Saturday, September 19, 2015

How we are handling a hit to our income without touching our debt repayment

We found out this week that our health insurance premiums will rise by almost $120 a month next year. I know that for a lot of people it’s not that much, and we have been blessed to have very low premiums so far, but there is very little wiggle room in our budget, and most of the extra income goes to debt repayment. So what did we do?

First, we didn’t panic. Like our French drain episode, this was not our fault. We had some areas of our budget that could probably be trimmed even if it would mean making more sacrifices. We also resolved not to cut any more into our debt repayment amount if possible. As tight as things felt, it seemed that we needed to cut back even more in regular areas of our budget.

Groceries are often the first area to go when things get tight. Our issue is that we have four children and we have to pay sales tax on food in a time where meat and eggs are at an all-time high. I also feel like it’s much harder to stay motivated if your food is so bland/basic that it demoralizes you.  So I felt like we couldn’t cut too much here – we went down to $375 from $410 (remember, this also has to include sales tax of 9.1%). This line item includes toiletries and diapers for our one-year-old as well. I found it uncanny that I just switched to cloth diapers for the daytime with our daughter to save some money (we already had them on hand from previous children, so there was no extra expense). So there was a little extra to work with that would be easy to cut.

Next, we looked at our spending money. My husband and I have been allowing ourselves $20 each to spend or save as we please. He meets with others for coffee and likes to spend it on the occasional bottle of wine that our grocery budget can’t afford, while I like to use mine to either save up or spend at Joann’s when I need something. But we both agreed that this was not a necessary line item, so we slashed it to $5 for my husband to get coffee twice a month with his friend.

We also have a line item for household expenditures that’s $20 a month. As homeowners, we know that expenses are a part of life and wanted to set some aside for paint, repairs, etc. but in this case, we felt it would be okay to move this expense to an annual expense we would budget for when we had our two extra paychecks come in. The annual amount would only be $240, and we were planning on not flying next year to loosen up some extra money anyway, so it seemed fine to take it from there.

And finally, we decided to reduce our contribution to our HSA. We had been contributing $200/month, and dropped it to $150 since our balance is reasonably healthy and we can always contribute more if we need to during the year.

Here is how our savings stacked up:
·      $35 – food and grocery
·      $35 – spending money
·      $20 – household expenditures
·      $50 – lower HSA contribution

Do I feel frustrated that things are getting ever tighter? Yes. The fact that health insurance premiums are going up despite the promise of “more affordable healthcare” is another blog post in itself, but that’s life in the modern US right now.

What I am grateful for is that we do have health insurance, and that we are able to make changes to accommodate the increasing expense of that. I don’t consider it a coincidence that we just so happened to be able to lower our utilities over the last year, or cut out most of our disposable diaper usage, because these changes make a difference. In a way I feel like God was already preparing us for a slightly lower income.

I am grateful that even though meat and eggs are expensive, dairy is relatively cheap and we have Aldi. I’m grateful that I know how to cook and can improve my skills by baking my own bread and finding new ways to create frugal and healthy meals for our family. To me, this is a challenge in a good way.

I am also grateful that we have time to prepare for this. The new premiums don’t kick in until 2016, so I will still try to live below our current food budget, but allow myself the full amount ($410) and use the savings for a “stock-up fund.” It’s a good time of the year to begin stocking up as stores put many pantry items on sale for the holidays. I will also do the same with my spending money, knowing that whatever I can save will be useful for the days when I don’t have more coming in.

As we were talking about the impact of this on our budget, my husband and I  were realizing that we need to seriously look into alternative streams of income. We are grateful for his job, but it doesn’t pay much, and because it’s dependent upon the state government whose budget is also tightening, things could get tougher in the future. You can only cut so much, and then you need to honestly look at other ways to increase your income.

The other thing I realized is that if we were not in any debt, we would have much more of a cushion to absorb this expense. This motivates us even more to pay off our debt as much as we can so that we can handle unexpected future expenses.

If you haven’t ready Brandy Simper’s posts at The PrudentHomemaker, you really should. She has constantly been an encouragement to me to look for ways to cut expenses when you feel like there is nothing left to cut.


Have you ever faced an unexpected blow to your budget? How did you handle it?

43 comments:

  1. Wow - it looks like you've got this under control. Although I am curious as to how it is you pay sales tax on groceries? I've never seen a state that charges sales tax on food at the grocery store (like meat or eggs). Unless I am misunderstanding and the sales tax is on items such as laundry soap, fabric softener, etc., (non-edible items).

