Wednesday, May 27, 2015

When the opposite of a "windfall" isn't a "downfall"

My husband and I are about to earn significantly less money in the upcoming year.  A year ago, my husband went from full-time to part-time employment; as of June 30 this year, he'll be out of a job entirely.  As for me, my upcoming sabbatical has me trading time for money: I'm taking a full-year sabbatical at 3/4 pay.  All told, our income will be less than half of what it was two years ago.

When we were younger (both in the chronological sense and in the financial sense), this year would have been the time to cut back--wherever possible--on our household spending and then turn to the Good Ol' Emergency Fund to supplement the difference.  That's just what we did back in 2000 when my husband was laid off from a job I didn't like much anyway (yay!), and the strategy worked as advertised, tiding us over until my guy found another good job and I got a promotion.

But now that we've matured a bit (again, both chronologically and financially), I think we'll try a different strategy: we're going to cut down on our "invisible spending".  A year from now, I can let you know how this plan goes.

Here's the basic idea behind why we think our "invisible spending" plan will work now, although it wasn't possible before.

During the first dozen or so years of our marriage, my husband and I had a lot of big financial obligations.  We had a mortgage; every once in a while we'd have a car loan; we had private school tuition and "kid bill" obligations for my step-daughters.  These were large expenses; they were non-negotiable; they drove me from being an ordinary, mildly frugal person into the manic, extreme Miser Mom I am today.

I buckled down and cut discretionary spending everywhere I thought I could.  Eventually we paid off our car loans, and then my step-daughters graduated, and so the kid bills ended.  With all of those expenses behind us, we upped our charitable contributions and pumped more money into our mortgage -- so much so, that a few years later, we paid off our mortgage.  We used the new extra money to  up our charitable contributions a notch further, and we started maxing out our 401Ks and 403Bs.  I opened a Roth IRA.  Last year, when we decided to enroll our boys in the Quaker Local School, I set aside a pile of NSF grant money that will cover most of next year's tuition.

What we didn't do was give up our thrifty ways.  Well, okay, I didn't give up my thrifty ways.  I still yard sale, avoid stores, blah blah blah (you know, the usual Miser Mom schtick).  But for all I chide my husband about spending a lot, even he hasn't upped the glam/wow factor in his life, and he's even made voluntary frugal sacrifices -- like agreeing to become a one-car family, where the one car is a beat-up old Prius, at that.

So as we've grown older and older, we've made more and more money, and we've had fewer and fewer expenses.  And instead of allowing the extra money to float around our heads like butterflies or gnats, we've hidden it from ourselves.  We asked our employers to remove gobs of money from our paychecks and send it directly to our retirement accounts.  They send other parcels of money to the United Way.  I write my first check of each month to our church.  There's money that comes out of my credit card each month for World Vision children we've sponsored.  All this is the money we don't even think about: it's our "invisible spending".

Our visible spending will be hard to cut back on -- for me, because there's not much left of it, and for my husband, because it's just hard to not buy things when he's so used to buying them, especially when all his friends and acquaintances buy even more than he does.  And it's possible the boys have some honkin' big expenses on the horizon, too.  So instead we're going to make our invisible money visible:  we'll just stop contributing to our retirement accounts, one year only.

Ignoring retirement savings isn't the transgression it would have been when we were younger.  For one thing, my employer will still contribute a bunch of money, even when I don't.  But even more significantly, we've now got so much money in our retirement accounts that, Market Willing, our savings will likely grow by more than our max contribution amount, even though we ourselves will chuck in exactly $0. And we've got so much money there already, that we're likely to have enough to retire when I'm finally allowed to retire (which is a few years later than I originally thought I was allowed to retire).

If the "retirement backwash" isn't enough to keep us afloat for the year, I suppose we can turn to reducing our charitable giving next.  I've always thought of that as a kind of a financial "safety valve", but there's something deep in me that hates to go there for my own needs.  Charitable giving has always, for me, been a psychological antidote to insatiable need.

So times will be a bit tight, but not as tight as if we'd grown used to spending all our money as soon as we earned it.  It's yet another reason that I give thanks for the Miser Mom lifestyle.

1 comment:

  1. That's where we are next year too, though it is mostly the mortgage prepayment we've stopped. I'm hoping we'll be able to max out retirement and still contribute to the 529s, but we will see.