Drastic shift in finances = new focus and priorities

It’s been six months since I last posted, and probably the most financially dramatic six months of my life so far. First a quick catch-up, and then on to the new focus in my life.

When I last posted here, I was in a period I called “temporary parsimony.” My family had stretched mightily beyond our means to buy the perfect home for us. As with many purchases like it, the process contained several pitfalls that meant we were stretched far thinner than we’d intended. Several unexpected costs around closing, plus the condo was taking forever to sell so we were covering two mortgages and sets of utilities. We knew we could do it, but only if we were extremely careful.

So we entered the most disciplined, strategic and conscious stage of our finances that we’d had since our near-meltdown in 2007. Our new home was furnished with loaners, alley castaways and Freecycle finds. Fun money was cut to the bone, debt payments kept to the minimum and retirement contributions reduced. Our entertainment consisted of cooking for friends and watching movies on Netflix. Our Xmas and birthday gifts were the money we’d saved up for those holidays so we could buy long-deferred wants (and it was thrilling, let me tell you, to suddenly have new T-shirts, socks, slippers and pajama pants!).

Our income was increasing during all of this; Neil and I got raises, and Anitra’s freelance business turned out to be much more lucrative than she’d predicted. But all of the money went to filling gaps, such as saving up to try and cover the big loss we knew we’d suffer on the condo if and when we finally sold it.

Even with all the saving and scrimping, we had to take out a 0% credit card to carry some expenses and use that money to buy  our way out of the condo. (The check we took to closing was nearly three times as much as what we’d brought to closing as a down payment when we bought the place!)

We received an opportunity to refinance the mortgage on our new place and save a ton of money monthly, but it involved paying off a smaller second mortgage that we’d taken out with the seller. We saved up as much as we could but also ended up taking out an unsecured line of credit to cover that payoff.

Even with the big checks, once the condo mortgage/dues were gone and the new home mortgage was reduced, I could see that our monthly cashflow looked much brighter. We’d still have to be disciplined, but there was light at the end of the tunnel.

Then we got unbelievably good news: A long-hinted-at windfall, a big chunk of money gifted by my dad, was coming to us. Sure enough, a few weeks later it was in my bank account.

I promptly paid off every non-home-related debt: the new credit card, the line of credit and the last of Anitra and Neil’s student loans. For the first time since I was 18, I had no student loan or consumer debt to worry about. There was even a good bit of money left over to start renovations on our shabby-looking (but very promising) home.

So six months since I wrote about all the ways we cut back, I could write a volume about all the impulsive and not-at-all-necessary purchases we’ve made! I’m still tracking every penny to make sure we don’t overdo it; we haven’t even come close, but I’m well aware that “lifestyle creep” doesn’t take much time at all to take over.

For the first time in a long time, I’ve shifted gears from how much I could reduce and save to thinking about what I want to spend our money on. It’s exhilarating, strange and a little scary to be honest.

But there’s another priority besides kicking up my heels and enjoying the sudden freedom: Retirement. I’m 41, and I realize that I haven’t ever given retirement savings my full attention. First I was too busy being young and irresponsible, and then I had to spend years digging myself out of the hole that irresponsible version of me had put me in.

Now I’ve always put a bit away for retirement, at least since my mid-20s, and I occasionally upped it incrementally. So it may be that I have more retirement savings than many Americans. But I’m not on track to have enough to live comfortably in retirement, nor to deal with expensive long-term care solutions, should I be one of many people who develops a disability late in life.

Especially now that I have enough money to have a bit of fun, traveling and fixing up the house and shopping, it would be a jarring thing to suddenly find myself scrimping and scraping again when I’m old.

So I’ve got to try and tackle this monster of a topic, retirement. Unlike budgeting and paying off debt, it’s not a simple calculation. It involves uncertain growth rates of investments, certain (but indefinite) inflation, and the mystery of just how lucky I and my spouses will be in the aging gamble: Will we manage to stay fit and mentally unscathed and wanting to spend money on fun, or will we be hit with debilitating ailments that take money to take care of? Either way, how much would those two futures cost?

Whatever the answers are (and I’m not sure I can answer them with any degree of accuracy), one thing is clear: We need to be saving more. Even if we don’t manage to get to a magic number that I may or may not come up with, we need to get closer to it than we are now.

My next post will show you my first rough attempt at calculating what we’ll need in retirement. Then we’ll just have to go from there.

NT water

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