Stay on Track Financially Even When You Don't Really Have To

Tip #300 - Stay On Track Financially Even When You Don't Really Have To - There will hopefully come a point in your life time when all the hard work you put into saving money will start showing some results. One day you'll have $200 in your bank account, and then the next year you'll have $2000 in it, and then a few years after that, you'll find $20,000 in there. It really does happen that way. And you might realize at that point that you have reached the financial goals you have set for yourself. What then? Do you throw your frugal lifestyle and your good financial habits out the window and start living the wild life? Or do you continue on the path you have worked diligently at of keeping expenses low, putting away savings, and investing your money? Continue the path, of course!

I liken this situation to weight loss. If you were overweight and have spent the last year exercising, cutting down on your food intake and eating healthier and are now at the ideal weight, do you just stop what you have done? No! You continue with a maintenance program with a treat thrown in here and there. The same is true for finances. Once you reach your goals, it doesn't mean you can suddenly spend frivolously, although you can probably loosen the reins on your wallet a bit. Like diet and exercise, being careful with your spending and savings is a lifestyle change for the long-term.

Now this may seem like a topic that is not important to you right now. You may not reach your goals until a date in the far-off future. So you may be thinking that this topic doesn't apply to you yet. But it does. Because when you start taking control of your finances, you need to approach it as a life-long goal. It is not a temporary plan that you do once and then go back to your old financial ways. Instead, they way you spend your money, how much you put away for savings, and where you invest should become part of your regular routine like brushing your teeth, eating breakfast, or getting dressed in the morning. You may tweak things over the years, but your overall plan should not change drastically.

Also, as time goes by, you will likely come up with more financial goals or bigger goals. Perhaps your goal of saving for a state college for your daughter changes to that of saving for a private school. Or after you have saved up for your first home, perhaps you want to start a vacation home savings fund. Realizing that your approach to personal finance that you are developing now is a lifetime plan rather than a temporary one will go a long way to making sure that you are successful in your financial endeavors throughout your life.

IRL (In Real Life) - I am already 46 years old! I began saving money in earnest at about age 22 when I started to dutifully put away $200 per month into a mutual fund account. It was primarily to save money for a downpayment on a house, but it was also an emergency fund of sorts. About the same time, I also started putting 3% of my $20,000 salary into my 401k. So I was putting away $2400 per year for savings and about $600 per year into a retirement account. I was pretty much on autopilot. I got paid from my employer minus my 401k contribution. Then I wrote a check to the mutual fund company and mailed it in (yes I'm dating myself here!). Then I paid rent and other necessities. Anything left after that I was free to spend. That was the beginning of my savings habit - pretty simple, and for the most part is hasn't changed since I started.

Now that 24 years have gone by, I have reached or am on track for most of my financial goals. We bought a house and don't need to save for a downpayment anymore. We have a separate emergency fund that has been in place for over a dozen years. Our retirement savings still gets an automatic contribution, and we're on the way to a decent retirement. So now what? Are we done? Can we be frivolous with our extra money now? Trips to Disney every year for my kids? A larger home? A new car every two years? No. We are still putting away money into savings for new, yet undefined goals.

We are a bit "freer" with our money and we have upgraded our lifestyle a bit - staying at slightly nicer hotels when we travel. We give in a bit more on buying treats for our kids than we used to. And we're going on a one-time trip to Disney World with our kids this spring. But our overall financial strategy has not changed. We put away a specific amount each month into savings, continue with our retirement savings, pay our fixed and necessary expenses, and then do what we want with the leftover. That method has served us well so far. We see no reason to change it now even though some of our goals have already been met.

