I am feeling a little blue today.

It seems that life takes great pleasure in kicking you when you are down, and today has been no exception.

One Step Forward

It started off well: I should have been off work today enjoying my long weekend, but instead I had arranged to go into work for 8 hours overtime (6am to 2pm).

The day got even better when I was asked to stay until 6pm instead. 12 hours at time and a half.

Despite how facetious that may sound, my regular readers will know I am working to pay off my debt before New Years Day 2010, at the very latest. A renewed sense of urgency was provided by my employer when they sent round an email two months ago warning that we were facing a significant funding short-fall over the coming years, and salary cuts were not outside the realms of possibility. Any and all overtime is therefore extremely welcomed, and worked in earnest towards my goal.

Two Steps Forward

As I was edging closer to being one or two months away from being able to pay off my largest, final debt, I phoned my loan provider today to ask what the settlement figure would be if I paid today. I couldn’t of course, but I wanted to know precisely how far away I was, as simply calculating on the loan outstanding is only half the equation.

It’s quite a complicated affair. There is an early settlement fee of 1 months interest if settled early at all, or 2  months interest if paid before at least 50% of the loan term has passed. There is also the added complication of a scaled percentage of the loan insurance being refundable, depending on what stage the loan is at.

If I paid today, I have precisely £8,036.64 outstanding (or $12,726 USD for my readers across the pond).  That is still £2,200 more than I have, so paying today wasn’t an option. But next month could well be!

One Step Back

All sounding quite good so far isn’t it?

Except, as of next month my eligibility for a 56% loan insurance refund expires. From next month onwards until sometime late in 2010, I become eligible for only a 26% refund instead. Despite my £415 payment next month, I will actually owe more afterward than I do this month. The settlement figure for next month will be in the region of £8,400. Canceling the insurance altogether whilst tempting, is not viable due to…

Two Steps Back

I found an email from the Big Boss with an update on the 5 year forecast for our organisation. It re-iterated the problem in the last email we all received, but put it starkly that despite looking initially at non-pay budgets, there will have to be cuts.

Department heads have been asked to identify 2% savings for next year, saving as a whole £5 million for 2010/2011. If it stopped there, I would not be too concerned. A one-off saving of £5m in an organisation the size of ours would be achievable with relatively little pain and likely no compulsory redundancy whatsoever. That £5 million though is merely the tip of the iceberg.

After 2010/2011, we will need to save £7.5 million every year until at least 2015.

Compulsory redundancy across the entire organisation is a certainty. My department may be insulated from the initial round, but I do not see how we can reasonably escape the entire period unscathed. Bad, bad times are ahead and I really dislike this feeling. I have worked for the same organisation for coming close to 8 years. I enjoy my job, I am good at it. The pay enables me to plan for my future.

Without it, and in the current financial climate, I no longer have a sense of direction.

Even the best case scenario is emotionally unpleasant – 5 whole years of wondering if I will have a job month after month. The recession has thrown my 5 Year Plan (and countless others, of course) out the window. My dream of becoming a home-owner in 4 years time, faded with this evening’s sunset.

Three Steps Back

A letter from my solicitor had landed on the mat for me when I got home.

Half expecting some good news, it was instead, the third and final kick of today. My wife (who wanted the divorce in the first place) has decided to contest it and defend the matter in court.

As she is bankrupt and to my knowledge unemployed, the public purse will be paying for her defense courtesy of Legal Aid, while I continue to pay for my solicitor and subsequent court hearings out of my own pocket, if there is any money in them come the end, given Kick Two.

Closing Thoughts

I must get consumer-debt free, and soon. It is reasonably likely that employment will continue for at least another year before anything starts rumbling in my direction; yet I cannot help but worry about “What if I get made redundant tomorrow?”. All my hard work over this year would virtually have been for nothing.

All my hopes, all my dreams, all my plans, gone in a single stroke.

What will I do?

As many of you will know, my journey to debt freedom began back in January 2009. I have been diligently working to pay off my debt  since then, and now that the end of the tunnel is in sight, surely it should be time for inward celebration? After all, in a maximum of two months time I will be entirely debt free.

In reality, I am more frustrated now than I have been at any point in the long, arduous road to a positive net worth. I sat down to try and work out just why that is.

In the beginning, it was fun finding places to make cuts in my budget. After 4 months I had pared down my outgoings to their absolute barest minimums. There is now not a realistic penny left to be shaved without going totally insane or malnourished along the way. I enjoyed seeing the balances come down. I enjoyed working overtime to make it happen faster. I enjoyed the mental challenge of not spending a single penny on myself unless it was absolutely necessary and budgeted for.

In my overtime quest, I have just spent 7 days away from home working 15 hour days and being accommodated at night for a few hours before getting up and doing it all over again and again and again. The days were long. I missed my family. I did nothing but work and sleep.

