When Expenses Crush, Retaliate!

Don't Crush Me, Expenses!
James Pond

 

“Hone your purchasing sensitivities so that you naturally won’t overspend on anything within your control.”

 

 

 

It’s fairly common for someone to write about crushing debt. “5 ways to crush your credit card debt.” “How I crushed my debt one account at a time.” It’s great and exciting when people vanquish their debt and are free from that crazy load on their backs. You can read about a lot of people doing just that, on top of saving and investing for their futures, and how they’ve accomplished it. And when that happens, it’s a bright world.

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Unfortunately, though, sometimes expenses can crush you back. A greeeeat number of people experience this reality on a daily basis. If you’re fortunate enough not to have regular health issues, major home repairs, a lawsuit or a long commute — or if your income or emergency fund is simply high enough that you can absorb them, you’re in a good place to control your finances provided you’re content to live below your means. But sometimes these things hit, and they can hit with enough regularity that it hinders your savings goals — especially if, like us, you get by on a single middle-class income.

First and foremost, if at all possible, one should build up an emergency fund to handle such unexpected expenses. Thankfully, we have one spread into several layers:

  • First layer in checking for immediate expenses
  • Second layer in an online, high-yield savings account gaining some interest. For this, try Barclays Online Banking or American Express High-Yield Savings. (Non-affiliate links)
  • Third layer in a CD ladder making higher interest (check Bankrate.com).
  • Fourth layer in a lower-risk taxable investment account that you can open with Vanguard. (non-affiliate)

Nevertheless, if the expenses keep coming, those could eventually be depleted where it might be difficult to resupply the funds. Still, it’s a great idea to create an emergency fund before anything else other than perhaps paying down debt.

To illustrate what I’m saying, here are some of the expenses we’ve incurred just over the past several years:

Medical

  • Braces for 2 kids (at 3 years apiece)
  • 2 cataract surgeries
  • 1 detached retina surgery
  • Several dental surgeries: 2 frenectomies, 1 gingivectomy, a dental implant, a “extra tooth” removal.
  • Broken foot
  • Dermatology treatments (about a dozen and heading to the next level)
  • All 4 of us require glasses and/or contacts
  • Anxiety treatment and medication (from medical bills — ha ha, not really)

And, nope — a large portion of the cost was not covered by insurance. It did help out some — but it left thousands for us to pay. That’s with an expensive family-coverage premium (now at $600/mo) for workplace insurance. We had an HSA for a couple of years in the past and just used up the money (although, frankly, the investment options were poor). Now we have funds set aside in a pre-tax Flexible Spending account, but that generally runs out, too — and it can be a bad idea to overestimate withholdings for that purpose.

Imagine having something like this occur Every. Single. Year. Sometimes multiple times in a year. Every time we turn around, another large medical cost drains a chunk of our resources — inhibiting savings capacity while living frugally on one decent income. But these necessary expenses have to be met. You can’t just lose your eyesight or your teeth. And there’s really no good way to “frugalize” away these kind of expenses — at least that I’m aware of. If you have any great ideas (short of questionable/quack treatments), please pass them on!

Obviously, not everyone has a number of medical issues like this. But it happens, and I know we aren’t the only ones. Some have it far worse.

Now, please bear with me for a few moments longer. There’s a better ending, so don’t take all of this to be overly negative. But remember, too, this is a blog about “Hard Come, Easy Go!” so it’s my place to write about my personal situation and I’m reporting the reality.

Fortunately, in our case, we haven’t reached the point yet where the house requires a major repair — but it’s 12 years old so something could happen sooner or later. It’s a small home, so whatever comes up shouldn’t be as expensive as a larger home — but, nevertheless, expensive it could be. Well, the garage door spring snapped recently and that was pretty expensive to repair, more than I would have expected. So here are a few more expenses that have recently hit:

Non-medical

  • Garage door spring
  • Microwave oven replacement (the previous one got cooked)
  • My workplace relocated 15 miles farther away from my home into a traffic-jam area. What was a 35-mile one-way straight-shot commute suddenly became a 50-mile partial log-jam, not because I moved farther away from my job, but because it moved farther away from me. [I could move 15 miles in (which we may do), but any closer than that puts us in a HCL area where the housing prices go way up. And even moving just 15 miles closer, we won’t find a home as inexpensive as our current one.]
  • New teenager driver in the family traveling to/from community college and a part-time job, which has greatly increased our fuel consumption and auto-insurance expenses (yes, we shopped around but didn’t find anything better). She does help some with the insurance costs, however. This will likely be repeated in a couple of years as our second one ages in.

So, when you’re already living about as frugally as possible — without getting into some serious low-level living rearrangements (bad neighborhoods, etc.) — there’s not much room left to cut back.

Now, before this sounds like too much whining (instead of winning), this doesn’t mean our financial situation has reached an insufficient level yet. But it’s not ideal to keep shelling out when you need to save. It’s hard to save when you have limited resources and there’s always something else tapping into them. This isn’t a matter where, well, we just need to stop our out-of-control spending and learn how to live below our means.

And, admittedly, past mistakes have made the present more difficult because we could have had more savings. I own that — they were dumb on my part. But, we’re on the frugal path now and have been for some time. But it’s not going to lead us to much wealth and financial independence anytime soon — because, Life.

In order to reach that, one must have an income-to-spending ratio that allows you to put enough away so that your money can grow and work for you more aggressively. Regardless, all the more must we follow the principles for living below our means as much as lies within us to be fiscally responsible — even if it’s harder to save as a result of life’s curve balls.

So there are several important takeaways from our situation:

  1. If it’s still early for you in life, make sure you get started now with regard to responsible personal finance. I can’t stress that enough.
  2. Make SURE you start early!
  3. Repeat the first 2 steps several more times.
  4. Avoid (as much as possible) stupid big-spending mistakes. Do you really need that car, or will the lesser one work just as well? Or do you really need a larger deck or patio? Is that expensive gadget or hobby really necessary in your life? What about that large home or that recreational vehicle? I’m not telling you what to get or not, just offering some ideas to get you thinking. A lot of times you wind up regretting your decisions if they were just made in the moment. Hone your purchasing sensitivities so that you naturally won’t overspend on anything within your control.
  5. Even if you can’t become financially independent due to your circumstances, it’s still important to follow the principles of responsible financial stewardship. In fact, it’s even more important as much as you’re able: Live below your means, Avoid or pay down excessive debt, Save, Create an Emergency Fund, Invest in low-cost broad-market index funds (preferably in tax-advantaged retirement accounts if possible).
  6. Maintain a positive attitude and mindset even though that’s not going to eliminate necessities and unexpected life expenses.

To reiterate — all the more do those who struggle financially need to learn and practice good saving and spending habits to improve their financial health.

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