About 6 months ago I wrote about our accidental one income challenge — if you missed it, read it and come on back!

The Challenge

Sudden loss of income is something everyone needs a contingency plan for — while ours was modifiable, sometimes the circumstances are not.

There are many things that can lead to a loss of income without a clear expectation of when it will return: loss of a job due to layoffs, suffering an injury/illness that prevents working, a family emergency that requires an extended absence are common examples.

My wife’s salary was significantly reduced until mid-May, when her 401k contributions maxed out.  In June she received her first “full” check.

While her income is lower than mine, my own income is always noticeably lower in the same months (and beyond) as my 401k contributions are re-starting (I usually max out in the fall), and my social security tax re-starts (I hit the cap at some point).

The goal was to manage our budget during that time without “freaking out” and demanding the family only Ramen noodles (which would actually be okay for most of them).

Expenses

I’m already frugal, and occasionally accused of being cheap.  I disagree with the latter descriptor, but my wife also says I am stubborn.

I always keep close track of our fixed expenses to see how to reduce them.  I do not track our variable expenses assiduously, and did not suddenly begin to do so for this challenge.  Not shockingly, our variable expenses did not dramatically decrease.

Our biggest expenses have been (and continue to be) the kids daycare and our mortgage payment.  Daycare will slowly decrease on its own; the mortgage has a long time to go.

There were 4 trips planned for the spring which were our biggest expenses.  They took the place of trips over the summer.  However these trips were not as expensive as they could have been:

1) I attended the White Coat Investor Financial Literacy Conference.  It qualified as a CME (continuing medical education) conference and I was able to be reimbursed by my workplace for my plane ticket, the hotel, and my meals.  We still had to pay for plane tickets for my wife and oldest son, and recreation.  Skiing is expensive when you are a tourist renting skis and going to the tourist-y ski places.  I had to pay a large sum up front, however, and wait for reimbursement

2) I attended research conference in Toronto to present my research abstracts.  This was almost entirely subsidized by work, and I attended alone. I also split the cost of a hotel room with a friend (to maximize my CME funds).  Similar to above, I had to have the cash to pay up front while awaiting reimbursement.

3) We had a family trip to the Lake of the Ozarks with my in-laws, something we’ve done for several years.  The main cost involves fuel and food, as my father/mother in-law generously pay to rent a lakeside cabin.  If you have not seen the show ‘Ozark‘ on Netflix, check it out. My wife thinks I have significant similarities to the main character in the show; he is an accountant turned drug dealer/money launderer.  I like to think of it as a compliment, but I’m not sure it’s meant that way.

4) A family trip to what is essentially an “all-inclusive” cabin/camp type experience for the whole family.  This may have been the most expensive trip, as going here was much more expensive than you might imagine.  It was chilly/rainy but fun.

We’ve started making more of an effort to shop at Aldi’s — their 16″ cheese pizza is quite good and only costs $5 — but I’m more enamored with it than my wife (similar to how I’m more addicted to Costco than her).  Sometimes it has a reputation as being “cheap” because of the bad decor and limited selection, but the quality is good/great at our Aldi’s, and yes, it’s cheap.  It’s not an insult in this case.

While we can’t cut daycare unless my wife stops working or mortgage payments unless we want to be homeless, we do have room to cut expenses beyond going to Aldi’s more often in a true emergency.  College savings contributions can be decreased or stopped, some of the meals out can become meals at home, etc., discretionary purchases can be delayed or skipped.

Revenue

This is where we had the biggest changes.

In 2017 we front loaded a large amount of charitable contributions to a Donor Advised Fund in anticipation of changes of the new tax law (read about it here), significantly increasing our tax refund in early 2018.  Half the refund went to my wife’s Backdoor Roth IRA.  The remainder was used to cover our expenses in the spring.  Our refund will be much lower in 2019, so this is not a recurring source of “income” (I know it was already our money), however we have a little more in our pocket throughout the year because of the same tax law change.

In the summer I received some extra compensation for putting in a significant amount of effort into the deployment of our new electronic health record, and this went towards my Roth IRA.  Also not a recurring source of income.

I worked a few extra shifts in the ER in the spring, but between my regular work obligations, travel, and family, there wasn’t much time to do so. I’ve worked far more the past few months due to some temporary holes in our physician staffing.  This is not a recurring source of higher income unless I’m willing/able to keep up the pace, which will be difficult.

The blog is still going, but it’s not generating enough revenue to consider it a reliable or high source of income.

I (along with the rest of my department) received a bonus, which is going straight to savings in anticipation of the smaller tax refund next year.  Also not something I can assume I will receive in the future.

The likely biggest source of a higher income is my “day” job — sometime in 2019 I should be promoted to Associate Professor.  The salary increase should make up for some of the things above that will not repeat in 2019.

The Results

Because we both had a lower income and I had high up front costs to two conferences, I floated small amounts of money from our “emergency” fund to cover some expenses while awaiting reimbursements, higher paychecks, and the anticipated tax refund.  So not a total success, but definitely not a failure.

This was not an emergency, and I usually would not advise this.  However we have an HSA, which acts at times as a second emergency fund/float to cover healthcare expenses.  We always meet our deductible because of the astronomical costs of asthma medications for one of our boys.  In past years I’ve removed some of the contributions (not all) to cover big expenses.

This year I left the HSA money in the account instead of using it to pay our deductible.  The HSA money can’t be put back in once you remove it; the tax advantages to leaving $ in the HSA are potentially so large I didn’t want to give it up unless required.  The HSA money is quickly available if needed.

So at this point the Roth IRAs are funded, her 401k is funded, my 403b will be fully funded this month, and we managed to not change our 529 contributions or touch the HSA.  Our e-fund is back where it was at the beginning of the year.

We’ve saved a little for a trip to Disney World in 2019 (a ridiculously expensive topic for another day).  I even set up a savings account and set aside money from our credit card cash back rewards to pay for random holiday gifts (after all, we’ve got twice the holidays to pay for).

So while I think there is room for improvement, I’m overall happy with how this has turned out.

Next up?  Give it another try in 2019 and see if we can do as well or better, i.e. don’t touch the e-fund, fund the IRAs without using a big tax refund, and try not to need extra ER shifts to keep saving.  If the Rogue blog is going a year from now, expect another update on the topic in fall 2019.