Making $7,390 stretch for a year…and living decently

Okay, so just now $7,390 is left of the $28,000 of layoff savings that I entered unemployment with 18 months ago. This little stash, which I found sitting in my various bank accounts as my fine former job wound to a close, has been supporting me, along with Social Security and the irregular pittance I earn as an adjunct professor of English, while I try to delay having to draw down my IRA and brokerage accounts.

It’s lasted longer than anyone thought it would, and with any luck at all, it’s about to last another year.

The other day I revisited my ultracomplicated cash flow scheme, largely because I need to find a way to extract more monthly spending money from this Pushmi-Pullyu. The truth is, I’m not giving myself enough to live on comfortably. It was tight when I started a year and a half ago, but the increases in food and fuel costs (not inflation, right?), along with a never-ending slew of unplanned expenses, lately have made it impossible to stay on budget. I’ve been allocating $800 for discretionary expenses (a total of $2050 a month for all expenses, discretionary and fixed), when the fact is I really need something more like $1,500, for a total of around $2,750.

Unless a miracle happens (for example, I land that one-year-only job or, more likely, win the lottery), not only am I never going to earn any more than the $19,200 I’m making this year, my earned income actually is going to drop $2,400, because of the recently announced tightening of the noose around the adjuncts’ necks.

That means, I guess, the allocation from this serendipitous little “survival fund” will have to be adjusted.

Also, I’d like to simplify my bookkeeping.

What I have been doing is when money comes in, I transfer some of it to the joint account from which M’hijito and I pay the mortgage on the submerged house, transfer some of it to a self-escrow account for paying insurance and tax bills, transfer some into a short-term emergency and diddle-it-away fund, keep some of it in my checking account, and transfer $1060 from the survival fund to make up the shortfall between income and outgo. This complex shuffle no longer suffices to cover expenses. Way complicated!

So, I’ve cooked up something slightly different. In some ways, it’s six of one, half-a-dozen of the other (or, could we say, robbing Peter to pay Paul?). But it’ll give me a little bit more money—raising the discretionary budget to about $1,100 most (but not all) months—and the process will be simpler. I can’t afford the amount I actually need, but even a little increase will help.

Instead of moving money from Survival Savings to checking in amounts that supplement Social Security and teaching  pay, I’m going to go the other way around: move every penny of income—Social Security, teaching, bank heists, windfalls—from checking to Survival Savings. Then, once a month, I’ll pay myself $2,300. If any cash is left from the previous month’s budget, I’ll just “top up” the checking account to reach a base figure of $2,300.

This gives me a raise of about $250 a month, which I hope will cover the increase in routine expenses.

The problem with figuring out whether this will work and what it will do to the Survival Fund’s longevity is the extreme irregularity and unpredictability of adjunct income. From pay period to pay period, I rarely know what my check is going to hold. One week I can get $300, and two weeks later it’ll be $800 or $1,000, with no clear rhyme nor reason. HR seems not to know how to figure out what one will be paid, and not being an accountant, I can’t even make an educated guess. All I know is that during the summer when I most need extra money, my teaching pay drops into the basement, and during the month between fall and spring semesters I get nothing.

The only way to project the effectiveness of this scheme—and the length of time the Survival Fund will last—is to enter 2010-11 pay amounts into a spreadsheet showing how the new transfer scheme will work.

The upshot is surprisingly positive. Well…all things considered. Transfers into and out of Survival Savings  look like this:

If my amazingly tedious calculations are correct, Survival Savings will run out in August 2012. At that time, I’ll have to cash in a whole life policy; the post-tax balance from that will probably stretch another year or 18 months. After that…well, let’s hope the stock market is doing OK, because at that point I’ll have to start drawing down investments.

During the winter break and the month or so of summer that I’ll have no income, I’ll have to drop my living-expenses budget back to its present level, $2,090. This will be difficult next summer, because utilities are so high during the heat and because, as we’ve observed for the second summer running, everything goes wrong when you can least afford it. However…that comes under the heading of tough nougies.