After the Emergency is Over - Prepare How Life Will Go On

Tip - 299 - After the Emergency Is Over, Prepare How Life Will Go On - In my recently completed series on emergencies, I discussed a lot about how to prepare for emergencies - financially, physically, and emotionally - and what you need to do to get through the emergency situation. What I did not discuss is how to prepare your life for when the emergency is over. We may prepare for the emergency itself, but not necessarily the aftermath of it and how your life will change from it. The popular term for this is "the new normal." What will your life look like after the emergency is over? After the earthquake is over and you have picked up the pieces of your shattered home, how will your lives change? Or after your sick spouse passes away, and a year down the road you realize you need to make adjustments, what will you do? Or for those dealing with a job loss who finally lands a job in a new field or for much less money, what then? The sudden emergency has passed - the act of mother nature, the devastating illness, or the loss of a job. And the "new normal" is in its place - a new home location, a widowed spouse, or a period of time earning much less income.

Be Flexible. First and formost, as with many things in life, we need to be flexible. After the death of a spouse, you may no longer be a stay-at-home-mother. The kids might need to go to aftercare. Your income may drop considerably, and activities your family once did will no longer be the norm. Your days of working part-time and being scout leader may end for quite awhile as you put in long hours at a full-time job, and adjust to your new schedule.

Communication is key. Again, as in many aspects of your life, be open with communication. Explain to children why things have changed. Why, after your house burned down in a fire, you will no longer be living on the same side of town for awhile. Or after the hurricane that flooded your city, why you needed to start over in a new city and may not return to your old city for a long time, if at all. Be open with yourself that you now have to take on new responsibilities.

Learn from the Emergency. Sometimes the worst things in life become the greatest teaching tools. There is no rule in life that an emergency will happen to you once. You may get hit by an earthquake twice or more. Or someone in your family who gets sick and recovers may get sick again down the road. Or perhaps a person will be hit with two differrent emergencies, a job loss one year and several years later, a natural disaster. Use what you learned from how well you handled the first emergency to prepare you for the next possible one. Was your emergency fund big enough? Did you find support groups helpful? Which friends and family members were you able to count on? What would you do differently to prepare for another emergency?

Move On With Your Life. Easier said than done, I know, and more simple with certain types of emergencies like a job loss than with others like the death of a spouse. But after a period of time of grieving what you lost - your spouse, your old home, your former city, or your old job - there will come a time, when you just need to move forward and look toward the future. Unforunately, there is no way to turn back the hands of time, so you must learn to accept your new life as it stands. Nothing will ever be the same (and even without an emergency situation, nothing stays the same), but along with the challenges of your new life, there will be new relationships, more self-reliance, new experiences, more confidence and yes, even new joys.

In Real Life (IRL) - Most emergency situations don't afford the gift of time. Emergencies often hit swiftly. Although with prior planning, the upheavals after the emergency can often be delayed, most people's lives will still change afterwards, sometimes dramatically. Growing up, my close friend lost her father suddenly to a heart attack. My friend's father was a successful businessman, while her mom was a stay-at-home mother, so financially, their lives changed considerably. They were, because of prior financial planning, able to maintain their lives as close to the norm as possible for a couple of years after his death. But even with that, the mother had to return to work; the regular vacations they used to enjoy ended; and the large house they were living in became a burden, so they moved. Within a few yeas, their former lives changed into their new lives - working mom, condo living, and frugal vacations. Even with their prior planning, their lives still changed dramatically becuase of a sudden death.

In most emergency situations, the life you knew before the emergency will change into a different life after the initial emergency has passed. We should realize that while we can prepare in several ways to handle the emergency, we may still be faced with a completely different "normal" in our lives after the emergency situation is over. In fact, an emergency often isn't a one-time event that ends, but one that will likely impact our future lives. We should be prepared to accept that our lives will change, sometimes dramatically.

Preparing for Emergencies - Part 6 Summary

Tip #298 - Preparing for Emergencies - A Summary. I woke up this morning from a dream that I had started a blog a few years ago but somehow in the busyness of life pushed so far back in my mind that I kind-of, sort-of forgot about it. So this morning I checked and found out that it wasn't a dream at all, but that I really had started a blog and had not updated it for over 6 months! And the topic of emergencies that I left off with has been on the forefront of my mind, that I thought I'd do a summary of what I posted and what else I've learned lately.

