The infamous benefits affair of the Dutch tax office

 

Dear Bloggers,

 

Let me tell shortly that many years ago we brought our kids to childcare center and before we had a childcare mother before they had to go to school and sometimes after schooltime they went there as well. At these days our lives were running smoothly I was a sailor on passenger vessels and my wife worked for one of the gas and electricity company and later on for the phone c company. We earned enough to live on and we got support of the tax office for the child care part. Unfortunately they f*#ked up big time and we had to pay back all of the so called support. It turned my stomach upside down when I saw the numbers on the bill. I phoned them If we could agree on a payback schedule and man they were though. We lost all our savings and we had to sell the car to fulfill their needs. I could lucky enough agree on a down payment for the rest so we at least kept a roof over our head and could feed our kids

 

"Just go to your room for a minute, sweetie," I told our youngest daughter as I briefly rub my 10 -year-old daughter's back. "Why?", the girl asks. "Because Daddy is going to tell things that were pretty annoying to us. Or do you want to sit in?" She shakes her head, no, it's old news to her in the years that have gone by she became a young lady who is 19 now. And she has homework to do. Otherwise,  it’s quiet in the house: the oldest daughter is at that point in life that she is living together with her boyfriend and had some therapy. Our oldest, is going on a study to go and work in childcare. "She lives just a block away and she is trying to getting away from it all and build her own life.”

 Our daughter who is now nearly 24 who had to deal with a lot of our problems and learned a lot about the real world and that the tax office is able to send you down on poverty. "I thought I wasn't allowed to talk to anyone about it," she tells. I can only be proud and smile. "Brave kid I have, huh," says a proud dad "Telling all bailiffs and creditors of all these companies that they had to call back or come back when her dad was home. That is something what we kept hidden for years. I'm so proud." I put two glasses of tea on the table and sit down, let's have that conversation about those unpleasant times. "Every time I talk about it, the chaos in my head gets a little more ordered, it feels a little lighter. And it has to, it has to get lighter." We are one of thousands affected by the now infamous benefits affair of the Dutch Tax office. Me and my wife and  two daughters have "stumbled into the financial abyss," as she calls it, and the family still hasn't quite clambered out of it. "People see this house, with furniture, a car out front, and they think: they have it good. We have it better now than we did then, but we're still in debt. You can't always see poverty on the outside. I would love to shout from the rooftops what happened. And at the same time, I don't know if I can find the words. Only now, more than fifteen years later, do I realize all that has happened. Then right after that I think: I just don't believe it. I can't believe this happened to us."

 

We are writing 2014, I am 46, just being a father of two girls one is fifteen and the other is ten. We got married, seventeen years ago and we were moving into our new house in Lippenhuizen, Since we both work, we did need childcare. Part time. So my wife tells me to apply for childcare allowance at the Tax Office. Not much later, she is on sick leave as she has been mentally destroyed by a manager who tries to get rid of people who are standing in his way. After two years she loses her job because the company she works for wants to end her contract as doesn’t recover soon from her CPTSD. She is not able to take care of anything and leaves us with the administration of our family, so we want to stop the allowance. Then follows a message from the Tax Office: 'The amount to the daycare has already been paid out.' 'But I'm no longer at that daycare, my child hasn't been there,' is my defense. They don't care about that at the Tax Office, because we eventually had to pay back three thousand euros over that same year. I just had no idea how. "In retrospect, all the bells should have rung, we should have done everything at the time to resolve it. But I was not the best bookkeeper that you can find and together with my daughter we tried to pay all the bills and debts and we made several phone calls explaining our situation hard, in the mean time I had to fight for my job, getting a lot of understanding from my boss but getting rejection after rejection, from the Tax office to get a solution to pay everything back. And they were pretty stubborn. Luckily we could close payment deals with other companies and we were in the middle of my daughters exams. We got life slowly back on the move. It was total chaos."

 

From the stress, my wife gains more than 10 pounds, due to the medication the medication made her life bearable . "I used to learn from my own father: make sure son that you can keep your own pants up. I thought that was SO important." I was retraining and working for the bus company on a temps office contract. Now things should work out, at least that was what I was thinking. But it doesn't work out, because in order to work, my wife she needs care and our youngest needs childcare. We were also duped by the new care, things have been changed in the tax system and the shelter gets the money straight away, All of a sudden we received the bills and reminders. Desperate and in slightly panic, I also wonder: have I been too naive? "At bad moments I almost break down from feeling stupid," did I make the same mistakes again?

