Author Topic: Slippery slope  (Read 3986 times)

EconDiva

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Slippery slope
« on: May 22, 2014, 02:20:30 PM »
I recently posted about having tracked my spending for the first time ever for a consecutive 30 days; I posted an Excel sheet of every expense of mine for the entire month of April.

So I'm doing good for the month of May, however, a family member passed away.  I have forgone a lot of funerals in the past and am attending this one.  So we're talking $400ish for the flight.  Plus I'll be out of town for 5 days so there will be some food expenses, and my part of gas and hotel room.  Lastly, the person that passed did not have insurance and I really really wanted to give my uncle (father of the child that passed) at least $100.  It's not much but maybe it will help with his part of transportation and food expenses incurred while out of town for the funeral.

Basically, I'm estimating I'll be spending about $750 for this trip.  The thing is, I had an unexpected expense come up last month that was about $900.  I spent almost all of my EF paying for it, so this time I may have to dip into my ROTH to help fund this trip :(  I just opened the ROTH this year so that means I'd be taking out a pretty significant portion of it. 

My concern is this: I'm actually a little fearful I might fall off the bandwagon of saving soon due to these expenses.  In the past, I've tried to initiate a process for budgeting, and as soon as something unexpected came up and threw me off track, I'd end up giving up/stopping the process.  I guess the question I am getting at here is this: 

How do you keep set backs from sending you into a slippery slope of falling off the budget bandwagon? 

I had been tracking all of my expenses daily this month like I did in April.  When I heard about the death 4 days ago I haven't tracked anything since.  I guess part of me feels like "Why bother? My budget is already blown for the month.".  In order to make up for the money I'm taking out to cover the trip, there are things I could do but they involve things such as cutting down on my 401K contribution.  I'm currently doing 22%, which is the most I ever contributed.  I could drop it down to 5% until I've made up what I spent for the trip and gotten my EF fund back up.  But then it makes me scared to do so because I think of the money I'll be losing and I wonder if/when I'll actually get it back up to the 22%. 

As you can see, I worry a lot lol.  I guess I'm just trying to think of a game plan to handle these situations better.  Maybe it just comes down to having a larger EF fund really.  Which I was in the process of building, but sh&t happens......

matchewed

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Re: Slippery slope
« Reply #1 on: May 22, 2014, 02:23:53 PM »
I think you've hit the nail on the head, I'd push making sure you have a solid EF. A 900$ EF just may be too small for the kinds of things you may encounter. There are all sorts of rules of thumbs out there but you'll have to decide what's good for you and yours. Consider the types of emergencies you might encounter, consider multiple of them happening back to back just like what happened. Build it based on that sort of mentality and you'll have a secure foundation for when bad stuff happens.

Echonomical

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Re: Slippery slope
« Reply #2 on: May 22, 2014, 02:26:02 PM »
A few thoughts.

1. Ideally you would have a 'stache in place for this type of thing, but you've just started so don't feel like you've made a mistake.

2. This is totally out of your control and you're doing the right thing as a family member.

3. With that said, you can still scrimp and save. Try bringing some food that won't spoil with you on the trip, grocery shop while you are there, etc.

4. Divide unexpected expenses by 12 and spread them out over the year if it helps you psychologically. $65 for misc./travel looks a lot better than a one month $750 for "funeral." This might help you stay on the track when you look at it for what it really is. Building your 'stache isn't about one-time changes. It's about lifestyle adaptation.

Just my .02

EconDiva

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Re: Slippery slope
« Reply #3 on: May 22, 2014, 03:00:54 PM »
I think you've hit the nail on the head, I'd push making sure you have a solid EF. A 900$ EF just may be too small for the kinds of things you may encounter. There are all sorts of rules of thumbs out there but you'll have to decide what's good for you and yours. Consider the types of emergencies you might encounter, consider multiple of them happening back to back just like what happened. Build it based on that sort of mentality and you'll have a secure foundation for when bad stuff happens.

