How do you justify saving when there are other expenses?

[pixiewytch]

As a family with zero savings (I know, it sucks), I have had this dilemma for a long time. In our house there is ALWAYS something that needs to be paid or taken care of. I'm not talking about luxuries but necessities...ie. car repairs, doctor visits, unpaid bills, etc. I guess I don't understand how I can put money in a savings account when that money could immediately go toward something else that needs to be done or has been put on perpetual hold. How do the rest of you handle this?

[shayinme]

Well I am in the same boat to some degree but I am making a point of trying to save something because truthfullly there will always be something that needs to be taken care of. Right now we do a automatic $25 deduction our savings account, admittedly sometimes I end up tapping the savings account after several months but its better than having no back up. My goal now is to leave the money in savings no matter what and any extra money that is not already accounted for goes into savings as well. We are self employed so we generally have an idea of what to expect but just the other days a small client check came in for a few hundred and while there are things we need around the hoouse (tree trimming/furnace cleaning) I decided to just put that check in savings and next month budget the other things into the regular budget.

I am not a Dave Ramsey fan for the most part but I have become a believer in having an emrgency fund, in the past 18 mos not having an emergency fund of at least 1K really screwed us up when our car needed repairs so I had to juggle our bill money.

Just start small even if its only $10-15 a month, its something.

Shay

[Jenelle]

Everyone has such unique financial situations...

In our case, we don't save much, and by that I mean that we have JUST gotten to where I have felt ok with sending a little to savings here and there.

Yes, there are a million other things that money could go to. And yes, we are in debt, LOTS. But... there will always be wants and "needs" -- always. And, while we are in debt to a lot of creditors, we have never been late, and I always send a little more than the minimum.

I justify saving a little here and there, because, for our entire adult lives, our "backup plan" has been CREDIT. We have had no real savings. Ever. ...Well... that hasn't worked out well. Turns out it is pretty easy to rack it up!

And it is time for change.

[pixiewytch]

Okay, that makes sense. It is true that there will always be some kind of expenses....and I'm not a Dave Ramsey fan either or at least I don't believe in investing all of my money into future instead of enjoying the now...but bottom line is that we need to save something regardless.

[jennlindsey]

We usually have, oh, about 30 cents in our savings account. Sad but true. We have a VERY small cushion each month once our most basic bills are paid, and I'd say 90% of the time it winds up being used on unexpected expenses that come up. It's VERY hard to save up under the circumstances, especially if you are also trying to pay off debt/avoiding putting more emergencies on the credit card. There are only so many issues you can address (savings, debt payoff, emergencies) with a small amount of "extra" to play with. Right now we are putting it all towards the credit card, which then sets up a vicious cycle of not having any left for new emergencies, which then go on the credit card ... sigh.

In a perfect world, i would be more down with Dave Ramsey's advice, but when your DH is working 55 hours a week just to pay the basics and you haven't been able to find a job for a year, the idea of paying everything in cash, putting 10% into retirement, and having 3-6 months' expenses saved up is laughable. (Don't hurt me, DR fans!) I'll be happy if we get to the $1k emergency fund stage again, honestly.

[AuntNi]

We have always been in the same position. I had such an epiphany when I read Mary Hunt's book Debt Proof Living, though. Her solution for what you describe: the Freedom Account. The situations you describe aren't really emergencies - they're situations that are definitely going to happen, you just don't know exactly when. So you figure out, on average, how much you spend every year on car repairs, home maintenance, car insurance, Christmas, etc. Divide that by 12, and that's the amount you need to put in your Freedom Account every month. Then, when the car inevitably breaks down (boy, do I know about that!) you have the cash set aside to handle it, without turning to credit cards.

I freaked when I first realized how much I needed to set aside monthly for these inevitable expenses - over $700/month! But we just pared all our other expenses down to make it happen, and it has literally been what's saved us. I don't want to go into details, but in the 18 months since we started, we've paid down thousands in debt, saved a 3-month emergency fund, and funded every single car repair/home repair/insurance bill with cash.

Feel free to PM me if you have questions. I just can't emphasize how important I think it is to set aside money for these irregular expenses. Good luck!