I summarized in the first 5 parts of this series about what constitutes an emergency and how you can deal with it. Reading back over what I have wrote, I can heartily say I agree with my earlier thinking and continue to strongly emphasize the importance of being prepared more than just financially. While the money is a very big part of being prepared for an emergency, I know many people aren't in a financial position just yet to have a big fund put away. For them, they might not do any preparedness for emergencies because they think money is the only thing they can do. But as I've written about earlier and more things I've experienced over the past year dictates to me that being as ready as you can be for an emergency is much more than having an having an emergency fund. These other things are just as important:

1. Keeping up with your family, friends, and community. If an emergency strikes your family, the first ones who will likely help you whether you have emergency money or not are your extended family, your friends, and you community. While a recluse might garner the sympathy of a few neighbors or strangers, a person who keeps in contact with his family, surrounds himself with friends, and is a contributing member to his church, synagogue, mosque, knitter's group, book club, soccer league, professional group, etc. if much more likely to have lots of support during an emergency, whether it's emotional, financial, physical or any other needed kind.

2. Have a written plan. We discussed the most typical type of emergencies. Of course things rarely happen the way you plan, even emergencies, but taking note of the ones that are common and having a plan on how to deal with them is a big step in being able to handle what comes your way. This could include things like having a will, having a fire espcape route, a place you would go if a hurricane/earthquake/tornado hits your area, where you would store precious items if your damp basement floods, what you would do if you lost your job, etc.

3. Be emotionally ready. Today, with the presence of nearly instantaneous news, it's hard not to be reminded of all of the things that could go wrong in our lives. We are exposed to earthquakes on the other side of the world, floods in anothe region of the country, health scares in a neighboring state, and dangers in our own town. We witness the upheavel that people have experienced due to these events. And while we are sometimes quick to think, "that cannot happen here or that won't happen to me" the more we see these types of events, the more likely we are to realize that at some point, something emergency-like IS going to happen to us. And while we might not know what that emergency will be, we should be prepared to expect the unexpected. It might just mean doing some talking to your self to build yourself up that you can handle anything, it might mean turning to your religion to help you be preapred for anything emotionally, or it might mean that having taken all of the stpes I outlines in the other posts will be enough to help you deal with most any emergency that comes your way.

Of course nothing can fully prepare you for a devastating emergency, but the first step to meeting it head on is to be as prepared as you can be in advance.

In Real Life (IRL): It has been just about 1 year since we moved away from our home in Virginia and we are settled in our new home and no longer in emergency -preparedness mode with regard to having a job or a place to live, at least for now. However, I feel like with better communication with old friends through Facebook, and the instantaneous and constant news we receive has done a lot to open my eyes to emergencies that people face every day in their lives. We were exposed to almost daily news reports of Hurricane Sandy for several weeks this past fall along with posts from friends and old classmates about flooded homes, loss of power, and downed trees. Living not too far south of where the storm hit, it's easy for us to say, "it could have been us." And it could have been - easily. And next time it might be. Will we be prepared for it? We've take precautions. We have a generator, we have family to turn to if we need a place to stay. We have insurance. We have an emergency fund. We will take warnings seriously. Our home and possessions are important to us, but our lives are much more important.

As I cam getting older - mid-40's now! - I am starting to hear more from friends and former classmates about diseases and illnesses. We are no longer in our 20's when we think we will live forever. People my age are getting high blood pressure, high cholesterol, cancer, and other devastating illnesses. A good friend of ours just received a second cancer diagnosis within 1 year's time. I see him and wonder how prepared is his family - financially, emotionally, and logistically to deal with this? What plans do they have in place? And I realize the importance of our health before even dealing with any thing else on this earth. Through social media, I also learned of an old college friend who recently lost her husband suddenly to illness. I noticed in the obituary that in lieu of flowers they asked for a donation to their children's college fund. In the midst of tragedy, that seems like a logical way to prepare for her children's future.

