Hmm. Kat’s entry got me (money coach) thinking about the many times in life when we simply don’t have enough to go ’round. Those are really awful moments, and frustrating, esp when you’ve done everything ‘right’.

A couple grounding points:
1. We’re still standing. Seriously — think of all the times we’ve gone through that were really, really tough and yet!here we still are alive and presumably healthy.
2. Remind ourselves that this too, shall pass. This too, shall pass.
3. Time, time, time. It’s like mending a broken heart. Time and generally staying-the-course is the answer. It took me a full two years from when I started really paying attention to my money, to when things generally felt even-keeled. And it was an additional two or three years before I started to move into ‘thriving’ mode.

and I say two thumbs up with Jack’s comments - sometimes it’s not about 100%, it’s about 25%.

A huge tip of the hat to anyone who reads this who is striving to make the most of what you have, when what you have doesn’t seem like enough. If you have a story of how you’re managing, please fill us in! Just e-mail to: contact at your money by design (all one word) dot com.

Hi Kat. Hope you don’t mind further thoughts on planning for the big bills from a fellow financial sojourner. Keep in mind, I’m not a coach, just someone who lives with the consequences of past actions and trying to learn the odd lesson along the way.

Me thinks you’re being a little hard on yourself. Unexpected expenses do pop up, especially if you own a home or a car.

Best intentions are frequently unrealized. Just look at the scramble I blogged this spring when I forget to plan for my son’s sports and camp fees.

And sometimes, we yield to the call of fun, but not so sensible uses for our money. As I’m writing this, I’m enjoying a portion of approximately $200 plus I recently spent on “must have” CDs.

There might be a middle of the road option if you wish to save for anticipated expenses, but can’t manage the whole shot. Try putting aside a percentage instead of the whole amount. 25% saved for the big bills is financial pressure and stress reduced by at least 25%. Maybe more, because you recognize you have taken a proactive and positive financial step forward.

And now I’m off to the library as books are free there, as long as you give them back.

Cheers,

Jack

Well…so much for “forward planning”. Now I know why I don’t do this on a regular basis!
So, what happened this time is pretty much the same thing that has happened when I tried to do “forward planning” in the past: I calculated my needs, saw the number, looked at how many paycheques I have until the first major expense occurs and then felt completely overwhelmed and discouraged…”I’ll never be able to set aside THAT much each pay between now and then!” is what I thought. Then I simply reverted to my usual pattern, which is to think “I have no idea how I’m gonna make this all happen…I’ll just put aside as much as possible until the time comes and then I’ll make it all work somehow - relying on credit if I have to, to make up whatever I cannot save ahead.”

And there, dear readers, lies one of the most firmly established roots of my debt-load!

So, in the post-mortem analysis of this exercise, my observations are:

a) I rarely engage in forward planning because it nearly always feels unmanageable considering my regular income/expense/discretionary income ratio. (Which makes me yearn to earn more in my day job, as well leaving me feeling frustrated that my secondary source of income is a fledging work-in-process that needs time to develop AND I don’t have a substantial source of passive income);

b) This pattern is OLD and keeps me feeling that “I’ll never have anything” because my day job income does not provide any bonuses or increases beyond standard cost-of-living due to the nature of the contract I’m hired under; therefore, unless I’m prepared to devote most of my discretionary income to savings, I won’t be amassing great fortunes of savings any time soon. Since I already live relatively simply (I don’t live the way I would if I made as much as I would like to earn) and I have very little room left to pare down before I feel stifled and deprived, I feel the return of that vicious cycle of “how will I EVER get ahead?!”(…or get out of debt, or have six months of expenses saved, or own property, or…you get it).

c) I’m aware that this sounds suspiciously like perfectionistic all or nothing thinking and there is probably a more productive approach I could be taking here…but I confess at this point it escapes me!

Despite feeling this frustration I still managed to put away $100 in savings from last week’s pay, with the intention to add more before month’s end if at all possible.

