Adjusting the Budget for Job Loss, Planned or Unplanned

Do I need to find another part-time job?

Job loss was one of the biggest realized fears that crept in after the COVID-19 shut-downs in March of 2020. Many people were forced to adjust their lives and their budgets due to being furloughed or laid off with short notice. Thankfully, along with the loss of those jobs came higher and extended unemployment benefits, economic stimulus packages, relief from eviction or foreclosure, and fewer opportunities to spend money. Who knew that after mass lay-offs around the country that now, a year later, there’d be a shortage of labor, not jobs! A large percentage of the workforce learned how to adjust to one income or a lower income and have now chosen to be unemployed, with or without the government benefits.

In my situation, the business my mother and I started about 15 years ago managed to stay afloat through the pandemic, but the effects it’s had long-term on both of us, as well as our client caseload, may lead our business down a path of never fully recovering. We are considering closing our family therapy practice for good. This is a combination of forced and chosen job loss, for which I now have to adjust our family budget.

Over the many years, I’ve slowly reduced the number of hours I put into the business and also the amount of my pay. I have a very flexible schedule and work exclusively from home, which has been such a blessing at the current stage of my family. I still have two preschoolers at home with me three days per week and two older children with very busy extracurricular schedules. The paycheck has been smaller than when our business was at its prime and our caseload was overflowing, but the extra money has been essential to getting us ahead in our journey toward FI. We’ve been able to contribute the full amount of my part-time income to investing and charitable giving, while meeting all of our living expenses with my husband’s salary. Now, we will have to make cuts as my mother and I move closer to closing the doors to our practice for good.

My total take-home pay is currently $1,910 per month. $1,700 of that goes toward my ROTH contribution (averaging out to $500/month but invested as a lump sum at the beginning of the year) as well as my husband’s and my combined contribution to our joint brokerage account ($1,200 automatically invested into VTSAX monthly). The other $210 is set aside to make charitable contributions of our choice each month. This giving is in addition to tithing.

The last thing I want to do is cut out our investing or our giving when I lose that monthly income. Whether we’re a one-income or two-income household, we still plan to hit FIRE by 50 (or hopefully sooner). Continuing our current rate of investing is essential to meeting that goal. So, I now have to make some tough decisions about where to reduce our spending or whether to take on more work to replace that income.

I can also take into consideration the cash flow we are receiving from our rental properties, if that’s where the money is best served right now. However, we’d ideally like to put all our cash flow this year toward reserve funds or future real estate investing.

So, I decided to dedicate a slow, rainy, unseasonable cold morning at home to analyze our current expenses and determine where I can “find” as much of that $1,910 per month in our budget. There is a strong possibility that my final paycheck will come in June, so we will need a total of $11,460 for the last 6 months of the year to make up for the loss. That’s a big chunk of change!

Our annual budget was my first place to look. I discovered that I had budgeted some overages in our savings categories above the contributions mentioned above. Because we already have a 12-month emergency fund, plus money set aside to buy our next two vehicles in cash, I decided to re-allocate the $1,000/month going into our online savings account. That adds up to $6,000 over the 6 months that I’d be without my part-time income.

Then, I reviewed what I had budgeted for a new life insurance policy this year and what we actually spent. After reading about life insurance options, listening to a couple podcasts on the topic, and doing some comparison shopping, we were able to secure a term life policy for my husband for much less than we had budgeted. We had $860 set aside for that new policy (as a supplement to the one offered through his W-2 job), but we only spent $380 and paid in full. Therefore, we had a surplus of $480 in that category. Additionally, we’ve already pre-paid for all of the kids’ summer activities and camps, as well as the registration fee and August tuition for our preschooler, leaving us with no child care costs for the summer. We will not have to pay the $749 monthly preschool tuition for three months, and we can remove the $300/month we’ve been budgeting for kids’ activities and camps. That leaves us with another $3,147. A few additional cuts include a decrease in cell service fees for a savings of $100/month by switching to Mint Mobile; cancellation of Camp Gladiator membership for a savings of $79/month; and cancellation of private horn lessons now that our eldest daughter will be receiving additional band instruction each day at her public high school for a savings of $100/month. These three changes add up to $1,674.