The economy seems to be improving, so I am hearing less and less of job loss, and more about increases in home prices, so that is good news for many people. But the recession of the last four years is still at the forefront of my mind. The economy we left in Washington, DC is much better generally than where we live now in North Carolina, so for me, it hasn't been as easy to find a part-time job. And I realize what I lost when I gave up my career 5 years ago (although I don't regret for one minute staying home with my children). I am now behind on skills, have a gap in my employment, and I have few contacts in this area. We are fortunate with my husband's good job. And while his company is doing well now, one round of layoffs or another buyout could end his job and leaves us in an area of the country that isn't as well off. We do have our emergency fund should that situation arise, and we aren't expecting it anytime soon, but after what we've witness since 2008, we are definitely aware of the possibility.

Emergencies come to us in many different ways. And often the emergency we get is not the one we predict. But being prepared for it financially by having an emergency fund, emotionally by having friends and being part of a community, and logistially by haivng a written plan and procedures in place, we will be better off to deal with an emergency that comes our way.

Preparing for Emergencies - Part 5

Tip #297- Preparing for Emergencies - Part 5 - We've discussed financial, job loss, and health-related emergencies in Parts, 2, 3, and 4, of this series. . Today we're going to discuss natural or large-scale community emergencies. One area of our lives that we have little control over is weather or wide-scale emergencies. They come in the form of hurricanes, earthquakes, tornaadoes, and terrorism. When they hit, the whole community is often going through the same emergency as you. Unlike with the other emergencies we mentioned - job loss, health issues, and large expenses when there are other people around you who are living their lives ordinarily and can stip in to help - in this type of emergecny, most everyone around you is in the same circumstances. Most likely, the only thing that will help is having prepared in advance.

What are the types of things you can do to prepare for this type of emergency? First, try to figure out what is the most typical emergency that could happen based on where you live? If you live in Kansas, a tornado would be a common possibility. If you live in Florida, a hurricane would me the msot likely. While things are calm, plan an emergency preparedness kit. For example, if you live in Florida, have hurricane shutters installed on your windows or have wood boards sized to your windows for your use. Keep your gas tank full from August until November so you can get out of town without stopping or waiting in long gas lines. Keep gallon bottles of water in your hosue. Have flashlights ready and batteries charged or new in the package. Keep packaged food that you can take with you if you need to leave or if you lose power, if you decided to stay. Have a plan on where you would go if a hurricane hits - Aunt Sue's in the northern part of the state or a hotl in Georgia? Most people will be scrambling once they hear the news of a hurricane coming on the television.

By being prepared, you can be one step ahead of the rest of the community who are in need of necessities or are fleeing. Also, having these things in place before the emergency strikes assures you that you will not be paying top dollar for necessities, and the cost will have already been mostly spent and spread out. If you have to flee, the hotel and food costs while you are away can fall under your emergency fund. The more prepared you are in advance, the less impact you will have of the emergency.

IRL - We often think of Mother Nature-type emergencies as very infrequent events. But, in reality, depending on where you live they can happen more often. Even if they don't turn out to be as devastating as Hurricane Katrina, we are often in emergency mode before we know the extent of the impact. In the past 15 years alone, I have dealt with two hurricanes, 9/11, and some smaller-type emergencies such as a flea infestation, and sniper attacks in our city. While none of them left me homeless, each of them caused extra expenses, sudden change of plans, and had emotional consequences.

One hurricane happened while we were visiting in Florida. After a hasty packing job and closing of hurricane shutters, we needed to get home to Virginia. We had tickets to return home on the Auto Train, but with a hurricane forecast, the train was cancelled. We suddenly had to drive home, along with the thousands of other people escaping South Florida. What is normally a 5-hour ride became 9 hours. Looking for gas on the overpacked highways became a search in futility. Using our cell phone, we were able to call ahead to hotels in Georgia for a place to stay. And luckily we made it out of the path of the storm. While it wasn't as devastating as other hurricanes, it caused a lot of damage to our condo community. Some buildings were left without electricity and roofs, while others, including ours, were spared. But trees had to be replaced, condo and isnruance fees went up, so we paid for the mess for years afterwards.

