by Hope
I recognize the whiplash of my thinking. My apologies for not responding to the individual comments. It’s been a really challenging month with “busy-ness”.
However, I did sit down this week and read through many of them during some quiet times of reflection. And I am so grateful that you as a community keep hounding me. I need it.
Big Change of Plans
I recognize that you all only see the smallest sliver of my life here. There is so much more to it. And it’s just as much of a roller coaster. As much as I love the “adventure” my life has been, you are very right that this time of stability has me struggling more than I do in times of high stress.
Sitting down to write about my failures was hard. But what is worse is that even in recognizing my biggest failure, I didn’t do anything about it.
I’m still spending down to the last penny every month. I have done NOTHING of significance to prevent the biggest challenges that I have faced over the last decade…a couple of times. By that I mean, losing my largest source of income and having no real cushion to tide me over.
Here I am in a season of feast. And while I am paying down debt. And getting things of importance accomplished. I am not focusing on resolving this, my biggest failure.
And failing to do this seriously contributes to my high level of anxiety, fear, and lack of self confidence. I have to change this NOW.
Priority Change
I realize that this blog is Blogging Away Debt. But I feel like it’s important to switch my focus for a few months. And I need to focus on Building a Significant Emergency Fund. The recommended $1,000 just doesn’t cut it.
And I’ve learned this the torturously hard way over the last decade. But I didn’t really learn, because I didn’t change.
I have to change now. This will allow me to be more confident that if something happens with my income, I have time to replace it. (Goal = Peace of Mind that I can’t remember the last time I had)
SAVINGS GOAL: $36,000
I came up with this number by adding my forecasted monthly output for the next months outside of my aggressive debt payments and current savings plan.
Meaning, if I lost the bulk of my income, this is what I would need to meet all financial obligations for 6 months. (With a bit of wiggle room since I used averages.)
So my thought is, instead of pushing to pay off debt. I push to save, thinking 5 months to hit this goal. Then turn my eye back to the aggressive debt payments.
Thoughts? And if this is a good idea, what is the best place to put the bulk of this savings? I’m assuming high yield savings, recommendations? This is a I’m asking post, not telling. Guidance requested.
Hope is a creative, solutions-focused business manager helping clients grow their business and work more efficiently by leveraging expertise in project management, digital marketing, & tech solutions. She’s recently become an empty nester as her 5 foster/adoptive kids have spread their wings. She lives with her 3 dogs in a small town in NE Georgia and prefers the mountains to the beaches any day. She struggles with the travel bug and is doing her best to help each of her kids as their finish schooling and become independent (but it’s hard!) She has run her own consulting company for almost twenty years! Hope began sharing her journey with the BAD community in the Spring of 2015 and feels like she has finally in a place to really focus on making wise financial decisions.
>you are very right that this time of stability has me struggling more than I do in times of high stress.
This statement right here is something that I think you need to address with your therapist. You seem to be most comfortable when your life is chaos. When you have stability, you sabotage yourself until you end up in chaos. You need to figure out WHY you do this before you can effectively change it.
That’s not to say your judgement whilst in chaos is good, because it isn’t. But it really seems like you go out of your way to make the worst possible choices when you do have a steady income, etc. You take on extra unnecessary expenses. You decide you absolutely “must” do this or that thing, when the reality is you probably don’t. You refuse to listen to well meaning sound advice.
ADHD. Classic ADHD—you induce chaos so that your brain gets the stress hormones it needs to run and have a hope of getting things done. Your son has a diagnosis. It’s highly heritable. It very clearly came from you.
This is a bad plan. You are paying 30% interest on your credit cards- those need to get paid off first, otherwise you are losing lots of money on interest. Your student loan is less critical to pay off, and I would prioritize savings over that, but definitely pay off the credit cards as soon as possible so you aren’t paying huge amounts of interest every month. Just look at how big your finance charge is every month on your credit cards!
https://www.calculator.net/credit-card-calculator.html?balance=5%2C000&rate=30&payoffoption=1&fixedpaymentamount=135&year=2&month=0&x=Calculate
Take a look at this calculator to see what it will cost you to pay only the minimum payment on your credit card.
I hope you follow tto hrough with therapy. It would be interesting to unpack why you function best in crisis mode – and maybe have subconsciously been creating that for yourself.
Meant to say “follow through”
I’ve given up commenting here but will try one last time.
TRACK your ACTUAL spending, don’t base this on “forecasting” which is NOT REAL. Look for ways to trim your budget, e.g. talk to an insurance broker.
Make a BUDGET that includes high-interest debt payoff AND emergency savings, AND your IRA. Don’t jump from one to the other. You have enough income to build up emergency and retirement while still paying off debt. Extra money left over can go towards your EF.
Get HEALTH insurance instead of LIFE insurance.
