Changing Priorities – Part 1 of 2

Today, I diverge from my usual subject matter and write about something a little more personal …

Since my last post, my priorities have changed significantly.  Upside-down, in fact…

Earlier this year, my wife received the news that she’d be losing a major portion of her contract/commission income “sometime in 2010”.  Not having heard any more concrete timing since then, and seeing no action being taken to initiate the transition process, and the Management being what they’re like, we both thought things would be delayed until at least 2011.  Wrong.  As of this writing, September 2010 appears to be the cut-off date.

When we decided to move into our current home 5 years ago, we did so under the knowledge that we needed my wife’s income in order to afford it.  Initially, I was hesitant to take on the additional debt associated with a larger home, and the dependence upon my wife’s income.  But, for the first 3 years in this house, both of our incomes continued to rise nicely.  In fact, it was around the 3 year mark that we decided to take on even more debt by doing major landscaping, hardscaping, and in-ground pool.  We’ve really enjoyed the “escape” that our property now provides for us (not unlike a cottage, but without the annoying traffic jams).  Then, things changed…

For the last 2 years, it’s been a painful balancing act to service our debt.  My wife’s income has dropped-off over the past 2 years, and this year has been no exception.  And now, most of what’s left of her income is scheduled to disappear in September.

Money has never been an issue for us, per se.  It’s just kind of “always been there”.  We’ve been fortunate, to be sure.  But if I am to be completely honest with myself, we’ve never really done a good job of setting aside money for a rainy day or for an emergency.  Saving for retirement and our kids’ education, yes – without a doubt, we’ve done OK there.  But especially this year, I’ve felt like all of the hours that I’ve spent at work have been for not.  Financially speaking, we’ve barely kept up, and it’s only going to get worse come September…

So, for the better part of the last 3 weeks, I’ve been busy analyzing and scrutinizing absolutely every expense for cost-cutting opportunities and refinancing possibilities.  I’ve created spreadsheets of data and calculations up the whazoo so that it’s [now] easier to run various “what if” scenarios.  I’ve spoken to almost every bank, insurance company, and service provider of whom we’re a customer.  Here’s a list of the changes we’ve made over the past 3 weeks:

-       paid-off our 3.9% car loan with our floating line of credit (negligible savings over the 3 years remaining on the loan; the main motivation here was to improve payment flexibility should we be cash-strapped at some point)

-       locked-in over half of our floating line of credit debt @ 2.65% for 1 year (many thousands of dollars in savings over 12 months, but none of that is really “in our pockets”; it just reduces the time required to pay-down our debt)

-       cancelled our home cleaning service

-       staying off the toll highway every morning, and taking it only half way home every evening

-       bringing my lunch to work as often as possible instead of going out, and keeping my coffee purchases to 1 per weekday

-       making meals at home twice as often (reducing by half how often we dine out)

-       cut-back on the frequency of my wife’s massage

-       scaled-back our Internet, phone, and satellite television plans

-       sold 1 of 4 ASUS VH242H 23.6″ LCD monitors, with every intention of selling the remaining 3 ($215 each, any takers?)

-       I’m in the final steps of completing a transaction to sell my ham radio equipment

-       I’m selling my oscilloscope ($300.  Any takers?)

…and otherwise being very conscious of where we are spending money, especially uncategorized “cash”.  We decided against increasing our home insurance deductible, and removing certain coverage on our minivan; our insurance setup was already chopped-down pretty lean.

All told, about $920 in tangible savings each month so far (i.e. excluding “hidden” loan savings), $935 cash from selling stuff (with hopefully more to come), and some additional flexibility in debt re-payment.  This was certainly a worthwhile endeavour, although some of the changes will take some getting used to.

Even with all of these cost-cutting measures, my wife will still need to work if we want to continue to live in this house and not feel like we’re just “getting by”.  My initial estimate is that she’ll need to bill somewhere between 12 and 15 hours every week.  She has a small network of business contacts which she’ll start to ping for work opportunities now.

Between now and September, it will be important for us to set aside as much cash as we possibly can.  Cash will help us to “buy some time” if my wife’s billable hours aren’t quite where they need to be.  I’ll also use this time to actively monitor our expenses, and to refine our go-forward financial forecast based upon actual monthly expenses.

This concludes Part 1 of the “Changing Priorities” series.  Please join me for Part 2 when I discuss putting my dreams of being a Day Trader on temporary, but long-term hold…

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