I agree...I think a big part of the problem I'm encountering here is having too much going into retirement without a larger EF fund.  However, I'm also too old NOT to be contributing the max to my 401k, so the thought of continuing not to do it just scares me.  I guess I need to just mentally get over it and understand that the reality is I'll be less likely to have to dip into other funds if I focus on building a bigger EF fund FIRST.  I was trying to max retirement funds first while building a tiny EF fund.

Primm

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Re: Slippery slope
« Reply #4 on: May 22, 2014, 03:05:02 PM »
I agree with increasing your EF. I thought $1000 was enough for me until I read a story about a guy who had $1000 deductibles on all his insurances with a $1000 immediately accessible EF. He was golden until his spouse drove his car into his garage door and hurt her neck. So all of a sudden he was hit with $1000 excess for the car, $1000 excess for the house and yep, you guessed it, $1000 for the ER visit.

Sorry about the loss of your family member.

matchewed

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Re: Slippery slope
« Reply #5 on: May 22, 2014, 03:10:18 PM »
I think you've hit the nail on the head, I'd push making sure you have a solid EF. A 900$ EF just may be too small for the kinds of things you may encounter. There are all sorts of rules of thumbs out there but you'll have to decide what's good for you and yours. Consider the types of emergencies you might encounter, consider multiple of them happening back to back just like what happened. Build it based on that sort of mentality and you'll have a secure foundation for when bad stuff happens.

I agree...I think a big part of the problem I'm encountering here is having too much going into retirement without a larger EF fund.  However, I'm also too old NOT to be contributing the max to my 401k, so the thought of continuing not to do it just scares me.  I guess I need to just mentally get over it and understand that the reality is I'll be less likely to have to dip into other funds if I focus on building a bigger EF fund FIRST.  I was trying to max retirement funds first while building a tiny EF fund.

Once you have a large enough foundation is when you start building the house to use a building analogy. Once you have the frame up and are putting up the sheetrock and the like then you can probably pair down on having a large EF as you will have a boatload of assets. Until you have that building going though focus on the foundation. Making sure you and yours is secure now is more important than making sure you're secure five years down the road but are still shaky now.

EconDiva

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Re: Slippery slope
« Reply #6 on: May 22, 2014, 03:12:25 PM »
Oh boy...I forgot to add...since my mom is unemployed and going with us, I will be covering her cost of everything too. 

:/

nereo

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Re: Slippery slope
« Reply #7 on: May 22, 2014, 03:15:03 PM »
Quote
How do you keep set backs from sending you into a slippery slope of falling off the budget bandwagon?

My suggestion: budget monthly but keep tabs of the yearly average spending.  There will always be blips where you have to spend more, as well as windfalls when you get some extra cash.  Keeping a longer timeline will help even those blips out.

Also - very sorry for your loss.  Your heart is in the right place wanting to help out your uncle.

Finally, there's a thread going on about how to cook meals in a hotel room.  You might want to check it out to avoid over-spending on restaurants away from home.

trailrated

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Re: Slippery slope
« Reply #8 on: May 22, 2014, 03:56:02 PM »
OP, Although I think it is great your 401k contribution is so high... the situation you are in right now goes to show you are stretching yourself too thin to start off. I started getting serious about budgeting almost a year ago and I have had something "unexpected" come up pretty much every month.

Best advice would be to scale back retirement briefly while you get a larger E fund in place so you don't find yourself in the same situation again.

I found the Dave Ramsey advice worked for me in giving some structure, although I think his investment advice is awful. A quick modified version might look something like this. Maybe work on 3 and 4 at the same time...

1. $1000 e-fund (you might want to go at least $2,000)
2. Pay off all debt (minus mortgage)
3. Build up 3-6 month emergency fund
4. Re-start retirement/other savings.

deborah

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Re: Slippery slope
« Reply #9 on: May 22, 2014, 05:14:26 PM »
How do you keep set backs from sending you into a slippery slope of falling off the budget bandwagon? 
You could mark it in your budget as "emergency fund used" and amount, and continue your budget. That could at least keep you budgeting.

In the future, you might make sure your emergency fund covers the types of emergencies you get, and change your budget to have a small amount (even $5 per pay) toward your EF until it is a reasonable amount.