If you’ve read, well, anything I’ve posted since last summer, you probably know that I live a little close to the bone by the middle-class standards I’m used to.
My regular monthly income is generally adequate to my regular monthly expenses and even most of my irregular expenses. It does not, however, leave much over for savings.
That’s where my windfall strategy comes in. I get two main kinds of windfalls: the Earned Income Tax Credit and three-paycheck months. The EITC is a doozy, and it came at a perfect time for me (February).
See, in January I was totally tapped out. I had taken money I didn’t really have yet, plus all the money I did have (Christmas money, December’s third paycheck, everything I could cadge from my HSA) and used it to pay off the divorce lawyer I had consulted. Nothing left, period, and with my monthly earnings so low, reaching a comfortable savings cushion felt very far away indeed. Then I found out the size of my tax refund.
Side note: I’m not sure “refund” is really an adequate word because it is money I did not pay. The EITC is really other people’s money, which makes it more like welfare. I am grateful to receive it, and look forward to paying my share in the future.
I did buy a few things, but my February income turned out to be totally adequate to cover my purchases, leaving my entire EITC available to create savings.
Step one was to budget for March. I have not been following the general financial principal that you should live off last month’s money. I have been living off the money I was earning in the present month, leaving me in the red until I received my support check and last paycheck. Not a pleasant feeling.
So first, I budgeted for March, generously–March’s rent, groceries, everything, and with some left over because I know I probably forgot some things. I was realistic but moderately ambitious; I said I would keep groceries under $300, for instance. I will see how much money I earn in March and that’s what I will budget to cover April.
That took a good chunk of it, but there was plenty left. So I earmarked about 1 months’ expenses as an emergency fund. This is my liquid emergency fund, the money I would use if my car broke down, for instance. More of a rainy-day fund, if you will.
There was still some left over. I earmarked $500 for travel, aspirationally. Some day, I’m going to Paris. Because February was a good month for me, I STILL had some left over, which I earmarked as “investment holding.” I used to have a Roth IRA. It all went into the house we bought in 2015.* I would like to open one again as soon as I have enough money ($3000) to buy into the Vanguard Total Stock Market Index.
*The house where my ex-husband lives with his new wife and stepchildren and my name on the mortgage. This is a sore point.
That will leave me with three potential sources of emergency money, in the order that I would most likely tap them:
- Cash (in my Ally savings account);
- HSA (for medical, sure, but since I pay for things like my $185 asthma medicine out of pocket normally, I could submit those receipts later if I was in a bind for some other reason);
- Roth IRA–you can withdraw the contributions at any time, so again, if I was in a bind I could do so, unless the market had tanked quite spectacularly.
With my savings pretty well covered, I felt comfortable increasing my HSA contribution for the year to $4000, which will put me well over the investment threshold (right now that money is not earning interest, but I’ll have some options once it tops $2100).
I feel good about where I am, savings-wise. It’s not exactly putting me on the fast track to retirement, but it’s adequate for my current standard of living. Which could use a little increase, to be frank, and feeling a little more secure in my savings makes me feel like I can afford, for instance, new mixing bowls, when the old ones start moving past “gross” and into “health code violation.”
How did your tax season shake out? If you got a refund, what did you do with it?
In January, I found out that I qualified for the Earned Income Tax Credit and would be getting a sizable tax refund. Now, most of that money is intended for saving, and I’ll write a separate blog post about that. But I did think, well, I’m getting a good amount of money back, I can loosen the purse strings just a touch. And I bought a few things I’d been wanting for a long time.
The great thing is, I have been getting so many hours at the library, I am in the black even without touching that windfall. The other great news, money-wise, is that our CICP (Colorado Indigent Care Program) came through. I am getting refunds for a lot of the money I paid for Big Brother’s November ER visit and won’t have to make any more payments. Instead of owing about $2200, our bill became $70.
We were back at the ER in February getting Little Brother’s forehead stitched up, but no big deal–again, we will owe just $70, if I’m not mistaken.
With no further ado, here’s how February looks
Returning things to Costco: $69.75
Library take-home pay: $2187.22
Subbing take-home pay: $44.06
Interest: 61 cents
Trivia writing: $95
Gift and travel money from Grandma FP: $125
Child and spousal support: $767
Medical reimbursement: $156.38 (more on this below)
Non-windfall income: $3443.01
Rent and included utilities: $1084.08
Household oddments: $9.54
Stop-payment check fee: $35 (my rental office lost my check and will take this off of next month)
YNAB renewal: $45
Groceries: $456.40 (Holy smokes! What happened here?!)
Car wash: $10
Kid allowance: $18
Walkie-talkie batteries: $4
Boy clothes: $91.38
Children’s museum membership: $117.25
After-school babysitting: $88
Kid health: $160.86 (about $125 of this has since been reimbursed)
Adult health: $38.87 (meds and a dentist copay)
Coffee shops and snacks: $30.98
Shoes and underwear: $293.81 (When I got my tax refund, I figured I could replace all 3 worn-out pairs of exercise shoes and stop wearing hand-me-down underwear.)
Year subscription to Washington Post online: $99 (I’ve been stealing their articles for like 10 years. Journalism costs money.)
Something from Target: $14.04
A non-leaking, non-disgusting travel mug: $2 (plus reward points)
Southwest credit card fee for a bunch of bonus miles: $99
Total spending: $2907.70
I can’t count on always getting so many hours–I still need a full-time job. And over the summer, I will probably either have child care costs or way less income, so I need to be prepared for a few lean months.
But I feel great about February. I earned enough money. I spent some money on things that are important to me. I came out ahead, and I used a windfall to bolster my savings.