[honeybunmom]

I'm a child of a foreclosure, so, straight fear motivates me to do it. I don't ever want to have to sleep in someone else's bed again or have my daughter literally kicked out of a bed and onto the floor like I was (by the child who was forced to share hers with me). I have a direct withdrawal out of my checking account every pay day and into an account that I cannot pilfer(sp?) from. The withdrawals have to be no less than $500. I use it to pay the property taxes and the $600+ scheduled maintenances my car requires. And for those situations where it wasn't even an inveitable event, but a true - where did this come from?

And I have credit card debt at a ridiculous rate. But, I also have a little bit of peace of mind in my savings account.

[karne]

I think that getting into a savings mindset, when there are so many other demands that life throws at us, is definitely a challenge. For me, I just decided I needed to do it for my sanity. I literally cannot sleep at night if I know that I don't have an emergency fund-I just feel too vulnerable. It's worth it to start small if that's how you need to do it-every bit adds up. And try to "pay" your savings account first each month. That way you make your needs a priority, and it becomes habit.

I have my emergency fund in a money market account and you must withdraw in over $500 amounts. More than once a month means a penalty. Then I have a small savings account attached for easier access if I need it where I keep a small amount. The key for me is making the money difficult to access. I have to be thoughtful about what really constitutes a need for withdrawl.

[Jenelle]

Originally Posted by AuntNi

I had such an epiphany when I read Mary Hunt's book Debt Proof Living, though.

Thanks to you for the book recommendation. I have not read any Dave Ramsey, but just the things I have read on this board make me feel that his philosophy is not right for us, in our situation.

Jenn, our situations sound similar as far as dh's working their butts off just to cover what feels like the basics. I do have a question for you... when you say you are putting it all toward the credit cards, do you mean that you are sending any extra you have to them, above and beyond the minimum payment? It's just that, I've been where you are with the frustration of having to turn around and use the cards AGAIN... sigh... And I personally feel that that sets us up for feelings of financial defeat, where maybe instead there is room for a feeling of small victory?

For example, in our situation, my dh's pay is not regular. He gets paid every two weeks, and there is always a check, but from one check to the next it can vary -- greatly. So we have, pretty much always, used the credit cards to fill in the gaps... and we are now to the point where I am not comfortable with the payments and the balances. At. All.

So, I am at the point of just wanting to be DONE with the cards -- I am disgusted, I never want to use them again, I want to cut them up, throw them away, close the accounts! But if it were that simple, then, I wouldn't be in this mess. There is no savings. We have, for 11 years, spent more money than we really ever had. So, what this takes, is baby steps.

I began by checking balances on all cards on the same day and putting the total on one of my spreadsheets. I vowed that I would check all balances on the very same day of the next month, put these totals side-by-side and see where we were. This, for me, was a good indication of how far we were going in the hole each month... because we don't buy extravagant things on our cards, large purchases, etc. -- It is mainly food and gas! So, that was eye opening...

The next step for me, is I decided to keep track on the exact same date every month like that, and I wanted to see that number GO DOWN. It did go down -- we were still digging a hole, but it was at a slower pace, which meant that we were making progress. (A small victory).

My goal now, is that I want to see us break even. If we can just break even. If we just don't put as much on the cards as we have sent them that month in minimum payments & finance charges, then we aren't going further into the hole... we are at least breaking even.

Then, of course, I would like to be able to see that we are actually paying our debt DOWN. That should happen for us this month -- even if it is only by a small amount.

Sorry this got really lengthy, I am just trying to make the point that it is really working for us to have those small victories. I think sometimes that is more motivating than thinking "woo hoo! i sent $_____ to the credit cards this month" and then beating yourself up when you don't have the money to pay for ______ and you have to use the card AGAIN.

[karne]

I know it's not possible for everyone, but we do not ever use credit cards. Never. If we don't have it, we don't get it. It means serious, serious budgeting, and sometimes raiding the emergency fund, and sometimes some serious doing without, but it's been 5 years without cc's.

[WeasleyMum]

Originally Posted by AuntNi

We have always been in the same position. I had such an epiphany when I read Mary Hunt's book Debt Proof Living, though. Her solution for what you describe: the Freedom Account. The situations you describe aren't really emergencies - they're situations that are definitely going to happen, you just don't know exactly when. So you figure out, on average, how much you spend every year on car repairs, home maintenance, car insurance, Christmas, etc. Divide that by 12, and that's the amount you need to put in your Freedom Account every month. Then, when the car inevitably breaks down (boy, do I know about that!) you have the cash set aside to handle it, without turning to credit cards.

