Rebuilding Cash Reserves
I have made a (temporary) change to the amount I contribute to my 403(b) retirement account. After making a few major purchases, it’s time to rebuild our cash reserves.
Our income has been down, just a bit, as compared to this time last year – and expenses have been up. We now have three kids, and our youngest is still in diapers. As a family, we are trying to eat at home more often, and we are focusing on fresher, healthier (and therefore more expensive) foods. I also used some of the money in our cash reserves to purchase some additional (and un-budgeted-for) disability insurance. We also purchased a new computer – a MacBook that I love – and a new lawn mower – which I also love. Adding it up, we’ve spent more this year than in previous years, and now it’s time to reign in the spending and rebuild our reserves.
One interesting thing that I noticed over the course of the last few months, is how strange it feels to buy things, even things we can afford. In the past when I used a credit for most “major” purchases, I would focus on monthly payments, barely giving a thought to the real cost of each item. Now, as I move through life paying cash, it “hurts” to spend money, because every dollar, every single dollar, comes straight out of our bank account, right up front. Buying a $1500 computer requires – surprise, surprise – $1500.
The season-of-splurging (if buying a laptop, insurance, and a lawn mower can be considered splurging) has come to an end. We are going to focus on rapidly rebuilding our cash reserves. Here’s our quick-and-easy plan for piling up the cash.
1. I will temporarily reduce contributions to my 403(b) account. By temporarily, I’m thinking six months, or less. Reducing my contributions will increase our taxable income, but we are willing to “take this hit” in order to rapidly build our cash cushion.
2. I will automatically deposit a set amount, at the first of each month, into my online savings account.
3. At the end of each month, any extra money that I might have earned from blogging or eBay sales will be deposited into the savings account.
4. We will fine-tune our budget, cut out the fat, and go back to our more-frugal ways.
For the first half of 2009, I’ll freely admit, I’ve been a bit more “relaxed” than I could have been. I needed these six months, to focus on my family, my commitments at work, and my health. Now, however, it really is time to “get back into the game” and get serious again. It felt good to spend a little money, and it will feel just as good to rebuild our savings.
Side-Note: I consider “cash reserves” to be any money not allocated to retirement or education savings accounts, and above our standard six months’ of expenses “emergency fund”. Also, even with the reduction in retirement account contributions, we will still be contributing more than 15% of our gross household income to retirement savings.