When All Your Savings Go Towards Bills
How do people get ahead?
I didn’t make more than $15 or $20K a year until I was 26 years old; for the years before that, I was either in college working a variety of interesting part-time gigs, in graduate school as a graduate teaching assistant, or teaching abroad. I didn’t earn a lot, but life didn’t feel like it needed more money during those years; I wasn’t really saving anything, but as a healthy person who was happy to have roommates, I found ways to live quite cheaply and not feel the pinch.
Since turning 26 I’ve done a lot of new things financially: I got engaged, got my first real full-time job, started saving for retirement, got married, bought a house with my husband, and started allocating money to give to charity. I’m earning more, but I’m also paying significantly more.
So let’s look closely at where my money is going. My tax burden has expanded to include state taxes that I didn’t withhold, a local property tax, and a local income tax. (I work in a different state from where I live, and I occasionally do freelance writing — taxes are just swell, I tell you.) I’m also paying new insurance bills for my home and my car. My husband and I have friends and family we want to see, so we’re also shelling out money for plane tickets and lodging.
The combination of new bills (like insurance) and occasional large bills (like taxes or plane tickets) means that I’m constantly having to plan ahead and figure out how to get everything paid.
I’ve heard of people either having so much liquid cash that they don’t have to worry about these bills, or having so little cash that they avoid them. I’ve heard very little about what people do if, like me, they’re earning a decent amount of money but don’t yet have enough buffer in the bank account to shell out a few thousand dollars all at once—and can’t build up that buffer because of all the bills.
My husband and I have created bill-payment schedules based on when our cash is scheduled to come in. He gets paid mid-month and I get paid at the end of the month, so I time our checks to go out based on the next influx of cash; we start paying things like taxes months ahead of time because who can pay all those tax bills right before April 15? We certainly don’t have that kind of liquidity.
It makes me wonder if I am just bad at keeping a buffer in my bank account, if we are trying to save too much (we try to transfer 10 percent from each monthly check to savings, but have sometimes had to scale that back), or if there’s something else going on. I especially wonder this when I see articles like the one about how most Americans don’t have $500 in savings right now:
That’s us, especially after paying off a big bill—and as soon as we save up $500, it goes to another payment.
There are a million reasons why any given situation is unique, but I do wonder how other Billfold readers handle the big, non-monthly bills of life. Do you just keep enough money in checking to deal with whatever comes your way? Do you have to wait and save, or are you careful to set up some kind of payment plan to make the big bills smaller? My husband and I are doing our best to figuring it out, but it often feels like maybe there are other, better ways somewhere that I haven’t thought of.
Laura Marie is a writer and teacher in Ohio. She blogs about family recipes among other things at Recipe in a Bottle.
This article is part of The Billfold’s Tax Series.
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