Leaving underemployment, with lessons learned
When the Consumer Reports Index reported recently that Americans are feeling significantly better about their personal finances, I could definitely agree. My husband recently found a new job after an uncomfortable stretch of underemployment.
I’ve been thinking in the last few days about all the ways we adjusted–and the lessons in frugality we learned–while he searched for a new position. Though we’re heading back to normalcy, I expect we’re going to continue some of those habits. They’re wise steps to take in good times and bad. I’ll share a few with you here.
•Know what you spend, then cut. I found Mint.com useful–though not perfect–for tracking spending and deciding where to cut. Where we whacked most: entertainment (good-bye Netflix, hello public library); restaurants (we learned to cook!); clothes (shop consignment); and travel (a weekend in Poughkeepsie actually was a lot of fun).
•Build an emergency fund. While my husband was still working full-tilt, we’d followed Consumer Reports’ advice to save at least six months’ living expenses in an online cash account. After his income plummeted, we still avoided tapping that fund for day-to-day expenses. But the emergency stash was handy for bills when, within a short time span, the following died: our two ancient cars, a dishwasher, a vacuum cleaner, a microwave oven, a beloved beagle, and a barely tolerable cat.
•Buy used cars. I replaced one dead car with a used Hyundai Sonata sedan based on a Consumer Reports recommendation, and saved a couple thousand dollars over buying new.
•Be creative in finding extra income. We boarded foreign students enrolled in a local English-language school. We not only earned a stipend, but got to know some lovely kids. We hope to visit them eventually in their home countries when our bank account revives.
•Grieve your property taxes. I feel guilty recommending this because loss of local taxes means the potential loss of jobs. But it was our right to do it and we felt we had no choice; taxes in our very high-tax town had more than doubled over about a decade. We went through the process on our own at little cost, and ended up saving about $2,000 a year.
•Adjust withholding. I gradually increased the allowances on my W-4 from 0 to 7 after using the IRS Withholding Calculator. That put several hundred dollars more in my paychecks every month, and our 2012 tax return confirms we didn’t over-withhold. While a fat refund’s nice, it means the government’s keeping too much of your money for too long. (Now that my husband’s employed, I’ve reduced my withholding to zero again.)
•Get a HELOC while you’re employed. We regretted not doing this. We retired a home-equity line of credit when we refinanced our first mortgage in 2010 and didn’t apply for a new HELOC. When our household income tanked, our bank wouldn’t lend us more. Even if we didn’t tap the HELOC, its presence would have helped us sleep better ’til the first new paycheck arrived.