Money Matters – Part 2

Welcome back to our blog.

If this is your first time on our blog, we suggest that you you visit our previous blog posts on this link Previous Blog Posts

Apology

Apologies, we had advised that we will be sharing “30 lessons” we have learnt as we approached our 30th wedding anniversary. However, as we wrote the blog we saw that the lessons learnt so far will be way more than 30. We hope you don’t mind us going past the 30 limit! 😉

Now back to Money Matters Part 2

Indeed we entered the UK completely debt free – that included mortgage free.

As mentioned in a previous blog, I was blessed to get a job very soon after arriving in the UK.

Lesson 27 – We underestimated the cost of settling in the UK.

We were not prepared by what financially awaited us. We had not fully anticipated what was likely to come our way. Whilst we came debt free, we didn’t have any meaningful savings to help us settle. As I moved from London to Preston, thankfully my sister and brother-in-law were on hand to provide some financial support to help us settle.

Firstly, we needed a deposit for renting a house, which was more than a month’s rent – my sister and brother-in-law were on hand to help. Then there was the true cost of housing – rent, gas, electric, water, broadband, telephone and council tax.

Secondly, my job required me to travel and I needed a car urgently. Yes, you guessed it, my sister and brother-in-law lent me money to buy my first car in the UK – a red 1.2ltr Ford Fiesta; so modest compared to the company car, Nissan Hardbody Twin Cab (Yellow Flower) with 3.6ltr petrol engine I had back in Zimbabwe. Then I started to fully appreciate that the cost of owning a car is more than the cost of the car itself – fuel, car tax, insurance, MOT, service etc. In Zimbabwe my company would take care of all that.

When Wim and the kids arrived, we needed another car as Nomsa’s school was a long distance away from our house and was not on a direct bus route. We secured a bank loan to buy another car – thankfully my car allowance at my new workplace was enough to cover the loan repayment.

Generally, one area that took us some time to adjust was moving from a hyperinflationary environment to a place with low inflation – coming from a place where the interest on bank loans were around 150%, 19% looked like a bargain! It took us time even to appreciate the value of £1.

Another area where we had not fully appreciated the cost was Immigration Costs. From the time we came to the UK until we got settled status we parted with several thousands of pounds. We couldn’t believe the total amount when added everything up. We were not budgeting for these but putting them on credit cards.

Lesson 28: Review housing situation

Twelve months after renting our house, we were given notice as the landlord wanted to sell the house, he said. After mentioning the issue to our church pastor when he had visit us, he then suggested why we had not thought of buying our own house, rather than spending “dead money”, as he puts it. (This was the first time we had heard this term – which meant that by renting you are paying in money and that you will not have anything to show for it by the end of the tenancy).

We reasoned that we have just been in the UK for a year and we had not built up any credit history to qualify for a mortgage. He gave us contact details of a fellow church member, whom we didn’t know was a mortgage broker.

After some initial checks, the good news was that the mortgage broker, who has since become our very good friend, confirmed that we would qualify for a mortgage. We quickly looked for a house within our price range. We needed deposit – you are right again, we went to my sister and brother-in-law who made provision for us. Six months later we had moved into our own house in the UK. We thank God for His blessings – it happened a lot quicker than we had anticipated.

We know our situation was different from what others face. However, we encourage that you look at the options that are currently available, especially for first-time buyers like UK Government’s Help to Buy scheme etc. We also appreciate that in certain places like London, renting may be the most viable option as someone settles due to the astronomical cost of housing; but the bottom line is, review options available to you.

By the end of 18 months since arriving in the UK, we had built some substantial debt – car loan 1 (my sister), car loan 2 (bank), house deposit (my sister). Thankfully, our income was decent, and the loan repayments were not a problem.

Thank You

We feel that it may be an opportune time to publicly say Thank You to my sister and brother-in-law for the support they gave us to settle in the UK, as they have been part of our journey we are now sharing publicly. We continue to show our appreciation to them in private. They are a generous couple and their generosity continues even to this day.

After a couple of years since coming to the UK, we visited Zimbabwe and we had a wonderful time with family and friends. We had saved for this trip, so everything was ok.

Then tragedy struck. Within three months of our return from Zimbabwe, Wim lost her younger sister; less than 12 months later, we lost our nephew whom we used to live with (some people thought that he was Tim’s elder brother); a further 12 months, I lost my sister. We had to separately go back to Zimbabwe for the funerals – Tim went back with Wim for our nephew’s funeral.

Flying to Zim is not cheap and last minute tickets are even more expensive. We were not financially prepared for this. We put these costs on credit cards. Fortunately, we managed to secure 0% balance transfers which helped for limited times. Thankfully, I was getting promotions at work with associated salary increases and the repayments were manageable.

At one time some years later, we were planning to visit Zimbabwe for holiday. We bought our tickets directly from Air Zimbabwe. The airline office insisted on using debit card and not credit card (didn’t understand at the time why). A month before the trip, the airline went bust, stopped all flights from London and we lost the money. We had to rebook alternative flights and put the costs on credit cards again.

We were comfortable with the debt as it was manageable.

Lesson 29 – We needed an Emergency Fund

Another example showing the need of an emergency fund would come a couple of years later. We felt that our car still had a number of years of life left and we had just finished paying off the bank car loan. After MOT and service, the garage advised me that brake pads had worn out and were approaching legal limit.

