Adjusting the Budget for Job Loss, Planned or Unplanned

Do I need to find another part-time job?

Job loss was one of the biggest realized fears that crept in after the COVID-19 shut-downs in March of 2020. Many people were forced to adjust their lives and their budgets due to being furloughed or laid off with short notice. Thankfully, along with the loss of those jobs came higher and extended unemployment benefits, economic stimulus packages, relief from eviction or foreclosure, and fewer opportunities to spend money. Who knew that after mass lay-offs around the country that now, a year later, there’d be a shortage of labor, not jobs! A large percentage of the workforce learned how to adjust to one income or a lower income and have now chosen to be unemployed, with or without the government benefits.

In my situation, the business my mother and I started about 15 years ago managed to stay afloat through the pandemic, but the effects it’s had long-term on both of us, as well as our client caseload, may lead our business down a path of never fully recovering. We are considering closing our family therapy practice for good. This is a combination of forced and chosen job loss, for which I now have to adjust our family budget.

Over the many years, I’ve slowly reduced the number of hours I put into the business and also the amount of my pay. I have a very flexible schedule and work exclusively from home, which has been such a blessing at the current stage of my family. I still have two preschoolers at home with me three days per week and two older children with very busy extracurricular schedules. The paycheck has been smaller than when our business was at its prime and our caseload was overflowing, but the extra money has been essential to getting us ahead in our journey toward FI. We’ve been able to contribute the full amount of my part-time income to investing and charitable giving, while meeting all of our living expenses with my husband’s salary. Now, we will have to make cuts as my mother and I move closer to closing the doors to our practice for good.

My total take-home pay is currently $1,910 per month. $1,700 of that goes toward my ROTH contribution (averaging out to $500/month but invested as a lump sum at the beginning of the year) as well as my husband’s and my combined contribution to our joint brokerage account ($1,200 automatically invested into VTSAX monthly). The other $210 is set aside to make charitable contributions of our choice each month. This giving is in addition to tithing.

The last thing I want to do is cut out our investing or our giving when I lose that monthly income. Whether we’re a one-income or two-income household, we still plan to hit FIRE by 50 (or hopefully sooner). Continuing our current rate of investing is essential to meeting that goal. So, I now have to make some tough decisions about where to reduce our spending or whether to take on more work to replace that income.

I can also take into consideration the cash flow we are receiving from our rental properties, if that’s where the money is best served right now. However, we’d ideally like to put all our cash flow this year toward reserve funds or future real estate investing.

So, I decided to dedicate a slow, rainy, unseasonable cold morning at home to analyze our current expenses and determine where I can “find” as much of that $1,910 per month in our budget. There is a strong possibility that my final paycheck will come in June, so we will need a total of $11,460 for the last 6 months of the year to make up for the loss. That’s a big chunk of change!

Our annual budget was my first place to look. I discovered that I had budgeted some overages in our savings categories above the contributions mentioned above. Because we already have a 12-month emergency fund, plus money set aside to buy our next two vehicles in cash, I decided to re-allocate the $1,000/month going into our online savings account. That adds up to $6,000 over the 6 months that I’d be without my part-time income.

Then, I reviewed what I had budgeted for a new life insurance policy this year and what we actually spent. After reading about life insurance options, listening to a couple podcasts on the topic, and doing some comparison shopping, we were able to secure a term life policy for my husband for much less than we had budgeted. We had $860 set aside for that new policy (as a supplement to the one offered through his W-2 job), but we only spent $380 and paid in full. Therefore, we had a surplus of $480 in that category. Additionally, we’ve already pre-paid for all of the kids’ summer activities and camps, as well as the registration fee and August tuition for our preschooler, leaving us with no child care costs for the summer. We will not have to pay the $749 monthly preschool tuition for three months, and we can remove the $300/month we’ve been budgeting for kids’ activities and camps. That leaves us with another $3,147. A few additional cuts include a decrease in cell service fees for a savings of $100/month by switching to Mint Mobile; cancellation of Camp Gladiator membership for a savings of $79/month; and cancellation of private horn lessons now that our eldest daughter will be receiving additional band instruction each day at her public high school for a savings of $100/month. These three changes add up to $1,674.

Also, I’ve resolved to going back to at-home haircuts for all the males in my household, which amounts to a savings of $85/month. That will provide us an extra $510 through the end of 2021.

