I have a question and thought this would be the best place to post since it is e-fund and budget related. When something unforeseen happens and you dip into your emergency fund, how long do you continue before taking irreversible measures to fix your cash flow situation? I'm talking about losing a job or something similar where the future is unknown and you are slowly hemorrhaging money.For example, to use the recent example of Gov't furloughs, were going to be out of work for an unkonwn period of time. Your in a situation where you don't know when you'll be generating income again or if you do it may not be at the same levels. How much of your e-fund do you burn through before you start taking little measures (canceling cable, clipping coupons) vs. big measures like pulling the kids out of daycare, selling the house, moving to an area with better job prospects, selling the 2nd car, taking out a loan from retirement funds, etc? I talking about the difference between making budget adjustments and major lifestyle changes.As soon as you dip into your e-fund, would you start cutting your budget in little ways like canceling cable? And how long would you wait until you make those big lifestyle changes? Are there any rules of thumb?Just curious. I know it would be depend a lot on the situation.
I've BTDT over the years-my husband always worked for companies that were defense contractors and many close calls on layoffs. There was one particularly wonderful time when I thought we would both lose our jobs.I went to the mattresses as soon as there was a threat. No matter how frugal, there were things I could cut or postpone and that was the first stage. There's usually less harm in cutting spending than acting like everything is just fine. BTW, clipping coupons and shopping by special was a standard. Stage one would be moving to cooking from the pantry and eating less expensive items.
I've had long term unemployment a couple of times, and I tended to prioritize the expenses to be cut so that I knew where to start. Typically, we immediately cut things that were easy like no longer going out to dinner or spending money on entertainment, and cutting back other expenses that were discretionary or had room to cut without really feeling it much like reducing the grocery bill by buying cheaper cuts than I typically purchase. Daycare, however, was always at the bottom of the list of things to be cut because I always expected that I would go back to work, and finding the kids daycare slots was a difficult thing to do.We only have basic cable, so I've not considered cancelling that, and it is bundled with phone and internet, so separating these things out can cost more. If, however, I had some premium cable stations, those would certainly be cut. I also found that some expenses were reduced a lot just by not having to go to work like fuel for the car because I wasn't driving anywhere, so some of this helps as well.I have always planned for the efund by being defensive in our planning to start with, such as having a mortgage that only requires my paycheck. This allowed us to need a smaller efund, but it also gave us some flexibility in that as long as one of us was bringing in an income, we could stretch quite a ways until we really had to do something drastic. I've been out of work for up to a year, and we've been able to weather that by using our efund, having DH bring in some income, and having unemployment for part of that, but my target efund has generally been 1 year with no income, so I also know we can go a really long time without having to make major changes, and that has helped tremendously in terms of stress management during a tough time. I realize that if you don't have such a significant efund, this won't help you now, but perhaps increasing it later might help in the future instead.
As soon as you dip into your e-fund, would you start cutting your budget in little ways like canceling cable? And how long would you wait until you make those big lifestyle changes? Are there any rules of thumb?I would think that if you are resorting to dipping into an efund for living expenses, then you would need to cut any unecessary expenses immediately.I would definitely start trimming expenses by asking whether it's a need or a want. For instance, we have high speed internet at home. In some homes that would be a want, you could certainly make due with something slower, right? Except in our house, DH has a second job that is entirely online, so the high speed internet becomes a need, since we use it to make somewhere in the neighborhood of $20K a year.Cooking with cheaper cuts of meat, shopping in less expensive stores, there are quite a few ways you can work to lower expenses, if for no other reason than to extend the efund for as long as possible.LWW
As soon as you dip into your e-fund, would you start cutting your budget in little ways like canceling cable? And how long would you wait until you make those big lifestyle changes? Are there any rules of thumb?I don't know if there are rules of thumb, but DH and I have deferred a couple of thousand dollars of expenditures in the last week and will continue to defer them. DD has heard me say, several times, "I'll buy that after I'm not furloughed anymore." We have not cut off everyday expenses yet, but are economizing in easy ways. I am home more and thus able to do many chores that I might pay for in other circumstances, from cooking to car washing. DH is working on larger home projects that he might normally hire out to a handyman.I have also ridden my bike rather than driving, but that's more for the exercise and the joy of having the time to be on my bike than for the money savings.As this mess continues, DH and I will ramp down expenditures further. We have the mortgages on both houses and various other fixed expenses, though, and in my mind the variable expenses are already fairly low.ThyPeace, could always rent out the house and move, she supposes, but that would be a consideration after a bit longer.
I am also on furlough, and will be until the shutdown ends. I have enough saved to maintain my current lifestyle until December. So I haven't considered cancelling my cell phone, internet, Netflix, or satellite tv. All of which have helped me keep sane the last few days.However, I have reduced my discretionary spending in other ways. I am delaying other types of spending. I am working my way through staple foods that I bought in bulk when they were at low cost (canned soups, frozen meals, etc). No restaurants, fast food, or delivered pizza for me during the shutdown. I have put off any type of purchase on things like video games, clothing, replacement computer, etc.If furlough continues into November, then I will start looking for a another job. At which point, I will cancel my entertainment items like Netflix and satellite tv. I am optimistic that this will be resolved before I am in real trouble because many more are operating on much tighter margins than me. But I am concerned. I do believe that this will have a big impact on the economy. I am in better shape than most, and I have cut back spending. Next week, my agency will send out partial paychecks for the time people worked up until the end of September. After that, no more pay. The exempt employees are guaranteed to eventually get back pay. The non-exempt are likely to as well. But the economy will struggle to deal with the decreased spending. Some non-federal workers supporting federal agency work will never be compensated for the pay they lose which will have an immediate impact on the economy.
You must evaluate how much emergency fund you actually have versus how much time you think you might be without income. Then you must adjust that evaluation with the knowledge that you might be wrong about how long it will be before you get income.Personally, when I was fired, I cut everything to the bare minimum the very next day. And I could have lived for a couple of years without lowering my standard of living because of the size of my savings. But I wanted to be cautious about my expectations of work, plus I didn't want to waste away that pile of savings any more than I had to. If you've got the responsibility of a family then be even more conservative than that. Better a low standard of living for a while than NO standard of living later.xtn
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