I’ve also registered for some market research focus groups. I’m going to do some pamphlets for lawn mowing and distribute them hopefully next week.  These aren’t big money earners but they’re all extra cash.

What do you do for extra money?

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