Tuesday, February 3, 2009

What Happens if I Don't Get $900 a Month

So, it occurs to me that I have never really broken down what happens if I don't make my $900.00 goal each month. Obviously I haven't always made the goal, (you can see that along the right hand side there,) however, I am still paying all my bills on time and haven't had the bank knocking on my door yet. So, how do I do it?

Well, the first thing that you have to realize is is that my budget has some flexibility in it. I am using the same budget (with a few revisions) that I had before the divorce. When I took over the house I simply added all the house bills, utilities, etc. to it, and there it is... a $900 difference between what I budget to spend and what I know will come in from my 40 hour job and the rent from my tenant. However, you have to understand that money is kind of fluid. I don't have to actually earn $900. I could chose not instead not to spend $900.

It is easier said than done, but here's what I mean:

The difference between the two columns - what I budget to spend and my income - can be either made up by earning extra income or by saving money. In my budget there are things like dining out, entertainment, groceries, auto fuel, gifts, home improvement needs and charitable contributions. All of those things are pretty flexible. In addition, there are items that could be cut - my monthly emergency fund contribution, the extra I am paying on my credit card, my cell phone, even my life insurance. The question is, could I cut enough of those things to not have to scramble each month?

In a word, no.

I added it up once. I took out all the things that might be considered "extras" first - my gift fund, dining out, entertainment, the amount I put aside each week so I have Christmas money, my home improvement fund, my emergency fund, and the $15 I try to give to charity each month. That didn't cut it so I grabbed a calculator and started chopping in other areas - making minimum credit card payment, getting rid of my cell phone, cutting my grocery budget and my fuel budget. Then I calculated the difference if I cut my life insurance and the amount I budget for eBay selling fees, and when I was done, I still wasn't at $900. In order to make up the money completely I would have to live like a hermit and probably sell the house at a huge loss.

I decided that I would never do that. My goal is to live frugally - not unhappily. That is when I decided to work at doing whatever I could to do to make the $900 through extra income if possible. However, at the same time, I am very aware that if I can save money I don't need to make $900. For example, at the beginning of this whole process I was able to change my insurance and mortgage payments and save money that way. That gives me a fairly significant jump to the $900. I am also keeping the fact that savings and income are equally important in mind all the time. I do what I can to reduce the utility bills and other bills. I also am very frugal at the grocery story and those other more flexible areas of my budget. For example, last month I spent about half of what I normally allot for groceries, only $5 of my entertainment fund and came in at just a fraction of my fuel budget. So, even if I don't hit the $900 I can still come really close.

Fortunately I have also had a few good months where I have hit a surplus. That keeps enough cash in my account that I have only had to dip into emergency funds a few times. When that happens I always work hard to bring it back up. If a time came where I couldn't make the $900 for several months on end, and had used up all the reserves - even then I have back up plans and back up plans. It certainly keeps me on my toes, but it isn't like I am on a knife's edge... more like a balance beam.

Photo by Hello, I am Bruce's


Kristy @ Master Your Card said...

Do you include the income from your second job in these calculations? I'd think that a second income would help significantly with this goal.

It's good that you were able to get lower mortgage payments, but you also mentioned tenants. Are you renting out a room, or do you own another house? If the latter, have your considered selling that, or are you looking at a loss there as well?

I just hope that you haven't taken on too much. I know you work super hard to keep the house, and I'd hate to see you in a bind. I'll keep you in my thoughts and prayers!

Dawn said...

Great questions Kristy! It is an extensive answer, so I will put it in a post. Thank you so much for your thoughts and prayers - I can't tell you how much those are appreciated.

Catie said...

How does the saying go? "There are 2 ways to become rich: earn more or desire less"? So basically you are doing a bit of both!

Miss M said...

Yes, it's important to remember there are two sides to the equation, income and expenses. I had to raise my income to get out of debt, it wasn't going to happen on my old salary. I also cut my expenses, so I could be out of debt more quickly. I like that you've looked at the various scenarios and concluded that the extra income is pretty much a necessity. Some people would just try to get by, digging deeper into debt, rather than face the fact that they need more money. You must be exhausted from so many jobs.

Dawn said...

Catie - I love that saying! I couldn't agree more. Ah, won't it be grand to be rich?

Miss M - the jobs sound a lot worse than they really are. There are a lot of them, but typically I am not working more than 2-3 nights a week, with plenty of "no work weeks" in between. Sounds to me like you and I have similar styles when it comes to making ends meet!