The total amount “found” in our annual and monthly budgets to make up for the loss of $11,460 in income is $11,811!! I was able to complete this analysis in less than half an hour using the detailed spreadsheets I keep for our family’s income and expenses. With the conclusions drawn, it will not be necessary for me to find other part-time work to replace my lost income for the second half of the year! We can continue making substantial progress toward our FI goals without sacrificing what’s important to our family or seeking additional sources of income.

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Many people fear that having detailed budgets and tracking expenses will limit their spending and, therefore, their happiness. However, I find that these practices provide the opposite: freedom! And for me, freedom with my time (and my family’s time) is the ultimate goal of pursuing financial independence.

If you find yourself in a similar position, either preparing to leave your current job or fearing that you might lose yours at any moment, I definitely suggest tracking every dollar you spend, if you haven’t started doing that already. Once you have a framework, finding places to make cuts is pretty easy.

If you’re already a great budgeter, think of your income loss as a total dollar amount through the end of the year instead of what you need to cut or save each month. Recognizing that there are annual expenses/allocations that might be easier to cut than your monthly ones might give you a little room to breathe (and spend) when the expected or unexpected happens.

For more specific ideas on where to make big cuts, check out 9 Ways to Save this year.

Fuel your FIRE: Your Why for Financial Freedom

Financial Freedom in 2021! Take Action: Day 30

Wow! We made it to Day 30! I calculated that I’ve written (and you’ve read) over 25,000 words in the last month. That’s enough words to fill 1/3 of a novel, and all of them were about saving money and investing for the purposes of financial freedom.

But why?

In my post titled, What Does Financial Freedom Mean to You?, I summarized what motivated me to jump on board with the FIRE movement:

“Financial freedom allows the ability to let go…

of maintaining a specific image; of an addiction to other people’s lives; of the shackles of material goods; of the restrictions placed on me by others; of saying ‘yes’ when I want to say ‘no’; of saying ‘no’ when I want to say ‘yes’; of negative relationships; of working to achieve someone else’s dream.

It provides the option to linger…

with a baby in my arms; in bed all morning with my husband; on the floor in my kids’ playroom as they set up a tea party; at church after service or maybe on a Wednesday; on a restaurant patio with a friend; at a beautiful beach all day; in my sister’s living room catching up on a favorite TV show; at my mom’s house sipping coffee; at my children’s favorite museum; on the hiking trail or in the river at a state park.

It affords the privilege of indecisiveness…

on whether to build a forever home, buy an investment property… or both; on whether to volunteer in local church ministries, start the business I’ve always dreamed of… or both; on whether to do travel homeschooling, keep my kids in public school… or both; on learning to play golf, participating in an over-40 soccer league… or both; on whether to write a book, start or podcast… or both.

It commands the responsibility to give…

financial literacy lessons to my children; personal finance advice to the young and old; donations to charitable organizations; more time to important projects; opportunities to the underprivileged so that they can break the cycle of poverty; gifts to my church; more of me to those I love.”

It’s this final paragraph that makes the FIRE movement especially appealing, not just for myself, but for the entire community too. I recently heard that while others might see an individual’s push toward financial independence and early retirement as a selfish, greedy move, the truth is that most people in the community want to use their freedom for greater good.

Those who’ve reached FIRE write blogs to help others improve their money situations. They host podcasts and share the best tips available. They write books to make investing easier. They teach classes for free to the under-privileged, under-educated, and under-represented. They run fix-it clinics, start buy-nothing sites, and inspire minimalist movements. FIRE people don’t keep this to themselves; they share what they know and encourage others to make the best use of their money as well.

Consider the type of people who truly subscribe to the Financial Independence Retire Early life. These people are often intelligent, motivated, educated, persistent, goal-driven, risk-tolerant, and innovative. When people with these qualities are freed from the daily grind, their talents can then be put toward philanthropy and changing the world we live in.

Take action today on Day 30 by determining what fuels your FIRE and decide what good you could do in the world if earning a regular paycheck was no longer a top priority.

Thank you so much for going on this 30-day journey of action steps toward financial freedom with me! I truly hope it’s been helpful and that you’d be willing to share these tips with others.

I invite you to subscribe to this blog and follow Frugal_with_Four on Instagram. I’m looking forward to sharing so much more on living this frugal yet wonderful life with you.

Thanks for reading!!