The two things I find most difficult here are:

1) Despite all that great advice you hear from the financial gurus who tell you to pay yourself first, I cannot simply choose 1/3 of the expenses I would like to have by 3 periods from now and set it aside because I simply don’t earn enough to do that - in this instance I left my “saving” for too close to the deadline. And saving a pre-determined amount each pay every pay over the year somehow always seems to get off track as invariably unexpected things crop up no matter HOW well I plan. Then if I “fall off” the savings plan I feel defeated.

2) I notice that even though I plan to use them, there is substantial psychological impact when I use my savings because it is such hard work growing them, I simply don’t want to withdraw them! The feeling that results on withdrawal is, “what if I can’t replace that [again/quickly]?” Then what? FEAR.

So, despite all my grown and progress these last two years, my savings habits/abilities are feeling distinctly inadequate at present. I seem to get to certain threshold, use up the savings and then have to start all over again. Ergo *I* feel woefully inadequate too. Sigh.

Ok, Coach Nancy…over to you for analysis and feedback. (Preferably this will involve some magic solution that doubles my income overnight….HA!)

Kat

This started as a blog with two separate people telling their fiscal story. Our entries during the past month or two seems to becoming a conversation, much to my delight.

In Kat’s last blog, she wonders how a rare third paycheque in a month is actually an “extra” in my financial domain. Good question.

Anyone who knows me would not consider me anally retentive (at least I hope not). What I’m about to explain may sound that way, but I find have a very loose system keeps my life running smoothly with only moderate attention.

I get paid every second Friday, which means twice a year I get three paycheques in a month. Remember that, as it comes into play in a minute or two.

The majority of the paycheque that arrives before the beginning of the month goes to rent and utilities. A big chunk of the other paycheque in a typical month goes to child support, credit card, life insurance, a small RRSP contribution (only $50) and few other bills. Also from each of those cheques I try to save $100 for the big annual bills.

The remainder of the each of those cheques, $400 to $600, covers groceries, gas and entertainment. It’s not a lot - to me anyway - but I get by.

So when that semi-annual third cheque rolls in, I live off my usual $400 to $600 for groceries, gas and entertainment and bank the rest for the big bills. Remember, rent and child support is covered by the other two paycheques. That’s how it works in Casa Jack and I admit that when I see that cash sitting there, it is hard to resist the temptation to blow it on something other than those big bills.

Kat! Do you realize you pretty well navigated through a potentially tricky time, and have emerged more or less unscathed?
WTG! It’s an interesting case study of how we so often dread the worst … and things end up being not half bad.
Enthusiastic tip of the hat, too, for your courage in looking at some upcoming events that will call for funding. You are trying a different way of handling it — looking at it without immediately knowing how you will manage. In doing that, you join the ranks of the heros who faced many unknowns, in their quest for accomplishing something great. You go, girl!

So not having had much preparation for my unpaid time off, I have fared not badly so far. I feel comfortable with how I’m managing, have not needed to dip into my tax return/savings and have not added to my line of credit. I have instead chosen to carry a manageable balance on my Visa rather than paying it off in full as I normally do. A usual-sized paycheque arrives Friday and I would prefer to make a couple of payments to my Visa as opposed to depleting the sum I’ve managed to set aside so far. Psychologically it’s more comfortable to have some savings and pay off the Visa in a couple of payments, than to have no Visa balance and no savings.

When I read Jack’s blog about planning forward for the big expenses in advance, I became aware that I know what I can do each month with my 2 paycheques and how much discretionary income I have to do things with, so thinking ahead in terms of expenses for an entire year knowing where things currently stand, feels both constricting and unrealistic to me. I’m now paid twice monthly but formerly was paid every 2 weeks, and unlike Jack I never found that “third paycheque” in a month to make any practical difference when all was said and done. I still had bills to pay, usually it made the timelines on everything a little more comfortable, more breathing space. So I’m mystified at how that “third paycheque” really can be “extra” in a month! Jack…we need to talk!

