I learned from the financial crisis back in 2008 the importance of having enough money in savings. Ever since then, I have been vigilant about keeping a heavy stash of cash in my emergency fund.
When I had to have my hips replaced, the medical bills came to almost a year's worth of my living expenses. Because I had read Suze Orman's book, I had enough money in my account. She said that self employed people should have in savings enough money to meet their yearly expenses. I had been slashing them by cutting out cable, taking the bus, walking, and cycling, growing my own food, cooking from scratch, and only buying needs. I had also taken on a side job at a farm, selling produce in the mornings. I would go to work at the dance/yoga studio in the afternoon and evening. That extra $250.00 a week, plus the free produce, totally saved me.
When I closed my dance and yoga studio, it was because my profits had dropped 60%. "It's mirroring the market," my father explained. I ran the numbers, paid back all of my students, and quickly closed the doors. I'm so glad that I didn't wait. I knew the ship was sinking. Many of my friends with studios stayed open and tried to make it. They were flying to Korea to teach, working two jobs, and just making enough to pay their business rent.
Thanks to listening to Suze, things worked out for me. The older I get, the more conservative I become, financially. Her podcast today discusses the pandemic. Here is the link.
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I think our frugal life style gives us so much financial and emotional security.
ReplyDeleteIt does make things much easier, Nil. It's so easy for people to slip into worry and panic. I like having the positive focus of planting fruit trees, berry bushes, and vegetables.
DeleteI think in times like these and they certainly are unchartered territory even worse than the GFC having an emergency fund [or in Australia - the Barefoot Investor Scott Pape refers it to a "mojo" account] is even more important.
ReplyDeleteHi Kathy, Thanks for reading and for commenting. It really is. It gives us peace of mind, and buys us some time.
DeleteYou are a wise woman when it comes to managing your finances. I am afraid I am poorer today than I was a couple of weeks ago, but, I'll be OK.
ReplyDeleteI think you will be okay, too, Bless. These are uncertain times, but it helps to focus on what we have today. I am so thankful for this little cottage and my garden. I think I will plant some pumpkin seeds in June. I have some winter squash in the stockpile.
DeleteThis is when being frugal really will come in handy. Those of us who practice it as a matter of course will weather this storm far easier than those who have no idea how to budget
ReplyDeleteThese are such unusual times. My heart just breaks for the self-employed and the owners/employees of small businesses. Thanks for the link to Suze Orman. Her common sense approach has always made sense to me.
ReplyDeleteHi Anita, Yes, I know. Self employed people are very resourceful, though. Hopefully the business closures won't be for an extended period of time. I'm glad you liked the Suze Orman podcast. I had to laugh at her example of not buying a pool. The less expenses we have now, the better...
DeleteIt has really helped so far, Cherie. The fertile soil really feels like a blessing right now, too. People who had vegetable gardens, chickens, and land fared much better during the Depression than those who didn't. They were more self sufficient.
ReplyDeleteThanks for the link! I can listen easily. Good, wise advise, your advise. You are a good example. We are living on retirement savings that are all in CD's (which have low interest right now). But if I had stock, I would just keep it. They need to quit the rule that people who are 70 1/2 have to cash in so much stock....it is unfair to force that if the stock dips. Andrea
ReplyDeleteI've never heard of that rule, Andrea. My dad was 88, and his stocks were in a trust. After the death of both parents, the stocks could be transferred to his kids. He continued to reinvest the dividends during the last downturn. I am glad that you have CD's.
DeleteI think they just changed it to 72. But there is a minimum amount you have to take out and pay income tax each year, beginning at that age. It basically is so that the gov't gets some of your tax $$ before you turn it over at death to your kids without tax money. It is called RMD, required minimum distribution. Andrea
DeleteI know that retirement plans have mandatory distribution rules. But I don’t think it applies to individual investment accounts.
DeleteOh, yes...required minimum distributions. I was fortunate with my dad's IRA. He died before they changed the law, and I was able to take my portion and convert it to a Stretch IRA. They did have to make that distribution last year, though.
ReplyDeleteYes, I think you're right, Nil. This is all new to me, owning stocks and having an IRA.
ReplyDeleteYes, Andrea must have been referring to the RMD which does require one to begin withdrawing from your traditional IRA (not your Roth) at a certain age.
ReplyDeleteBut that doesn't mean you have to sell individual stocks or stock funds or stock ETFs in a down market.
If stocks are depressed, and you must withdraw - that is when you sell from the bond side of your portfolio.
The effect is a rebalance of sorts and it leaves the beaten down investments alone to recover.
I appreciate your posting about finances and retirement and just money in general and how a careful frugal approach to life is very comforting.
It's an important part of my life and something I've always been interested in.
Debra
Hi Debra, Thank you for your insightful explanation. I don't have any bonds, but at this point I can still live off of the interest and dividends from my stocks. The Stretch IRA I use for essentials, like groceries and my water bill. I'm so happy that you enjoy reading the blog. I find personal finance to be a fascinating and deeply revealing subject. You sound like this is your field of expertise. Thanks again.
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