************WARNING*********************
*************There is a frustrated rant below, read at own risk************

So this is the second part of our financial regrets. The first one covered the bad financial decisions we made ourselves; this part covers the bad financial decisions made by our parents which are affecting our current financial situation.

Hopefully, if this issue affects anyone out there then I hope it is only one side of the family. In our case we have both his parent and my parent’s bad financial decisions affecting our current situation. Both of our parents have not been very good with their finances through out their lives, despite being giving plenty of opportunities to secure their financial futures. His father always made a good income with whatever he turned his hand to, and he also won a lottery once, which if he had invested the money wisely, would have set his parents up for the rest of their lives. My father always had a good paying job to, both he and my mother received some inheritance money.

Despite their good fortunes, both sets of parents have unstable financial situations now that they are verging on retirement. Now I am aware that times have changed in the last few decades, whereas their parents before them did not have to worry so much about their pensions, as most pensions were provided by employers or the governments ( depending on where you live). However, this knowledge does not make me any less annoyed with their bad financial decisions and that because of them my BH and I may need to step in and help out.

What makes me probably even angrier is when they were younger and having financial issues, who did they turn to? They turned to their parents of course. However, now that they are grown and are parents themselves instead of turning to their parents, they will turn to their children. Which leaves the question for me of who do we turn to for help?

As you may see this is a sensitive topic for me right now....I'll return to it in a later blog.

Recently I have been posting about all the good steps that have been taken to secure our financial future. However, there have also been some bad steps taken in the past which are affecting our currently financial situation, which I'd like to record as a reminder and warning.

I will divide this topic into 2 parts. The first covering the decisions made by me and my BH with direct affects our financial situation and the second part will cover choices made by our parents which are directly affecting our current financial situation. I have decided on this split as I feel the first part is much more straight forward to explain while the second conjures up powerful emotions.

When BH and I first moved in together we both were very naive when it came to anything to do with money. We started off with about 3000 EUR. 1100 EUR went to pay the deposit and first's month's rent on our apartment. So we had very little left over and every penny was important. We were lucky that the apartment came with a washing machine and tumble dryer, fridge, stove and curtains. However, we still needed to buy a few household items like a mattress (we did not have a bed, we just slept on a mattress on the floor for about 3 years) and a microwave combi oven. In our very unrealistic view of the situation, I thought we'd only live in the apartment 6 months because by the time we'd have enough money to put down a deposit and buy a house. Little did I know it would take us 2 and half years just to have enough money together to place a deposit down on a bigger apartment and still just be sleeping on a mattress on the floor. So when we purchased the first few household items, we decided we needed to have the same sort of things we'd been accustomed to while living with our parents. This meant instead of buying a microwave for 150EUR, we brought the most expensive microwave in the store for 499 EUR.

We were so proud ourselves when we got that microwave oven home to our hole in the wall apartment. We made a fuss about setting it up in our tiny little kitchen ( it took up half the counter space available in the kitchen). It was so wonderful because we had brought our first grown up household appliance, one of many fancy ones to come. The first few weeks we kept admiring our new purchase and congratulating each other on what great taste we both had. We were like a right bunch of peacocks, pruning our feathers in front of each other!

Fast forward to last week, 4 years and a few months after our initial purchase and I am using the microwave to heat up milk, when it finishes it beeps, I take out my milk and close the door. As I'm preparing my milk I hear the microwave beep again. I've never heard it beep like that before, so I check this screen and see the screen has gone blank. So I check to see if I can change it back to normal. It does not work. So I try to reset it. No, that doesn't work. Eventually I unplug it then plug in the power cable again and no it still does not work! I checked the user manual but still it does not work!

So here we are, with no warranty and the decision to pay to have this expensive microwave fixed or to buy another one that is cheaper and more reliable. At this stage we are kicking ourselves; normally we would expect a cheap microwave to lat at least 5 to 6 years, at the very least! So an expensive should last longer, or at least you would hope. In the end we decided to buy another one, cheaper and more practical with a 5 year warranty. One very expensive lesson learnt by me and my BH.

Buy according to your budget. So all purchases we make now are carefully considered with a cost versus benefits calculation built in.

I wish I had realised this sooner, but I recently discovered two ways of benefiting from tax exemption, which will result in an additional 1020 EUR saved instead of paid to the taxman. So in effect, I found a way to give myself a raise curtesy of the government. I've done this by:

1) Enrolling into my employer's savings plan, which allows me to save up to a maximum of 600 EUR a year, pre-tax. The only catch is I cannot touch the money for 4 years, as if I do I will need to pay tax over the amount. At a tax rate of 34%, this means I earn an additional 204 EUR.

2) Maxing out our employer's pension plan contributions. This year I have increased our contributions by 2400 EUR, which means I will have an additional 816 EUR instead of ginving it to the tax man.


I love this tax exempt saving, as where else would I receive an annual return on investments of 34%?

Since I have found this site and several other personal finance websites, I have become more and more excited about creating a financially secure future for me and my BH.

When I first turned to the web for some help with our finances, I was very insecure and stressed about our financial situation. We always seemed to be so many steps behind everyone else we knew. I was faced with some pretty big anxieties about not only our financial future, but those of our families'. However, since being able to read about other people being in the same situation and how they are coping with it, I have managed to calm myself down from being worried and stressed all the time.

