budgets | Funny about Money

The American Express bill arrived today. Hot dang! Just a little over $1,000!!

That’s within easy shooting distance of the $1,000/month post-Canning Day figure I’ve set for total discretionary spending (i.e., all costs that are not recurring monthly bills), and it’s well below my current $1,200/month budget.

And that’s without even trying very hard!

Last month’s success included a $97 bill for pool repair, a $50 trip to Home Depot, and a $25 junket to Lowe’s. Plus the $30 flu shot that GDU’s cockamamie insurance wouldn’t cover. Criminey, I even went to Whole Foods in this billing cycle!

So pretty clearly, even at the $1,000 target, there’s room for some play.

This month I’ve been consciously aiming for the $1,000 budget—last month, I had in mind $1,200 as the spending limit. So far, I’m in the black overall…but we’re only a week into the budget cycle, and I’ve spent about $60 more than planned for that first week. But catching up should be fairly easy: I’ve got all the food in the house I need, probably won’t have to buy gas for another week…uh oh.

Nooo… I take that back: the plumber’s coming over this morning. Day-umn! Bathtub drain is clogged. That’ll be a hundred bucks.

Okay…so I’m about to be about $160 over budget for the first week of this month’s budget cycle. That just means I’ll have to stay out of grocery stores next week. Not a very tall order, since the freezer is so full I can barely close the lid.

So, what’s the explanation for this little flicker of budgetary joy? A couple of things:

1. Mindset. I just made up my mind that I was going to spend less. Somehow, like making up your mind that you’re going to eat less and eat better to lose weight, that seems to set you on the right track.

2. Keeping track of every expense, to the penny. I keep an Excel spreadsheet in which I subtract expenditures from the amount budgeted for each billing cycle.

3. Strategizing shopping trips. I made three Costco runs and three trips to Safeway, each time with lists in hand. All were scheduled shopping trips, not serendipitous drop-ins on the way home from work. During the month, then, I had three shopping days, and on those days I went to Costco, Safeway, AJ’s, Trader Joe’s (once), and Whole Paycheck (once). Because I bought only what I’d planned to buy, costs at each of these emporia were kept under control.

4. Staying out of stores! Other than the grocers’ (if Costco can exactly be called a “grocery”), the only other stores I went into last month were Lowe’s and Home Depot, and the only reason I went to the Depot was that Lowe’s didn’t have everything I needed.

5. Not getting discouraged. Several times in the past few months, I’ve thought there’s no way in He** I can possibly get monthly expenditures down to $1,200. Then when I realized even that was too high, I thought I was doomed! But lo! Here we are closing in on Canning Day, and spending is getting right down to where it needs to be.

Don’t give up! You can meet your goal if you keep at it.

With my share of the Downtown House mortgage coming out of a tax-free draw from a whole life policy, if “non-regular” spending stays at $1,000, my bare-minimum costs next year will come to $27,672. They’re that high because the cost of Medicare will be many times what I’m paying now for health insurance. Though I think my projection is accurate, I may be overestimating the total Medicare cost by as much as $100 a month. If that’s true, then I might get by on $26,472. My projected net from teaching and Social Security alone will be $26,453. Not quite enough to cover costs, but it doesn’t count the $2,000 I can pull down as a dividend from the S-corporation or the $3,960 in projected net vacation pay. In 2010, total net income should outpace total costs by at least $2,600.

The year 2011 will have to take care of itself. And it probably will.

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.

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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.