The money will be good when it comes in, but I am now completed exhausted, mentally and physically.

I have one day off before returning to my ‘normal’ work tomorrow.

I am frustrated because no matter how hard I work now,  I remain in debt until the numbers come together in one or two months time.  I am so close, yet so far away.

I find myself wishing for 2 months to just fly by so I can finally say “I am debt free!”.

In our lives we are constantly striving toward one or more goals. These vary from person to person and life-stage to life-stage. I strive to be debt free; others strive to buy their first home. You may be striving for some other target.

The one thing that remains the absolute same, regardless of what you are striving for, is that it is a future event. You require the passage of time for it to come to fruition. We are ultimately wishing our lives away to reach an arbitrary goal that constitutes only one portion of our ultimately very short lives.

I vow, here and now, to stop ‘striving to be debt free’.

I am striving for one target, and one target alone.

To live every day to the maximum it can be.

Enjoy the sunrise if you are fortunate enough to be awake. Help others in your day as you would like to be helped. Treat others as you would like to be treated. Make the most of time with friends and family. Appreciate the sunset each day.

Do not desire the passing of time to achieve your goals. By all means celebrate it when the event arrives, but not to the detriment of everything and everyone around you. I will be debt free. I will be a home-owner. You will achieve whatever it is you are striving to achieve in time.

Live your life by its journey, not its final destination.

Why should you wish away 2 months or 2 years or 2 decades of your life to reach a goal? When one goal is out of the way, you will replace it with another and then another. All events that will occur in the future, and each requiring your patience to achieve it.

Patience is a virtue, and it is the journey that matters.

Others will not judge you on what you achieve, but who you were whilst getting there.

In 2006, long before I came to the realisation that my finances were in a dreadful state, Trent over at The Simple Dollar proposed a simple question.

Living on Half Your Monthly Income: Could You Do It?

I’m going to pretend first of all – for the sake of this financial experiment – that I am not still living at my parents house. In my mind that is cheating when it comes to the spirit of the question. So I will for the moment assume that I had a rosy life before now, and have managed to buy myself a wonderful little apartment and have a mortgage to go with it.

That seems a little fairer.

Ground Rules

• My monthly income is calculated without any potential overtime
• Income tax remains at 20%
• V.A.T. calculated at 15%

With those rules set, half my present monthly income after tax is around about £1,000 (or $1,600 USD for my American visitors). That is a little better than some folks, and between a little and a lot worse than others.

Playing With The Numbers

Continuing the assumption that I had been financially astute in my prior years and hadn’t been taken to the cleaners by my ex wife instead, for this little paper experiment I bought a wonderful flat with a £32,000 deposit and a mortgage of £71,000 for a 70% LTV (or as our American friends would say – a little over 30% down).

• According to the Barclays Mortgage Calculator: £336.
• Gas and electricity bills are £50 each, so: £100.
• Water Rates (Supply & Drainage): £40
• Council tax on a flat with 25% single-person discount: £82.
• Landline telephone (with broadband of course) £15.
• My mobile phone bill: £20
• Groceries: £75
• Road Fund License (Tax): £14
• Car Insurance: £30
• Fuel to get to work: £120
• Car Servicing: £20
• TV License: £12
• LoveFilm Subscription: £15.65
• Blog Hosting: £12

How Did I Do?

Half of my monthly income (without figuring overtime into the equation) is £1,000.  My total outgoings in my simulation above come out at £891.65.

I can continue my standard of living without making any changes whatsoever if my income suddenly halved! This is quite a surprise actually. In fact, I could continue to save over 11% of my monthly take-home if I agreed with myself not to go out or conduct unnecessary spending.By the end of a year, excluding holidays I could actually still save £1,300.

And If It Dropped Tomorrow?

In the spirit of the question as things stand for me right now (rather than my fluffy fantasy above), could I survive?

• Rent: £120
• Mobile Phone: £20
• Mobile Broadband: £5
• Landline Telephone: £10
• Groceries: £50
• Road Fund License: £14
• Car Insurance: £30
• Fuel: £120
• Car Servicing: £20
• LoveFilm: £15.65
• Blog Hosting: £12
• Credit Card Payment: £120
• Loan Payment: £413

Total monthly expenditure would equate tomorrow as £949.65. Still just under half my income, but a little tighter. My savings goal would struggle. This would leave me with 4.9% of my pay left to save, totaling just £604 for the year.

What Did I Learn

Every exercise you do, try and take something away from it. I have learned that I am pretty frugal already. I don’t spend excessively, and I even upped my normal food spending in the fantasy exercise to make it a fair fight. £50 a month on food is very low statistically. As Trent realised – if you can live on half your income, why aren’t you doing so now and saving or investing the other half? What unnecessary money drains are you entertaining?

Could you live on half your income? Would you need to make any changes?