Also, I’ve resolved to going back to at-home haircuts for all the males in my household, which amounts to a savings of $85/month. That will provide us an extra $510 through the end of 2021.

The total amount “found” in our annual and monthly budgets to make up for the loss of $11,460 in income is $11,811!! I was able to complete this analysis in less than half an hour using the detailed spreadsheets I keep for our family’s income and expenses. With the conclusions drawn, it will not be necessary for me to find other part-time work to replace my lost income for the second half of the year! We can continue making substantial progress toward our FI goals without sacrificing what’s important to our family or seeking additional sources of income.

Many people fear that having detailed budgets and tracking expenses will limit their spending and, therefore, their happiness. However, I find that these practices provide the opposite: freedom! And for me, freedom with my time (and my family’s time) is the ultimate goal of pursuing financial independence.

If you find yourself in a similar position, either preparing to leave your current job or fearing that you might lose yours at any moment, I definitely suggest tracking every dollar you spend, if you haven’t started doing that already. Once you have a framework, finding places to make cuts is pretty easy.

If you’re already a great budgeter, think of your income loss as a total dollar amount through the end of the year instead of what you need to cut or save each month. Recognizing that there are annual expenses/allocations that might be easier to cut than your monthly ones might give you a little room to breathe (and spend) when the expected or unexpected happens.

For more specific ideas on where to make big cuts, check out 9 Ways to Save this year.

Reset Spending Habits with Fun Challenges

Financial Freedom in 2021! Take Action: Day 10

We’ve talked about making changes to the Big 3 expenses, but in order to reach a maximum savings rate for your family, it may be time for a (mindless) spending reset as well. I love to take on mini-challenges throughout the year to reset my spending habits and to make this financial independence journey that much more fun.

This doesn’t mean that life has to be emptied of valuable experiences or that your home has to qualify for a minimalist lifestyle website. It just means that you use a specific challenge to identify what you’re capable of and what’s most important to you. Basically, these challenges are opportunities to cut the fluff.

I propose that you engage your family (or friends) in a fun money-saving challenge at least once per quarter. Here are a few ideas:

Spend-Nothing Week: Try spending an entire week eating what’s left in your fridge and pantry and participating in free entertainment options, like game nights and hiking. After the week ends, reflect on whether you missed out on anything significant.

Free-Activities Month: What if you spent an entire summer month participating in only free activities as a family? Think beach days, picnics, bouldering, swimming in rivers and lakes, neighborhood scavenger hunts, and playground-hopping.

Purge Week: De-clutter one room per day and pull out items no longer useful to you. Think of rooms like the attic, closets, playroom, and the garage. Then, as a reward, list all of those items for sale online the following week (and donate those not worth selling). Use 25% of the money to do something really fun together and save the other 75% toward one of your priorities.

Budget Birthdays: Challenge the whole family to participate in budget birthdays for the year. Set a spending amount, such as $50 for the fun and $50 for the gifts, for each birthday celebration. Get creative in finding free locations, use hand me down decorations or items in your home for decor, and stick with homemade treats. As for gifts, try freecycle, buy-nothing sites, or consignment shops to find new-to-you items.

A Month of Eating In: Can you do it? Can you make it a whole month without fast food, your favorite take-out, or a night out at a restaurant? You can do anything for 30 days, right? It would be a great challenge for a reset, and when the month is over, you’ll think twice before just grabbing a dinner that’s convenient rather than saving the money and the extra calories. You might also get pretty savvy in your own kitchen and make use of what you have already in your pantry.

Vacation for <$500: Challenge yourself to plan a family vacation for under $500. You can do it even without tent-camping. Stay tuned for tips on frugal travel.

Today’s action step is to commit to a few challenges this year. Get out your planner and write them in.

When a challenge ends, reflect on what you learned from it. How much money did you save? Did you identify anything you really missed out on and want to make a priority in the future? Did you identify things that you’ve been spending on that really aren’t that important? Was the challenge fun or stressful? Are you ready to do another one?

Spend Nothing Week

Is it time for a spending reset?

In August of 2019, I decided it was time for myself and my family to become hyper-aware of our mindless spending and to hit the reset button. The result of this decision was a Spend Nothing Week, which provided us with a reason (or excuse) to just say no to the frequent discretionary spending we were doing.