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    1. I used to live in California, where they had no sales tax on food, but now we live in Kansas, which charges a whopping 9.1% on all grocery items, including edible anything! There is a tax credit you can get if you are very low-income (our family would have to make less than $32,000 or around that figure) to offset the sales tax, but we don't qualify anymore.

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  2. I totally feel you on this. My husband and I went on a budget, and there are times that we have to reassign and deal with less in certain envelopes. It works though, in the end. Only debt we have left is our home...plus regular bills, but now we can focus on building our Savings for the future! :) Good luck!

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    1. Yes, Jamie, I look forward to the day where we can put extra money toward something other than debt!

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    2. Yes, Jamie, I look forward to the day where we can put extra money toward something other than debt!

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  3. I can relate. I have been cutting back on misc things to get things under control. Not always easy. One of my favorite savings is choosing a 3rd party for electric and gas savings ( if I had a house I would use solar for more savings) the company I use is a sustainable company and contributes to places all over the world , that makes me smile that I am paying it forward :)

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  4. Jenni, I know it is a difficult situation, but it sounds like you have a solid, well thought out plan to address the upcoming financial changes. It is great that you found out a few months in advance to allow you to prepare. I feel confident that you have everything under control.

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  5. You seem to have this under control. My family did the get out of debt plan by Dave Ramsey. #commentathon
    Jay of www.relaxedthairapy.com

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    1. We like Dave Ramsey here too, though we've not followed his plan 100% (for example, a $1,000 emergency fund is just a little too low for our comfort). We also don't snowball, but instead pay off highest interest loans first.

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  6. We are on a fixed income (husband was medically retired from the Army) and it is so difficult for him to stay on a budget because of brain damage. I'm always looking for ways to cut corners and save money.

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    1. Erin, I am sure that is hard! It's hard enough when one spouse just doesn't want to budget, but when there is a medical reason for it, I'm sure it takes a lot of wisdom and grace to know how to navigate it.

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  7. I can not begin to tell you how much I can relate. The same thing happened to us. It is not fair, but I have to remember how blessed we are in spite of. Good job making the changes to your budget.

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    1. Raquel, yes, I think a lot about what we are blessed with as well. Right now, we are really grateful to have our health, a home with a good backyard, and a location with a very reasonable cost of living.

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  8. I commend you and your family for taking control of your financial planning and household budget. I am in an excellent Facebook Community facilitated by The Budgetnista and I highly recommend looking into the Dream Catchers Facebook group to find support and encouragement.

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    1. Those Facebook groups sound great - I am a part of one right now, and find it so encouraging to hear of other's people's struggles as well as successes. It makes me feel like I am not alone! I will check them out!

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  9. We have recently had a loss of income as well. It is challenging to deal with. We get behind on bills and it gets embarassing. We try to do a budget then get off track. I'm always looking for sales and deals.

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    1. It's a constant struggle, isn't it? We have a budget, and between the two of us with bachelor and master's degrees, one would think controlling your budget would be easy, but our issue is tracking our expenditures sometimes. But we are committed to continuing to try and get better at managing it. I hope your situation improves and you can find a way to get back on track with your bills. Stephanie at SixFiguresUnder.com has some great posts on building up a month's worth of income so that you can live on last month's income.

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  10. It sounds like you've got your budget very organized and have planned well for the changes coming. I'm afraid our health insurance premiums will go up as well. You've provided great information on ways to save, so I'll have to look into our budget now too. Thank you!

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  11. I don't know what kind of health insurance you have but affordable health insurance is a crock. I don't know anyone who it is affordable for. Maybe, rich people.

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    1. I agree. Our portion of the insurance is actually much more affordable than it is for some (though we would pay less under subsidized Obamacare), but it is kind of mind-blowing that for a family like ours, if we had to pay for the entire premium, it would be probably more than double our mortgage, and quadruple our food budget. And all for the luxury of having access to a system where they don't tell you the price up front of anything because they don't know, but they are legally allowed to come after you to pay whatever they deem is appropriate. It's the most backward system I have ever seen.

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  12. I think it is commendable that you are preparing for this and you are committed to paying off debt! One way I have helped my grocery budget is to visit local food pantries. My community has several walkin food pantries. and I have been able to get milk, eggs, a bit of meat and some canned goods to help bring our grocery budget down. Which in turn put more money into our debt.

    #commentathon
    Erica

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  13. I do not have debt. My family uses coupons for groceries. It helps with the amounts being lowered and/or to get the items for free.