 

I probably could write a book about it, but in a nutshell: the financial misery is increasing, as the debt is now several thousand euros. "And then we did something we should never have done. We took out a loan to pay off the debts. We thought we would be able to hold out for a while." As I say that, our second daughter walks in, along with Mom. She goes upstairs as she doesn’t want to interrupt while I am writing this story and my wife plops down on the couch: "Another long day ahead of us." "But not as long as it used to be," I complement her, and for a moment our gazes cross. We can remember it well: how she worked day shifts, and I worked late and night shifts, how we have struggled in their off hours and weekends. "If I had to do it again, I would probably fall over. We barely saw each other, the guilt and debts grew, we stuck our heads out and my wife’s mom and dad lend us several thousand euros which we paid back with every penny we could miss. At least we did not stick our heads in the sand. What else could we do?" We didn't really talk about it. Not with each other, no time for that, and my wife could not follow this anymore as she was mentally destroyed and had enough to just get through the day. 

And no we did not talk about it  with others, too much shame. And it feels like failure to me. In my family, you don't hang out the dirty laundry. "And we had two kids that needed clothes and they had to get their stomachs full, because we were poor it did mean to ask the kids to help out sometimes but we luckily never ended up in a marriage crisis." At a certain moment we closed our doors more and more. "Only her mother and other relatives we still allowed here. She knew about it and helped without naming it. Then my mother in law she'd say, 'Come on Jacob, put on your coat, take the kids and we'll go to the Aldi and you fill up the shopping cart with whatever you want and what the kids like. I'll pay for it.'"

 

The mail became more imperative, "In the name of the king," it would say. And: 'Restraining order. Bailiffs followed. "We taught the children: when the doorbell rings, act very carefully, they must not enter our home. So our kids went to the door when the bell rang. Even when bailiffs rang the bell." My daughters told them to come back an other time. They couldn’t do anything as our daughter was a minor and my wife was very ill and could not talk to them.  She was bullied, at school, she only told us that in a later stage. Just like that she only told us as well later, "I was hungry pretty often. "That's what kids do. Who see: mom and dad are struggling, they spare them. Children have a thunderous sense of when something is going on." An empty refrigerator, second-hand clothes and, at one point, no longer than five minutes showers. "As a parent, you pretend everything is normal. I made fun of everything."

 

There were agencies demanding money, but no agencies were offering help. "The school didn't come here, they immediately called in community service. Terrible times, just trying to remember?" Says my wife and she nods, "You were checking every day before school to make sure they didn't have holes in their clothes, putting those lunchboxes as full as possible so no one got suspicious." One time our youngest had a hole in her shoe and she told her teacher that we did not have enough money to buy new ones for her. "The next day the teacher got her some shoes to keep her feet warm." Me: "I felt so embarrassed and empty and felt I had totally failed as a father." Debts had now gone up to our top all because of the loan, fines, unpaid bills. The pressure on our relationship was also mounting and no I am not a quitter so it was not going to result in a divorce. We sold our house and moved to a smaller house, we took the money that we earned out to pay off debts the house we bought back was needing a lot of work to be updated and so we wanted to get a higher mortgage only the bank would not give any credits so we had to get a loan again. We are in the middle of the process with the Tax office to get this fixed so we can live a happier life.

 

Our (s)old house 

We are now applying for help at the council as our children missed a lot due to all of this and through a social worker there might be some money for a new bike and school stuff for the children. "It was the first social worker who cared about us and applied for a fund.".

The children's rooms may have been furnished, but we sleep on a  bed that is almost thirty years old. The mattress is in a poor condition. And then comes the day when my  body signals that it's too much. I suffer from arthroses and I did end up in the hospital care. This is followed by rehabilitation getting of the meds that I have been on for years and later at home. Meanwhile, the family no longer has extra debts only for the house. The refrigerator is stocked again and hot water flows in the shower again. I just share our story, thinking we have been lucky they did not take our kids from us and we have survived this crazy part of life. "I asked my daughter if she was sure she is okay with her youth?  Then she said, 'Dad, if we hadn't been so embarrassed, and unknowing maybe help would have come sooner.' She is so wise." She has become very price-conscious, I still go together with her to the supermarket as she doesn’t have a car yet. She has given herself  some pocket money, but hardly ever spends it. "I don't want to use that until I need it," she then says. "When we saw the other day that some euros had been debited from her account at a clothing store, we joked about it at the table: 'So, did you finally spoil yourself?' Then she told us she had bought a shirt for her and her friend." As her friend had to choose either paying the food for the coming days or this great shirt. She has a good heart and when the time is right she will pay me back anyway. 

