Finances & Money

What could you give up when you’re in financial trouble? – Part Three

In Part One: Luxuries, I outlined the few expenses in our life that could easily go if we wanted to save a few bucks extra, pay off debt faster, or buy that giant 60″ plasma TV (with a few months savings of course). In Part Two: Semi-Luxuries, we dug deeper into our budget and cut a few expenses that would make our life uncomfortable, but still allow us to function in case, say, Stacie lost her job.

In Part Three, I’m going to discuss our options for cutting out some bare essentials in case I lost my job (and maybe even if Stacie lost her job too). You see, I can cover our housing with one paycheck, but it would take her entire month’s pay to cover our mortgages, with nothing left over. As a sidenote, we don’t pay each of our bills separately; we merge our money and then pay bills together. For us, we both earn an equal share of the income, even if the salary distribution is unequal. Honestly, Stacie does twice the work I do, but her field is unappreciated while mine is high-demand.

Anywho, let’s get back to the issue of financial trouble. What would we do if I lost my job? Although I find it hard to believe that I couldn’t find another job very quickly, humor me in this one:

Giving Up the Essentials

You may have noticed that I didn’t include retirement contributions or charity in the first two parts. The reason is that I learned that as long as you can give to yourself (401k, IRA, etc.) and to others, you should do so before treating yourself to “luxuries”. In the 4 years I worked at my first employer, I only contributed to my 401k for 18 months, and I look back now and wish I contributed the whole time due to the great match. Too late now, but I can learn from my mistakes.

Retirement Contributions:

If everything went downhill for us, we would have to cut out retirement contributions to our 401k’s (especially if I/we don’t have a job anyway), and to our Roth IRA. It’s silly to give a number here since we may not even have the option to contribute, but it’s over $500 per month.

Life Insurance:

I admit, we have a couple whole life insurance policies. I know, I know, term is better, but we already have a vested equity in the policies, so I don’t have a reason to mess with them. However, the premium is a few hundred per month for 3 policies (one is blended) and the policies aren’t aged enough for the dividends to cover the premiums fully for an extended period. So, the 2 options we have are 1) cancel the policies or 2) convert them to term life insurance. I would choose the latter and save, oh, let’s say $200 per month. I have no idea the actual amount, but I’m basing it off my premiums on term life with my employer.

Housing and Sustenance:

If I was unemployable, I’d guess that the whole D.C. area was in the crapper and we couldn’t sell our house. But, again to humor me, if I couldn’t find a job, we’d have to sell the house or rent it out. Right now, we have a low mortgage, but if disaster struck after we refinanced it, I’d guess we wouldn’t break even on the monthly rent vs mortgage. We would have to find a very inexpensive place to live, or shack up with the neighbors for a time, depending on whether Stacie still has a job.

If all else failed, we would try to sell the house, take a big hit to get rid of it quickly, but probably still break even. We would move in with Stacie’s parents in PA and save over $2000 per month on our mortgage. If you’re wondering, I’m giving vaguely similar numbers compared to the actuals, so don’t strain too much on doing the math to figure out our income. Of course, we would also save hundreds on utilities, but we would also contribute to the in-laws for our additions to theirs.

I’d try to find something in IT back in PA, or something at Penn State, but make any money I could in the meantime. I’d continue blogging, which brings in about $1000+ per month lately, as would Stacie.

As for food, I’d give up fancy dishes entirely and rely on Stacie to ensure I had a balanced diet on a modest budget. It would probably consist of egg whites, wheat pasta, bulk frozen spinach, Velveeta cheese (with added calcium) and whatever we got out of my father-in-law’s garden during the summer 🙂

Sell, Sell, Sell:

Last, but not least, if we really needed the money we would sell things like the MINI (gasp!) and rely on the Pontiac. We’d sell electronics, furniture, and anything else needed to maintain ourselves without going bankrupt. Let’s hope that it never comes down to this.

Summary

So what did we learn in this little experiment? Well first, I don’t ever want to be jobless unless I have a good income alternative lined up! Second, I took the first swipe at categorizing our expenses as Luxuries, the “In-Betweens” and Essentials for varying levels of financial distress or disaster.

For you, I suggest making your own categories to know where your priorities stand. You may even decide to cut some things once you see the grand totals. When you look at a $70 cable bill, it seems Ok, until you add in the $80 cellphone, $50 home phone, and other luxury items. Then compare it to your debt or savings goals and see how much of an impact doing without the luxuries could make.

Heck, you might even find some fun, free or low-cost alternatives to the TV, wireless internet, or just plain entertainment that you didn’t consider before.