The other hurricane, Hurricane Isabel happened in Virginia. It totally flooded our basement because the electricity went out and our sump pump stopped working. We had just months earlier put down brand new carpeting that needed to be replaced. A huge tree fell in our backyard in the storm, too. We were without electricity for just about half-a-day, while friends of ours were without it for 3 days! We had carpeting costs, tree removal costs, stump-grinding costs, cleanup costs, last-minute pay-whatever-they're-asking costs, in addition to the emotional upheaval it caused our family. We ultimately bought a battery-backup sump pump and a generator as a result of that storm so we could be prepared for the next one.

Living in the DC metropolitan area on 9/11/2001 was an emotional time. On top of that, I was 7 months pregnant. Nothing could prepare anyone emotionally for that tragedy. As a result, though, a lot of people came up with disaster preparedness plans - for when the unthinkable happens. My good friends wrote out a plan about how if something similar happened, they would meet up at their church, with her husband walking from work to get there. Our county came up with brochures on what do if tragedy strikes close to home.

While we never can be fully prepared for anything that Mother Nature or an enemy throws at us, we can definitely take some steps to ease the effect the destruction places on us. Having money in an emergency fundy is one large step toward that goal.

Prepare for Emergencies - Part 4

Tip #296 - Prepare for Emergencies - Part 4- One of the most common emergencies is an unexpected big expense. Sometimes we're sailing through life and paying our monthly expenses, and everything seems to be going smoothly, financially. Then you walk into your house to find the furnace has blown out. Or your car's transmission suddenly dies, to the tune of $3000. Both of these big expenses, however, are probably not totally unexpected. If you have a 30-year old furnace, you should probably expect that it will not last much longer. If your car is 15 years old and has never had a new transmission put in, it's likely time. I wouldn't constitute either of those events as true emergencies. They are expenses that should be planned for and saved up for.

However, sometimes we are faced with an expense from out of the blue. For example, suppose your car is parked on the side of the road and is "totaled" by another car. Even though you have car insurance, the value they offer may not be enough to replace your reliable car. Or suppose your son throws a ball and breaks your window. Your insurance deductible is too high to use it, so you pay out of pocket. That may be a $500 expense that you didn't see coming. What if a tree falls down in your backyard, not hitting any part of your house or fence? Insurance doesn't cover that. Instead, you will be paying the cost of having the tree removed. Add a stump grinding to it, and you expense could be close to $1,000. These are the types of expenses that are unexpected, sudden, and costly that we can't truly plan for. Instead, these fall under our emergency category as a means to pay for them. If you don't have this category, you will be scrambling at the last minute to try to find funds to cover these unexpected costs. Eat less? Skip a vacation? Go in debt? None of those choices is idea. Instead, having a fund set aside for these unexpected, sudden, costly expenses can cover you when you need it.

IRL - One day two winters ago, it had snowed several inches. My husband went out to shovel the pathway to our house when he found that the front patio had sunk literally into the ground. What he found out, after investigating, is that the patio was built on top of a big hole in the ground. It was definitely not built to code (although code was likely different in 1953) and was unsafe. Our insurance wouldn't cover it. We needed a whole new patio put in. Mind you , this was in the winter under snow - not exactly the time contractors are building patios! Fortunately, it warmed up soon after. My husband, who is quite handy, actually decided to tackle this project himself. Even though we have money in our emergency fund, we prefer to still be frugal with our expenses when we can. He still ended up spending several hundred dollars to rebuild our patio, but less than if had hired someone. And we were able to breathe easier knowing that our emergency fund covered our expense and the ground, too!

I am still around!

We are moving this week and packing up the house, buying a house, and selling a house has proven to be a bigger chore than I expected! I've also been working part-time, and we traveled over the holidays. It doesn't leave much time for blogging, but I promise to finish my thoughts on preparing for emergencies once we get settled in our new North Carolina home.

Prepare For Emergencies - Part 3

Tip #295 - Prepare for Emergencies - Part 3. In parts 1 and 2 of this series, we are talking about being prepared for emergencies - not just financially, but emotionally and physically as well. We defined that an emergency is unexpected, sudden and can devastate you financially, emotionally, and/or physically. In the last post we described how to be prepared for a job loss. Today, we'll talk about being prepared for a diagnosis of a serious illness and death of a family member.