Save on Groceries

Financial Freedom in 2021! Take Action: Day 9

Food is the third largest expense for most households, especially if you have growing children or pets in that house. A family of 4 in the US spends around $700 – $1000 per month. When I first started tracking our spending, I discovered that our family of 6 was spending close to $1500 per month on groceries and eating out. Woah! That’s a lot of money!

Thankfully, I quickly found ways to reduce our food expenses, starting with grocery shopping. The following tips show how our family dropped our monthly grocery bill from around $1200/month to $800/month. We’d like to get that down much further, so we continue to try to find ways to cut back although we do not have discount grocery stores in our area.

1. Ask yourself whether you HAVE TO go. One of the best ways to save money on groceries is simply to go to the store less often because once you’re there, you know you’re going to buy something else … and another something else… and another. I get it if you have a sick child and ran out of his medication or if you need more baby formula. However, many of our *quick* grocery store runs are for want items as opposed to need items. Can you make a slight change to tonight’s recipe so that you can go without a certain ingredient? Can you bring a different dish to the potluck than what you had originally planned? Can you make pancakes or muffins rather than instantly replacing a favorite cereal? Find ways to eliminate those in-between trips, and you’ll spend significantly less.
2. Take Inventory. As I mentioned in a previous post, making note of what you already have in your fridge or pantry and determining how best to use them in the weeks ahead will prevent you from buying duplicates or even substitutes when at the store. Know what you have and don’t buy more (unless there’s a deal really worth stocking up on).
3. Don’t bring the kids. Easier said than done, I know. However, kids can make you stressed… stress makes you cave to convenience… and convenience costs cash. If you are able to change habits and go to the grocery store less often, you most likely can find an hour each week or a little longer every other week to go alone. It’s glorious. And necessary.
4. Know when your store sets out clearance items. I called my local grocery store and asked what time they set out clearance items daily. At the Dripping Springs HEB, they stock those specific shelves between 6 and 7 am. Eek! That’s not even close to my usual shopping time, but I still always check the racks because I have found so many items I would’ve bought anyway marked way, way down. If your store doesn’t have a clearance rack, maybe they mark down soon-to-expire meats or day-old bread at certain times of the day. A quick phone call or short visit with a manager is all it takes to get the inside scoop.
5. Keep your grocery list generic and shop the sales. This brilliant idea came from a podcast featuring the Saving Sherpa on Bigger Pockets Money Episode #75, during which Justin shared how low his grocery bill can go. It is completely unrealistic for me to feed a family of 6 on $15/week, which is his personal budget, but hearing how he shopped was pretty inspiring. Instead of planning very specific meals with very specific ingredients, his list remained generic so that he could shop based on sale prices, seasonal produce, and in-store coupons. His list might read “Protein, Fruits, Vegetables, Lunchmeat, Fillers (i.e. rice, potatoes, bread, tortillas), Snacks, and Yogurts”. The most important aspect of this idea is to break habits and buy based on value, not based on routine or rigid meal plans.
6. Before you grab an item from the shelf, ask if it’s something you can make from scratch at home. If frozen waffles aren’t on sale this week, can you make extra waffles on Saturday morning and freeze them for later in the week? You can ask this same question when shopping for granola bars/balls, cookies, rice krispie treats, muffins, frozen pizza, sweetened coffee creamer, bagged popcorn, chex mix, lunchables, veggie trays, fruit salad, jars of soup, pre-made/frozen meals, and so on. Not only is it usually cheaper to make something with scratch ingredients, but it’s a lot healthier too.
7. Make the most of store coupons and apps. Use your local grocery store app to save money on groceries. I’m a big fan of HEB… everyone in Texas is! And with the featured HEB digital coupons, I’m an even bigger fan. HEB is already known for their in-store yellow coupons and their weekly meal deals, but the app offers additional featured coupons and even sends users freebies every once in a while. If you add a cash-back app, such as Ibotta (enter referral code “wpcrvpk” pretty please), you can even double up on some coupons or on other items you bought. In fact, there have been many, many times that I’ve saved using an in-store coupon and then received additional money back from Ibotta on the same product. Ibotta pays you back on specific grocery items listed in their app, and it changes weekly, but it also has “any item” options that will earn you some money back for simply redeeming a receipt or buying bananas. All you have to do is select the items you purchased, take a picture of your receipt, and cash in. I’ve earned over $200 since I joined in Oct of 2019.
8. Know what to buy when. Usually, vegetables and fruit are cheaper when in season. This guide might help you to determine whether now is the time to stock up on berries or whether you should wait until a different season of the year. Also included below is a guide of which fruits and vegetables freeze the best so you can stock up when they’re on sale.

