Normally I am thinking about the following years budgetary goals way in advance of mid-December but this month has already felt odd. DH losing a week plus to illness, the jump to December seemingly before Thanksgiving was even done, and just the fast pace of life has my timing off. I keep thinking DH's store is not long for the world of commerce and at some point in 2020, we will have some decisions to make-tough and tight budget decisions. Should his job go away and mine stays steady, we can cover all our living expenses and some beyond, but with new budget line items in mind. I've taken inventory of each cash fund we have, factored in with a new tighter budget, and we still should be able to honor all the commitments we have made for the next four years. Some are not yet commitments with specific expenses, but personal commitments to what we would put towards life events for our children. Being able to support each of them is a high priority, much more so than silly spending throughout the month and year.
We have a couple safety nets. If DH stopped working, he actually is just 18 months away from being able to draw down from his 401K. Not ideal as we were hoping to leave his account be until we both retired full time. Still, it's an option. To make up any long term loss should he start pulling money out earlier than we planned, I could add years to my employment, off setting any withdrawls. For each additional year I work, I would contribute to approximately 2.5 more years of retirement-the amount we would essentially pull out of DH's account if need be. This is calculated by what I would be putting into retirement, the additional year of interest on my current retirement fund, and an added year of pension accrual. One additional years of me working would make up him drawing down at 59 and 1/2, and I would still be retired at 62. I could even stretch another 6 months and see a bit more tucked away. Him not working would have some financial advantages such as taxable income. Our quality of life could improve as he could take care of tasks we now split, leaving more time for shared leisure time. These are me looking at the situation with rose colored glasses. Everyone I've talked to about having one partner, or they themselves retired early seem to have no regrets.
Still, having a forced reduction of household income by 45% is nothing to take lightly. The stress of having only one income means we lost the safety of two wage earners because no jobs are guaranteed. With that, I want to set aggressive monthly savings targets. I know DH will want to contribute to the Roth by April 15th if he is still working, so that's aggressive target number one-save $13,000 by April 15, or $3,750 per month. The other commitment we need to honor is our trip to Las Vegas in November. With the concert tickets, I think we can get by for $2,500 for all expenses based on the packages we've used for estimating. Maybe I am off there, but I'd like to get that tucked away before the end of April. A third payday month falls in January, so while $15,500 in just four months seems astronomical, it is doable while he is working. Everything else must be cash flowed-trips to DD2's school, long weekends, and any other entertainment.
Are you starting to plan for 2020? Do you have any precarious employment situations that have you looking at managing worst case scenarios? If so, where will you cut back? What do you know you will do without in 2020?
Wednesday, December 11, 2019
14 comments:
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Daughter's wedding next month will eat up some of our Slush Fund and if we replace the windows like we want to in 2020(plus $3K off the top for the high deductible of our medical plan)that will wipe out what is left in the Slush Fund which means we'll have to belt tighten in 2020 or start 401K withdrawals again. sigh. There will be much finance planning ahead at my house in early 2020.
ReplyDeleteIt's always good to have Plan B and Plan C to fall back on when the future employment is uncertain.
I'm not sure why you are sighing. Isn't the purpose of 401K to be drawn down for retirement? I mean if you all do't use it, there is limits to how much can be passe don to heirs. Maybe I'm missing something big I should be aware of for our own planning.
DeleteOh-and congrats! Planning a wedding is a huge undertaking in work and expenses. Enjoy the process.
DeleteHe can probably find other work, that could pay household bills. Unemployment is scary, but scarier at the close to retirement years. Hubs was unemployed for the first 10 years we were married. He never worked ore than a few months a year, it was awful.
ReplyDeleteHe could find something-even drive school bus which he has a retired friend doing right now. Most likely one of the other stores would take him on. It just feel like we should be conservative and have contingency plans.
DeleteWell, we own our own business and due to a sudden decrease in billings due to losing our biggest client we had a 45 percent pay reduction since August with no outside income. Things are looking up this month however, several contracts are on the verge of signing plus we got our biggest client back albeit on a much reduced level of spending. I think planning for the worst is likely best in both your and my scenario. If good things happen then the rest is gravy. Just a thought though, even if your hubby's store was closed, it likely would still be open for a period of time (1-3 months) after the decision is made which gives you a tiny bit of leeway. It does help when you have little to no debt. In our case this has meant no adding to funds like Christmas/travel/big bill fund/furniture and appliance replacement fund. Luckily we do have all our retirement saved for and in absolute worst case scenario can tap into that. Hubby is 57.5 so essentially same age as yours, he can collect Canada Pension at 60 which helps too. We need to keep the company running for at least 3 more years. In the mean time the plan always was when retirement or semi retirement hit for Buddy I would go get parttime work. Now that things are quieter with the business I am starting to look for casual/pt now in hopes that I can get something that pays well versus having to take the first job I find
ReplyDeletePlus - so glad I fully funded Christmas in the first 6 months of 2019! That has been a huge relief
DeleteI see we may be in similar circumstances. You are right-most likely there would be a short window, plus some bookings. he also could take on even part time employment that would keep from having to draw down much. We always need to prepare, don't we?
DeleteAs you know I'm retired on a fair-ish pension, but my company (international organization funded by governments) struggles to get its budget approved every year. My friend was saying she was somewhat worried about our pensions but I'm not. The pension fund has assets even if the budget didn't go through. But I did get to thinking about when my ex made us leave D.C. (and my good job at the World Bank) to move to PA and I had to start again. I didn't want to leave my new baby so I built up a decent income working from home. I guess if anything did go wrong with our pension fund I could start editing work again. I'm not as "afraid" as I might have been years ago as I know I can always find work. Plus I'm not averse to child-minding (would probably love it actually) and am more than capable of stacking shelves if need be! It's good to weigh up your options though.
ReplyDeleteAs you know, it is health care coverage in the US that is the scary issue-the part that keep me awake at night thinking about retirement. Hubs does not carry the health insurance, so that isn't lost should his job end. right now, there seems to be a lot of part time work, so if I can keep paying all the bills and a bit above, he can probably supplement.
DeleteI've been doing similar calculations here as we both feel our jobs are not secure for the long term. I find it reassuring to calculate ahead for different scenarios and be very detailed like you are doing so I have been doing lots of number crunching this week. DH has just had his work cut back this week so we need to cut back a bit, we have a trip next year to pay for but on the upside our retirement savings have exceeded my expectations so we're ahead there.
ReplyDeleteThat is exactly it-reassurance in running and checking numbers, figuring how you can get by with less.Even today, I was about to go in on sandwiches with a group and save my packed lunch, but then just said No to myself, that's $8 for groceries if we hit financial issues. good for you for being ahead on retirement-that is peace of mind.
DeleteOh heck, I can barely do a month budget with his changing job projects. This last one was supposed to be for 6 months now its only 6 weeks and he will have to find another one after the 1st.
ReplyDeleteHis work sounds like my sons. He just got done with a 7 week project, now he's bac to piecemeal freelance jobs most likely until after New Years when something else should start. It is tough on budgeting.
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