Hello! Today, I have a guest post from Dave at The Dollar Blogger. Dave lost his job, and then 2 weeks later his wife was laid off. This is their story of how they got by, their sacrifices, strategies, and more.
I’ll be honest – I’m not one for excessive frugality. I wouldn’t consider myself frivolous, at least, not anymore, but my wife Mary and I were hit with a solid dose of reality when we lost all of our income over the course of two weeks in 2012. One wrong turn and a layoff two weeks later took Mary and me from making over $100,000 in a year to zero income.
In this post, I’m going to share with you this scary financial hardship that rocked our world, and how the two of us got through it successfully and back on our feet.
We also learned some life-changing lessons about money, which is excellent for anyone who suffers a sudden and total income loss.
In the end, we lived on $2,000 a month, for just over three years.
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From $100,000 to Zero in Two Weeks
In 2012, I was working as a software engineer making $75,000 a year, and Mary was making $12/hr as an intern at a local business, with a potential raise to $15/hr once hired.
This put us at roughly $100,000 a year, and boy, we were excited.
We had been scraping by for the past couple of years after moving to a new state where we hoped to start life anew.
We were so sure that life could only go up that we were meeting up for lunch daily, spending up to $100/week during the week on lunch alone. We would then spend an additional $100-$200 per weekend eating out, sometimes twice a day.
With a fully-owned townhouse, our only major expenses were HOA fees, taxes, utilities, food, and basic necessities.
But, my job was causing me undue amounts of stress, and I left it voluntarily, under the assumption that a web design business I started as a side hustle would take off. I also assumed my wife’s internship would turn into a full-time job. Both accounts didn’t happen.
Once we both lost our jobs, our income fell to zero. Mary had another year of grad school, and we didn’t want her to withdraw.
Before we could even think about creating a budget, we had to address one of the top reasons that can lead to divorce – financial problems.
The Initial Toll on Our Marriage
Now, I’m no counselor, but I have learned over the years that financial issues are one of the leading causes of divorce. In fact, according to Insider, over one-third of all people polled stated that financial problems led to their divorce.
Mary and I had and still have a strong marriage, but this financial hardship tested us. Here’s what we did before we even examined the budget.
- Assess what to do: We sat down and talked about how we would live off zero income and how we could recover while keeping her in school. We went on a spending freeze for as many days of each month as we could. Mary and I discussed who could work where and for how much.
- Disability Claim: I have Asperger’s Syndrome (an Autism Spectrum Disorder), however in my adult life, it hadn’t really gotten in my way as far as work. Some people with this disorder gradually get worse over time. I decided to get evaluated for such to see if I could claim a disability.
- Could Family Help? Mary’s family offered to send us cash every month while we got back on our feet. While only so much was available, it did help us make a budget.
In the end, Mary got a temporary job at a local gas station/minimart, and I helped Mary’s father work on his business. Combined with getting a little extra money from Mary’s family, we ended up with $2,000 per month in income after living with no income for several months.
The key take-away that I got from this exercise was that in a financial hardship, it’s crucial to be on the same page with your spouse.
Had we resorted to fighting and finger-pointing, everything would only get worse.
The Tightest Budget We Ever Made
It’s always been my job in the relationship to draft updates to our household budget and finances. Mary certainly has her say and must agree to everything, but I do all the initial drafting.
I had $2,000 to closely allocate to all of our expenses, including around $8,000 in credit card debt that had wracked up before the loss and in the several months that we had zero income.
After mulling over the numbers for some time, our budget looked something like this:
Let’s break this budget down, shall we?
First of all, notice there is no line item for credit card debt.
When I wrote this budget, I was so desperate to fit everything in that I left out a key item. What ended up happening was, I used our Buffer / Margin of Error, combined with what was leftover each month from our Semi Variable Costs, to pay as much of the credit card debt as possible.
In hindsight, I would have lowered our Electric / Gas / Water bills through more strict usage. The financial hardship started in winter, and we could have cut back on electric heat by wearing several layers of clothing. With a near $250 electric bill in the winter, mostly from heat, I imagine we could have saved $50-$100 simply by wearing heavy sweaters or jackets while inside the house. This was an oversight and something one can consider if they are on an incredibly tight budget.
