Clash of the priorities: Spending, saving and giving in 2018
June 18, 2018
Our mortgage, recast twice though it has been, is still an astronomical 4 figure number that I’m quietly desperate to reduce as fast as possible. To that end, though we don’t have much spare every month, our payments have been rounded up to the nearest thousand to whittle away at that principal slowly. Drip drip drip!
Before I could bask in the rewards of taking a long term approach, I discovered a hole in our plans.
We started paying a multi-hundred dollar therapy bill monthly at the end of 2017 and I blithely assumed we could cash flow it. Yes, but…
This is where the drips worked against me. I lost track of when the extra therapy bills ate up our whole cash buffer in the checking account but we slowly dripped and dribbled that “extra” money out the door. It’s entirely gone now and we’re back to a paycheck to paycheck situation.
All our money first goes to their various prescheduled destinations (investing and savings), then we have exactly what we need to cover our bills as they come up. This is NOT ideal. As loathe as I am to have money sitting in checking accounts not earning any interest, the scenario where a missed paycheck would send me straight to pulling money out of our savings and that stinks. We do maintain a large cash savings for major bills like insurance and property tax but that isn’t intended to be tapped for any normal recurring monthly expenses.
Sadly this means I’ve got to make even more budget cuts. The “big” mortgage principal payments of $200 are now reduced to only $20 extra per month. Our cash buffer needs to be at least $3000 to be useful for more than a minute and that’s going to take quite a while to rebuild. In the meantime, I’m considering the impact this will have on our charitable giving.
Our savings rate is sacrosanct and must stay that way. We must be sensible about saving our own hides before we can help others.
But giving is a muscle – it has to be used, regularly.
I’m trying to figure out a new balance. The original plan at the start of the year was to donate $100 a month, not realizing that our therapy bills for JB would eat into our cash flow so badly. I’m still committed to giving, so it might be that we just need to back down from the $100 a month to $25 a month and see how it goes from there. I will keep doing freelance work as I can, though my time is more constrained due to the Day Job and unexpected regular bills have cropped up that have to be dealt with.
With less money to distribute, I ought to keep our money closer to home for a while: the local CASA chapter, neighborhood school, city library, animal shelter and the homeless shelter. Addendum: and to help kids being separated from their parents because that inhumanity cannot stand. Dr Linus is matching funds until he reaches $10K in matches. We’re lucky that we have an employer that will match donations so the power of our money is doubled. That will take us to the end of the year.
In the meantime, this is a huge change for me: I’ve resolved to have an open attitude about money this year. Instead of battening down the hatches and not letting a penny leak out as I once would have done, I resolve to trust that by 2019 I will have figured out additional sustainable ways to generate supplemental income so we can cover more of our expenses and the causes we care about.
Balancing priorities is tough. I hope things settle to a place you feel comfortable.
I use a combined pay yourself first (401k) and pay yourself last (all money after monthly spending dumped into investments) system to try and avoid worry about cash flow issues. Checking account buffer is kept at around $3-5k, depending on if I know there are big payments coming up.
Thanks – I was living on a bit of hope there that the therapy bills would be manageable and that was silly.
Not an easy place to be in. What we’ve done in the past in this situation is cut spending and also cut retirement savings. But like you, extra mortgage payments were the first thing to go (for example, rounding up to the nearest 00 or 500 instead of 000, or rolling increased escrow from property tax increases into the monthly bill instead of paying it off at once). Now that we’re doing well financially, I’m wishing we hadn’t cut retirement savings but had instead kept less in cash or sold taxable stocks. But if we weren’t doing well financially, I’d be glad that we kept money fungible. It’s really hard to predict the future.
nicoleandmaggie recently posted…Leaving breadwinner status
I’ll definitely continue working on cutting spending and bringing in some side income to cover the spending I can’t cut, as well. It’s just uncomfortable to have to worry about every single penny. There’s a matter of possibly losing main income as well hovering in the background that we need a resolution for before I take more drastic measures but I’ll preserve retirement savings as the most important until that’s truly necessary.
We’re about to enter the phase of more limited mortgage prepayments, but I’m happy that we got a head start on beating it down and reducing our monthly obligation.
Generally keep a lot of cash on hand, so a specific cash buffer (separate from these savings) is not something I worry a lot about or am generally organized about. But – I like at least $500 in my checking $1000 in our buffer/slush fund accounts. T tends to keep more in his checking than I do, so I generally just have him transfer $$ if those buffers are too low and I’m not expecting a large reimbursement imminently. When his checking is too high, it is allocated to savings or mortgage.
