by Ashley
Hi all!
Thank you so much for all of the fabulous tips and comments you left me on all of Monday’s posts. I always appreciate constructive criticism and love all of the ideas you have left in the comments – it gives me lots to think about.
Right now, I’m not making any big changes. I’ve decided to put off all non-essential purchases (including hair cut/color, dental work for my chipped tooth, vehicle maintenance, etc.). I think this month has really been tough financially and I just want to wait and see how the dust all settles before making any changes or spending any more money. All of these expenses are “necessary” (in that, yes, I need to have my chipped tooth looked at, we need to take care of our vehicle, etc.), but nothing is urgent so I’m just putting it all on hold for now.
Instead, I want to talk about what my hope is for the outcome of this month (calling them “hopes” instead of “goals” because I feel like, with 1 week left in the month, we’re a little late in the game for defined “goals”…though I will be updating our goals for the upcoming months in a post to come next week). Remember, with our variable income it’s always difficult to predict how a given month will go. That’s one of the reasons I’m so keen on starting to live on last month’s income!
Soooo, here are my hopes in order of importance (#1 being the most important hope, #2 the second most important, and so on).
- I hope we’ll have enough money leftover at the end of the month to do great things, as opposed to barely covering our expenses. Remember, we had some very pricey expenses this month (husband’s root canal, and my car maintenance). Currently, the “other” portion of my budget spreadsheet shows nearly $2,000 in expenditures (for reference, only $125/month is budgeted), so this is already a huge excess that will eat up a lot of our “extra” income. My first hope is that we’ll still have plenty extra even on top of this.
- I hope we’ll be able to put $2500 toward my “living on last month’s salary” savings. Last month we socked away $3200, so if I were able to add $2500 that would bring us to a total of $5700. That’s much lower than we’ve been earning the past few months (our income has been closer to $9,000ish), but it’s certainly a livable amount. Plus, it would only be one month with this somewhat lower income, because we’ll be stashing the full amount of all of our August paychecks for use in September. I’m very excited about living on last month’s income, so I have put this hope above #3.
- I hope to pay off the last of the license fees. I’m going to be honest and say….I don’t think we’ll be able to do this in full. We still owe a little over $4,000. Originally, I was thinking we’d be able to have that paid off by August (this is the bill we’re currently throwing our snowball at and our regular snowball payment is $1055/month). I don’t think we’ll have an extra $3,000 from July (on top of the $2500 going toward “living on last month’s income” and the $2000 already spent on car maintenance/dental care) in order to make this happen. But hopefully we’ll still be able to make somewhat of a dent.
Just to give a brief heads up about where our finances are sitting right now, today (with another week in the month to go), our expenses total roughly $7500, and our income is sitting at just under $9000…..so, yeah. It’s gonna be tough.
That being said, we shouldn’t have any other big expenses (knock on wood!) and husband still has another check coming his way so we’ll see how things all shake out. I guess this is what Dave Ramsey refers to as “more month left than money.” Ugh! I’m wishing August would just hurry up and get here already!!!! I can’t wait to give an updated budget, see where we stand with spending, and where we are in our debt payoff journey!
On a semi-related topic – we do have some extra cash in our regular checking/savings account. Remember that I like to keep a buffer of at least a couple thousand sitting there to cover bills (this is how I was able to pay all our expenses the first half of the month while we were waiting to get paid. I also talked about the buffer this post). Since we’ll be living on last month’s income…..could I eliminate this buffer and put that money toward these hopes??? Note, this isn’t an official “emergency savings” (I have that set up as a Capital One 360 account), and the money goes up and down depending on the time of the month, the bills that have gone through, when we’ve been paid, etc. But it occurs to me that if we fall short on some of this month’s hopes that maybe we can simply take money from here to try to make a larger dent in our debts (and/or make sure we have enough for living on last month’s income). Just so you have the full financial picture, we only have $1200 in our “emergency savings” account, but we have several sub-accounts for various things (car repairs, dental/vision, semi-annual expenses, vet expenses. A full list of our monthly savings can be found here.) and if something awful were to happen I could always tap into our money market mutual fund account (which has close to $6,000). So we don’t have a ton of liquid assets, but we do have enough that we may be “safe” to eliminate our buffer….
Thoughts?
Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Freshly 40, married mother of two, working in academia. Trying to finally (finally!) pay off that ridiculous 6-digit student loan debt!