Mary and I have clean driving records, and at the time, she had no accidents, and I had one fender bender in the past eight years. If we had shopped around more, we could have lowered our auto insurance further, saving us more money while living on $2,000 per month. In a situation where money is incredibly tight, always contact all providers and negotiate your bills.
Negotiating Bills and Cutting Back
Here are some of the bills we negotiated from the above list:
Car insurance: We called our provider and stated our financial situation and asked if we would qualify for a lower rate after being a loyal customer for so many years. They worked with us, and we saved $25 per month. As I mentioned above, we likely could have saved more switching to another provider, which we did a few years later.
Homeowner’s Insurance: Our homeowner’s insurance wasn’t bundled with our car insurance. We moved our homeowner’s insurance to the same company that had our car insurance, which allowed us to pay only $15 per month for our policy. Also note that we lived in a townhouse, where policies are less because the HOA has a master policy that covers the outside of the home. Our original policy cost us $35 per month, so a savings of $20 a month total.
Internet/Landline: Most people don’t realize this, but you can generally talk your internet/cable/phone bill down significantly by politely telling your cable company that you are planning to take your business elsewhere if they won’t lower your rate. We used both the financial hardship and data found online that said we were paying well over the average national rate for internet to haggle with our provider. In the end, we agreed to a 24 month extended contract at the introductory rate, which was $40 per month less than what we were currently paying. I’m not one for contracts, but there were no other decent internet providers where we lived at the time, so I took it. That’s $480 per year saved for two years.
Additionally, we cut back on the following:
Utilities (Electric / Water / Gas): I mentioned above that our financial hardship started in the winter. We budgeted $300 per month for utilities, $250 of which we estimated for electricity due to electric heat. It gets incredibly cold up here in New Hampshire during the winter, and heating bills go through the roof. We were fortunate enough not to go over our limit by wearing heavier clothes. I’m sure we could have lowered our heating bill further had we worn jackets, long johns, and doubled-up our socks on the coldest of days.
Groceries: During the financial hardship, we had two cats. We include their food and litter in our grocery bill, and as you can imagine, feline family members can cost a bit to feed and keep healthy. We tackled groceries by shopping for generic brands and using coupons. We only bought what we needed to eat, versus snacks and other fun foods. This cut our estimated grocery costs from $400 to $300 per month, saving us $100 monthly.
We couldn’t save much on medical due to my disability and requiring health insurance plus doctor visits and treatment. This has always been a tough situation that is certainly not unique for those who suffer from any form of physical and/or mental illness that requires temporary or permanent treatment.
A Curve Ball Set Us Back Again – But We Didn’t Give Up
Mary had a semester left to go when we started to stabilize. We had gotten used to our $2,000 per month lifestyle, but we were still in a lot of debt, and we weren’t happy.
When she graduated with a Masters in Marketing a term later, she looked for work.
Unfortunately, we lived in an area where there weren’t many marketing jobs. This, on top with what we were already going through, was gut-wrenching.
Did we just make another mistake?
What do you do when your plans go south again and again?
You don’t give up.
Since my disability claim was for SSDI (Social Security Disability Insurance), I was legally allowed to work at a very limited capacity. I picked up a few more hours per week for my father-in-law and gained an additional couple hundred dollars per month. Mary left the gas station that was 15 miles away and started working at a private grocery store that just opened 2 miles down the road. The pay and hours were better, and by being right near us, she saved on gasoline and other car maintenance.
We were now 24 months into our three years of living at $2,000 per month.
We got savvier with our money.
We contacted our credit card company and told them we were going to start paying down our balance more aggressively. We requested an APR decrease and cited that otherwise, we would have to consider getting a balance transfer card at a different bank.
The representative transferred us to their supervisor, and the supervisor lowered our APR by 3% after we shared our situation and discussed that we had never missed or had a late payment in the over six years that we had an account with them.
