Prior to getting married I wasn’t very good at saving money. I guess I didn’t really have a reason to save money unless there was something that I wanted which required saving for. A little over eight years ago I was engaged to be married, didn’t have hardly any money in my bank account, and nothing in my savings account. It was at that point I realized that I needed change because I might have been okay up until then existing without a backup plan, but I was not about to enter into marriage without a plan.
I ended up selling off a lot of stuff including DVDs that I never watch and my home entertainment system to get some money in our bank account. After that, I started saving whenever I could. Still wasn’t as good as some people who manage to save a large portion of their income however I was doing much better than I ever had in regards to saving.
After about eight months of marriage it was quite obvious that building a savings account was going to be one of the most important things that we did together. We ended up miscarrying our first child and were denied coverage by our health Insurance provider. That instantly put us $20,000 in debt. Thankfully, besides some savings, I was also able to empty and old 401(k) that I had never touched to pay everything off. Now our small savings account was depleted.
We continued to save when we could. We could’ve saved more but we like to travel and eat out occasionally. We were then blessed with our first born child. Being self-employed, private medical insurance is pretty expensive. Our health insurance plan had a pretty high deductible and maximum out-of-pocket responsibility. That year, we ended up emptying our savings account once again, to pay off medical bills.
When our firstborn was six months old, I decided I would be more productive if I moved my office out of our third bedroom and into an actual office. That meant taking on a bit of overhead and at the same time, I hired an employee. We still tried to save when we could and thankfully we had a few good months where we were able to save a lot.
Our second child was born in February so we met our max out our out-of-pocket responsibility with our insurance the calendar year before he was born and during the first two months leading up to his birth. Our oldest had fallen and broken his leg two weeks before his brother was born which resulted in me being off work for a couple of months to help my wife with our newborn son. My oldest son was in a body cast from his waist down which made him very difficult to pick up and move around. Thankfully our savings and the success of one of my businesses was experiencing carried us through this time.
Later that year our oldest ended up in the hospital again with an infection. Thankfully it was during the same calendar year that we had already maxed out our out-of-pocket responsibility, so we just had to pay our co-pays on everything, and I missed a few weeks of work. At this point, we were able to pay off everything immediately without carrying any additional debt.
The next year was kind of up-and-down. My business was busy some months and very slow others. I had hired a couple of employees here and there which did not pan out like I had hoped so overhead was higher than usual. My oldest son also started preschool that year. We had decided to try the preschool at our church, which was not exactly cheap. Our savings allowed us to send him there without worrying about sacrificing by sending him to a cheaper school where we didn’t know anybody.
Then our daughter was born, so we maxed our out-of-pocket again. Let me remind you of the $10,000 maximum. Yes, it still hurts to think about it. In hindsight, we could have delivered our children in Costa Rica for a fraction of that. Our savings account came to the rescue again. This time, I put the payment on a credit card with points for Amazon.com and immediately paid off the credit card.
We had outgrown our home and it was time to find a new home to rent. We had been renting, which also allowed us to save more money because we did not have to spend it on repairs and other costs associated with home ownership. Still, we could have been saving more, but we enjoyed several vacations and still enjoyed going out to eat often. The increase in living expenses took some time to adjust to. During the week we were planning to move, my wife came down with a pretty bad infection that had her in the hospital for over a week. Thankfully our family stepped up and helped us move, and the savings account once again helped us avoid debt.
In 2015, we had saved more money than I have ever had been able to keep for more than a week. We had used credit for a few things, but with zero interest. I had saved money only to empty it out for bills so many times that I was doing whatever I could to avoid having to touch our savings. I had a few investment accounts that were not doing much that I was occasionally contributing to. The months of May/June have become expensive months for us because there are multiple things that come due. We now have two children in school as well. This June, we had school tuition, car insurance, renters insurance, business liability insurance and workman’s compensation insurance all due at the same time. In the past, I would pay several of these monthly because I didn’t want to touch that savings account. This time, we decided it would be best to pay everything in full so we would have less monthly expense to worry about. This proved to be a good decision leading into the holidays.
One of my employees was to have his first child with his wife and I wanted to be able to give him some time off for that. Because of savings, I was able to do that. A couple of days before Christmas, our landlord informed us of a rent rate increase followed by a notice to vacate the property (a story for another day). Our savings will once again play a role in keeping us comfortable.
I understand that was a very long prelude into a post on the importance of savings but as you can see, it is important. Most people do not think about savings and live outside of their means. They put expenses on credit cards and spend money that they should be saving. We will all encounter unexpected expenses and it is our responsibility to pay for them. Nobody owes us anything.
