Back to a Budget of Austerity
Well I am back to living on the Austerity Budget. The Budget of Austerity is what I call the budget that I use when I am about one step up from survival mode. It covers the purchases of basic needs, and I look harder for deals and sales and use coupons, and Groupons. The reason for this is that I took off most of the month of March without pay, took a 2 week vacation, purchased a new king sized bed, attended a convention and co-hosted a party of 100 people. I had enough money saved in anticipation of March, but did end up digging into my savings to pay for some of it, and all of it I paid for with my credit card in order to collect travel points. I am not favorable toward carrying a balance though and as of last week I had some work to do in order to pay off my credit card and money that I had taken from my line of credit before there was any opportunity for interest charges to kick in.
In order to pay off my credit card and take my line of credit to a zero balance I lent myself money from a retirement savings account which I use as my emergency fund. I still have enough money in the account to carry me through at least 3 months of income loss. I am not suggesting that people deplete their emergency funds to make frivolous purchases. The vacation, party, conference and new bed purchase were not an emergency situation – they fit the category of wants, not needs. However, I will not carry credit card debt or keep my line of credit in an interest incurring state and I needed a way to pay them down, so I lent myself the money to pay off the frivolity.
In order to pay off my the outstanding balances on my credit cards and line of credit I borrowed money from my emergency fund. This is a registered retirement savings account. It is not my retirement fund, it is a place that I put money in order to defer taxes and it functions as my emergency fund. As with any loan, I need to pay back my loan that I took from my registered fund. Because it is a registered plan, the government withheld 10% for taxes. I received exactly enough to pay off my credit card and my line of credit.
Now I need to pay back the loan and I need to have the money back in the account by Feb 28, 2017. In order to do this I have added $150.00 per month to my regular monthly budget to deposit back into the fund. I will roll in monies from my biannual work bonus into it as well. By doing this I will be able to repay the loan, I will not have to pay any taxes on the cashed in registered retirement monies at tax time, the money will be back in my account, and I will not have paid any interest on the purchases. Again, this retirement fund is not the monies that I will use for my retirement, it is monies that I keep as an emergency fund, and I still have enough money in it to satisfy my emergency fund requirements. The last time that I borrowed from this account, I used the monies to pay off the $18,000 remaining balance of a mortgage loan on property that I own. I paid off that mortgage 3 years early, freeing myself of a $667.00 monthly mortgage payment. That was one of the things that I did that allowed me to cut from full to part time employment.
Over time, it is easy to become complacent with your money and to deviate from your budget, particularly if you have come through an income loss and have adjusted to the financial revisions of that income reduction. This is what happened to me this spring. I thoroughly researched my finance my vacation,and all of the other things that I spent money on in order to get the best deals possible. It is obviously not something that I would have been able to do in a financial crisis mode. After a crisis period subsides and you learn to creatively to modify the means that you use meet your needs, a complacency can set in. It’s like cheating on your diet. Whether it’s a small cheat or a big cheat, it’s best to have a plan for getting back on budget.