One thing I know well is debt. Small wonder this is: I lived with debt for quite a few years before we reached a crisis point and dealt with it once and for all.
Debt, however, is just a symptom while the illness is in a number of behaviour patterns we acquire on the way.
My illness was in:
- Refusing to talk about money;
- Refusing to check on my money;
- Convincing myself that I need stuff (I didn’t really);
- Not having a big, fat dream for my life; and
- Being sloppy about money.
How can one be sloppy about money, you may ask?
Well, let’s see:
- I’ll lend people money and forget about it;
- I never knew how much cash I have in my wallet;
- I’ll always pick the tab when out with friends; and
- I’ll leave money ‘on the table’ because it is too much bother to do anything about it.
Most importantly, I somehow always neglected to claim what is due to me. Want an example?
I travel for work quite a bit and this means claiming expenses. Did I do it? Yes. It just took me on average six months to claim my expenses because I hate filling in forms, you see.
This kind of behaviour is bound to get you in debt and very likely keep you there.
Debt is like any illness: cure is in tackling the causes not simply treating the symptoms.
Paying of our debt, and staying out of debt for about eighteen months now, came together with learning to get what is due to me (us). Today, I claim my expenses and do it on time.
Here are three examples of large claims we made which we would have probably ignored before…
“Make sure to get what is due to you!”
…became our battle cry.
Example 1: Increasing the interest on a credit card without letting us know
This happens. Credit card companies do increase the interest rate on borrowing.
When this happens, or any other change to the rules and conditions of the credit card, we usually get a letter from the provider telling us that.
This was not the case with one of our credit cards. It was John’s (my friends, meet my husband) and he’d had it for about twenty years. During this time the credit card changed ownership several times. This can happen as well.
What shouldn’t happen is for the last provider (MBNA) to jack up the interest by several percent without informing us.
John checked the balance from time to time (remember the behaviour about not checking ones money) but never noticed that the interest has changed.
(Note: John did notice that MBNA don’t calculate the interest correctly and make quite a bit of money this way but this is another story.)
When he finally clocked this up, John put the case to the ombudsman and won.
This cost MBNA over $15,000 which went immediately to our debt repayments.
Lesson 1: Be prepared to claim what is due to you if you’ve been wronged.
Example 2: Underpaid Child Benefit
Now this needs a bit more explaining for my friends in the US.
In the UK, there used to be a universal social payment that was known as Child Benefit. This used to be paid directly to the mother and was intended to help towards the support of children. Child benefit was worth $36 per week for the first child in a household and $23 for any subsequent child.
Not much but we saw it as our right as part of the welfare state (this is part and parcel of the same welfare state through which we have free access to healthcare and education). This is all changing at the moment and we as a family are not eligible for this any longer.
In March 2012, John write a commentary on the UK Budget and his key points were about the problems with changing the Child Benefit.
I read his article: after all I’m the Mistress Supreme of The Money Principle (or the publishing editor, in more tame terms).
“John, you’ve got the Child Benefit payment wrong.” – I said. “We certainly don’t get $36 per week.”
John’s numbers were right. What had gone wrong was that our third son was never changed to be the first/only child in the family.
As a result we had been underpaid a bit of Child Benefit for a very long time (about ten years).
We contacted the appropriate agency and they paid the different without any problems.
This was over $5,000 (and it made a nice lump sum payment towards the debt).
Lesson 2: Learn what is due to you! Having a budget is very useful but not enough.
Example 3: Sneaked in Payment Protection Insurance (PPI)
You may have heard that claiming PPI is all the rage in the UK at the moment and has been for several years now.
It is not a fashion: it is a really big, bad scandal. In a nut shell this is a payment protection insurance that allows borrowing to be repaid if the borrower become ill, dies, loses job or something else that can prevent him/her happens. Thing is, that the cover is for the minimum payment and it is for a certain period.
In other words, not terribly useful.
Still people were duped into buying 34 million PPI policies since 2001 and these were found to be mis-sold. As a result, almost $24bn were set aside by banks and building societies for compensation.
What this has to do with us, you may ask; after all we are financially literate people who are not likely to fall for something like that.
You’d be right: we didn’t. Still when John was checking some financial statements from the mid-1990s he noticed, for his great surprise, that we’ve been charged PPI for several years.
We could have noticed earlier. But we didn’t look for PPI payment because we never bought it: the bank sneaked it in.
For this one, our claim is still with the ombudsman and we are waiting to hear what the outcome is. I won’t be surprised to get a payment of several thousand at the end.
Lesson 3: Check regularly whether you are paying for something you haven’t bought.
My examples probably don’t have direct equivalent in the US. Still the message, I believe holds:
“Make sure to get what is due to you!”
For that you need to know what is due to you, make sure that you are not paying for stuff you haven’t bought and be prepared to fight if you’ve been wronged.