A Financial Re-Think.

by jolyn on April 13, 2011

in Planning

Well, that was fun, wasn’t it? (See previous.)

Now that we have that crisis diverted, can I see a show of hands for those who may be conducting their financial lives differently in the future? No more can we claim our income is guaranteed just because we work for the government. Oh, we would have gotten paid eventually once Congress reached an agreement… But what about in the meantime? And what about the “non-essential” civilian government employees who were told not to bother coming to work until the politicians signed an agreement, because their pay wouldn’t be made up anyway?

From what I gathered listening in on cyber conversations, a lot of people were not prepared for the eventuality of not getting a paycheck, even for a day, let alone a week. Or more…

Some of them couldn’t help it. One military spouse in particular comes to mind: her family had just experienced a year of unemployment and her husband had recently joined the military. He was getting ready to deploy and leave her and the kids on the homefront. They’d depleted their savings during his unemployment and hadn’t had a chance to shore them back up, and she was scared. Can you blame her?

I’m not talking about people like that.

But what about the rest of us? Lest you think I’m picking on you, I can think back to just a year ago when my husband and I were not exactly prepared in the event his employer decided not to pay him on time, no sirree. We were going hog-wild and paying off debt Dave-Ramsey style: that is, keeping only $1k in liquid savings and putting every extra penny toward our snowball. Had we lacked a paycheck, even for a week, we had virtually nothing to draw on besides that measly $1000. Which doesn’t go far when you have a mortgage to pay and lights to keep on and food to put on the table…

We would have been forced to reach for the credit card. Or to not pay our bills on time. I know some of you were facing that choice this time around. Which would you have chosen? Did you even have a credit card as a choice? Hard-core Dave Ramsey fans would have already cut up their credit cards…

I think we have a responsibility to ourselves, and to society at large, to be as prepared as possible to help ourselves in the even of a financial crisis — even when it’s not of our own doing. Or maybe especially when it’s not of our own doing. It’s all good and well to whine and cry about how unfair it is and how Congress is still getting paid and How Dare They? and point the finger and blame everyone else. But that’s not going to put food on your table or keep a roof over your head. And it’s certainly not going to help your neighbor who may be worse off than you. And there will always be that neighbor. Don’t we want to help them out, too?

I think of the young family, new to the military, fresh off of a year of unemployment. It’s difficult enough to face your first (or second, or third…) deployment, let alone wonder if your husband’s going to be paid while he’s gone. In times of old, that young woman might have known that her neighbors would come to her aid. That food would find its way to her table. That her rent would get paid. That she would get by, with a little help from her friends.

I feel like we’ve lost that faith, and that feeling of responsibility: that when times get bad, neighbor will help neighbor. Part of it is that we don’t know who needs help: they don’t exactly go around with a sign around their neck. Part of it seems to be a lack of trust: what did they do to get themselves in such a bind in the first place? But much of it seems to be our inability to help anyone else because we’re just treading water ourselves.

I think this budget crisis woke a lot of people up. At least I hope it has. The crisis was averted a whole five days ago. Have you already forgotten?

I’ve been thinking about how we in the Budgets household might do things differently, both short-term and long-term. I’m thinking a little differently about our financial planning, and about what purchases we were thinking about that we might hold off for now. For example:

Short-term:

  • I did not re-enroll my youngest in Karate for the two months we have left in Ohio. That’s about $200.
  • I had told John that I wanted to get a new washer and dryer when we get to California in June, finally. We’ve always made do with used ones. I’m re-thinking that now.
  • John wants to get a motorcycle and has been shopping around. That purchase is on hold.

Long(er) term:

  • Continue to snowball debt. The crisis renewed my motivation to do this as fast as possible. See above.
  • Double our liquid savings. The original amount was arbitrary to begin with, and partly determined with the mindset that John’s military employment and income was secure. In light of the budget crisis, and of our becoming reluctant landlords for the second time around, we need to rethink our savings buffer. In my mind right now, doubling it is just until we pay off more debt. After that we should add to it even more…
  • Figure out how we should best balance bulking up savings with paying off debt.
  • Add income: Several months ago, I sort of stumbled into a way to earn a little income through a home-based business. I’m more motivated to continue doing the work necessary to maintain this business and allow it to grow, albeit slowly.

