“Why Save When You Have Debt?”

Because sometimes it comes to this.
Photo by Daniel St. Pierre

This question was posed to me in response to this post, in which we discussed our budget (I was also thrilled by the lively Facebook discussion that ensued).  I thought it was a fair question.  The logic behind it was, we are charged a much higher amount of interest on our debt than we could ever hope to earn on our savings.  This is true, and I’ve noticed that even experts can’t agree.  Some state that you should put every extra penny into paying down the debt and leave saving until the debt is gone.  Others argue that you should do both because you never know what life is going to throw your way.

I personally agree with the second camp.  What good is paying down the debt if every one of life’s little tailspins causes you to add onto it?  Take the car incident.  If we had had our emergency fund built up, we could have just run to the bank and solved the problem.  Instead we had to borrow money and just tacked on more debt.  That’s not helpful.  It’s completely a step in the wrong direction.  If every time something goes wrong I add on more debt, I’m just endlessly throwing my money into a bottomless pit.  The point of saving while I work on the debt is to keep a stash of cash handy for dealing with emergencies. 

While the logic behind not saving until the debt is paid off is sound, I believe that it doesn’t take the reality of day-to-day living into account.  Shit sometimes happens.  I want to be prepared when it does.

Back to the Budget

Not one of my favorite things to do...
Photo by Stuart Miles

Tonight we finally got our act together and worked out… not so much a budget, but a map of where our money should be going.  I figured out one of the reasons I utterly hate looking at our finances on paper:  It’s completely stupid.  There’s honestly no reason on earth why we should be struggling the way we do.  Even with my own meager earnings, we should be getting all this stuff paid with room to spare.  I just don’t understand why it never seems to work out that way…

Well, that’s not entirely true.  There’s crap like the car repairs.  Plus, we always seem to be starting from behind.  But at least we can play a little catch-up – we filed our taxes and should be getting a little refund by the end of the week.  Nothing amazing, but at least enough to keep swimming for a while longer.  I’m really looking forward to the flashcards project payout.  That’s going to give us some really good breathing room.

One of the other things we accomplished with this was that I was able to see how much I actually need to make per day to stay afloat.  Once again, what gives?  I can do this, easily.  I don’t know how it’s not happening, honestly.  But at least I can have that number in my head every day so when I sit down to work I know what my daily minimum is.  I’m not going to count the flashcards project toward that minimum.  That’s going to be gravy, as far as I’m concerned.

I’m not going to lay our entire budget out for inspection; we do need to keep some things private after all!  But I wanted to at least show you our categories.  We haven’t yet set up the categories for things beyond the basics.  Most of our expenses really are monthly.  I didn’t set up an entertainment category, although we do have a spending money category.  Once we have this running somewhat smoothly, we are going to look at options for one evening out a month and hopefully a regular date night.

The budget categories:

•  Rent
•  Groceries
•  Power
•  Gasoline
•  Water/Sewer
•  Internet
•  Emergency Savings Plan
•  Debt repayment
•  Cell phones
•  Bus fare
•  Taxes
•  Spending money
•  Netflix/Hulu

I should probably mention that I’m not counting things like insurance and such that come directly out of Gavin’s paycheck.  When we calculated our income, I only looked at the net that actually comes into the checking account.  The taxes category is for the taxes that I have to pay, since mine aren’t deducted automatically.

The next step in this process is going to be to track how much we are actually spending in each category to make sure the numbers are fairly accurate.  I think I overestimated in a few areas; groceries and gasoline come to mind.  I’d rather be over than under though.  

And… Cue the Meltdown

It was just a matter of time.
Image by digitalart

Sorry about my recent silence.  Beginning last weekend, things kind of went into free fall around here.  It started last Sunday, as I was on my way to the Y to get in a workout.  As I got off the freeway, I noticed white steam/smoke (I had no idea in that moment) pouring out from under the hood of my car.  I pulled over as quickly as I could. 

After getting the hood up, I discovered that my cooling system had completely blown its load all over the inside of the engine.  Unfortunately, I’m no car genius, so I had no idea what to do.  I posted an urgent message on Facebook for someone who knew anything about cars to contact me ASAP.  The phone started ringing almost immediately.  A huge thank you to Aaron, who was the first to get through, and the others whose calls I missed while I was on the phone with Aaron. 

My primary question was can the car be driven home, or would I be calling AAA for a tow.  (Get AAA.  Seriously.)  Verdict?  That car wasn’t going anywhere.  Great.  Another call out soon had my friends Kelli and Kris en route to help me get the kids home.  They showed at the same time as AAA, and we all got home safe.

To help distract me, Kelli and Kris helped me clean the place (bless their souls).  I was trying very hard not to think about the money situation.  I was hoping it was something small and maybe I could get away with a $200 repair bill.  At least the house wasn’t chaotic.

