This year Molly started to notice a shift in the girls’ perception towards our standard of living. Even with the two of us out of work for most of 2011 our spending has changed very little compared to the previous year. When we cut our expenses back by 50% a few years ago they perceived us as a family who had money but chose not to spend it. There’s an interesting interview Molly did with the girls 2 years ago about their take on our cutting back on Molly On Money. In the interview they talk about their initial fears but in the end they were happy that we did cut back and paid off our debt.
Lately we’ve heard them make comments to the effect that we are ‘poor’ and cannot afford to have a nice things like so-and-so’s car. So let us repeat…how we spend our money now compared to when we had much larger incomes has not changed but somehow we’ve become ‘poor’.
Molly: I’ve thought a lot about this and I believe Mike and I are mostly responsible for their shift in perspective. When they ask for something I find myself saying, “We can’t afford that right now.” Before I would say, “I don’t want to spend our money on that. We don’t need it.” The former statement suggests that there is no choice- we can’t have it so don’t even think about it. The latter gives them the message that it’s a choice whether we want the item or not.
The other change that happened last June was that we stopped tracking our expenses. WHAT?!
Molly: Mike, did you hear that?
Mike: Relax, it’s just our readers screaming in shock and surprise at finding out that we (you) haven’t tracked our expenses for the last 6 months.
Last June our Quicken file was corrupted. To make matters worse, by the time Molly realized it she had tried restoring from several backups which promptly were also corrupted. On top of that Quicken and our bank stopped talking to each other. We weren’t able to download any information from the bank to start over. It took almost 50 hours of talking to the reps at Quicken and at our bank to figure out a solution. As of last Friday it was resolved and finally all of our accounts are updated and reconciled.
Molly: I was a little worried to see how the year ended for us. Because of my unexpected lay off in September we did not have a lot of wiggle room.
Mike: So how did we do on keeping our most challenging expenses in check and adding to our savings?
- Dining: Over by 10%
- Groceries: Over by 6%
- Entertainment: Under by 31%
- Household: Under by 20%
- Health & Beauty: Over by 13%
- Gardening: Under by 28%
- Home Repair: Under by 45%
(January 1, 2011 we had $7,000 our emergency fund)
Our goal by the end of 2011 was:
- Emergency Fund: Add $3,000 (to bring the total emergency fund to $10,000)
- Savings: $2,400
That goal went on hold (in our minds) in September when Molly was laid off. Our emergency fund had reached $10,000. Automatic contributions to the savings were put on hold and we just hoped that nothing else unexpected would happen that would cause us to dip into our emergency fund.
Mike: This type of circumstance is exactly why we were happy we had an emergency fund but we still wanted to see if we could make it without using any of it.
How did we end up in the savings department?….drum roll please:
- Emergency fund: $10,000
- Savings: $6,800!!!!!!!
How did this happen?
1. We made more in the first half of the year than we predicted.
- Molly worked more than expected and we did not account for Mike’s last paycheck.
2. We spent significantly less in several categories:
- Automotive repair, the kids activities, donations, entertainment, gardening, home repair, medical bills and heat for the house we were under by $500- $1000 in each of these categories.
- Where we were over was only a few places- vacation (by $400), Vet visits ($600), chickens ($850).
3. We felt poor so we spent less.
Not tracking our expenses actually helped us. Starting in September we reacted like we were in a economic meltdown. The combination of Molly’s unexpected layoff and not tracking our expenses created a perfect storm of non-spending.
Molly: I’m still a firm believer in tracking expenses. We stopped spending as an emotional reaction to our circumstances and not because we were making informed decisions. It goes back to how our attitude towards our money made the kids suddenly feel we were ‘poor’. I think one tragedy is that we did not donate the $650 we had allotted to causes we wanted to support.
Mike: I’m on it. I just donated $25 to our favorite jazz station, KCSM the Bay Area’s Jazz station.
Some good news: Mike just got a job working as a web designer part-time. It doesn’t match the pay of his last job but it is something that he finds interesting, keeps him on his toes and off the dole.
Mike: I enjoyed my ‘time off’ but it feels good to be working again. I wouldn’t have been able to get the job if I hadn’t had the experience of building this website so you could say this site is making us some money now.
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