I freaked when I first realized how much I needed to set aside monthly for these inevitable expenses - over $700/month! But we just pared all our other expenses down to make it happen, and it has literally been what's saved us. I don't want to go into details, but in the 18 months since we started, we've paid down thousands in debt, saved a 3-month emergency fund, and funded every single car repair/home repair/insurance bill with cash.

Feel free to PM me if you have questions. I just can't emphasize how important I think it is to set aside money for these irregular expenses. Good luck!

I couldn't agree more. Not with the book (because I haven't read it) but with the idea that most "emergencies" are fairly predictable-- they will happen eventually. Everybody gets sick or injured (doctor/hospital bills), every car breaks down, every house needs so much maintenance a year to keep it running. Saving money from every paycheck with that stuff in mind is what keeps them from becoming emergencies. Any personal finance book-- the one mentioned above, DR, Orman, whoever-- will stress having an "emergency fund" of a few hundred to a few thousand dollars to cover those inevitable random expenses.

You don't go into too much detail about the household finances, but it seems like you may need to redistribute things a bit or cut some expenses, because you're absolutely right in that you can't save for next month's emergency while ignoring last month's bill; they both need to be done. Is there anything you can cut back on, any non-neccessary expenses that you can get rid of for a few months? If there is, you could put those funds towards the savings while using the "extra" you already have towards the existing bills.

[milletpuff]

There are some "other expenses", and also some regular expenses, that I realized weren't as necessary as I thought they were, and I learned that by posted my problems on another message board for help. It was brutal and not pretty, but I came out the other end with some really good ideas. Would you be willing to do that by any chance? Sometimes other people can spot opportunities that you miss.

Also, I learned that if I waited till the end of the month to save what was left over, there was NEVER anything left over. If I had the savings come out the day after pay day, I was pretty good at adjusting. I started REALLY small at first ($10 I think), and it didn't take long to get used to it and up the amount.

[llamalluv]

Originally Posted by pixiewytch

and I'm not a Dave Ramsey fan either or at least I don't believe in investing all of my money into future instead of enjoying the now..

Um....that is not at ALL what DR is about. Not even close.

[AuntNi]

Originally Posted by WeasleyMum

Any personal finance book-- the one mentioned above, DR, Orman, whoever-- will stress having an "emergency fund" of a few hundred to a few thousand dollars to cover those inevitable random expenses.

I just want to add that my Emergency Fund is totally separate from my Freedom Account. Right now, we have 3 months' expenses in the Emergency Fund, but I want to get it up to 8 months. The way I differentiate is: the Freedom Account is for stuff I know will happen, just not when. The Emergency Fund is for stuff I pray never happens, like job loss or illness. The Freedom Account lets me fund unexpected expenses without turning to credit. The Emergency Fund is what lets me sleep at night! It's a brick wall I'm building, bit by bit, between us and the edge of financial disaster.

[jennlindsey]

Originally Posted by AuntNi

We have always been in the same position. I had such an epiphany when I read Mary Hunt's book Debt Proof Living, though. Her solution for what you describe: the Freedom Account. The situations you describe aren't really emergencies - they're situations that are definitely going to happen, you just don't know exactly when. So you figure out, on average, how much you spend every year on car repairs, home maintenance, car insurance, Christmas, etc. Divide that by 12, and that's the amount you need to put in your Freedom Account every month. Then, when the car inevitably breaks down (boy, do I know about that!) you have the cash set aside to handle it, without turning to credit cards.

I freaked when I first realized how much I needed to set aside monthly for these inevitable expenses - over $700/month! But we just pared all our other expenses down to make it happen, and it has literally been what's saved us. I don't want to go into details, but in the 18 months since we started, we've paid down thousands in debt, saved a 3-month emergency fund, and funded every single car repair/home repair/insurance bill with cash.

Feel free to PM me if you have questions. I just can't emphasize how important I think it is to set aside money for these irregular expenses. Good luck!

That is an AWESOME idea about the Freedom Account. I agree with you that a lot of things we define as "emergencies" are really more predictable, but on a tight budget they can sure feel that way -- especially when several of those situations occur in one month and slam ya! If we had enough money to set aside every month to cover the annual amount of those occasional expenses, I would absolutely do that. Until then, though ... hmm.