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  14. Wow, very enlightening post for me to read. I really need to buckle down and make a budget and stick to it. I hate feeling like we are always playing catch up! Thank you for sharing your story and what you are doing to make it work.

    Brooke at Brooke Blogs
    #blogelina #commentathon

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  15. Sorry that you're going through this. I definitely need to get my debt under control soon. Thanks for creating a blog like this.

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  16. We have been in a similar situation, when we lived in OK. Couponing really helped when we lived there, to stretch our grocery budget. There are also ways you can make money blogging, email me if you'd like, I'd be happy to share some things with you that have worked for me :) Good Luck!

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  17. You're certainly doing things the right way by concentrating on paying down your debt as a priority. Getting that paid off will make it so much easier for you to save money and have a cushion for unexpected expenses.

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  18. So lovely to see how many of your sentences begin with 'I am grateful' in a post about how you are being forced to tighten up your budget! Great read, thank you for sharing :) xxxx

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  19. Oh I am so pleased to have found your blog. My husband and I spent 6 years plus making the biggest financial mess. Private student loans, an unaffordable mortgage, and lack of any sort of budget and we are currently residing under almost 200k in debt. It seems insane that we as teenagers and young adults were even able to legally accumulate this amount of debt haha. But we managed it. Amazingly God has indeed granted us everything we need to dig out of our mess. Over and over we hit walls and He provides. I've learned couponing, ways to make extra money, and ways to cut costs just about everywhere. Whew over 9% sales tax is tough!

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    1. I know - if I could change a couple of laws in Kansas, the sales tax on food would be one of them. But I have to say that the lower cost of living makes up for a lot of it. It is true that God provides as we hit walls. I try to remember that when the debt still seems big or finances are particularly tight, because we always have what we need. I will have to share sometime about one instance I remember where we were faced with what seemed like seemingly insurmountable medical bills in law school. Going through that made me much more interested in what goes into health care and its costs, but it also showed me that God provided for us even there.

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  20. I've have spent way over my budget a couple of times. Usually I handle it by trying to limit my expenses stringently till I'm back on track. You seem to now how your budget and control and pretty organised.

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  21. Consider using apps and coupons to save money on your groceries. Some take money off at the register while others are a cashback. A few of them even offer savings on eggs and vegetables.

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  22. Ugh health insurance can be a bummer!

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  23. Great blog! I have family members that are currently in debt, and I can now share this helpful information with them. :-) Thank you so much!

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  24. Wow, I am truly impressed with the way you've juggled and assessed the value of your expenses. One of the expenses I would love to transfer and lower is our monthly rent…which is way more than paying a mortgage. It's depressing that all of the money isn't going towards something we will own in the future. We're working on changing that by saving money.

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    1. We've also been renters in the past and in an area where the rent was more than double what we are paying now, so I can definitely empathize! That said, being on the homeowner's side of things also has its' challenges. All repairs are on you, so for example, this past spring we had torrential rains which led to flooding in our window wells downstairs, and we had to figure out both how to deal with it as well as pay for the repairs. I can tell you that right in that moment, we wished we were renters again! I think you're on that right track though with saving more money.

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  25. I applaud your stick-to-it-iveness, as well as your planning. Amazing that you didn't have to sacrifice a penny of the $ allocated towards debt reduction. I've been there (with a large amount of debt)' we used Dave Ramsey's system to become debt free more than a decade ago and never looked back. It is an amazing feeling to be debt free. I can't wait for you to get there!

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    1. Thanks, Natalie! I can't say that we won't always be able to avoid reducing our debt payment if prices go up in the future, but for now, we are grateful. We look forward to being debt free too :).

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  26. Great job at reconfiguring things. I definitely hope to read your post on the system, I feel trapped by the current one! We just got hit with a larger student loan payment per month, that my husband miscalculated, so we are having to cut a lot out, too! This gave me great pointers.

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    1. Thanks, Nicole. I hope it helps! I love connecting with others who are also in debt-repayment mode - it makes me feel encouraged that I am not alone!

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  27. I feel your pain my real estate tax went up almost $1000 out of the blue recently ( I still need to look into it) and I am not happy. As a fugal person I am going to be looking at all my spending and looking to cut what I can but as a couponer I don't spend that much so it is going to be difficult.

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    1. I was worried about our property taxes too - we were set to get a policy renewal this month, but thankfully (so far) they have stayed about normal. I do think that there is only so much you can cut. For us, my husband and I are actively looking at extra income opportunities right now because there will be increases in costs in the future, it's just a question of when.

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