Family: Our Looming Financial Apocalypse
I hate to be all gloom and doom after so long a blogging silence, especially when I have other things to say that I haven't gotten around to saying. I've got some political thoughts that are almost organized enough to share, and a whole host of comments on photography inspired by my Photo of the Day feature.
But sadly, what's heavy on my mind at the moment is our family budget. Liana's new job left her feeling too stressed to handle the family finances, so I have taken them over. I've got spreadsheets and folders aplenty. However, the budget won't balance, I haven't been able to make it balance, and our "cushion" has dwindled away to nothing.
At the root of the problem is my work-related income. I can't and won't go into any specifics here, but it was higher once. The economy put the squeeze on our corporate clients, my company switched focus, and it's been reflected in my "take home". Before that, Liana and I were putting money into various retirement savings, we were making regular payments on our cars and house, and while we were carrying a pretty sizable consumer debt, it wasn't anything we couldn't handle the payments on. In hindsight, our big mistake was not attacking that consumer debt more aggressively.
Now that my income is lower, that debt is a millstone we can't seem to get rid of. Liana has taken a job, but it doesn't help enough. More than 3/4 of her income goes immediately back out to daycare because she's not home to watch Rose. This means that for every $4 she earns, our bottom line is only improved by $1. Not only are we incapable of reducing the size of the consumer debt, we're actually having pretty substantial trouble making all our payments while buying things like groceries and gas.
We recently took a vacation we planned earlier in the year (and had prepaid for part of). However in its aftermath it's become clear that our current situation is untenable. We're canceling our life insurance, trying to get out of our DirectTV contract, dumping Liana's cell phone and my pager, and strictly budgeting personal allowances, groceries, and gas. While this all slows things down, we're still substantially in the red. We are approaching a point in time where Liana and I will be forced to press the "reset" button, liquidating our retirement savings so that we can pay off enough of our debts that our monthly bills will fit within our income. This is a disaster, representing the loss of about 4 years of retirement savings. And it will leave us starting our retirement planning over from scratch, with four years less to do it in.
Why I am I bringing this up here? Mostly because I keep needing to explain it to family and friends anyway, and it's difficult to do. I've lost track of the number of lunch and dinner invitations I've needed to turn down in the past few months. We had to cancel our trip to Gen Con this year, which marks the first time I've missed it since age 15 or so. The gas budget is tight enough that we may need to decline trips to people's houses in the later parts of the month, because the $5 or $6 the round trip will take in the bug is going to be hard to fit in. It also seems likely that there aren't going to be any Christmas gifts coming from the Loos-Austins this year. (Sorry!)
All is not lost. While our expenses exceed our income, our assets do exceed our non-mortgage debts, if only barely. This means that we're in no real immediate danger of being out on the street (or staying at one of your houses. *wink*) I'm working with my brother, who is very money-shrewd, to make up a financial plan. Liana is seeing what she can do to bring in more money, and my income is supposed to be going back up (though sadly not to previous levels) in the first quarter of 2006, due to my company's steadily improving financial health. When Rose gets into kindergarten in September of next year, and we can stop paying so much for daycare, our budget will be nearly balanced. But that target is very far away, and if I don't manage to do something sooner, our debt will grow each month until then.
In the meantime, we're going to eat a lot more ramen, I guess.