I am in the fortunate position of having made more money than I needed ever since I started work right out of grad school with an MBA in finance. I am very aware that this good financial fortune is not a result of personal virtue but rather the way our society values certain activities. Not to mention the start I got from having been born into a privileged family, race and class. (I contrast my earnings with those of a good pal who got a Master's of Library Science from my same school at the same time as me - she has worked as hard and dedicated a career as me, but without the same financial rewards. Not due to personal virtue is my money.) But from the first paycheck on, I haven't needed to budget. Money comes off the top to savings, I spend what's in my checking account, and big things are planned and managed within the savings. Only two years of my working life have I not net-saved: the year my wildlife photography hobby caused me to be bit by the flying bug, and the year my sister died, when I paid cash for her funeral and carried the family until things stabilized. But I was not responsible for college tuition, the single biggest investment most families have to make. (Note: life insurance. All families should have life insurance, my sister was well insured, and that has paid for college for the kids.)
But my financial good fortune is not unblemished. The first two companies I worked for were record-setting bankruptcies, and as a result their pensions were turned over to the government backstop, the Pension Benefit Guarantee Corporation. And hooray for the fact there is a government backstop - I know the system has shifted so there are fewer defined-benefit programs in existence anywhere. The PBGC exists as a safety net, and doesn't pay out benefits at the same more generous rate the companies promised at the time. And the PBGC is supposed to be financed by the companies relying on it - but may itself need a bailout in the future. I tried to catch up. When I moved to the government twenty years ago, I maxed out the government version of a 401K every year - but starting such a thing in one's forties is not the same thing as a whole career of planning and saving.
The fact that I haven't had to budget doesn't mean I don't know where my money goes. I was an early adopter of Quicken for tracking my money, and now have switched to Mint. I almost never use cash, I just charge everything, and it gets recorded automatically. So I have the data to know what I have spent in the past, and to estimate what I need in the future. Of course I have charts and make graphs! Over the past couple of years, I've started to get a handle on this as I try to decide if I have enough money to retire.
But tracking and knowing where my money goes is not what "having a budget" means to me. The way I think of it, to have a budget means to have a plan and live within constraints. To decide in advance where the money will go, and manage spending so that is where it does go. And when the budget is spent, stop there and don't spend any more. This is foreign to me.
When I sat down and analyzed my spending about a year ago, I noticed areas I could save, and made some changes. This was a test case, trying to get ready for retirement. For a person who lives alone, I spend a ridiculous amount of money on food. I paid attention, cooked at home from scratch, wasted less, and was successful at a major cut in that spending. It didn't last, I got lazy, but I was reassured I didn't need to spend that much and I was capable of managing it - I just need to put in the work. I did some other things to manage fixed expenses. The big thing was to pay off the mortgage, just a few months early, but DONE. I have one more big recurrent item to fix - cut the cable TV. I keep postponing it, though as a general rule I only watch HGTV, and record a couple of shows to watch later that could be purchased on Amazon or Hulu. Right now, my excuse is to binge watch the whole season of The Good Place that is on my DVR, and then I'll call Verizon. But the truth is, I hate talking to Verizon and so that's why I put it off.
For retirement, I spent quite some time with Jane Bryant Quinn's How to Make Your Money Last. She really laid out from beginning to end how to do the analysis of whether you have enough money, and talked through different strategies, investment types, etc.. So I did my own analysis, somewhat sketchy, but pulling together the information needed was the hardest part. So I compared what I need and what I want to spend, to my resources - four different future income streams, each fairly small, plus my retirement savings accounts. I reached the conclusion I have enough money to get by in most scenarios (especially since the mortgage is paid off) but it's not clear to me how much more than the basics I can afford to spend. I've had a financial advisor for a few years, but I'm switching because we don't click. The new one I know from his previous career, and I can talk frankly and openly to him. He agrees I have "enough" and has recommended some moves on the investments that make some sense.
In November, we went out to Ann Arbor to visit Alex at school. I have some dear friends there, a few years older than me, and I talked frankly and at length to them about money and fears and how do they manage. It's hard to describe how helpful it was to be able to share this discussion with someone who is there already. They are easy going, which is easier when you are comfortable, but that's their style anyway. It is really those conversations that got me over the hump from "if" I retire this year to "when".
I would be filing paperwork to retire with my agency right now were there people in place to accept and process the paperwork. We have good websites, and I've reviewed and downloaded the forms, but there are many choices to be made and no-one to answer questions. For that reason, and for another I won't go into here, my original plan for April Fool's Day will likely get pushed back. The comforting thought I have is every additional month I work is lots more money in the bank than I'll get in retirement. Of course, that's not strictly true, since right now no money at all is going to the bank but there is a law that says I will get back pay.
