In the last few months, my husband and I have completely reformed our relationship with money. We were not in debt, but experienced a series of unforeseen expenses that drained our emergency fund (meager as it was) to almost nothing. The turning point was an unexpectedly large car repair bill; we realized we were one more emergency away from going into debt. We both work full-time and make a good income, but we had no savings to show for it.
I realized that my spending behaviors were the biggest impediment to our success. Eating out at work, visits to Starbucks, buying way more clothing for my daughter than she could possibly wear. A book here, an iTunes purchase there. I had been turning towards the right path for about a year or so, starting my own savings account, reading Suze Orman books. But as soon as my money market balance would reach a couple hundred dollars, I would plan a weekend trip or go shopping.
After the big car repair, we started looking around the internet for money savings ideas. By far, the best resource we found was the personal finance blog the Simple Dollar. Not only does Trent Hamm offer practical tips on frugality, he is constantly examining the psychological relationship people have with money and offering insights that will forever change your feelings about what money is for. I read it everyday to remind me what we’re doing and why.
We set a goal to eliminate all discretionary spending until had an emergency fund that could cover five months worth of expenses. We trimmed hundreds off our monthly budget by carpooling, cancelling our landline, cancelling Netflix, cancelling our dog’s weekly trip to daycare, getting a better price on car insurance, and cancelling our once per month housecleaner. We each used to get a sum of money on payday to spend as we pleased. No more, we leave our debit cards at home and pack lunches everyday. We paid cash for a cheaper car, sold our more valuable car, and put the money in the bank. We found ways to save energy around our house. We submitted paperwork for our medical and dependent care reimbursement accounts and pulled all our money together in a savings account where it earns a decent interest rate.
In less than two months, using every method at our disposal, we have an emergency fund to cover four months worth of expenses.
Once we reach our goal, we have a prioritized list of spending. Future savings will be earmarked to a specific purpose; some car maintenance, a new computer, new rain gutters for one corner of the house.
My husband and I don’t fight or worry about money anymore. We are proud of what we have accomplished by examining our values and making our spending choices accordingly. We are prepared for the next emergency. Best of all, we’re setting a good example for our daughter.