As the Spend Nothing Week went on, I posted about it on Facebook. My posts and photos are shared below. Upon reflecting on our week of resetting our spending, I realized that awareness is just the first step; changing habits requires the hard, consistent work. Since taking the Spend Nothing Week challenge, we’ve definitely improved in making better use of the food we have at home … eating what’s available rather than what we’re craving. However, we haven’t managed another Spend Nothing Week in over a year. It seems we’re due for another spending reset, or better yet, maybe we should attempt a whole month of spending nothing. Can we do it?

Mom’s Piggy Bank

Aug 26, 2019 – After realizing how much money we spent on school supplies, clothes, shoes, band fees, end-of-summer excursions, and then listening to my kids continually ask for MORE, I announced to my family that we’re having a Spend-Nothing Week! Anyone up for taking the challenge with us?
Step 1 was to do pantry/fridge inventory and figure out meals with our limited supply of food in the house. I hadn’t planned for this so there was no big grocery trip last week to prepare. We had zero fruit, hardly any meat in the freezer, 3/4 gallon of milk, a handful of pre-packaged snacks, and only half a loaf of bread.
However, I was feeling super confident with my meal plan this morning and thought, “for sure, we can do this!“ Then, within the first few hours of Monday, a youth group pizza party invitation came up, and the kids poured almost half a gallon of milk into their cereal bowls this morning, BUT crises averted when I discovered a small balance in my Venmo account and transferred it. I grabbed a few groceries and paid for the $5 pizza ticket… we’re back to being in the black!!
Let’s see how long this lasts…. 🤔😬🤞

Aug 28, 2019 – I’m disappointed to report that there have been a couple hiccups with Spend-Nothing Week. The hubs STRONGLY suggested I get gas in the car if I wanted to continue to drive it. 😜 And then at my dentist appt today, I discovered that my deductible hasn’t been met, and I had to fork over $50. 😩 I guess those were non-negotiables, but I’ve mustered up all the willpower and stubbornness in my body to resist buying a new pair of sunglasses to replace the ones I lost this week and also to buy a new TV after one of the kids BROKE the screen of the one in our living room! 🤦‍♀️😖 (I’m sporting free shades from the dentist office today. 🤣)
But there is a plus side: The fam is getting Chick-Fil-A for dinner without a single dime being spent, thanks to app rewards and some freebies we had acquired!!

Aug 30, 2019 – Celebrating the end of Spend Nothing Week with steaks from the bottom of the freezer 😋, a salad made from veggies the kids won’t eat (including 1/2 a head of barely-edible lettuce), the last few potatoes, and margaritas, plus flourless PB blondies!! It was delish, but shelves are bare, and we definitely won’t make it another 12 hours without milk for the toddlers. I’ve never been so excited for an early Saturday morning grocery trip before! (I’ll share how much I spend tomorrow.)

Aug 31, 2019 – The day after Spend Nothing Week included a BIG grocery trip. Here’s a picture of my receipts from that day:

BIG grocery spending after Spend Nothing Week

Yep… that adds up to about $440 spent at H-E-B this morning. 😱😱😱 I made THREE different trips inside bc I realized in the parking lot that I forgot things and did not want to go back another day. The total definitely caused a bit of sticker shock, but I bought 2 weeks worth of groceries (hopefully), and if we actually make it 2 weeks, it will still be a big improvement on what we usually spend.

Recap: Total amount of money that we charged on our credit card was <$100 between Sat, Aug 24th and tonight, August 30th. The only money that left our bank account was a recurring medical bill. Full disclosure, I did go to the movies on Sunday evening, but I had paid for the ticket in advance, and on Sat night, I bought a beer and fries using a gift card. So, we did not, in fact, spend “nothing”, but it was the closest we’ve ever come, and it leaves room for improvement!

tracking your spending is easy

The Secret Path to Tracking Your Spending

In my previous post, “New Year, New FRUGAL You”, I mentioned that tracking your spending is the most important yet most daunting step in starting your journey into savings. However, figuring out HOW to track where your money goes doesn’t seem to be the biggest challenge. We’re all smart and savvy people. We can find apps, we can keep receipts, we can download Excel templates, we can jot totals in a notebook… to each his own.