Save a three-month emergency fund based on REAL NUMBERS while also paying down some debt. Try this for three months and track your spending ,every penny. Then revisit.
Respectfully, you are considering another change instead of staying the difficult course.
6 months of cash savings is a great objective but not if the tradeoff is keeping $30K of debt on the books. $30K of debt will cost you $500/mo in interest alone, perhaps $1000/mo of minimum payments.
So I encourage you to think of it as “my $6K/mo budget needs will drop to $5K/mo once I pay this off.” Once debt=0, save aggressively.
But for now, focus on your expenses and keep them low, avoid lifestyle inflation. Peace of mind, and flexibility, can come from less pressure (need) to make a higher salary because you are stuck in this cycle of spending and debt.
Finishing this goal in five months would mean saving $7,200 per month. Seems like a big leap from where you are now. Is it realistic?
This is not a good plan. You need to pay off the debt, at least the credit cards and personal loans. You can set the school loans on a slow course. The debt has to be your first and foremost priority. Pay it aggressively and with every extra penny that comes in. Do NOT rely on credit cards that you pay off at the end of each month. That has proven to not work for you. If you have something that must be paid by card, then pay it and immediately transfer the money to pay the card, the same day. I know you think that your travel cards points are benefitting you, but the interest you are paying overall is more than negating that effort. And Jen is spot on, you thrive in chaos. That is absolutely something to address with your therapist.
I wouldn’t call it “thriving”, but I would say that Hope gravitates towards chaos, typically self-created chaos.
I’m all for prioritizing savings! But I think it would be wise to knock off the last credit first before aggressively saving. it would only take you a month or two to get that monkey off your back. I really don’t see a point in paying down your student loan other than the minimum with that low interest rate.
Also, not sure why no one has ever said this before. But have you ever thought of living off 50% of your income? Then using the other 50% towards long term savings? That’s usually good advice given to two income households, to spend one salary and save the other. But your income is so high I think it would be a great target to set yourself up for success. It’s twofold because you’ll wind down your spend a little. But also then every month you are in a steady job you would be saving enough to last you a month without a job.
I have been following your journey for what, ten years now? And what I find interesting is how you approach your finances in a strictly emotion driven decision path. Sometimes thats great, it has led you to support your children’s dreams fully. Other times its terrible, you want to feel “safe” so you buy an expensive car. Its frustrating for readers, because all we want is for you to make a budget (not a “forecast”) that reflects your priorities and implement it. But I think we, and you, have to accept that just isn’t’t the way you think. You prioritize spending on what is bothering you at the moment, and as that changes, so do your plans. Yesterday you were bothered by the bad memories of your ex, so you wanted to sell the house. Today you are worried about job loss, so you are all in on an emergency fund.
An emergency fund is a great idea. You need one. This is part of the reason everyone freaks out about your spending. The steps are 1) budget, 2) pay off high interest debt 3) aggressive saving. Can you make a stab at step one?
How much, exactly, do you have in your current various savings accounts? I recall that you were sending $790 to your Emergency Fund and $350 to investments and $500 to travel savings. What are these balances, and are there any other savings out there? I agree that $1000 is low, but $36000 is high when you have this much debt. I’d aim for something like $2500 now, which will be $5000 in 3 months at your current savings rate. And then focus on your debt with that same aggressiveness. With the savings rate you planned you could be totally debt free in that same amount of time, then focus on building up your EF, but with more disposable income and fewer bills to plan for if you had to go bare bones.
Outside of your school debt – I think clearing off the credit cards should still be a huge priority – and close them down if not needed. There is no need to ignore the debt payments. You make enough to pay them off, save and have some fun here and there now.
Please, please stick with your original plan. You have $30000 of debt, if you think you could save $36000 in 6 months you could get that debt wiped out in the same time if you stay focused.
Savings is good but having debt hanging over your head if you didn’t have a job is terrible. And you don’t want to retire with student debt.
You could even do both- ie: put every left over cent from your wage onto your debt but if you do a contract job put it into savings- that would be a reward for working extra hard. Or every time you pay off $5000 of your debt add $500 into savings- that would motivate me to keep battling with that debt.
Keep at it Hope, you are getting so close- don’t stop now!
Okay, maybe it’s just me, but wasn’t prioritizing savings the plan a few plans ago? Honestly Hope, I think you are addicted to changing directions to matainin an unhealthy level of drama and chaos in your financial life. This all-or-nothing approach … how’s that working out for you?
Like so many others have said before, you need to give up the credit cards until your debts are paid and BUDGET what cash money you have in your accounts.
Again, the whiplash. Use your income to pay off the damn credit cards. It’s literally a two month project on your income.
And for your asking, yes, put savings into a high yield savings account. Build up to 10k that you can pull for an emergency furnace repair, ER visit, etc.