The next day, we started making phone calls.  We arranged to have the car towed down to the Firestone.  Bam.  $75.  We waited and waited, and finally they called back with the estimate.  The initial estimate was over $1000.  Gavin and I immediately began stressing out.  We were already late paying rent.  We had money in the account, but that was because we were holding it until Gavin’s next paycheck.  The apartment complex doesn’t let us make partial payments, which often presents a problem. 

At any rate, we had to have the car.  While the car was in the shop, we had a situation in which I had to go pick Elias up from school.  My friend Danielle came to give me a ride, but it really highlighted the fact that we needed the car fixed ASAP.  We were able to negotiate a bit and got the bill down to about $900, but this was still an ugly situation.

A temporary fix is in place to stop the bleeding.  I’m not happy about it, although I’m grateful for the help.  But it really emphasized the problem that we always seem to find ourselves in every time we try to save money and get things in order. 

Namely, SHIT GOES WRONG.  Call it whatever you want – emergency fund, freedom account, whatever.  I often feel like there’s this assumption that shit will stop going wrong while you try to build up the plan.  I can’t put the world on hold for the year it’s going to take me to build up this account.  We’ve saved about $100 toward the emergency fund and immediately get slapped with a $900 bill.  How is this going to be possible?  Now I need to pay back a ton of money, while still attempting to save for the future?  Do you see the problem here? 

And everything starts falling to pieces.  I ask Gavin about the transfer for this week.  It didn’t happen because we were trying to figure out the rent/car situation.  THIS IS WHAT ALWAYS HAPPENS.  It feels like there’s a hand on my head, pushing me back down, telling me to stop trying.  Why bother?  Things will always be shitty.  Shit will always happen.  I don’t know how to make it stop. 

So I’ve been in money meltdown this week.  Who the hell am I to try to help anyone else?  I can’t even help myself.  The more I try, the worse it seems to get.  We can’t continue this way, but no other alternative seems to present itself.  I can’t go to work full time because of the situation with Elias (which got considerably worse this week and, once again, emphasized that point).  I can’t change Gavin or make him do things he clearly doesn’t want to do.  I can only change my part of the equation.  I’m trying.  But I’m tired of failing every time I try.  

The $1000 Emergency Fund Plan... As Promised!

Okay, that might be a slight exaggeration... not much, though.
Photo by Bill Longshaw

It’s a miracle!  We have our plan in place!

Gavin and I sat down and worked out our plan.  Just like everything else I tend to dread (I’m looking at YOU housecleaning), it didn’t take nearly as long as I thought it would.  It wasn’t too difficult to work out a solid plan.

My friend Erin was kind enough to forward me an interesting blog post this morning that took a slightly different spin on Mr. Ramsey’s plan.  This plan had a different approach to savings, namely just start saving and then figure out how you’re going to continue.  Without intending it, we had actually done just that. 

I had $50 hanging out in my savings account.  I left it there when I cashed a check.  We also have quite a bit of assorted change in the family jar currently, but I’m not going to sit down and count it all out.  It probably has about $5 or $6 in there.  We’ll work that out later.

Here’s the plan we decided on.  

In order to do this, we will have to go a ways out.  Our goal is to have $1000 in our savings account by the end of the year.  Counting the $50 we currently have, we will need to withhold approximately $40 per Gavin’s paycheck.  It would be $20 per paycheck, but my Paypal doesn’t want to link with the savings account, so we are just going to do it this way.  I know to a lot of folks, that doesn’t sound like much, but that figure makes me a little shaky.  We are going to need to trim a few more expenses to come up with that amount.   We’ll discuss that in an upcoming post. 

We are also going to be contributing any amount of change we can gather into the family money jar.  We’ve had that jar for a while.  We usually let it accumulate for a bit and then use it on a grocery run.  From now on, it’s going to be deposited monthly into the savings account.  We debated whether to use that extra bit to lower our biweekly contributions or to reach the goal faster.  We decided to try to reach the goal faster, but like any other plan, we may eventually decide to tweak that.  We’ll see how it goes.

So there it is:  our plan to save $1000 by the end of 2012.  It feels good to have it in place.  

Will Somebody Please Invent a Perfectionism Cure?

Image by Grant Cochrane

I’m doing it again. 

We are supposed to be figuring out how to come up with that $1000 emergency fund.  It’s been our assignment for nearly a month now and we haven’t gotten anywhere with it. 

Excuse #1:  It’s the holidays.  Who wants to deal with it right now?

Excuse #2:  Rent’s due.  I don’t want to deal with it right now.

Excuse #3:  Gavin’s at work.  I want to sit down and have a real conversation about this, not over Google Messenger.

Excuse #4:  Gavin’s off.  I have other things I want to do. 

Excuse #5:  (I don’t know what this excuse is, but give me another day and I’ll use it.)

I want to come up with the perfect plan, the one that will solve all our problems.  I think I need to accept that that’s probably not going to happen.  I’m determined that the plan will be created tonight and will be posted here tomorrow.  It might not be ideal, but it will be good enough and it will be a starting point, which is all we really need right now.  We can tweak it as we go.