In order to ensure that the car was safe and could last until the following year’s MOT and service, I arranged to have the brake pads replaced. After confirming that the work could be done whilst waiting, I took car in and waited for it to be fixed, as I had to attend an afternoon meeting in Warrington. As I drove out of the garage after the work, the car started sputtering, smoking and losing power. I even struggled to get home – just over 1 mile away. It could not be explained how work on the brake pads triggered such a serious engine problem. Unfortunately, the car could not be repaired – so we had paid for MOT, service and new brake pads and then scrap the car. Ouch!

Lesson 30 – Avoid Unnecessary Purchases

In our life in the UK, we have bought a number of useless stuff that we would regret later. We think the worst one was when scanning in an Argos catalogue we saw this on special offer – Cross trainer and Treadmill offer – pay nothing for 6 months etc. After discussing on why we needed this, we went for it – I think I was a little bit pushy on this one and Wim gave in.

This purchase caused us more problems than benefitted us. When the items were delivered, where would we keep them? From the photos in the catalogue, we had not fully appreciated the actual sizes of the items. You should have seen how crowded our dinning room became when they were delivered. This was by far our worst purchase ever (fortunately it was not very costly, but the mindset was in a wrong place). We eventually had to give away the equipment after they had hardly been used.

Back to our senses

Then we came back to our senses. The lightbulb moment came when we sat down and added all our debts. By this time our debt had increased to unbelievable levels – tens of thousands of pounds, but still manageable as my salary had been going up regularly through promotions and annual increases. We never struggled with the debt repayments, but it just felt so heavy and holding us down.

Then we decided to break the Parkinson’s Law (mentioned in the previous blog) which suggests that “Expenditure rises to meet income.”

The tide began to turn when we came across the website www.moneysavingexpert.com.

We started using the suggestions and links on that website. Our aim was to get to a point of debt free again. We had some quick steps to do

1. We had a family meeting with Tim and Nomsa where we informed them of our financial situation and what we were trying to do to get out of the situation. After recovering from the initial shock of money we owed, they quickly supported us.
2. We created an Emergency Fund – we started small. This was to cover things like unexpected breakdown of car, washing machine etc. Before this any financial shock would send us onto credit cards. Experts suggest that an emergency fund should be between 3 and 6 months expenses, but we feel that it should be more than that.
3. Improve Budgeting Effectiveness – A budget tells your money where to go, but sometimes we didn’t enforce that. Budgets should cover all expected/planned expenses e.g. monthly budgeted for one off regular annual.
4. We started what we coined CARD ATTACK. We would pay minimum payments on other cards and targeted one card where we threw all excess cash. (this is referred to, sometimes, as the snowball method). Since most of our credit card debts were on 0%, the order of attack was targeting credit card with the 0% offer expiring earliest. A couple of times we fell off the tracks but managed to get back on.
5. We moved away from the high end supermarkets to the discount supermarkets.
6. If we have not saved for anything, we would not buy it.

We would use the Martin Lewis’ Money Mantras from the website (skint is a British slang meaning – no money)

It worked!

Surprisingly, the changes highlighted above did not noticeably affect our standard of living. Our debts started coming down, and down and down. You should have seen our smiles as we looked at our spreadsheet monthly, with a pie-chart showing how much we were eating into the debt.

By this time Wim had finished uni and was working full time. We just threw everything at this debt. Within two years of putting our minds and efforts to it, we became 100% debt free.

We cannot believe the feeling – such a liberating feeling. No consumer debt – zero. Cars fully paid up. Only outstanding debt now is our mortgage, which we are now overpaying to finish it early.

Now we had an opportunity to look at some areas that we had never considered in the UK before – Investments (we will cover these later).

As you can see, this chapter is still work in progress but we are happy that we have managed to get back control of our finances by going back to the discipline that we had learnt over the years in Zimbabwe.

Lesson 31 – Helping Family Back Home

Wim and I believe that God blesses us so that we can bless others. Between us, we have a good number of siblings back in Zimbabwe. Economically, things have been hard in Zimbabwe with people facing everyday challenges for survival.

One thing we have witnessed since coming to the UK is that NONE of our siblings have ever asked for any financial help whatsoever. (I know – our case may be the exception). They all NEVER complain about their situation. We have received requests for help from other people – extended family and other acquaintances.

We have developed a system that we have found helpful.

1. In our budget, we have allowed a monthly provision to help support our families.
2. We join our siblings in supporting our parents back home and try to make their lives as comfortable as possible. At present, we have only two surviving parents – Wim’s mum and my mum.
3. Since our siblings NEVER ask for help, we try to keep our ears to the ground and look for areas and opportunities where we may be of assistance. Normally when we receive blessings, we look around to see how we can share that with family.
4. Where we can, we have tried to support in areas of education and support people become self-sufficient.
5. When someone asks for assistance, we are no longer embarrassed to say “We are sorry, we are not able to help at this time”. (Remember when we used to borrow money off our credit card to help someone)

Suggested Activity

We have told our story and how we have learnt our lessons – some of it the hard way. As an activity, we encourage you to discuss your debt situation. Normally there is a tendency to understate the total amount you owe – therefore it is important that you list everything down. Develop a plan to tackle your debt.

If you do not have any debts, good; try to find out better ways to manage and invest your money. Don’t forget that helping others is an effective way of investing.

This has been a long blog post – thank you for getting this far. Please share with others. Until next time, bye and God bless you.