freedom · Step 4: Cutting Costs

Case Study: Flexible Employment vs The Bills

It feels important to me to work part-time now, while our kids are young, and my husband is very supportive of that. However, he has been unable to find work in his
field, and feels terribly unhappy in most of the options available to him, so he is working extremely part time too. All things considered, we don’t actually have enough to pay all our bills every month right now.

My brother has been giving us money regularly, and that’s what’s getting us through the pinch. My income is going to go up soon, and realistically my husband is bound to find a full-time position at some point, so we just need to get through this interim period.

I totally get it about living within one’s means, and being frugal, but I don’t see where else we can cut. We need the car, it’s important to have a few luxuries like vacations and concert tickets, and we’ve already moved to a cheaper place that a friend is kindly subsidizing for us. I’m not sure what else we can do, but wait for our income to go up.

Any thoughts about how to get through in the meantime? Am I missing something??

Wow, you’re a tremendously lucky family! You have both a sibling and a friend who are happy to support you financially right now. What a gift!

At the same time, their financial presents are allowing you to perpetuate an unsustainable situation. You recognize it as such, and are eagerly anticipating the day that your salary and your husband’s hours increase dramatically, trusting that all will then be well.

Not to be a pessimist, but personally, I would feel very uncomfortable running on that assumption. What if your raise doesn’t pan out? What if your husband finds satisfying work that pays lower than his usual field does? What if both of your ideal scenarios do work out, but then personal illness in either of you, or a company restructuring, comes into play? What if your friend faces a serious crisis, or her house insurer triples her rate, and she needs to raise your rent to market levels? Or your brother decides to redirect his generosity into post-secondary education funds for your kids?

It seems very stressful to plan for spending based on factors that can change regularly due to any number of variables.

For that reason, I love planning according to one’s guaranteed minimum income (GMI). To do so, calculate your reasonable worst-case scenario. i.e., Not the zombie apocalypse, or global economic collapse, but one more likely, e.g.:

  • Only one of you is able to work full-time
  • Both of you are only able or willing to work part-time
  • Anyone in your financial support system (including you and your husband) becomes ill
  • His company restructures
  • Your friend decides to sell her house, effectively ending your monthly subsidy

What is your family’s income then? Is it $1200/month? $1600? $2300?

Count your own certain income—that which comes regardless of adjustments in scheduling, sales quotas reached, and so on. That is, determine your base income in “a bad month during a bad stretch.”

Count your husband’s too—if he works a minimum of sixteen hours per week, at $10-$13 per hour, that would count as $160/week, not more. If a relative sends $100-$800/mo, and you genuinely feel comfortable viewing that as guaranteed, include its lowest figure ($100/mo) in the calculation. Be sure to consider any government income as well.

Work out the monthly guaranteed amount, then multiply that by 12 to get your annual figure.

The guaranteed minimum has to cover everything—housing, groceries, child care, fun, hair cuts, phone, transportation, and so on. Be sure to factor in costs that will come up at any point in the year, including annual charges such as insurance.

Whatever the GMI is, that is the amount you must be living within now. If the guaranteed annual amount doesn’t yet cover all annual costs, you need to cut back, radically.

This may mean moving not just to a smaller apartment in the same area, but to a lower cost-of-living region, or into a permanent housesitting gig or another exchange such as WWOOFing. Or swearing off optional/bigger ticket luxuries like concerts and vacations. (One needs these less when one is happy and relaxed day to day!) Or getting rid of all cars. Etc.

You and your husband get to decide which radical step you prefer. But if either or both of you are already choosing the radical step of part-time work, no work, only work that makes each very happy, etc, then other radical moves need to be in place to support that.

If at any point another stable income source appears in your life—dividends, a long-term disability benefit, rental profit—the GMI might well increase, but we don’t live on that today. We live within what is guaranteed and stable and sure NOW.

In the meantime, everything that comes in over the GMI is saved or invested for your future.

After the initial lifestyle adjustments are put in place, living on one’s GMI can be the fastest step to a stress-free life. It’s a surefire way to never have to worry about money again. All that’s left to concern oneself with is the zombies!

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