 

"My tears, they've been so on the surface the last few months." Breathe in. Exhale. "My daughters are too mature for their age. We are doing pretty well now; we are slowly healing, I think. I am teaching the kids that they are allowed to feel what they are feeling. They are allowed to cry and talk about everything. I didn't do that myself for too long. Now we are learning this, together, as a family. But the childhood of those girls, part of it was taken away from them. And I am kind of wizard if it comes to solutions in life itself, although loosing your childhood is irreplaceable. And no I can't buy that back for any amount of money."

The Old Sailor,

When you are old and grey

Dear Bloggers,

I came to these thoughts when my nearly 80 year old dad got hospitalized. And after a couple of days he was worried sick about how he could manage at home in this condition. He got a place for the coming weeks in a pensioners home to recover and possibly he might stay here. But that is up to him of course. As my mum past away nearly eleven years ago he is living on his own. Although he is not that mobile as before he does his best to mix and mingle, his health is becoming a bigger and more often an issue. So the question is what is wise and how will my future be. So here is my conclusion that there are very big differences between married, widowers and single persons.

I’m married…and totally bored with articles complaining about the questions couples are asked by concerned friends and family as I worked outside the country as well. For several decades, the supposedly offending questions have not changed: Why did you get married? Are you afraid of being alone? Are you unhappy? Will this relation last? How will you take care of yourself when you are old and grey and your partner is not there anymore?

Of course, no one likes having to defend her or his personal situation; I wouldn’t like defending mine (although to be honest with you, no one ever seems to be that interested in asking me about my relationship status).

But, whether you like being asked or not, the last question is a good one if you are single, married or a happy gay couple or whatsoever with no intention to think about what is coming on your path, then what exactly is the long term plan? I don’t just mean in terms of who is going to take care of you when you can no longer take care of yourself, but how are you planning to afford old age?

A woman who is thirty years old today has a 29% chance of living beyond her 90^th birthday and 12% chance of living beyond the age of 95. A man of the same age has an 18% chance of living beyond the age of 90 and a 5% chance of seeing his 95^th birthday. Yes we are getting older and older.

These predictions do not take into consideration the possibility that major medical advances will radically extend life expectancy, which given the time frame is likely; most of today’s nonagenarians never expected to live this long.

Every one of us, regardless of our martial status, needs to plan for the possibility that we will live for many decades after we have stopped working. But the need to plan for widows and singles is much greater; not only are they more likely to find themselves buying the services (like housing) but they are likely to be buying those services on a much lower income.

Being married does not provide you with a guarantee that you will have someone to care for you when you are old (although, you have to admit the odds are much better than when you remain single), but being married makes it much easier to accumulate wealth over your lifetime.

Research has shown that the wealth level of married couples at the age of retirement is significantly higher than that of both single men and women, with single women heading into their sunset years with the lowest level of wealth it is less than one third the wealth level of married couples.

And because married couples are able to accumulate more wealth, their income in retirement is also much higher. In fact, one study found that at the age of retirement single women could anticipate living on an average income of only €9.000,- per year and single men on an income of €12.950,- per year, compared with an annual average income of €29.000.- for married couples.

Part of this discrepancy in wealth and income can be explained by differences in the earnings of married men and single men (married men earn more) and the gender wage gap. That strange enough is still existing

The big difference, however, is that it is simply cheaper to live as a married couple than it is to live alone and that lower cost easily translates into higher savings for married couples. And, of course, it is also cheaper to live as a married couple post retirement, which means that married and unmarried seniors experience large differences in standard of living.

A couple of weeks ago I was reading an interview with some well known economists and financial experts to share their biggest financial mistake. I told them that my opinion was just staying single. Don’t get me wrong, there are benefits to not being married, but those benefits come at a high cost in terms of long-run financial well being. As even the tax is still different between married and unmarried couples. That is weird and old fashioned.