A quick math note: A 3% APR change on a $5,000 credit card balance, when you’re only paying the minimum payments, can save you over $400 in interest payments over the course of paying down the card. It can save you over $1,000 in interest payments if you also pay an additional $100 per month on top of the minimum payments.
When in doubt, always contact your creditors and work with them.
We also started using apps to save money on shopping. Ibotta, for example, is an app where you can save around 8% on many grocery and retail store purchases. We took advantage of this to put as much money back in our pocket as possible.
I also started doing Swagbucks, which earned me around $3/hour, 1-2 hours per day. This didn’t add up to much, but when money is tight, and you have a credit card to pay, every dollar counts.
The Letter That Changed Everything
This next part is something that won’t happen to most people. But to contrast it with typical results, this was the resolution to the financial hardship. Every situation has a resolution – some take longer, some results are better than others, and all vary widely.
In my case, the social security administration approved my claim and back-dated payments for 2 years.
We received a lump sum for 24 months of disability payments, which left us feeling more ecstatic than I can possibly convey here, as you may imagine.
We were now approaching the 36-month mark, and my SSDI payment amount raised our income a fair share. But we weren’t out of hot water yet. We had a financial lifestyle problem to address. How could we avoid this from ever happening again?
Mary and I sat down for another meeting.
Our Next Steps and What We Learned From This Financial Hardship
We paid off our debt with the lump sum and banked the rest. But, our living expenses compared to our income was still tight.
We needed to enact serious financial change.
Here’s what we did:
We flipped our house and downsized: Our house was valued at just over twice what we paid for it, and we didn’t need all of the space. We sold our house and used the cash to buy a comfy mobile home a few towns over, replenish our emergency fund, pay off all debt, and take a budget vacation to an old favorite place that we hadn’t visited in the three-year hardship. I had considered selling the house when the hardship originally happened, but I’m glad we waited because the value increased so much as the housing market boomed over those three years.
Over the years and going forward, we track our finances monthly: From the end of the hardship in 2016 to the present, we track our finances monthly with Personal Capital, an easy-to-use app where we plugin our bank, credit card, and investment accounts. It also lets you track any other assets and liabilities as well as individual transactions on each account.
We now live greatly within our means: We learned that anything can happen with the drop of a hat. Instead of living just below our means, we live as much below our means as possible. While we aren’t extremely frugal, we are nowhere near the spend-thrifts that we used to be. We check with each other any time one of us wants to spend money. We allocate “fun” money each month and don’t exceed it unless saving across multiple month’s fun money to buy a bigger purchase.
We learned that there is so much we don’t actually need: Everywhere you go, you are told “YOU NEED THIS” – the reality is, you don’t need much of anything. You want many things, but when it comes to needs, you need food, shelter, clothing, and transportation, among other small necessities. You don’t need a fancy car. You don’t need extravagant vacations. And, you certainly don’t need to eat out all the time.
Fast forward to 2020, our income has had its ups and downs, but we have not had an issue with it. By using apps such as Personal Capital, and keeping track of our money with a budget Excel spreadsheet, we seem prepared for anything that comes our way. If you’re not good with spreadsheets, I’ve also used YNAB – You Need A Budget – which is the perfect site for tracking your money.
Wrapping It Up
It doesn’t matter if you’ve never had a financial education or if you write about money every day – financial hardships will happen. When they happen, remain calm, stay focused, and find opportunities to work your way out of them. If you’re married, get on the same page, and be an amazing team, rather than panic and turn on one another.
We got through this hardship over the course of 3-4 years. We still live on just over $2,000 per month, minus the two months each year where we travel.
Tough times happen, but staying strong, coming up with a plan, and then executing on it is your surest way to recovery.
Author Bio:Dave Bochichio is the Owner and Writer for The Dollar Blogger. When he’s not writing about personal finance, Dave enjoys spending time with his wife and two cats, and eating exotic and international foods. Dave also writes fiction, with one book published and two more on the way.
What is your monthly budget? What have you done to cut expenses?