What I discovered is that the most difficult aspects of tracking your spending are the initial execution and staying motivated enough to follow through. Do you remember wanting something so badly as a child that you saved and waited and then saved and waited some more to be able to get that desired object of your infatuation? For me, it was a pair of rollerblades when I was a teenager. My best friends and I explored the neighborhood on eight wheels every single day after school, practicing tricks and showing off along the way. My first pair was an off-brand set that my parents bought me, but after those started to wear out, I really wanted a real pair of name-brand Rollerblades. Prior to setting this goal, I was the type of kid who spent every penny I came by, so I had to really buckle down to stay motivated and save every little bit of cash I received. Eventually, I had enough, and I proudly purchased that pair of black and neon-green skates. I loved my prized possessions so much because I had waited for them and earned them myself.

Do you remember what that special thing was for you? What were you willing to save every last penny for as a kid? Can you remember that feeling of accomplishment and the well-deserved reward?

setting goals

It’s time to rediscover that childhood perseverance and determination! As you read this, set a short-term goal that is really meaningful to you and/or your family. Maybe you want to stay in a picturesque pastel beach house in Seaside, Florida this summer for a few days with your family and cruise around in that quintessential golf cart. Maybe you want to spend a birthday or anniversary night away with your partner at the chic Camp Lucy in our beautiful town of Dripping Springs. Maybe you want to buy a trampoline for your kids so they can burn off that after-school or pre-nap energy each day. The dream is all yours to come up with. I just recommend that it’s realistic, that it’s short-term (achievable within six months), and that it’s something that will continue to keep you motivated, like a super cool pair of neon rollerblades. Now, write it down. Yes, write it down right now and share it with others. Text your partner, call your mom, share it with a friend, or write it in the comments below. This goal needs to be real, and as soon as you share it with someone else, it will keep you accountable. My short-term goal is to take my husband somewhere special (shhhh) for his 40th birthday coming up in May.

With that goal in mind and a very specific deadline on when you want to achieve it, let’s talk about getting there in 4 simple steps without digging into savings or just purchasing on a credit card and figuring out how to pay for it later. This goal is going to be your budget-motivator.

1. Start tracking!

There are apps, such as YNAB, Mvelope, Every Dollar, and Mint to help with tracking and setting an initial budget based on what you think you’re spending each month. You can also go old school with pen and paper or excel spreadsheets. This personal budget template has several common categories already listed and is a great way to get started, but there are hundreds out there to choose from. Pick your poison and track ALL your spending for one month.

2. Budget and eliminate!

Based on your current spending in the first month, budget reasonable amounts for the the next month and then find categories that can be reduced significantly or eliminated completely, even just in the short term to reach your goal. For example, I want to save $600 for my husband’s birthday celebration, which will be toward the end of May. This gives me approximately 4 months to save the money. That comes out to $150/month. Looking at what we typically spend in specific categories, I ask myself, where can I cut out $150 for just the next 4 months? Can I go without new clothes for that amount of time? Can I do pedicures at home for a few months? Can we cut our eating-out budget in half? This is the same process you can go through to reach your specific goal. If it’s a $300 trampoline that you want to surprise your child with at his birthday party in April, then where can you cut out $100 per month in the short term?

3. Set that money aside!

Put that money saved in a separate account or withdraw it from the ATM and hide it in the house. Don’t spend this money on other things. Keep your eye on the prize.

4. Buy it and reap your rewards!

In the process of saving for this one specific goal, I predict that you will have developed a habit of tracking your spending, and it will become easier and easier to budget every single month from here on out. It will also become easier to cut out a lot of spending fluff, all those extras that no longer seem necessary once you’ve seen exactly how much of your hard-earned dollars are being spent on them. Think of your budget as a way to afford you something you need or want, rather than depriving you from it.

Congratulations! You’ve found a personal and achievable way to get started and stay on track. Now, set bigger goals! After saving for that one reward and accomplishing a big win in doing so, now it’s time to set long-term and even bigger savings goals. What’s next? A paid-off credit card? Buying your next car with cash? A house in a better neighborhood? Early retirement? Once you’ve started on your path, anything is possible!