Case Study worthy of face punching (multitudes of face punches)

[tduff311]

I do think that either there is too much emphasis on the forums on having an emergency fund, or that "emergency fund" is taken to mean something different from the precise words.

I think spending on things which are not monthly expenses (bikes, furniture, gifts, car repairs) but are not emergencies needs to be planned for with a sinking fund - you set aside a certain amount of money each month for eg annual expenses and future expenditures, and put that into an accessible savings account to draw from when the payment comes up.  It means that you never again need to borrow money for consumer spending and never again buy anything you don't have the money for.  After a year your sinking fund should be pretty much at a steady state as you understand what those "regular irregular" expenses are like.

A true emergency fund is something different, to my mind.  It's having money that you can use for true emergencies.  Personally I think that because that need is so unpredictable both in timing and amount that it is futile to set aside a certain amount of cash for it and much better to plan how other existing assets (sinking fund, credit cards, fungible investments) can be drawn down as necessary.

You may want some kind of combined sinking and emergency fund.  Whatever you do, you do need to ensure that in future you are planning ahead for the kinds of expenditure that you previously ran as debt on credit cards.  It will give you a great sense of control if you do so and prevent you from accumulating debt again.

Very well said!

Thank you

[ATR]

Posting to follow! Looking forward to continued progress and to seeing what fancy snacks the kiddos have been dining on.

[fuzzy math]

I'm going to buck the trend and mention that you should spend the same or more in 2 categories:

1) Dental insurance. If you had a big dental bill recently, I don't think its a great option to self insure. Kids do all sorts of crazy stuff and you could have a year or many where multiple of your family members are maxing out their benefits. The temptation to save when self paying is to get your teeth cleaned less often which can lead to more expensive problems.

2) Life insurance. You're only paying $22? Who has the policy, you or the wife? From your lifestyle it sounds like either of you would be screwed if something happened. I understand it might be difficult to get some insurance as a cop, but that doesn't protect you if there's an accident on your own time. My life insurance policy excludes things "in the line of duty or war, during a riot etc" and I would think  you could get a policy with similar limitations. Also with a medically fragile child, you would need a buffer if something were to happen to your wife. You should both have policies. I believe some people recommend 6x annual salary, but anything at this point would be helpful.

[formerlydivorcedmom]

Your children are 7 and 8 - are they old enough to have an allowance and for all their snacks and treats, such as ice cream, to come out of it?  If you can transition to that system it could take a lot of pressure off your wife to be the regulator of what gets bought and when.

Good plan :)

Now to sell it to the wife....lol

If you haven't broached this yet with your wife, please do!  My kids are that age.  They used to nag all the time that they wanted ice cream at school or candy at the store or some special prepackaged snack that is SO GOOD.  Some days I'd give in because I just didn't have the emotional bandwidth that day to say no One.More.Time. 

So I switched to this method.  They get allowances for doing chores, plus a set amount of money per month for school lunches.  If they want to pack a lunch and use the lunch money to buy an ice cream, fine.  If they don't want to pack a lunch and buy it instead, fine.  If we're at the store and they want a giant pack of Swedish Fish, fine.  If they run out of money for the month....too bad, no snacks, no purchased lunches. 

It WORKS.  I no longer get asked to buy those types of things.  The youngest has even started spending an extra dollar to get the family-sized bag of Cheetos instead of the individual size "because you get more for your money".  We write his name on the bag so the other kids don't eat it, and he can have a serving every day.

I bet your wife could modify a system like that for homeschooling, too.    It's taken so much pressure off of me, and I'm always amazed that they're putting into practice the financial lessons we've been trying to model for them.

That said, I do stock the occasional ice cream/popsicles, and I surprise them sometimes with donuts or snocones.  They appreciate the treats more now that they are more rare, yet they don't complain about being deprived.