So how am I handling zero-dollar paychecks? I have resources. I have a savings account, and don't have to touch retirement savings for several months. It's taken a while for me to grasp that I don't have money coming in, and the prudent thing to do is not spend any money I don't have to. So I've clamped down on my spending, but not eliminated it. Back to trying to cook at home. Wasting less food, eating out of my freezer and cabinets instead of running back to Whole Foods every night. Postponing the final phase of my home renovations. Not ordering the plants I was planning to order for my new garden (and if I work longer I'll not have as much time to plant this spring anyway). My biggest expense for the past two weeks has been lunch during the week. I decided to buy my lunch from the small businesses near my office who are hurting and who won't get back pay. (Such a noble sacrifice on my part, yes?) I'll be fine, though I fear our country is sustaining damage that we'll never fully understand.
A few years ago, in the midst of a "take this job and shove it" moment at work, I developed my Plan B. I would rent my house, move onto the boat, bungy-cord a milk-crate on the back of the Vespa, and get a job delivering Chinese food. Now, I've renovated my house to be able to gracefully age in place, and if I needed to, I could rent a nice little space in the basement. I could always find another job, and it's possible some work will find me. So once I close my eyes and jump off that career bridge, I'll monitor how things are going, and I have some Plan B approaches if needed. I'll be fine. But it's still scary.
4 comments:
I have SO MANY thoughts!!! I'm just going to free associate.
* I love your musings about your good fortune to be born into the right family, go into a career that society values. And your friend the librarian. So important for us all to understand and acknowledge these advantages/disadvantages. It took me a long while to truly "get" my privilege.
* I shed a tear thinking of the year Mary died. And whispered a thank God you were there for that family. and then another thank God that our friendship grew from the roots of my friendship with Mary. I think she'd be pleased. I know I am very very grateful.
* I have always been a cash person. Maybe because at several times in our younger lives we wrestled with cc debt. We conquered it, but I've always been wary of being too much in debt, even if it was just for a month until it was paid off. That being said, since I have started working out of the home, my abilty to keep track of every cash purchase with a receipt or a jotted note has wildly diminished and I am gradually moving over to less cash in the system. After al these decades of farly decnet spending management, I trust I won't overspend on my cards and it is SO MUCH EASIER to track!
* This is the year, we don't just simply build a budget, but actualy check real spending against the budgteted amount. We've done this before, but the last 10 years we've been in a bit of a haze paying for the kids education out of pocket. We always build a yearly budget which keeps the general spending idea in mind, but really the discipine was "oops, tuition bill due, better stop spending". It worked, but made us lazy in the actual budgeting/did we meet our spending goals piece of the system.
* This is to say I know there is much fat in the system to cut, but not sure where it is and what to tackle first. F has always maxed out his 401K and I do too, so that is one automatic savings. Now, we are setting up further automatic contributions to an investment fund and a higher-yield savings account where money will leave our everyday checking account every two weeks automatically at a more aggressive clip. No better time than this year to analyze our spending to see how we're doing meeting this new goal and if we could be doing more. I know that wiley Stephanie (my hippy/kooky/razor-sharp advisor) will be asking if we can step it up even more if we do this with any sense of relative ease. She was already eyeing up our Airbnb income wondering aloud if that should get deposited directly into the savings buckets. We pushed back for now.
* Putting aside my horror at your zero paychecks, it made me realize that this ironically is something we are VERY used to. This year, the first quarter is going to be tight for F's company. That means no paychecks unti April. Yup, zero zero paychecks. And there have been many many years of me managing months and months of delayed freelance payment. I like to do work and get paid w/i 30-60 days. Often I had to wrestle with clients' 90-120 day turnaround. It ain't pretty or fair, but it's the nature of the freelance beast. So, we've done this paycheck drought before and manage. It's not fun, but we have looked this bad boy in the eye and know him. Never thought about that, but I see that now as a psychological advantage.
* LOVE LOVE LOVE this new topic to share amongst us! LOVE your talking to friends further down the path, as you will be for me. NEVER thought about how this, too, will be a shared learning, kvetching, strategizing topic in our lives, along with exercise, diet, kids, older parents. This makes it feel SO MUCH FREAKING BETTER! Wow! I not only don't have to figure this out by myself, BUT I can go to peeps who know more than me (advisors) and friends who I trust and who are smart and who will help me, too!
Yay!
OMG, I think I wrote as much as you did! LOL!!!!
sorry about the many typos!
Hi Nan. Love this: "A few years ago, in the midst of a "take this job and shove it" moment at work, I developed my Plan B. I would rent my house, move onto the boat, bungy-cord a milk-crate on the back of the Vespa, and get a job delivering Chinese food. " You make me think! I am glad there's a law in place to give back pay. I like this post. You and Kim are getting me thinking....love Alice
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