Author Topic: Making that 3 mth living expense goal in 2010  (Read 2455 times)

Offline hanzel

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Making that 3 mth living expense goal in 2010
« on: December 28, 2009, 09:18:18 AM »
We all know you should have 3 to 6 months of living expense saved up, but when most of us look at the amount we need to save we quickly give up.  I know most of you that have not done so will say, in 2010 I will save at least 3 months worth of my income.  Then we realize that in most cases we are talking about $9k and will give up by February saying to ourselves, it is impossible.

Try this instead.  Currently most Money Market accounts are paying maybe 1% so there is not much of an incentive to have the money in the bank. Take your utility bills and over pay them until they owe you three months of the average bill.  In 2009, I had an average of 3 months paid to my cable, light, phone, cell phone, etc. For December this month, as a Christmas present to myself, I did not have a pay anyone.  In most cases all you need to do is over pay everyone about $25 a month.  Lets take your phone bill, say it is $100 a month ( ok a little high but it is an example ), starting in Jan. 2010 pay them an extra $25.  With Decembers payment you will have a credit of $300.  Having everyone over paid, even by June 2010 will let you breathe a little easier each month and you do not have to worry about a service being disconnected due to a lost or late mail or a misapplied payment.

Once you have the Utilities out of the way it becomes easier to get the other payments that you might not be able to have credit balances on out of the way.  Mortgages, rent, car payments, credit card payments ( which in theory you are paying off the balance with each month anyway but things happen ) etc. and have that money sitting in the bank.

In these times of our unstable economy, which would you prefer for you and your family ?  Would you prefer to be informed that you are being laid off and like most Americans only have roughly two weeks of income in the bank and be informed that unemployment will take a month before it starts and be thinking "What am I going to do !!!" or be able to sit back and think, I have three months of food stored up, three months of utilities paid for, I already have next months Mortgage / Rent and Car payment in the bank, and be able to say, "I was nice working with y'all".

Another advantage, surprising enough is that they are nicer to you went you call for service or have a question about your account.  Today, as an example, I had to call AT&T, now most people will call, type in your phone number, get to a customer rep. who would again ask for the phone number ( and you hear .. click, click, click, click click ) and then " I see you have a balance of $X, when will you be making the payment" instead I got ( click, click, click click" ) .." Oh .. I see you have a credit of $X... How may I be of service to you today".   ;D




Offline ncjeeper

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Re: Making that 3 mth living expense goal in 2010
« Reply #1 on: December 28, 2009, 09:41:00 AM »
Interesting thoughts.
My money market account is paying 2%  :). But I think I would rather have control over my money then giving it to the phone/power/gas company by over paying and to have them hold on to it until it is needed.
What happens if an unplanned emergency arises. You gonna call the phone company and say "Hey I had something come up and I need back that extra 100 bucks I sent you last month?" At least with my money at my disposal I can get to it.
Of course your way works for those people that are not disciplined enough to put money away regularly in an account and not touch it.

Offline SigMan34

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Re: Making that 3 mth living expense goal in 2010
« Reply #2 on: December 28, 2009, 10:51:00 AM »
Those are interesting ways to "sock it away".

FWIW, many banks and credit unions have deals in place right now for NEW customers; we're now getting 4% interest on a new checking account at a local credit union.

However, there are a few "must do's" to qualify:
  • it must be a new account
  • you must have at least ONE direct deposit to that account each month
  • you must have at least 10 debit card purchases from that account each month
  • you must agree to "paperless" statements --- strictly online, no mail
  • you must access the account via the Internet at least 4 times each month

I assume these are to encourage activity, rather than just letting the cash sit there...their way of hoping to become your one and only financial house, right?


Offline survivininct

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Re: Making that 3 mth living expense goal in 2010
« Reply #3 on: December 28, 2009, 02:05:20 PM »
The only problem with giving them the money, is that they may screw something up or you may move.  I like the idea of sacking the same money away in an account and having them pull from that account for payment each month.  You will still have the extra cushion, its in your control, and you can shut them off - if you need to.  Just set up a simple savings or checking account and give them the ACH info and they will just auto debit the bill each month.  You could even have separate ones for the various bills - but that may get too complicated.

