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Staying solvent in penury

At last! The FIRST GLIMMER OF HOPE in the past 24 hours of number-crunching.

If my figures are right, after I’m booted out into the financial snow I can continue to pay toward the Investment House mortgage, continue to live in the outrageous style to which I have become accustomed, and not go broke. The trick is to earn about $13,500 a year, the amount a good part-time job around here pays. I would need to net $938.75 a month and add it to Social Security and 4% of surviving investments to pull this off.

My arithmetic skills are so wobbly that I had to add up a year’s worth of income and outgo to figure this out. Here’s how:

The amount I’ve used to represent monthly expenditures shows the highest monthly utility bills of the year. But the power and water bills drop by more than 50% in the spring and fall. The working figure also includes a $170 payment on the Renovation Loan, which I can easily pay off, dropping that monthly bill to 0.

It occurred to me that with the pending much-reduced income, I could create a “pool” account much like the one I fund now with biweekly paychecks. But because so little money would go into it and the demands of daily costs are so high, the initial “grubstake” would need to be much larger than what I put in to start my present, much better-funded pool.

My current pool account was bankrolled in the amount of one paycheck, which at the time was about $1500 (it’s significantly less now, thanks to the furloughs). What if instead of funding this new “pool” in the amount of a paycheck, I grubstaked it in the amount of an entire year’s net income, $22,500? I have more than half of that laying around the credit union right now, and if I pick up two classes between now and the end of December, I could easily come up with the rest. So, on January 1, I deposit $22,500 into my “pool” checking account, scrounged from present savings and future earnings. That becomes the account’s “cushion.” If unexpected repair bills or the usual astronomical summer utility bills outpace my income, the 22.5 grand will more than take up the slack. In theory, over the winter when bills are much cheaper, I should catch up.

First I added subtracted each month’s typical bills from each month’s balance (the previous month’s balance plus Social Security plus investment income plus a proposed amount of earnings), assuming I netted $1,000 a month from freelance fees or part-time jobs.

Lordie! The result is I live like a queen, never dip into the red, and end up $2,090 to the good at the end of the year.

Well…I don’t exactly live like a queen, but at least I don’t suffer a significant drop in my already modest standard of living. I get to keep putting $200 a month into a fund for unexpected expenses and indulgences, and, best of all, I have no problem paying my share of the Investment House mortgage.

Next, I repeated this 12-step process assuming I earned only $500 a month. This left me $5,265 in the red at year-end. To estimate how much I might need to break even, I divided $5,265 by 12 months and then added it to the $500 monthly extra income. This suggested I would need just under $939 a month to run in the black.

Since my math cannot be trusted, I ran an empirical experiment to see if this was accurate: plugged $939 into the 12-step process. And by golly! This scenario produces a surplus of $3.00 at the end of 12 months.

This is the first time I’ve run a set of figures that make it appear I won’t be taking up residence in a tent city after I’m laid off. With three potential income streams, it should be pretty easy for me to net around $1,000 a month. These activities will force me to get out of the house and interact with some live humans, which can’t be bad. And who knows? It may lay the groundwork for a full-time job after age 66, when the government stops grabbing back your Social Security just because you still have something to contribute to the workplace.

17 thoughts on “Staying solvent in penury”

  1. Hey, sounds like a plan!

    Hmmm…did I miss it or are you not counting unemployment benefits that you will be eligible for when you are laid off in nine months (so you could get them for 5 months before you turn 65)? Have you decided to eschew the horror of the unemployment office?

    Hang in there.

  2. If you get ANY income of any sort, at least in this state, you are ineligible for unemployment during that week. So if I get a $200 check from a freelance client, my unemployment goes away. Unclear whether Social Security serves to turn of unemployment, but given the cheapness with which Arizona operates, I’m assuming so.

    Besides, unemployment won’t last forever. I need to figure out how I’m going to survive over the long haul, given that no one will hire a woman of my age.

    Also, people here are just not getting paid, because DES (the state agency that disburses unemployment benefits) is so overwhelmed. They finally got around to depositing a piddling $48 to my checking account a week or so ago…and ASU’s request for Shared Work benefits went in on January 25.

  3. Will you be putting your “seed” $, $22.5K in an interest bearing account? It might yield a few extra $’s at the end of the year.

  4. The credit union has two variants on the money market account. They don’t generate much, but they do pay a little. That’s probably what I’ll do. Another option, especially if it looks like I’m not overdrawing the budget, would be to put it in laddered CDs. That would be less liquid, but I do have $3,000 worth overdraft protection that could carry me over until a CD matured. Problem is, of course, if the credit union covers an overdraft, it’s a loan and naturally entails a finance charge. Ugh!

  5. Have you seen the book “Live More, Work Less”? The title may be the other way around. There is an interesting chapter on taxes for those who are self-employed in “semi-retirement.” In that scenario, your health insurance is tax-deductible. I suppose your driving to the library for research is tax-deductible, and so on. The chapter shows that taxes are very different for the semi-retired, self-employed.

  6. Ah…that sux about unemployment but I am with you about the long haul plan rather than the short term. Very helpful posts on this stuff by the way, I am amazed at your calm rendition. Thank you so much for sharing your process.

  7. Whew, I’m glad to see you found a way to keep your IRA relatively in tact and still live!

    When it comes to laddered CDs, you could always leave a modest sum (say $1000-2000) in the bank for emergencies. Then you wouldn’t have to worry about overdrafts or penalties.

  8. Did you include the amount work is now costing? Clothing, transportation, meals, etc? Also you will not be paying into social security, Medicare, retirement, dues, most of the payroll deductions will be gone. When I retired I only “lost” $175 per month plus savings/retirement contributions. That has been the biggest issue for me. I have gone through what savings I had in the 5 years. (I retired early at 54.5) The good news(?) I have not needed to draw from my retirement accounts. The bad news…they have dropped 50% & 42%.

    Good luck. You will survive, even without working.

  9. Don’t forget to include the earned income tax credit back into your scenario. If you were earning between 11,550 adn 11600 you would be getting an additional $100. Whoops!! Can’t get this amount at 65 and over. Well, what about moving your Traditonal IRA amounts over to a Roth IRA while you are socially and work down. Can you come up with the taxes on this income though. Watch out for part of the social security being taxed also. If HR 1495 passes then you will have to move into a qualifying mobil home park. Besides that if the United States turns into a communist country then you will be the last one to go. Remember, shop owners, educators and professionals are the first to go and then the farmers are the next to go. Good luck.

  10. Oh heavens, I guess it’s a bit of a relief to finally know what in heck they had up their sleeves, and be able to make more accurate calculations, no? So glad that you’ve got a game plan in place.

    We’re only entitled to one month notice, but I’ve also been preparing for the ax for about 7 months and running the same kinds of calculations, only in my case, wondering how long I can support my ill and aging parents before we’re ALL out on the streets.

  11. @ Revanche: Oh god, that sounds terribly difficult! It’s one thing to become a bag lady, but a bag family is beyond the pale.

    Check with your state governor’s office: there should be an Area Agency on Aging (or some similar title). They may be able to uncover entitlements for your parents that you haven’t yet found.

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