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The following post is by MPFJ staff writer, Kelly Gurnett. Kelly runs the blog Cordelia Calls It Quits, where she documents her attempts to rid her life of the things that don’t matter and focus more on the things that do. You can also follow her on Twitter and Facebook.
We all know it’s important to pay down our debt, build up our savings, stick to our budget, and all that other practical personal finance advice. But, sometimes we let it slide.
That vacation we really want to take this year trumps our retirement plan savings. (Retirement’s such a long way off, and you’ve got your whole life to plan for it, anyway.)
Enjoying that new raise a little (haven’t we worked hard for it?) trumps putting that extra money away into our emergency fund—at least for now. We’ll do it later, for sure. And really, how likely is it we’ll suffer some devastating tragedy?
But the unfortunate truth is that disaster can strike at any time, and in any form—illness, job loss, unforeseen home repairs. Successfully clearing expenses each month may seem like enough as long as long as things are smooth sailing—but should the unexpected happens, you could find yourself wishing you’d put aside more of your money while you had it.
I’ve learned this firsthand recently.
Losing Half Our Income
My husband has Fibromyalgia, a lifelong, often debilitating neurological disorder that manifests itself in a myriad of unpredictable symptoms: constant body pain, nausea, sensitivity to heat, and exhaustion. It has steadily been getting worse over the past couple years, and we had a feeling that at some point down the road, disability would be something he’d probably have to consider.
We assumed it would be years and years down the road—we’re both only 31. Turns out, the timeline had its own plans.
My husband stopped working earlier this month because the symptoms just became too overwhelming. He’d been pushing himself to the limit and beyond for months without saying anything, not wanting to worry me, and finally, his body couldn’t do it anymore.
And just like that, with no warning and no adjustment period, we went from being a two-income household to a one-income household. (With half of my income coming from freelancing, which means Uncle Sam takes a hefty chunk out of it quarterly for self-employment taxes.)
Before my husband lost his job, we thought we were doing pretty well, all things considered. We hadn’t been personal finance pros in the past, but we were fixing things now, and it looked like we were on the path to financial stability. I was just about to finish paying down my credit card debt through a credit counseling program, after which my husband’s debt would be next, leaving us both credit-card-debt free by the age of 35. We were putting a little bit aside whenever we could (we had accumulated an emergency fund of around 1 month of expenses). Things were a bit tight since I’d recently switched to part-time freelancing, but we were doing better and better each month, and we had a plan in place to keep the growth going. It was only a matter of time before our ship righted itself once and for all and we started coming out ahead of the game.
Then that ship crashed. And we weren’t ready for it.
Batten Down the Hatches While You Can
If you think balancing a budget is hard in general, try it when you’ve just lost half your income, with no time to plan for the drop-off.
The good news is that there were some things we were enjoying in our old lifestyle that weren’t necessities—a nice cable package, dinners out on the weekends, a second car. (No need for that anymore now that only one of us is working.) We weren’t living the high life by any means, but we weren’t depriving ourselves, either. We were your average middle of the road, middle class couple. Meaning, there was a little fat that could be trimmed from the old budget. Everyone has some.
The bad news is that, even after slashing those unnecessary items from our expenses, it still wasn’t nearly enough to cover the difference of an entire lost salary—especially considering my husband was also the one carrying our health insurance coverage. (Did I mention that applying for disability benefits is a process that, on average, takes 2-3 years to fight out?)
What I wouldn’t give to travel back in time a few years and tell myself to start squirreling things away ASAP—anything, everything, even if things already felt a little tight. But hindsight is always 20/20. That’s why I’m sharing mine with you—not to make you feel sorry for me (we’ll find a way to make this work), but so that you don’t feel the need to go back and warn your past self.
We will make it through this. People make it through much worse all the time, and thankfully, our financial house was already getting back in order before we took this hit. But it could have been less difficult. We could have given ourselves a little more security.
So if you keep telling yourself you’ll start working on that emergency fund “later”—don’t. You are never too young to start (and it’s also never too late). You can’t predict what’s coming down the road, so do your future self a favor and prepare for the worst. Hopefully it will never come, but if it does, you’ll be o.k.
How about you all? Do you have an emergency fund in place? If not, what could you do now to start putting something aside for one?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/76657755@N04/6881502016/