I could have purchased a home with cash had it not been for the cost of health insurance and what we have had to pay in premiums, deductibles, and out-of-pocket expenses but it is my responsibility to pay it. Taking a cheaper route was not an option when it came to the health of my children.
One fear most self-employed people have is disability. We do not have the same disability options as those who are w2 employees. Since I do not pay into disability, I would not have it for long if something were to happen to me. This is another important reason for savings. Making sure you have at least 3-6 months of money saved so you could afford to live should you need time to recuperate from something is extremely important. There is a much higher chance that I would get hurt and have to take time off from work than be taken out completely (life insurance).
Saving money can be hard
I began saving money by taking money from my account immediately after placing it there. Before I could even come up with a purpose for that money, I had put some in savings. For me, it had to be automatic, so I set it as an automatic transfer from my bank account. I even transferred it out of the bank account I had a debit card and checks for because I knew it needed to be a couple of days away from my main account.
Saving is a sacrifice
Saving money means not spending it on something. This can be hard because there is no shortage of things to want. As a photographer and someone who loves tech, every day is a new challenge for me. Just today, a new handheld rig for my camera came out and I just know how awesome it would be to shoot video with that rig. Do I need this new $2200 rig? No I do not. That has been my problem over the years that has kept me from saving more than I already have.
Saving means showing restraint. It means saying no sometimes. I have found that putting a few days between me and available money is enough time to keep me from spending it on something that I think I need right now. I make impulse buys quite often if the money is there, so I have to remove the money and put it somewhere else.
You have to be vigilant
Even if all you have to save each month is $20, that $20 should get put in savings and forgotten about. Having my money in a savings account at another bank made it easy for me to forget about it. When I looked at my checking balance I saw what I had to live on. If it was enough for some fun, we would have fun. We are still battling with being consistent. Some years the first half of the year has looked much better than the second half. Being self-employed, I don’t receive a paycheck every two weeks. Some weeks I get paid, others I don’t.
You have to want it bad enough
My motivation was my wife. I didn’t want her to suffer the hardships I had put myself through by spending all of my available funds with a week or two left in the month. My wife and I both were not very responsible with our money before marriage. Our rude awakening was our first encounter with medical expenses. Sometimes you need a good kick in the pants to get on track.
You have to automate it
As I mentioned before, if you are bad at saving money, you have to automate it. I think that automating the process is good for anybody, even if they are good at saving. Though I don’t have a regular paycheck, I have some recurring income that comes in each month. That is my baseline savings. Once that hits the account, a chunk of it is transferred away. Later that month, once I have enough money in the account to cover the next months expenses, the rest is put in savings.
We used to handle vacations by just paying for them out of savings, or if I had extra money in checking however, that has changed too. We now have automated savings set up for a variety of things. I started this just shy of a year ago for a few items and setup a few more late last year. We have separate savings accounts for the following items and each savings account gets something each week. You can set automatic transfers for any dollar amount, even $1.00.
- Basic Savings Account (Our main savings account)
- Insurance Costs (Health, car, home, business, etc.)
- Children’s School Tuition
- Charity (Used to help people in need)
- Adoption (We are planning to adopt and have a savings account for adoption expenses)
- Children’s savings accounts (Somewhere to put their birthday money and save for their future. Once for each kid.)
- Travel Fund
- Racing Fund (For Quarter Midget racing expenses)
My prayer is that we will be protected from having to clear out savings accounts for unplanned expenses. We don’t have a lot of money saved, but we could weather a small storm or two. Since using a bunch of our savings to pay for items in full, we have been able to save even more. Instead of paying for school tuition out of our main savings account, we set up a separate savings account for that. I took the projected amount we would need for tuition that would be due in June of 2016 and divided that by 52. That amount is taken out each week and put into savings. As of writing this, that account is already more than half way to paying tuition in full. No surprises.
We often allow things to surprise us even if we knew they were coming. Last year I knew that our kids school tuition was coming up, so it was a bit of a surprise when I realized how much it would be with two kids now in school. Our goal this year is to automate even more savings until we are to the point where even future big expenses such as cars are saved for.
What are some of your savings goals? Have you been able to save? If so, what method worked for you? Saving money is an ongoing exercise in restraint. It’s like dieting, you have to put off what you want now for a later payoff. Our goals are to be able to pay for our next vehicles in cash, save at least 50% to put down on a house (this goal may change to save to buy a home with cash), continue to pay our children’s school tuition, and be able to take a vacation each year.