When you were worried about money a while back, what were some things you did to prepare for the blow?
So, that this person is referring to all of the vague posts I made between May and September about our financial and job situations. The situation is kind of explained in this post.
So here's the deal. Pink Hubby and I make approximately equal salaries at our jobs. Either of us losing our job means a 50% cut in total take home pay. That is no bueno. heh. Do not want.
Anyway. We are fortunate that both of us qualify for health insurance and other benefits for ourselves and our family. So thankfully, we would still be covered in those areas if one of us was to become unemployed. Mostly then, we were just worried about money.
First, let's talk bills. We have separate bank accounts and we each pay different bills, but we have them divided in such a way that each of us is spending [or saving] a pretty much equal amount. The basic bills we needed to pay (at the time of our scare) were:
--Mortgage and associated insurance, etc.
--Car payment #1
--Car payment #2 (bright idea we had, buying 2 new vehicles within 4 months).
--Water/Sewer/Garbage (utilities - generally stays about the same per month).
--Electricity and Gas (varies by as much as $100 based on our useage).
--Insurance (for both cars and personal articles)
--School (tuition, books and supplies)
Then there's the rest (either frivolous, or highly variable depending on our choices):
--XM Radio for one of the cars
--Other spending (i.e. personal or entertainment)
--Deposits to savings account
Any way I stretched our cash, I found that cutting our income in half meant that we'd be able to afford all of the things on the 'basic bills' list, except for school (and loans are an option for covering that). But we could JUST BARELY afford all of those things. I'm talking like 10 bucks to spare each month. And that's assuming we don't eat, drive, or spend any other money, and no emergencies arise. (Obviously Netflix and XM were going to need to be canceled.)
What to do?
Well, for one thing, I realized that we had almost no emergency fund. This was because (um, remember?) we had JUST bought the house. We reached deeeeep into our pockets for that purchase. What a lovely time to get uncool news! Since we had at least 3 months until the job loss could become a reality, I sprung into action. I took a look at our recent credit card statements to see where all of our money was going. I was shocked to see how much money we spent on things like eating out and renting movies. For example: we subscribe to Netflix (including their on-demand service for the PS3), but we ALSO were spending $50+ a month on movies from Hollywood Video and Blockbuster. *And* we were going to see movies at the theater (sometimes multiple showings) almost every weekend. That's over $120 a month, just on movies. That is a fail. We were also buying a lot of snacks and fast food, and usually going out for breakfast ($20+ per meal) on the weekends. $80 a month on luke-warm waffles and weak coffee? Ouch.
And did you see savings on those lists above? There wasn't room for any without the second person's income. Sad face. How would we possibly be able to save for a honeymoon, if we couldn't save at all?!
So, I created something I called "The Penny Pinchers' Code of Conduct". Here are some excerpts (there were about 10 rules in the list, total).
Thou shalt not:
...Eat out for lunch more than twice a week, once a weekend. Total of three eatings-out for lunch per 7 days. Ice cream or gas station snacks totaling over $5 counts as eating out. If disobeyed, subtract from the next week.
...Eat out for breakfast more than once per month. If broken, subtract from the next month.
...Buy more than a total of 2 movie tickets per week. One person may go to two movies, or they may see one movie together.
...Buy personal items costing over $20 without consulting the current credit card balance, the budget, and the use for BOTH people prior to the purchase. If there's no dire sale on the item, sleep on it for 2 days. Exception: A) You have a gift card for it. B) It is a gift for the other person.
I put the 'code' in a Google document. We started following the 'code'. We watched as our credit card bills went down and our savings swelled. We stuffed every penny we could into savings that summer.
We did NOT magically figure out how to live on just one income. There just was nothing I could cut to make that happen. Obviously the person whose income was going to be cut was going to have to find another job (at least a part-time one). We also tried to look at the silver lining of this: perhaps a part-time (rather than a full-time job), would allow more time to focus on school. We both could use that. So if (by pinching pennies) we could afford for one of us to have that luxury, it'd be cool.
But as you know: the necessity passed. The storm blew over. We're both still happily employed at our same jobs.
What didn't blow over was the new habits we have formed. It's amazing what a little forceful change will do to a person. We still hardly ever go out for breakfast - we do it far less than the once-a-month mentioned in the code. We also rarely eat lunch away from work, nor do we go to movies in the theater very often at all. (These two habits are mostly due to being busy with school though - things tend to change a little in the summer.) We are overall a lot more careful with our money. I never stopped hoarding extra pennies and looking for the best deals, and as a result, we were able to pay off my car. And pay for this trip. And our new bed. And still continue to sock money away for the future.
Eliminating that car payment means so much to me. Not only because it's great to be 'free and clear,' but because if this kind of situation arises again in the future, we won't be stuck. We'll have enough to pay for everything we need. Knocking one monthly car payment off the list did that for us. [Imagine how great it's going to feel if I can set my plan in motion to pay off the *other* car later this year?!]
Sometimes we slip, and sometimes we do awesome. But my ultimate goal (aside from reaching a point where we are free of debt) is to keep us from being in that awful, crippling situation we were in 9 months ago. Knowing that we couldn't afford to live on one income, and cursing ourselves for allowing our financial strains and payment commitments to put us in such a bind.
As an aside: You may have noticed that I talked a lot in this post about what *I* did to make all this happen. That's not because Pink Hubby wasn't involved. It's just easier for me to talk about it all from my perspective. I did do a lot of the figuring out, and I did write most of the 'penny pinching' code. But we were both involved in developing the financial plan that's been working for us.
P.S. Even though I am no longer answering questions on a regular basis, I am still accepting new ones here. My ongoing plan is to answer them on this blog, whenever I have time, until the inbox is empty. Once it sits empty for a week, I'll disable it.