It sounds so chaotic when I write it out! I plan our money at the yearly level, and even though I check our spending monthly, I don’t really plan our cash flow and savings on a monthly level.
That all makes sense 🙂 I just need more granular control so I can find ways to cut more effectively. I plan at an annual level but manage at a monthly level. Can’t get more granular than that though, or the system just gets too cranky. Or I do. One or the other.
Take care of yourself first! I know it sounds odd when talking about charity but your impact is bigger and greater when your personal financial house is solid. If you stick to your plans and goals you will eliminate one of the largest expenses (mortgage) in your budget and then you can donate your heart away.
Charity is not always donating money. By sharing and retweeting my post, you encouraged at least 2 or 3 people (and possibly more from here) to jump in and then they got matched. I don’t need an excel spreadsheet to show you the amazing impact you had with just a few clicks of a button.
Keep fighting for yourself so you can better fight for others.
Thanks for saying that, I was hoping to make up for my relatively small impact by getting the word out, and am grateful that it did work to any degree!
I’m not sure I’m reading this right. If JB’s therapy bill were, say, $300 per month and paying it ate up your cushion, then, the $300 a month payment was not really in your budget. To GET it in your monthly budget, other things have to be shaved back. So you’re doing the only thing you can, you’re shaving back other payments/expenses to pay this new bill.
My budget is an “every dollar accounted for” kind. So when a new monthly payment arises, something else has gotta give. I always have a pretty fat cushion in checking because all my accounts/funds are left in there. Our vacation savings, property tax, insurance etc. are all left in checking and I keep track of them on a piece of paper. Yes, hilarious and ancient. I know. But they are never all due at once, so the checking account always has plenty of money in it.
Oh you’re reading that right. I was being a doofus and didn’t want to actually accede that $500-700 variable monthly bill was here to stay as part of the budget. I know it was silly, I was also just hoping that the therapy would be shorter term than a full year, and so we could absorb it in the usual cash flow. Again, SILLY.
But we all make mistakes and I’m honest about mine 🙂
If a piece of paper works for you, then you have a working system!
This was kind of us last year. We set some automated budgeting amounts at the beginning of the year and then left them on auto pilot. We were too busy to mostly realize what was happening, but we finished out the year with no buffer in our checking account and riding the credit card float.
What we ended up doing this year was starting to use YNAB and then giving up the monthly savings until we got back to being a month ahead, which took a couple of months. It was really alarming realizing how many things we had thought we could cash flow and then we couldn’t really. I was quite loathe to give the monthly savings up, but it was worth it because I feel so much better now. We kept retirement savings the same though as we sorted through this. Our only checking account buffer is that we budget for the whole month on the 1st. We now have six months of expenses in a savings account and I’m feeling a lot better about things.
Perhaps you could use supplemental income to help cover the regular donations that you want to do? Good luck sorting through this!
Leigh recently posted…Adjusting our giving strategy to 2% and a milestones checklist from 2015
Yes, the side income will have to cover some of my donations but I also have to find other ways to pull back our spending as well. Retirement savings and regular savings that goes into investing has to stay the same as well, the latter being my retirement savings.
We use YNAB, so every dollar is budgeted but it doesn’t really matter which account it sits in; any more than it matters whether a particular $20 bill is in my wallet or my purse. I figure that the miniscule interest our $1,500 float could earn in savings would be more than offset if NOT having it led to a single overdraft fee! So, maybe it would be less stressful to preemptively use some of your targeted savings as a buffer in your checking account? And then you would get the satisfaction of slowly transferring funds back into savings as you rebuild that slushy-cash buffer. (PS Have you tried checking with the therapy office regarding costs? Sometimes they can do more to work with insurance, or offer a pay-up-front discount, or modify your visit frequency, or sometimes they’ll offer a zero-interest payment plan if it’s just a temporary situation you need to work through.)
I’ve been going back and forth on whether I would feel like I cheated by taking my savings back into the checking account for the buffer. Partly because I know that the easier fix option tends to fuel the bad habit so I want to be sure I’ve reformed my ways.
Unfortunately therapy doesn’t offer any of those options except for decreasing frequency which would set JB’s progress back, so I just need to find a better way to increase our income.