Unless you already have a concrete plan, if you are single and someone asks how you will take care of yourself when you are old and grey the answer really should be this: “I have no idea, I worry about that myself.” Live life as you want it but I think that a lot of things in the world need to be changed to a more fair way of making a living.

The Old Sailor,

You might lose thousands when refinancing your mortgage

Dear Bloggers,

When you and your spouce get into the adventure of buying property you need to borrow some money if you are a regular Joe like me and no I did not marry a rich chick like Paris Hilton. So you end up at a bank (too expensive and complicated as I didn’t have a regular job.) I am not a financial wizard and yes I must admit my wife understands these things better than I do.

We had just borrowed about two hundred thousand Euros and my question was pretty simple: "How do we pay you back?"

The woman on the other end of the phone, however, couldn't tell me. Ten days had passed since we signed the papers to refinance our home and, with the summer holidays approaching, I was worried our first payment would be late. She tried to soothe me with perhaps the most misunderstood phrase of the refinancing process: "Don't worry. You get to skip a payment."

Had I listened to her, it would have cost us thousands of euros. And if you are one of the millions of homeowners who will refinance in 2013, it could cost you, too. 

If your resolution is to save money or get control of the family budget, refinancing remains a really good option. But the idea that “skipping” the first payment can be pain free, financially speaking, is a myth, repeated over and over by loan officers like mine. Sometimes they are lying, sometimes they are misinformed and sometimes they are just trying to get an annoying borrower like me off the phone. But with rare exception, they are giving bad advice. (News flash: Whenever a bank seems to be doing you a favor, it probably has a hand in your wallet.)

Real estate transactions are already confusing enough. There are questions surrounding when you make your last payment on the old loan, when you make your first payment on the new loan, how many extra days of interest you pay toward both your old and your new loan, and when you are paying for both loans. We'll get to those tricky issues in a moment, but the priciest mistake you might make in a refinance is also the simplest one to correct. 

You've heard this before, but this time, it's probably true: mortgage interest rates are at historic lows, and there may never be a better time to refinance.  It's hard to imagine rates going any lower than the 3 percent range they are at now, but it's easy to imagine that, at the first signs of a real economic recovery or real inflation, they will climb sharply during 2013.  The low interest rates that the Nedrlandse Bank has imposed to boost the economy have been punishing for many, notably savers, who can barely earn 1 percent interest on their bank accounts and certificates of deposit. The one perk for consumers from the bank’s interest rate policy is the ability to get cheap home and auto loans. If you haven't refinanced your mortgage in the past 24 months or so, you are missing out.

Fortunately, many Dutch homeowners have gotten the message. According to the Mortgage Bankers Association, mortgage holders engaged in €603 billion worth of refinancing in 2012. In fact, more than four out of five new mortgages in 2012 were refinanced loans, not home purchases.
I wish there was a way to know how many of those borrowers chose to skip that first payment.

'Can I get that in writing?' 'No'

My loan officer was lazy, I believe, and -- knowing that my loan had closed and all the commissions were guaranteed -- just wanted her off the phone as soon as possible. My wife’s  call was unusual.  She is always overly cautious when she sets up any kind of new loan payment, as the chances for error are great: a wrong loan number on a payment, a bad address, etc. So she always makes the first payment early to make sure nothing goes wrong.  That good habit proved profitable this time.

When we signed the loan papers, there were no payment instructions in the closing documents (not terribly unusual). My loan officer said I would receive payment coupons later.  But when 10 days passed, and we heard nothing, She called them and She was sent to the bank's customer service line, where she was informed that there was no record of our loan. (Did that mean we didn’t have to pay it back? Sadly, No.) 

Customer service transferred me back to my loan officer. She assured me that their computers would catch up to my urge to pay the loan, and we’d get payment information soon. Incredulous that they seemed not to want my money, My wife persisted. She tapped a few keys on her keyboard, made us wait a minute, then told us that our loan had funded on May, so I didn't have to make a payment until June. 1.
"But my documents say repayment begins May. 1," I said. "So you're saying there will be no late fees if I don't pay May. 1?"
"
Yes," she said.

"Can I get that in writing.?”

"No. I can't do that."

