Thursday, March 22, 2012

Making It Work

There is a very good chance that even after my warnings and my story, which incidentally is not as unique as you might think, you will still find yourself in a precarious financial situation.

Take a deep breath.

Do you have a plan?

Right now is the time to sit down with your spouse/significant other and talk about what your strategy will be when trouble comes. Not IF, but WHEN.

Where will that extra money come from? Not just the extra money for your regular living expenses, but the extra money for the "Oops, that wasn't supposed to happen".

Here are some examples of things that did go wrong over 6 years. But they didn't all happen in the 6th year, they came like rolling waves from the very beginning, one right after the other.

  • Paid off car blows head gasket, now has cracked engine block.
  • Paid off car only fits 5, our family now is 6.
  • Financed car loses a transmission.
  • Water heater goes out.
  • Air Conditioning unit goes out on July 4th:-)
  • Dishwasher needs to be replaced after having been serviced twice without success.
  • Deck is peeling, needs sanding and painting (twice in 6 years, probably could use it again).
  • Grandparents 60th wedding anniversary and HUGE family reunion, want to go!
  • Grandfather passes away, want to attend funeral.
  • Sister gets married out of state, want to go!
  • Baby(s) is born, not free.
  • Tires need to be replaced.
  • Brakes need to be replaced.
  • Student loans are coming due, and can't be postponed any longer (TRUE)!
  • Garage door opener gives up.
  • Aluminum fascia on house blows off in wind storm needs repaired.
  • Roof needs replaced.
  • Trees need trimmed and they are too big for you to do.
  • Grass needs fertilized, treated, weeds destroyed.
  • Chimney needs cleaning.
  • Lawn mower needs repaired.
  • Screens torn, need repaired thanks to those big trees that didn't get trimmed in time because you have no money.
  • More babies, more diapers, more beds, more food, more, more, more, more. (But I love them:-)
  • Son starts school, registration fees.
  • Computer crashes, needs replaced.
  • Gas prices go through the roof.
  • Property taxes increase.
  • State income taxes increase.
  • Healthcare insurance increases.
  • Fellowship costs (seriously, expensive).
This isn't even everything, but hopefully will give you a good idea about what could happen, and what does happen and how creating a plan will never be a bad idea.

What are some options for adding extra cash to your reserves so you are prepared when IT happens?

Our story I have already shared in bits and pieces. Here is the readers digest version. Six months into our intern year (after having bought a house that would be too expensive to sell e.g., fees) we ran through our savings. In January I started working from home (with an infant and 2 year-old). I worked for a year but didn't make that much and my ability to perform my real job as wife/mother was compromised. It took up so much time and energy to juggle my responsibilities that I didn't have time to make and keep friends, or be involved in anything. I worked and took care of my family. There wasn't an extra moment.

After working for a year we found out we would be expecting again and I told my husband there was no way I could continue doing what I was doing. Our family was suffering, and with three kids everything would suffer and for what? We were both stressed nearly to the breaking point.

Making a commitment like this isn't for everyone. He had previously looked into the Military Reserves and was interested, but I didn't want him to commit. That was before we were broke, tired, stressed out. Six months later, and in the second half of PGY2 he joined the reserves.

Without their stipend there is no way we could have made it this long. The long list above... the only way we were able to take care of those things was because of the extra income we received. The only way we were able to save anything for when the next thing happened, was because of that extra income. There is no possible way we could have made it work on just his resident salary - No Way.

And it wasn't possible because we lived an extravagant lifestyle. We didn't. It wouldn't work. Our housing costs (mortgage and utilities) took up one entire paycheck plus some every single month. Don't let that happen to you!

Make your plan NOW!

Some of these we have used, others are not options, others are things I have heard of. Use it as a spring board to create your own plan.

  • Borrow from family
  • Use credit card
  • Obtain work
  • Moonlight
  • Signing with a large hospital affiliation, like HCA
  • Getting a stipend from a specific group or hospital that you will commit to
  • Joining the military full-time or reserves
  • Selling valuables
  • Cash out stock, life insurance policies, 401(k)

A note about the above options: these might not be available to you.

Before you make assumptions about borrowing from family, moonlights, getting a job, etc. Make sure that is possible!

Family may not  be willing or able to lend money. If you use a credit card where will the money come from to make the payments? Getting a job could prove difficult or counter-productive. Moonlighting may be prohibited. Signing with a hospital group may not be available in your specialty or they may not have a hospital in a state you are interested in working in.  Getting a stipend at the beginning of residency isn't heard of very often, don't assume you will be the exception. Joining the military (we did reserves), they might not need anyone in your specialty and it doesn't happen over-night. Selling stuff, eventually you will run out of stuff to sell - then what? Cashing out long-term savings instruments can be expensive or you may not have any.

My husband had a life insurance policy his parents had set up for him, that he was paying on. Not only was it a monthly expense ($25 or something like that) it had monetary value that we needed. Maybe not the wisest decision, but he was covered through work now so we eliminated that expense and cashed out his policy. I think it amounted to $2,500 but that was money we sorely needed.

I worked prior to our getting married and had some assets in a 401(k) plan. Taking money out of retirement plans isn't something to be done lightly. It is taxed heavily, and is further penalized through the tax code. You only get about 70% of the amount you take out. It could push you into another tax bracket in some cases negating whatever gain you realized.

Take another deep breath, and make a plan. Please. You will feel better knowing it is in place even if you never need it, and I really hope you don't.

NEXT: Did I Forget Anything?

1 comment:

  1. It will be worth it! When my husband finished up residency (2 years ago this august) and took a position with the hospital he did his residency with (in private practice of course) he got a lovely signing bonus and a set base pay that is CONSIDERABLE in comparison to residency pay. We are slowly climbing out of debt (2 years later)and have managed to pay off everything (including our wedding) last month! Though we do not have any children which i am sure makes a world of difference - there is LIGHT AT THE END OF THE TUNNEL!!


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