If all this comes to pass as estimated (a very big If, indeed), then I should be able to live adequately and pay my share of the mortgage without exhausting Survival Savings until a year from this August. Might even be able to stretch it out for another month or two, if I can keep expenses significantly under $2,300 for several of the cooler months. That’s not unreasonable; when nondiscretionary bills are at their lowest, I can have a surplus of $300 or $400. Four of those would keep that $7,390 grubstake going through September.

Obviously, I’m not thrilled at the precariousness of this system. On the other hand… I feel like it’s really not too bad. If in fact the insurance payout will last another 18 months or so, then I will have succeeded in pushing back the time I’ll have to draw down investments for four years after Canning Day.

Those investments have about recovered their former, pre-Crash glory. Assuming our esteemed leaders don’t bring on another market crash with their grandstanding shenanigans, a 4 or 5 percent drawdown plus Social Security (assuming, again, that it still exists in 2013 or so) should cover my expenses and pay the mortgage—without benefit of flakey part-time teaching income.

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frugalscholar July 26, 2011 at 6:37 am

As SDXB said: Money happened. Very impressive.

Linda July 26, 2011 at 2:47 pm

I’m still catching up with your “back story” but it seems that downtown house is a serious drag on your monthly expenses. What’s the worst case scenario if you had to let it go? Is the main concern that it would it trash your son’s credit for 7 years, or is there a personal, moral component to this situation?

Maybe a roommate could help take off some of the pressure. I took in two roommates/tenants in my house and have been so glad that I did. The extra income every month helped me get back on my feet after a divorce and I’ve really enjoyed having them around, too. Without that extra money every month I wouldn’t have been able to build up an emergency reserve so fast; now I’m putting extra toward the mortgage so I can have it paid off by the time I hit retirement age.

You’re so savvy with your budget I’m sure you’ve considered all these angles, but I do have this curiosity about other people’s choices.

Barb July 26, 2011 at 6:51 pm

As I read through this, I had the same thought as Linda. Would it be so horrible if you let the downtown house go? Your son could even rent a place or just move in with you and maybe help with some expenses. I know it dings the credit, but it seems that you are throwing money down a rat hole when you can least afford it. That mortgage money could build up your emergency savings. Or could he take in a roomate to cover your part of the mortgage?

funny July 28, 2011 at 9:47 pm

@ Janet & Barb:

Well, in the first place, yes, it would be good if we could default on the house, and we probably should. On the other hand, what my son could afford for what he’s paying on the place is a real, literal rat hole. Before we bought the place, he was living in a dangerous firetrap where the apartment-house plumbing backed up permanently and his car was broken into. He left on vacation one morning after showering — as usual the bathtub was barely draining. When he got back two weeks later, the filthy (and by then stinking) water was still sitting there in the tub.

Phoenix is not a very pleasant city, and the truth is that unless you have plenty of money you will not enjoy what Americans in more civil venues think of as a more or less middle-class life. My son’s income is right at the median household income for this state, and believe me: the median household lifestyle in a right-to-work state is nothing to brag about.

He had a roommate. They roomed together for about three years, until the roommate made a move on a young woman that my son was serious about. IMHO he did my son a favor in demonstrating that the lady was not marrying material, but my son felt betrayed and threw them both out. He observes that at 36 it’s past time he had the space to himself. He’s right.

I had a roommate. We lived together about two years. When I tired of having him try to run my life, I threw him out.

Both of us have had enough roommates to fill our roommate cravings for the rest of our natural lives.

As much a burden as the house is, the fact of the matter is that it’s providing him a much better place to live than he could rent for what he’s paying. I would rather put up with a little financial hardship than have him put at risk in a miserable flophouse.

We do have a couple of outs, even though the place is underwater. If and when he’s ready to move on, we could rent the house for just about what we’re paying in rent. We wouldn’t make a profit, but at least we’d have a renter paying the mortgage instead of us. Alternatively, I could sell my house, which is too large for me and soon will be too much work for me to handle, and move into the downtown house, which is about the right size, desert landscaped, and swimming pool-free.

We did make a mistake buying the house when we did, imagining that the market was bottoming out (who would imagine it would sink to the bottom of the Mariana Trench?). But in my opinion the U.S. and global economy is about to take a turn that will make a countryful of underwater houses the least of our problems; we may be glad to have a place that could very well be hard to get us out of. One of these days.

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