I used to think my job was safe until the last Government shut down. We were lucky not to be affected in my job but we could have easily been.
During the last Government shut down, my husband and I sat down and discussed our finances. I asked him if a Government shutdown causes a temporary loss of my income, how we will afford to pay for our living expenses. Without our mortgage our monthly expenses are $1,340. We save $350 a month for expenses that occurs few times a year like plumber cost, kids, school registration, car repair…. We live on the lowest income and use the highest income to pay our mortgage. If we have to pay all our expenses with my husband income, we figured out that we could cut some costs otherwise it won’t be enough to cover our expenses. With our mortgage of $919 a month, our monthly expenses are $2,259 ($1,340+$919). Our cell phone cost $105/month for 3 people. We would cancel two lines including my mother in-law and my line. She would get her own plan. I won’t need a phone or can carry a prepaid. That would spare $60. We would cancel our allowance of $ 200 a month for both my husband and I. The total money saved increases to $260. We would keep the internet and cancel cable. That could save us $100. Our cable and internet cost $175 a month. Total money saved would be $360. We may not be able to save $350 a month. The money saved increases to $710. Another saving of $100 (we usually have about that left in his income that goes toward mortgage every month) increase the saving to $810. Our monthly grocery cost is $375. We could decrease it to $250 and add the difference of $125 to $810. That would be $935 enough to pay the mortgage. That is why I like to stock up on food. When I build my stock pile, I purchase food on sale which saves me money as I don’t pay full price. It is equally important as to save 3 to 6 months of living expenses to fall back on in time of loss of income. Building food pantry is lot easier to do a little at a time. We figured it out that if we decreased or cut some expenses, we could pay our mortgage and utilities and have $250 left for our groceries.
We also decided that I would substitute teach. I have done it in the past and liked it. I started to take classes online to renew my substitute authorization and have a valid one on hand. I used to register with 4 towns’ school district to have more opportunity to sub. Substitute teaching pays $80-$100 a day depending on the town. I would be able to earn enough to supplement my husband income to pay for groceries or to save some money for irregular expenses.
Once we decided what cost to cut to be able to live on one income, we talked about other backup plans like digging into our investments. But I liked the plan of cutting cost.
It is good to have a backup plan in case of situations like a loss of income.
Months later, my husband employer decided to delete his position. His position allows him to work when I am at home and I go to work when he is at home. We both work and watch our kids ourselves without paying for daycare. With this major change at his job, he was given other management positions but with less flexibility. I told him to go for a position he likes that would allows us to watch our kids ourselves without daycare cost even if it means to take a pay cut. We would adjust our expenses to live below our means. We already live within his income and pay the mortgage with my income. We would cut down expenses like cable if necessary. When you work for an employer, you cannot say your job is safe and spend all your income every month. It is important to live below your income and save the rest to create a source of income for yourself. We are glad we paid off our consumer debts and are paying a lot toward our mortgage. We really feel strong about paying it off as our living expenses without a mortgage will be low.
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Few days after our discussion, my husband told me he would like to sell his company stocks as he believes it would go down with the changes the company implements. I totally disagreed with him but he made up his mind. He suggested using the revenue from the sale to invest some in our Roth IRAs and the rest toward paying down our mortgage. I told him as much as paying down our mortgage is important to us, our house doesn’t generate income, We live in it. I don’t consider it as an investment. I would consider that an expense. Therefore, if we want to sell the company stocks, we would put it in a saving account, save to add to it and invest in a rental property. We have a property we need to save to fix. We would like to save for it after our mortgage is paid off.
The sale of the stocks could go toward that but I prefer to open a new company and purchase a rental property with the revenue from the sale used as a down payment. That way we know we didn’t spent his investment money but we reinvested in real estate. He agreed with that option. He placed a request to sell his stocks and I filled an LLC certificate of organization with our state. I have created 2 LLCs in the past myself for two of our companies and did it again. The market value of the stocks was around $20,000. It could fluctuate by the time the stocks are sold. My husband invested in his company stocks for years. He is been working there for close to 20 years. Even when we lived on his income and I was out of job I agreed with him to invest the maximum his employer would match. We pay taxes on dividend the stocks generate every year during our taxes. But selling the stocks at a profit would generate a gain we will pay tax on. We will cross that bridge when we get there. We could put the money in a saving account for few months of our salary but still I prefer to reinvest it. Rental property seems to be the perfect investment of my choice as that would generate a monthly cash flow.
A job should be a mean to an end not our only source of income. Live below your means but within your needs and save to fund your own multiple sources of income. Grocery stores generate revenues from different products and departments. Why do we employees think we should solely rely on our payroll as the only source of income?
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