Monday, February 11, 2013

Where's the money going to come from?

Trying to look ahead a bit and come up with some goals for my soon-to-be post-debt life is a bit difficult.  I'm trying to accept that through all the twists and turns life has taken (or that I've taken myself along) one thing that really doesn't work well for me is to have concrete goals with definite timelines.  The more concrete something is, the less likely, it seems, I am to achieve it.  I understand where part of this comes from at least (therapy was good for a lot of this kind of stuff) but it's still difficult to accept it and plan my life accordingly.  Particularly when reading other people's blog and seeing how they make setting goals and keeping to strict schedules to achieve them work for them.  I've been reading through the archives of JD Debt-Free for a good part of today, for example - now that is one seriously goal-oriented and focused young woman.

We all have to deal with what we've got though and another thing I've learned is that trying to do the things that the kind of person I'd like to be would do doesn't usually help me.  So, for now, I have to stick to vague plans that I may or may not actually end up following through with.  At least getting my thoughts down on paper helps to move on from one particular thought.

Money first then.  As I've been clearing off the Table of Doom I've been filing bank and credit card statement after statement.  As it's all fairly mindless work at this stage, I've also had lots of thoughts running through my head.

At the moment, I have an Irish bank account which has a 3,000 euro overdraft facility/limit on it.  I have an Irish visa card with a 4,000 euro limit on it.  Last year, I got a German mastercard which has a 2,000 euro limit on it.  I have no official overdraft facility/limit on my German current account - as far as I know there is one automatically built-in but I've never asked because I don't ever want to start all that nonsense over here.

Once my debt is cleared I have to decide whether to keep my Irish credit card and overdraft facility.  I'm leaning towards getting rid of the card and this was part of the reason I went ahead and got the German one. My card is an MBNA one and used to give me points for a rewards website.  I could then use those points to 'buy' various things from that website, phone credit, restaurant or cinema vouchers and that kind of thing.  However, about a year ago they discontinued this program and it was switched to just an ordinary credit card.  A few months ago they announced their expected withdrawal from the Irish market and the credit card business is being taken over by a Spanish bank.  So I also have no idea if interest rates will start going up following the handover (which is happening in phases), whether the new bank will be difficult to deal with or anything.  However, that credit card limit and overdraft facility will still be the only access to emergency funds I have until I can build up a proper emergency fund.

At the same time, the free banking I used to have with my Irish bank was discontinued.  You used to have to do nine online or phone transactions a quarter plus lodge at least 3,000 to your account every quarter (so I spent many silly minutes transferring money to the Irish account and then bank to my normal German account after getting paid, just to satisfy the minimum lodgement amounts and avoid charges).  Now, however, you have to do the nine transactions and maintain a minimum balance of 3,000 at all times.  There has been a lot of discussion online about whether or not it's better to maintain this balance and not pay fees or to have that 3,000 in a savings account and use the interest to pay the fees.  In monetary terms, there isn't a whole lot of difference really though, unless you have a really, really good interest rate on a savings account.

So I think what I will try to do is to build up to a 3,500 euro balance in my Irish account.  Then I will cancel the Irish credit card.  Although it will cost me a small amount in charges to maintain the card even though I'm not using it, the peace of mind of having the credit available for emergencies would probably be worth it to me. Once the card is cancelled the current account balance will become my mini-emergency fund.  Enough to get the 'free' banking and a bit extra to cover using the Irish ATM card to take money out here (which sometimes saves costs that my German ATM card would incur).

Following that I'd like to work on building up an emergency fund in my German savings account.  5,000 seems like a nice round figure to aim for, even if it's not the six months worth of expenses people recommend as a minimum.   Once that's done I could cancel the overdraft facility (which costs 25 euro a year plus interest if I actually use it).  Or I could cancel the overdraft facility first and then the credit card when I've built up the same amount of money in available cash as I now have access to as credit.  I'll see.  

Another important aspect of life post-debt is how I actually want to live my life and where I want to be.  At the moment, I'm giving myself a time-frame of a bit less than two years to make decisions in.  That's enough time to get rid of the last of the debt, save a bit, is about how long I think I can stand to stay in my current job and will bring me up nicely to my fortieth birthday, which is just as good an arbitrary future date as any other.  More on the non-financial aspects of post-debt life to follow in a separate post.

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