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When my family’s income dropped by $90,000, we made 5 spending changes to stay afloat

Summary List PlacementIt was April of 2021. I had reached my limit. I dragged myself out of bed for another 10-hour day of remote work, logging on bleary-eyed and exhausted. I wasn't a quitter, I told myself. But this time was different. A combination of factors had forced me...

family playing on the bed

Summary List Placement

It was April of 2021. I had reached my limit. I dragged myself out of bed for another 10-hour day of remote work, logging on bleary-eyed and exhausted. I wasn’t a quitter, I told myself. But this time was different. A combination of factors had forced me to reevaluate my full-time job. I was burned out from juggling an inflexible workplace and my children’s simultaneously inflexible schooling needs.

Plus, work had become more demanding, even as the pandemic raged on. A few days later, I handed in my resignation while stifling tears, after almost four years of building a career in health insurance.

That day, my husband and I were forced to make some serious changes. Austerity was the name of the game. At the time, I was making just over $90,000 a year as a health insurance communications consultant. The loss of my income put a serious ding in our budget.

First, I took a fine-toothed comb and went through the nitty-gritty details. I logged on to Mint.com, which I had already been using to track our expenditures. Then, I calculated an average monthly view of our budget by dividing what we had spent the past year by 12 to find a monthly view of our output. It came to $6,500 per month. 

We got to work on a strategy to shave our monthly spending down.

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1. We did a look-back on our budget to identify areas for improvement 

I was embarrassed to find that our food expenditures totaled 19% of our budget. On average, we spent $1,235 a month at grocery stores and restaurants for our family of four. To cut this back, we started shopping at stores like Aldi and Lidl, shaving off money from our ample grocery store expenditures to a more manageable $800. I also focused on buying less meat and more grains and vegetables, along with fewer packaged foods.

In addition, we decided to take the counter-intuitive step of paying off our student loans. We had been chucking $500 a month at the balance. Thankfully, we had also saved up a hefty emergency fund. If we paid off the $14,000 balance with some of our emergency fund, we would be able to subtract $500 from our monthly spend. We had enough in our emergency fund that this step made sense to us — even if other issues came up, we would be able to handle them. 

2. We got rid of riskier financial positions (in our case, a rental house)

Knowing my job was in a vulnerable position, we had already begun the process of deleveraging by contacting a real estate agent to sell our rental house. Even though house values were skyrocketing, we wanted the peace of mind of cash in the bank versus a second mortgage. Plus, the lease was up for our current renters. 

Since our area was a hotbed for real estate, we pretty quickly sold our house and used the excess to bolster our emergency fund, instead of putting it in the volatile stock market. We did this because we were unsure how quickly I would get a new job and wanted the reassurance of knowing our expenses were covered for up to a year. This move also made sense for our tax burden, as we would have had to pay capital gains on our rental sale if we had waited any longer to sell. 

3. We looked for side gig opportunities to supplement income

Shaving down expenses is one thing, but fortifying income is another. We decided to use side gigs as a supplement. My husband had begun building a start-up business for podcasts called Podcasts Abbreviated, which created audio and video trailers for popular podcasts. His side business was just revving up. In the meantime, I reached out to my network to begin freelancing as a writer again. Within the first month, I had made $700 through my network. My husband made $300.

4. We avoided large purchases

Big-ticket items like car tires and appliances can do a quick number on reserves. Not to mention, the cost markup on these items is trending higher during the pandemic due to supply-chain issues. I wasn’t sure of the best way to plan for these expenses, as it felt like something always cropped up.

When our dishwasher started showing a serious error sign, my husband opted to try and fix it instead of buying a new one. It took three-and-a-half hours of labor, a $15 diverter motor, and a bit of sweat equity, but we saved $600, which could have put us over budget for that month.

Sure, it might break again, but it felt good to make use of our brains and brawn when funds were in shorter supply.

5. We always checked the price online

If there is anything I’ve learned this year, it’s that volatility in the economy breeds inconsistent pricing. Because we had gone from spending money semi-unconsciously to a point where every dollar mattered, we made a decision to check prices for everything before ringing up at the cash register. 

A quick five-minute check can save you more than 50% on an item. As an example, we found that a national pet store was marking up doggy treats in-store when their online prices were much lower. My husband price-matched at the cash register and saved $25 on one trip. Considering that our puppy currently goes through dozens of chewable bones a day, we notched this as a win.

Using these strategies, we felt more confident our future would turn around.

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