Plus, you get to keep the interest!  Whoopie ;D  A free cup of coffee annually!


Offline hanzel

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Re: Making that 3 mth living expense goal in 2010
« Reply #4 on: December 28, 2009, 03:15:59 PM »
The only problem with giving them the money, is that they may screw something up or you may move.  I like the idea of sacking the same money away in an account and having them pull from that account for payment each month.  You will still have the extra cushion, its in your control, and you can shut them off - if you need to.  Just set up a simple savings or checking account and give them the ACH info and they will just auto debit the bill each month.  You could even have separate ones for the various bills - but that may get too complicated.

I think you may be missing the point.  Most people when attempting to put away three months of there income give up because the goal seems unreachable. However, over paying a little each month is very manageable. Yes they can screw up, in which case your utilities are shut off until you prove it is their error and not yours ( unless you live in an area where they can not disconnect your service quickly, I know in states up north they can not shut off your power or gas during the winter months, however in the south if you miss a month you are sitting in the dark ).  You may have an "extra cushion" in the bank, until you spent it on something that it was not intended for, then what do you have as a "cushion" ?  Would you use this same argument about storing three month worth of food ?  Why should I put away three months worth of food when I could easily just put the money in the bank and wait until I need it ?  What if I move ?  Well unless I am moving out of state, the utility companies I have to use now will be the same utility companies I will have to use at the new residence ( except possibly for local water ).  A history of a credit balance may also mean that you will not have to pay a new deposit to set up your service again.  Finally, yes you could set up a checking account with auto debit, but in the scenario i described , if you suddenly found yourself laid off, they will attempt to take the money from the account and if there is nothing there the bank will be all to happy to charge you an NSF Fee for it, in which case you are now more broke then you where before still waiting on the unemployment check to arrive ( unless you in California and get an IOU from the state ) that may be only 1/4 of my previous income.  Sometimes when looking at something that seems unmanageable, like saving three months of your income for emergencies, its easier to break it down with, here is three months of food ( a small cost ) , here is three months of utilities ( a larger cost), here is three months of my credit debt and then here is three months of my rent / mortgage.  You do the first two and most people will think, "Wow !  I did it " and I can keep going, instead of by February or March thinking, I can't do this, and they just give up.

Offline survivininct

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Re: Making that 3 mth living expense goal in 2010
« Reply #5 on: December 28, 2009, 07:57:35 PM »
I agree 100%, but just do not like others holding my money.  Case in point, we are getting solar.  It is a lease (only way to get best deal from State - otherwise I would never do it this way) and I am planning on placing the full amount of the lease in an account and giving the lease company the ACH for it.  Then in essence, I have paid for the system and, baring a total bank collapse where FDIC no longer exists, I have paid for the system and will no longer consider it a liability or debt, as I will have paid for it up front, but over time!   ???

Yes, with my suggestion you have the cash and can spend it if you are tempted, but you could also just skip the electric payment and the mortgage, and buy the AK (or whatever) instead.  In either case, you have to be disciplined.  But, you have the option if an emergency comes up and you need the money for some purpose other than paying the utility such as replacing a crashed car, helping a family member with an illness, the BOL deal of the century, investing in a "sure thing" with Bernie Madoff or whatever.

The best way to save is to first, settle all accounts - get out of debt.  Then, put a little aside each month.  Unless you know you are going to be laid off in two months, you have some time.  If you take home $500 per week for example, and just put $50 away each week religiously, in 2.5 months you will have a week saved up, in a year, a full month of cash reserves will be in the bank.  That is much better than most people!  Keep at if for a few years, or double the amount, and you are at three months sooner than you realize!   And many people can double or triple this amount easy, unless they are real tight, financially.  But, even $50 a week will get you there soon enough!

But, your method works as well.  I have done this when I knew I was going to be away or for small bills to just not be bothered sending a payment in.  Not a big deal for a $100 electric bill or a $75 cable bill, but a mortgage could end up being thousands of dollars!  However, paying a mortage off early has other benefits, but should not be done until the cash reserve is fully funded as per Doctor Ramsey's baby step bible..