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To take action today, listen to the podcast mentioned above and download the Ibotta app. Also, go to your pantry and fridge to check out what foods you’re stocked up on. Come up with at least 5 meals you can make from what you already have. Then, calculate what the cost is for each of those meals. Set a goal for meal costs in your home. We aim for $2/person for homemade dinners.

Then, when it’s time to go to the store again, download your grocery store app and check what’s on sale or what coupons are offered. Make your list and your meal plan starting with those sales.

Why Frugal with Four?

I’m no expert. I’m not a financial analyst, planner, or coach. Actually, I recently discovered that I’ve been relatively bad with money for most of my life. I never really thought about saving for the future beyond having enough to make my next big purchase, and I applauded myself for finding incredible deals on things I didn’t even need (and often never used).

Thankfully, and in spite of my bad habits, I had an epiphany about a year and a half after my fourth child was born …

At our rate of spending, we were on our way from over $100,000 in savings to potentially going into debt within 2 years if we didn’t make some big changes!

I had always been a working mom. I never even took more than a few weeks off after giving birth to each of my first three children. I remember writing curriculum and answering emails while lying alongside my very sick newborn baby on a 5-day hospital stay. I remember putting little ones to bed and then staying up until 2 am typing out invoices. I hustled. I worked multiple jobs. And I refinanced a high-priced house as a single mom of two young children. I felt like I had all of my financial ducks in a row, and even though I wasn’t saving a whole lot, I had a small retirement account and an emergency fund in the bank.

Then, I met my future husband, and life was grand. We dated; we traveled; we splurged. Soon enough, we got married, and we combined two substantial incomes, while also combining two different spending habits. We never even thought to budget. We considered ourselves savvy shoppers and definitely not big-ticket spenders, so when we had a baby together, I reduced how much I worked. Then, when we had another baby together, I stopped working altogether. We went from two substantial incomes to one, but we never had a discussion or established a plan for what changes we needed to make in our spending to successfully embark on this drastic lifestyle change. We just kept doing what we had always done. We bought the groceries we wanted without tracking how much we spent per month. We went out to eat or grabbed fast food on a whim. We bought mountains of kids’ clothes even though several people offered us hand-me-downs, and we said yes to every party and social engagement that came along. We had fooled ourselves into believing that because we didn’t drive expensive cars or splurge on fancy clothing or stay at 5 star hotels on vacation that we didn’t need to pay attention to our spending habits. So, we were in for a big surprise when we finally did.

It turned out that we were spending a few thousand per month more than what my husband was bringing in, even though he had a significant income. We knew we had been dipping into our cash cushion here and there but didn’t realize for quite a while just how much. I am incredibly thankful that we had built up a large amount of reserves prior to the decision for me to become a stay-at-home mom, but it was time to make huge changes and create a plan to continue to build those reserves rather than deplete them.

I had to launch into hyper-learning and take action immediately! I listened to dozens of podcast episodes, read several books, researched online, and tracked every single penny for months. Within 4 months of this journey, we reduced our monthly spending on average by $3,000 (here’s how we started!), but to our surprise, our lives really didn’t change at all. I became focused and motivated, and I began to take our journey beyond just saving ourselves from future debt. I decided that this journey could take us on the path to future financial independence instead!

It’s been 20 months since I had my money epiphany, and since then, we’ve accumulated cash reserves more than 3 times what we had when I stopped working. We’ve increased our investment assets significantly. And we continue to reduce our monthly spending in creative ways despite supporting a family of 6. And we started all of this as I was nearing my 40th birthday! We definitely didn’t start early. However, we now feel confident setting goals beyond what we had ever imagined…

• Retire by age 50
• Find unique ways to fund continuing or college education for all four of our children
• Invest in real estate, including vacation homes
• Travel to all 50 states before our eldest child graduates (in 5 years)
• Live abroad
• Give generously
• Write this blog

I’ve been told more than once that I should write what I need to read. I’m hoping this blog will keep me motivated on this journey to financial independence, but more importantly, I really hope it can be encouraging to others. Please subscribe to follow along on the path that got us here and what lies ahead. I also plan to share great money-saving tips, budgeting ideas, encouragement, and financial literacy lessons for your children. Thank you for reading!