Originally Posted by Jenelle

Jenn, our situations sound similar as far as dh's working their butts off just to cover what feels like the basics. I do have a question for you... when you say you are putting it all toward the credit cards, do you mean that you are sending any extra you have to them, above and beyond the minimum payment? It's just that, I've been where you are with the frustration of having to turn around and use the cards AGAIN... sigh... And I personally feel that that sets us up for feelings of financial defeat, where maybe instead there is room for a feeling of small victory?

For example, in our situation, my dh's pay is not regular. He gets paid every two weeks, and there is always a check, but from one check to the next it can vary -- greatly. So we have, pretty much always, used the credit cards to fill in the gaps... and we are now to the point where I am not comfortable with the payments and the balances. At. All.

Coulda written your post word-for-word, mama, right down to the variable pay (we depend on DH's overtime to survive, which bites if for any reason he *can't* work the 55 hours a week). And the CC debt is, thankfully, a recent development (it started when DH got sued by his ex ... don't ask!), but it's still kicking our butt. I *hate* the thought of only paying the minimums each month -- I used to be able to pay it off every cycle, so it's embarrassing to think of only giving them $20 a month, but dang, do we need every penny DH earns! (Our cushion is at best $500 a month, which includes $200 in help from my mom. If you have a month like this last one, which included totally unexpected medical bills for both me and the dog, a blown tire, a dead battery, and DH taking time off to take care of me when I was really, really sick ... well, it's Mr. Mastercard to the rescue, I'm afraid!) When you honestly don't know which issue to focus on, it *is* really hard to feel any sense of financial victory, above and beyond "Well, we did the minimum and kept us clothed and fed." (Which I am seriously grateful for, lemme tell ya.)

Originally Posted by milletpuff

There are some "other expenses", and also some regular expenses, that I realized weren't as necessary as I thought they were, and I learned that by posted my problems on another message board for help. It was brutal and not pretty, but I came out the other end with some really good ideas. Would you be willing to do that by any chance? Sometimes other people can spot opportunities that you miss.

Also, I learned that if I waited till the end of the month to save what was left over, there was NEVER anything left over. If I had the savings come out the day after pay day, I was pretty good at adjusting. I started REALLY small at first ($10 I think), and it didn't take long to get used to it and up the amount.

I agree with putting the money over to savings (whatever your decided-on amount is) right away -- we've done that before when we've had savings to work with, and it really helps -- "out of sight, out of mind."

I have also thought of posting actual budgets myself for feedback ... but I'm scared to! Our budget is very bare bones, save for my daughter's part-time preschool, which is a stretch for us but essential since it's the only time I get to job search and work con grad school prerequisites. (I did just cut back her hours, which adds to the cushion a little!) Finances are such a sensitive thing for people -- everyone's situation is so individual, and blanket advice like "just cut your expenses" or "just get a part-time job" (I love that one -- I've been trying to get one of those for a year now!) can sometimes feel glib, even if it's well-intentioned.

Originally Posted by AuntNi

I just want to add that my Emergency Fund is totally separate from my Freedom Account. Right now, we have 3 months' expenses in the Emergency Fund, but I want to get it up to 8 months. The way I differentiate is: the Freedom Account is for stuff I know will happen, just not when. The Emergency Fund is for stuff I pray never happens, like job loss or illness. The Freedom Account lets me fund unexpected expenses without turning to credit. The Emergency Fund is what lets me sleep at night! It's a brick wall I'm building, bit by bit, between us and the edge of financial disaster.

That is a great distinction, having the two levels of backup funding. I may need to take a look at that book you mentioned.

[AngieB]

Originally Posted by pixiewytch

Okay, that makes sense. It is true that there will always be some kind of expenses....and I'm not a Dave Ramsey fan either or at least I don't believe in investing all of my money into future instead of enjoying the now...but bottom line is that we need to save something regardless.

Off topic...but, you have put into words what I have always felt about dave Ramsey. It was more like a feeling of just not wanting to live that way even though what he said made sense.

[texmati]

How do you justify saving when there are other expenses?

I think when you save money first, you change the question around-- which expenses can we justify, when we have so much saving to do?

Basically.... for us, savings come first. then if we can't afford the groceries, house payments, ect; we know something needs to change in our lifestyle.