Thanks to writing these on these planning topics, I’ve obviously been prompted to consider upcoming events: a vacation in August, school in October and January. I generally avoid this because it usually causes me to feel, “how am I going to manage to afford these expenses (knowing how much I already need to pay out each month)?”. Regardless, I’m going to try some of Jack’s strategies to plan for those events and see how that works for me. One thing is to my benefit - I LOVE watching the numbers in my savings account grow - it’s unbelievably satisfying! Much moreso than watching debt balances decrease…at least for me. So my project will be to add up the total expenses, figure out the number of pays until I reach each event and how much will need to be set aside each pay. At least this way I can deposit that amount into savings, enjoying watching it grow while knowing it’s purposeful, “not just for a rainy day”. I can tell you that already I feel fear that I won’t be able to manage that monthly number (then I’ll feel “a failure”), but I will do the math anyway and see what transpires…

Your thought process is appropriate - you are thinking about your family, not yourself… which is what life insurance is about. You may end up going to your local bank, or talk to a friend who knows someone who sells life insurance. Be VERY careful in the life insurance aspect. The first step is to ‘rent’ a life insurance policy that requires underwriting before the policy is issued called Term insurance (not credit card offers which is retroactive underwriting). You can always convert it into ownership piece-by-piece at a time later when it’s appropriate and affordable. The best-priced is the 10-year term… it only means that the rates will jump at a pre-determined rate every 10 years. You can drop it at any time - you aren’t locked in for that period like a lease. Don’t get caught up with ‘cash-value’ policies unless you have a really strong budget. These cash value policies only mean higher premiums, which means more commissions to the broker. Of course it’s in their !
interest to sell you policies with higher premiums.

You want to ‘bullet-proof’ your policy so that if (or when) the time comes, it actually pays out. The first two years of a policy are “contestable” by law… which means that even if a mistake was made innocently on the application, it won’t pay out because the insurance company can contest it. Your only defence is to give them “everything” on your health as they can sometimes go back in time and trace something undisclosed, which will void your policy (in the first two years). If you unknowingly missed something thereafter, then you’re ok. Go over whatever your agent ticked with a fine toothcomb. This is why replacing life insurance policies poses a risk to people who shop rates and shoot themselves in the foot thereafter. When the policy is finalized and delivered to you, ensure that you have “documented” with the broker that you have visited a doctor if you’ve seen one in the interim.

There is a saliva test – it tests for only three things: HIV, nicotine & cocaine. This is for smaller amounts in the $100K to $200K area. If you’re looking for larger amounts, then they ask for blood tests which provide a larger range of information. An insurance company is often helpless without these tests and have to rely on your word (called ‘good faith’).

Lastly, consider doing a “needs analysis”. This is an industry-standard calculation that will help you determine the exact amount - don’t be surprised because most think a $100,000 policy is enough. They consider the following factors: 1. Debts (like credit cards, line of credit and mortgages), 2. how much shortfall in income your family will experience in your absence and over how long, and 3. Other final expenses. Believe me, it adds up, so prepare yourself emotionally. Remember, it’s still cheap because you’re renting this coverage. Ownership is costly in the short-run.

Take it only a step at a time. Your agent will try to sell you “critical illness” insurance (more commission), which is for a small lump-sum amount if you get diagnosed with a life-threatening illness. Any hereditary problems, and you can easily disqualify or get a higher premium ‘rating’. I am not in complete favour of this policy - it is “expensive”… only if you’re making over $65,000 per year.

And of course, the disability insurance which is supposed to replace a portion of your income if you are unable to return to work due to an accident or illness. Don’t think it’s got anything to do with taking the week off… it’s more with 3 months plus. Unless you have a major income, don’t bother – it’s definitely worth it’s value, yet better off with your employer’s group coverage.

Finally, if you have a medical benefits package through your employer, you already have life insurance and very likely some other features. Review this before you pick up your own if budget is a strong issue.

Hope you’ve found this helpful.