What about you? Are you making financial decisions differently? Holding off on purchases? Halting retirement contributions to pay down debt? to bulk up liquid savings? Are you making any radical changes in lifestyle to lower your cost of living? Looking for a new (non-government) job?

Please, do share.

{ 5 comments… read them below or add one }

Romeo April 21, 2011 at 12:25 am

Hi Jolyn,
That’s great that you have begin re-thinking your financial decisions. I work with many military folk, and yes, they were sweating hard when they looked at their pay statements that originally said they they would only get paid for one week, as opposed to their normal two weeks. I think that I have sufficient savings at this point, but definitely not enough liquid. So yes, it has made me rethink whether I should save the same monthly amount in retirement or focus on building my liquid savings. Still haven’t figured out the answer.

Romeo

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Annette Campbell April 21, 2011 at 12:08 am

The panic we feel about any crisis comes from exactly that feeling you mentioned–that we have no one to bail us out besides the ‘friendly’ neighborhood bank. Besides taking measures to improve our financial security, my husband and I have taken serious steps towards changing our whole lifestyle to be more community-based. Now we have a group of people we can trust to help us out. It´s not just a question of borrowing money. A network of local friends can trade childcare, eat together, and even shop together.

This last activity has been a huge blessing. We have a neat system set up to buy in bulk together and save a ton of money–money that goes towards our ¨snowball¨as you put it. We use a free online tool called SplitStuff (http://splitstuff.com) to organize ourselves. The power of collaborative consumption is not to be taken lightly!!!

If you haven´t heard about it, I strongly recommend looking up ¨collaborative consumption.¨ I am absolutely convinced that this is the change America needs to be able to face the situations coming up in the future. It´s like the moral of the old fable–¨Stand together, or fall apart.¨

Annette

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Tam April 16, 2011 at 12:52 pm

My head is still swimming. I am truly worried. We need to sell our house but It is so so not going to sell. I need to find a job and we are slowly paying our debt but it is so slow….

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jolyn Reply:

Oh, Tammy. I am so sorry. Where are you moving to?

Or should I say, *not* moving to. Yikes.

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Newlyweds on a Budget April 14, 2011 at 2:00 pm

we’ve always tried to have our savings as full as possible even while paying off debt (i’m just not okay with only having $1,000 in the bank) but I know that if worse came to worse and one or both of us lost our jobs, we could always rely on both sets of parents to help us out.

I know that it obviously would be a last resort, but I also know that we would never have to worry about having a roof over our heads because we could easily move in with either set of parents if we couldn’t make ends meet (one of the benefits of having a month to month lease).

Obviously we should be able to handle stuff on our own, but it’s good to know that we can depend on our families as well–I know some people aren’t as lucky.

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jolyn Reply:

When we were still quite young in our marriage, we had a time of transition when we moved from one state to another, and for a short time we had to live with my sister, who graciously put us up while we got on our feet. I’ve thought back to that time and wondered what we would have done had we not had family to help. Our options were very limited.

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Crystal April 14, 2011 at 12:18 pm

Finding out that my husband could be on the chopping block whether he does a great job or not as a school librarian means that we are building up our emergency savings to at least $15,000 (we’re at around $11,000 right now). That would be enough to keep us going for a year or more if one of us lost our job (we can technically live on one salary) or 3-5 months if we both lost our jobs at the same time. Then we also have stock $20,000 in stock we could move on to cashing in if necessary…

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jolyn Reply:

Yea, I really don’t consider touching the retirement stuff, although we do have some in a ROTH if worse came to worse…
We have $10k in liquid savings right now. I want that doubled and the non-mortgage debt paid off, and ROTH’s maxed out every year, and then some! Our local library suffered some budget cuts this year, and they reduced their hours, and raised their fines, and started having book sales instead of donating old inventory. Hang in there b/c this, too, shall pass, and I’m so glad for people like you who are planning accordingly.

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