At that point, I did what any mature consumer would do: I laughed. And then I muttered something about the 100 pieces of paper they just made me sign, with innocuous documents putting the finest point on everything you can imagine, like the form I initialed in multiple places agreeing that, yes, I am known by Jake, Jacob, Mr.J. and various other nicknames. Yet I couldn’t get the bank to put something in writing saying when we should make our loan payment?

Our loan officer didn't laugh, but eventually she put my wife on the phone with a supervisor who sounded very grave. She'd done additional research, she said, and found out that the reason customer service couldn't find my loan was because it had already been sold to another bank. 

Steep penalty anyway
But I'm not writing to warn you about late fees. There's a much bigger culprit here you have to worry about.  Had I followed my loan officer's advice and skipped a payment, even if the bank waived the late fee (which the manager said was likely), I would have paid a steep penalty anyway.  You've probably guessed the punch line: there's no such thing as skipping a payment. In reality, homeowners are borrowing that money and extending the loan term for an extra month.  The payment will be tacked onto the end of the loan, with interest.  How much? If it's a conventional loan, that’s 30 years’ worth of interest.  Effectively, you are borrowing one month's payment for 30 years. Ouch!

"Skipping is a misnomer. A better description would be ‘deferring with additional interest added,'" 
Just how much extra interest can skipping that first payment cost you? There are too many variables to create a decent rule of thumb. But let me give you an example of how I think it would be. A payment that is miniscule to one is a fortune to another. I’ll give you the numbers, then you can answer your own question. They are for a €100,000 on a 30-year loan at 6 %.

The initial interest payment on a €100,000 loan at 6% is €500. It is .06 times 100,000 divided by 12. If you skip the first payment, the €500 is added to the balance, making it €100,500. In the following month, your interest payment will be €502.50. The additional €2.50 is on the €500 you skipped. Further, the interest payment will remain higher throughout the remainder of the life of the loan, relative to what it would have been had you not skipped the first payment.

 
If your loan runs for the full 30 years, you will end up paying an additional €2993 of interest. If you pay the balance off after 15 years, it will cost €864 in additional interest. If you pay off in 5 or 10 years, it drops to €205 and €486.

Forget the €75 late fee. That's real money. Hmmm...a payment that is miniscule to one is a fortune to another.

Some loan officers say they only won't offer the "skip-a-payment" option unless the refinance closes toward the end of the month, when the homeowner might have trouble coming up with the extra cash for closing costs and a fresh mortgage payment close together.  Others say they offer it all the time.

To be clear: Most borrowers don’t actually complete their 30-year loans before moving or refinancing, so few would end up paying that high a penalty. Also, it's important to note that my bank didn't even hold the loan, so they weren't profiting from the “skip-a-payment” advice.  I believe this is usually a lazy mistake, not a greedy one. Still, the basic truth holds.  Don't be tempted to skip a payment when you refinance unless you really, really need the cash for some unusual expense ( Christmas credit card bills are probably not the best reason.)

Skipped payments are not to be confused with other loan closing related interest payments, including:

Your last payment on the old loan. You can't skip that, either. If your loan closes near the end of the month, you should still make the scheduled payment to your old bank. Why?  Interest is actually paid in arrears, meaning you pay at the end of the month the cost of borrowing the money for that month.  It's confusing, because mortgage payments are really two payments at once -- last month's interest and next month's principal.  

To keep it simple, if your loan closes on the Nov. 30, you will be paying November's interest with your Dec. 1 payment, along with December’s principal. You won't need to make the December principal payment if you refinance on Nov. 30, but most folks pay far more in interest than principal because they are early in their loan's term, so the overpayment won't be large. Just pay it to avoid late fees, and enjoy any refund that comes your way. 

Pre-paid interest. When your loan closes in the middle of the month, your new bank will make you pay up-front (as opposed to in arrears) daily interest for the remaining days of the month. If you close on the 20th, you'll pay 10 more days of interest payments.  That's OK, it means you won't owe the money on the back end of the loan.

It's important to keep all these quirky, refinance-related interest payments straight when talking to your loan officer, so you'll know what to do when he or she suggests you can skip a payment. 

None of this should scare you away from refinancing, which is really the only way you can make the recession work for you.

But remember, you are refinancing to save money, and you probably shopped around trying to save €50 here or €100 there on closing costs; don't lose thousands of Euros because of one false move after closing.

The Old Sailor,