If someone in your immediate family has a serious illness diagnosis, that constitutes an emergency - it's usually, sudden, unexpected and has financial, emotional, and physical consequences. How can we be prepared for that? While, we can probably never be fully prepared, we can do steps in advance of this happening that can make a sudden diagnosis a bit easier to digest.

First, review your health insurance plans. Know what your insurance covers, in general. Be aware of any health services that your office offers such as a Flex spending plan and counseling. Second, obtain a list of specialists from your general practitioner, so you have a place to start if you need to scout out a doctor. Third, keep up your network of friends, neighbors, and local and even long-distance contacts. If your husband is suddenly diagnosed with multiple sclerosis, it's likely that you know someone who has a family member or friend who you can contact to get the low-down of the disease, treatments, and local doctors. Fourth, be aware of time off policies for work. You will need to clarify the policy once you need to use it, but being armed with knowledge in advance helps save time when a diagnosis becomes a very busy time. Last, make sure you have that emergency fund in place. This is the time that you may need to dip into it. No matter how good your health insurance, doctors' visits may involve co-pays, gas and car maintenance costs, time off from work, special foods or other products, and greater living expenses such as food-on-the run, babysitters, etc. Once the emergency is known and the initial newness of it has worn off, this will likely become a budget category for you or cause you to raise your budget in the expense categories just mentioned.

A similar-type emergency but one more extreme is the loss of a family member. If the family member is a spouse that is the breadwinner, then the financial consequences, not to mention the emotional ones, can be devastating. What can you do before a death in the family to prepare for this unexpected event? First, you can make sure any breadwinner or the person who provides a service to your family (cooks, childcare, driver) has life insurance. This life insurance should be enough to cover the expenses - at least for a few years - that this person usually takes care of - housing, food, utilities, childcare, etc. If there are children in the picture, it should cover them for at least as many years until the children are grown. Without getting into a whole post about life insurance, just make sure that you talk to someone (hopefully an unbiased person) about your life insurance needs before you need it, and make sure you are covered before the unthinkable happens.

Another way to plan for this type of emergency is to have a will. I cannot overestimate how important this is. When someone dies, if their will clearly states where funds will go, the beneficiary will receive the money much faster than if it has to go into probate. Third, make sure other policies have the correct beneficiary status updated. If you have a 401(k) at work, for example, is your spouse your beneficiary or is it still your parents (from the time you were single an started the job)? As you get older and have more accounts, it gets harder to keep track of this. So check on this status once per year to make sure they are updated to your current situation.

If the death of a family member is not a breadwinner or does not provide any type of services that would cost money, the loss is going to be an emotional one more than anything. There is no way to prepare for such an emergency, other than to have a good network of family, friends available to you. By being a caring, loyal friend when times are good for you, will likely lead to others stepping up to help you when you need it.

In Real Life (IRL) - In September, a family in my town lost their son to a tragic, unexpected, and sudden accident. One minute the boy was happy and playing. The next minute, he was gone forever. No one would have predicted it. I did not know this family before the accident. And other than through the web and from friends and local events, I still do not know this family personally. But I have seen the outpouring of love and helpfulness by their neighbors, their church, their community, and from their online friends and even strangers that has helped hold this family up.

Their son's loss of life did not impact them financially, but the devastation that his death brought to them cannot be overestimated. I do not think there is a thing a person can do to prepare, in advance, for this type of tragedy. Other than to be a good person and friend to your family, friends, and community, as it appears this family was. Because at such a horrific time in their lives, I believe their family and friends (and their personal religious convictions) are the only things holding them up. I hope no one I know or any readers here ever experience such a loss, but to see how this family is handling it, you can read the mom's blog: An Inch of Gray. She is a beautiful writer. While it is depressing reading about their tragedy, it is uplifting to see how this woman is handling a devastating emergency.

No one will ever be fully prepared for sickness or death. But doing anything that you can in advance, like the steps mentioned above, and admitting to yourself that life involves both sickness and death and no one will ever avoid them entirely, may make it slightly easier if such unexpected tragedy strikes.