Well, I’m managing to stay on budget, despite a $300 reduction this month. Last week’s $223 hit from the vet will be covered by the monthly savings fund, which is fairly flush now that the Renovation Loan Payoff is fully funded and the money I was embargoing for that can go elsewhere. Right this instant I’m $26 in the black—just about the price of a gas tank refill. And I just may be able to squeak by without having to buy more gas until after this week’s mini-budget cycle ends, on the 13th.
Along about the middle of last month, I decided that I’d better start getting used to living on less than I’ve been accustomed to, just in case the rumored Christmas layoffs actually happen. So I cut my weekly allowance from $375 to $300, just to see if I could do it. In November, that worked fine: came in $2.29 in the black at the end of the third week (because I’d had an unexpected bill of $225 the previous week) and $75.19 at the end of the fourth week, for a $349 underrun of November’s$1,500 budget. This month I’ve budgeted $1,200, and it remains to be seen how that will go.
Actually, it’s going better than it looks. Tomorrow I will return a $50 space heater to Lowe’s, having found a much better model at Costco. That will put this week’s budget enough in the black to handily afford a tank of gas. And then some.
The Board of Regents met on Thursday and Friday. We are told this was the Fateful Meeting in which Our Beloved Leader was to faze his plan to declare a financial emergency past the citizen bosses. If layoffs are going to come down soon, they should be announced by the 15th. So, I figure if I still have a job by the end of this month, I’m probably good through the end of June, when my contract runs out.
One way or another, the exercise of trying to live on a reduced budget should serve me well. If I escape the predicted layoffs this time and find I can live on less without much pain, then I’ll continue to do so and bank the extra $300 a month in the emergency fund, the better to have something to fall back on if future rounds of layoffs catch me in their net. At that rate, in five months I will have set aside the equivalent of one full paycheck.
Since December of 2007, I’ve lost over $100,000 from my retirement nest egg (that I know of: I still haven’t seen my 403(b) statements). A 4 percent drawdown from what remains will generate $18,748 a year, of which $9,600 goes toward servicing a mortgage, leaving $8,878 to supplement Social Security of $12,480, for a projected post-layoff gross income of $21,258 a year. I probably wouldn’t owe much tax on that, and so we could think of that as pretty close to net.
My net income right now is about $39,700.
If I earn the highest amount allowed before Social Security starts to penalize you ($13,500), I could bring my total gross to $34,758. State and federal income taxes would take about 20 percent of that, leaving me with about $27,800 to live on: an $11,900 cut in net income!
If I succeed in reducing my budget by $3,600 a year, that will supplement the $6,888 I can cut out of the regular monthly savings set-asides I’m making now plus the $170/month I’ll recover from no longer having to pay the loan, for a total cut in spending of $10,488. So…that will cut my living standard by a de facto $1,412 a year.
And I probably can live with that. Elsewhere, I’ve estimated that the minimum annual net I’ll need for bare survival is about $25,980. It’s going to be a challenge, and it will mean that I will have to teach miserable composition courses and generate income from freelance editing until I’m 66, when I can turn back the amount I will have collected from Social Security to the feds and reset my SS payments to the “full” amount, which is about $25,128 a year.
Assuming I don’t lose an awful lot more in the market, though, these desperate straits will only last for 29 months, until I reach age 66 and am eligible for so-called “full” Social Security entitlement. At that time, I can go back and raid my savings again to repay the $30,160 I will have collected between ages 63 1/2 and 66, which will permit me to reset my Social Security payments to the “full” amount of about $2,094 a month. This will give me a $16,408 drawdown from my reduced savings plus a $25,128 annual Social Security income, for a total gross of $41,536. Suck 28 percent out of that, and you have a net of $29,905, still not a comfortable income by any means (especially given that Medicare will cost nine or ten times what I’m paying for health insurance now), but livable. There’s some chance, though, that my tax rate may not be quite that high, since Social Security is taxed with byzantine complexity—the only way to know what it will be is to have my tax lawyer figure it out, which I ain’t a-gunna pay for until the time comes. Butof course, there’s also a chance that taxes will actually be higher in two or three years, given the bailouts and other extravaganzas our nation is financing.
Time will tell.