Saturday, July 20, 2013

Being prepared

That's a boy scout motto, isn't it? Always be prepared.

In 2008, right as the stock market was beginning it's decline and banks seemed to be going under on a regular basis, we were in the middle of having some major work done on our kitchen. We had saved for this work for many years. That savings, although earmarked for the kitchen remodel, was our cushion against any unforeseen circumstances. I always felt we were financially safe. Our mortgage was about to be paid off that year as well. We were secure.

Then it hit me. We were spending that savings on the kitchen work. Our safety net was slipping through our hands. We still had investments. But with the downturn in the markets at that time, selling stocks would not be a good move. That was when the thought occurred to us to build some new savings cushions, 2 in fact. One for medical emergencies. And the other for any other emergency that could come up (like the engine in the car just drops out the bottom, or some other such financial surprise). The medical emergency fund amount was based on how much our out-of-pocket for 1 year could possibly amount to, with our then current insurance. Having spent just 1 day in the ER a few years before, I knew how quickly medical expenses could add up. So the medical emergency fund was the priority. I reworked our budget to allow for hefty contributions to that budget item.

The other fund has grown more slowly. I add a little bit every month, even if it's just a couple of dollars. Over the years, that has grown to over $1000. All of that money is still there, untouched. Even now, with our current financial changes, I don't feel it's time to use that money. I feel there could be even greater challenges, as a possibility.

Several months ago, call it intuition or God's guidance, I felt compelled to cut our spending further, and bank more of my husbands income. So, basically for this year, we have been living on a good deal less than our income. As I draw up each month's budget, I simply don't allocate all of the income from the previous month's paychecks. I carry forward some of this income, in a "Surplus" category. While the total right now is not huge, it is something. We have surplussed about $3500 since the first of the year, Some of this is due to extra hours my husband was able to pick up, and the rest just living below our means.

I guess you could say that I'm a compulsive saver. I have always saved a little bit, no matter how small my income was. Some folks like to live right up to the edge. They are comfortable spending every last penny they earn. Other folks like to live well beyond the edge. They are actually comfortable accruing debt month after month. (You can tell by my use of words that this baffles me.) And then there are those of us who feel most comfortable when they are accruing a surplus month after month. I fall into the latter category. It's my comfort zone.

When some people see a surplus, they immediately think "whoopee! Here comes that dream vacation, new car, sailboat, etc." I know that for our family, we are better off just being prepared for the unforeseen.

I suspect that I am a more extreme saver than my husband. Although, at this point, I think he can see the benefits to my compulsive saving nature. In the next several months, we'll still try to maintain that surplus, as long as possible. We'll be growing our income and cutting our expenses, and likely dip into the surplus in the tighter months, so that we can stay on track for retirement and our kids' university expenses. Simply put, our bigger goals outweigh fleeting pleasures.

10 comments:

  1. I think you are in a very small minority. Did you feel social or family pressure to spend more? You must feel so relieved now because your long-time habits have paid off.

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    1. Hi anexacting,
      Did we ever! For our entire marriage it seemed we were making choices that went against what society (and friends and family) thought was "normal". Sometimes, I think it was easier to just let people think we were just desperately poor, rather than try to explain that we were so conservative with our money so we could save for that rainy day.

      Any other time in history, our chosen way of money management would have been the norm. I have drawn strength and inspiration from reading novels set in earlier centuries, or stories from the Great Depression. I guess I've learned to tune out what modern culture says we should want.

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  2. I'm voting more on God's guidance than intuition! And I suspect, when you got married however many years ago, that He already knew that putting such a frugal person in this marriage would have lots of benefits during tough times--just my take on it! :)

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    1. Hi Kris,
      Hmm, I hadn't quite thought about it that way. But I think you're right -- I am well-suited to dealing with hard financial times, better than many people I know. I do sometimes feel envious of those who don't seem to have the same challenges. But they probably struggle in their own way.

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  3. I am also one who prefers to live below my means to be well prepared. Does this remind you of the early years with your husband when times were tough financially, but very good otherwise?

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    1. Hi live and learn,
      That's a good example. Most of us struggled financially in our early married years, but we were still quite happy with our lives.

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  4. I'm definitely in the compulsive saver category. I'm always baffled by people who make plans for how they're gonna spend some extra money that comes in the door, because for me it all just goes in the bank and doesn't come out unless I need it. I've never really had funds for this and funds for that, I just save as much as possible. So far it's worked out pretty well, and I feel really blessed to enjoy such a level of financial freedom. I really don't think I could emotionally handle the stress of living paycheck to paycheck.

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    1. Hi Cat,
      Living paycheck to paycheck would be a nightmare for me, too. Talk about stress! My situation would feel a hundred times worse right now, if I also had creditors breathing down my neck.

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  5. I'm with you on this. I always feel more secure when there's a buffer of savings, however small, and prefer to pay for stuff with real money we've saved not credit. We're just about to use most of our savings to pay off a large chunk of the mortgage, but this still feels like saving rather than spending as we'll reduce our outgoings considerably, which will allow us to save more and, unforeseen circumstances withstanding, build up the reserves again quite quickly. Reduced monthly outgoings will also allow us to cope better with a situation like you're facing which is still a possibility.

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    1. Hi Sarah,
      When we made that last large chunk payment on our mortgage, that's how we looked at it, too -- a savings of sorts. It's freeing. For us right now, with a house paid off, we're not thinking, "oh we HAVE to sell the house because we can't make the payments!" Instead it's a choice. A matter of where's the best place to put our money, maintaining a large house or down-sizing and having more disposable income.

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I'm so glad that you stopped by today. Please comment, and let me know what you're thinking.