Congrats – you are doing great! I like to keep a buffer in our checking account (started back in the day when there was always more month than money) but aim for about $500. Since the point of the buffer (us) is to cover times when a bill hits off the pay cycle – I think the fact that you are moving to living off last month’s income means you should be able to reduce your buffer significantly – since the income for the month is already available.
Best of luck with the goals this month!
Pay off those license fees, Ashley. When I get close to a payoff goal, it’s impossible for me to leave any potential avenue untapped. No slush fund, buffer, emergency cash stash or sellable household good is safe in this situation!
I think you are wise to hold off on making any big decisions – this month has been crazy for you….so let the dust settle, see what kind of income you have, then make reasonable decisions on where to spend it.
I agree that your checking account buffer could be smaller, maybe reduce to $500-1,000 and see how that goes? I used to have a bufffer, but to some extent that allowed me to go over each month – it was a bit too easy to just say “Oh, the buffer will cover it” so be careful not to fall into that trap.
Hang in there – one more week to go!
A tough month, to be sure. Look at the bright side. $9000 is a LOT of income to work with. Enjoy this time while you have it. Many people would have been sunk further into debt by these unexpected expenses.
I think you’re doing great but I am a little shocked and turned off at saying that $5,700/month is a “liveable amount!” I’m fairly certain that is more than the majority of American families earn! That seems to be to be a large income.
While $5700 is a nice amount, I think Ashley has expenses that can eat that up quick. She has a large daycare bill and the thing I’m finding is that even though I’m working on getting out of debt, those minimum payments really add up quick and make my “large” amount of money look rather meek. It’s all those years of having that nice income that got me in the position where now I have to spend that nice income getting the debt gone. Ashley, you’ve done a really good job of updating where your money is going and how it is being spent without making excuses. Congrats on all your hard work and tireless effort.
As to the buffer, I would cut it in half (putting the money towards debt of course) and see how it goes the next month or so. Then maybe you could eliminate it all together. Don’t get rid of your true emergency fund though because you never know when those emergencies will come along. Keep up the good work!
Hey Tammy! I definitely didn’t mean to imply that $5700 is chump change (and I think you’re right that it’s right around or above the average family’s income)! What I meant was that it’s nearly as much as we’ve been used to earning and it will certainly get eaten up quickly by our expenses (as Julene pointed out). Take out $1,000 for rent,, $1000 for childcare, and $1500 for normal debt payments right off the top. That leaves us with about $2200 for all our other bills (utilities, groceries, gasoline, savings, car insurance, health insurance, etc etc etc.). You can check out our last budget so you can see how I appropriate these funds (https://www.bloggingawaydebt.com/2014/06/budgeting-a-work-in-progress/). I’ll be doing an updated budget as soon as this month is over, too. While $5700 is certainly enough to cover all our monthly expenses, it will likely leave us with less money to throw toward our debt (on top of the $1500 normal debt payment, in recent months we’ve been able to put at least another $2-$3000 each month toward debt….not sure that will be the case this month)
Ugh – I meant “not nearly as much”
What other families earn is irrelevant I think. We all have different situations and expenses. For Ashley, $5700 is liveable, for friends of mine, it wouldn’t pay all the bills, and for us it would be more than plenty. It’s all relative.
I agree. Although $5700 is not chump change it is all relevant to where you live. I live in one of the most expensive cities in the country and $5700 barely covers basic housing, car expenses, utilities, etc. Both my husband and I have advanced degrees, but it is something we will be paying for many years to come. That also factors into the budget.
I have read on different blogs how people have switched to living on last month’s income with great success. It seems to reduce a great deal of anxiety and unknowns. (Check out what Stephanie says at “Six Figures Under.”) We have lived like this for years, and it seems to really cut down on impulse purchases and expenses.
I’m confused. The purpose of living on last month’s income is to allow that buffer in your account. It sounds like you already have it you just don’t know how much it is. Why wouldn’t you count it?
Additionally, I believe the point is to live off of last months income assuming that you have a steady income. I would argue it is more beneficial to set this amount for your expenses not income. What’s the point in earning extra money for debt repayment if you cant “use” it until the next month?
You should check out the YNAB website, they break it down really well. For us, the fact that we have a steady but highly irregular income makes living on last months income so beneficial. Being one month ahead actually gives us more flexibility and freedom to earmark funds as needed.