After reading so much about personal finance I have come to realise that I have managed to equip myself with some pretty hefty tools to use against even my worst money fears. This is itself is comforting. However, I have even gotten to the point where I can be so excited about new opportunities and goals that I find myself thinking about them over and over again. Budgetting, calculating, setting, re-setting and finally taking actions to make and achieve these goals. This excitement is a wonderful feeling and I hope that I never forget just how empowering it is to take charge of my finances and build something with them.

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As an exercise to keep myself on track and also for records sake, I am going to list the steps I have already taken this year to achieve some of the goals I set for us at the beginning of the year.

- We have paid off 1200 EUR of CC debt.
- I have signed up for my company's saving plan. This should result in a saving of 600 EUR this year, tax exempt.
- My BH will start maxing out his contributions to his employer's pension plan, which should hopefully kick in this coming month. I already do max out my contributions.
- I have opened up a free internet savings account with a 4.5% annual interest rate.
- I have set up automated transfers for monthly savings and several bills. This means I have less stress each month when it comes to ensuring all bills are paid on time. Only 3 line items on our monthly bugdet are not automatically deducted from our account( groceries, travel and extras).
- We upgraded our internet and downgraded the monthly costs from 30 EUR to 23 EUR.
- Gas/electricity bill has been reduced from 148.01 EUR to 137.01 EUR per month.

Wow, even I did not realise how much has already been done until I just listed the items. Can you tell how excited I am?

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One last note, I have found another goal I would like to track for 2008. Last year we earned 40.09 EUR interest on our savings. I am going to track what we earn this year and hopefully this number will start going up. Ultimate goal will be when we earn enough interest on savings that we can retire. Interim goal, try to beat the previous year's interest. Very optimistic goal, double last year's interest earned amount. We'll see what happens, but all in all I am quite happy about the progress we have already made. I feel we are on the right path.

I have been doing some research into the second question I had about pension savings, as discussed in my last post. I have found that it is better to contribute the maximum voluntary contributions to our employers'pension plans as the full contributions are tax exempt. WOOHOO!


I also need to make a correction, in the last post I mentioned we are taxed 38%, but if I take a look at BH's pay slip it looks more like 34%. I'll find out more from his next pay slip.

Even with just a 30% tax rate, that means we will be saving 420 EUR from his back paid contributions of 1400 EUR this month. Who does not like free money from the government, especially if it means you can save it?

The last couple of months BH and I have been focused on paying off our CC, with a goal of having it paid off by March. However just as that goal was within arms reach something came up. My BH's pension plan for his new job (new since August last year) has finally kicked in. This means that we need to back pay the monthly contributions for the last 7 months. As our pension savings are not very good for our age, we decided to pay the maximum voluntary contributions to play catch-up. This means we expect to pay a total of 1400 EUR this month to his pension. This is much more than we can afford to miss from his salary if we stick to the plan of paying off the CC by the end of March.

We have weighed out the budget and if we use the money we have stashed away in savings to pay off the CC to help pay the bills this month, we will be able to make it through to the next pay check. Hopefully we will also be able to keep our 1000 EUR emergency fund intact. The long term benefits of having that additional amount in his pension savings far out way the additional interest that we will have to pay on the CC ( about 20 Euros for the additional month).

Combined with his employer's contribution, that means his pension plan should receive a 2100 EUR boost in March. This will also mean that we would have already contributed a combined total of 2314 EUR to our pensions already in 2008. This will leave only 2486 EUR short of the goal for 2008.

This leads me to 2 questions that I have been trying to answer lately. The first is that due to my BH and mine's situation, should we save for our retirements based on the Dutch pension system or on the American pension system? This question is relevant for us as we both intend to move to the US to live eventually and because we will not be entitled to all the same benefits as Dutch people if we retire in the US. This question came up as I only realized we would not receive the same benefits recently.

As the Dutch pension’s savings schemes are calculated based on the Dutch retirement benefits model, much less personal savings are required for retirement income. However, if we do not receive the benefits, then we need to have saved ALOT more by now than we have actually saved for retirement (mini-freak out session). So I am currently adjusting my thinking to start saving as recommended by an American based retirement model.

Then the second question that has come up is whether I should be putting the additional retirement savings into a pension savings plan, or whether it would be better to save the money in a different way? I could open a trading account and have my bank invest the money saved up for retirement for us. I guess what might help us make the decision of whether we should be contributing more to the current employer pension plan or invest on our own would be what benefits the employer pension plan offers.

The plan is set up so that both the employee and the employer contributes a mandatory amount, then the employee is entitled to voluntarily contribute more up to a certain percentage of your gross salary. I am not sure yet if there is any tax relief on the voluntary contributions. I need to find this out as if there is tax relief, then the choice is already made for us. Considering we are currently taxed 38% of our earnings. However, if there is no tax relief, I ask myself whether it would be better to spread the risk and invest more of the voluntary contributions in a separate investing account with my bank.

As you can see I do not have the second question worked out yet, I still am lacking enough information to make an informed decision.