While my boss meant invest in retirement early (very good advice), when he told me that his best financial advice is to “invest in yourself early,” I am going to expand this to the here and now. During a breakout session at a recent conference, we had a speaker from an affiliated bank who touched on good financial habits. And so now, I am thinking about my own financial journey.
One of the best habits that I have adopted, that this speaker spoke on, is sneaking in savings – this means I use automatic payroll deductions and a split paycheck to maximize my savings before I receive the remaining money designated for bills and day-to-day living expenses.
Three key ways I do this: 1) I take advantage of my employer’s cash match option for retirement savings via payroll deductions. 2) I use payroll deductions to deposit pre-tax dollars into my Health Savings Account (HSA) to pay off my never-ending medical bills. 3) I split my paycheck so that my long-term savings/emergency fund gets paid first on payday.
After I receive the 2nd part of my paycheck into my short-term savings and checking (hint: I have different accounts designated for each task), I make automatic payments into my other retirement investments and towards my auto loan. I live on less than I make, to the best of my ability, and treat my credit card as a debit card by paying it off every month.
One of the key choices I made when I took my current job almost two years ago was that I would use my automatic saving process to squirrel away part of my raise, which in turn allowed me to purchase my first house this year.
Great! This sounds dandy! But how in the world am I supposed to do anything like this when money is tight, Sarah?
It comes down to priorities. And let me tell you, I’ve had them checked by life events a few times in the past 5 years. Here is a timeline of how the last 5 years went for me and why I prioritize my emergency fund:
May 2014: Quit the 3 jobs I was working due to an injury. Took temp jobs for 5 months to make ends meet while I moved to a new place.
November 2014: Took my first full-time position at UVA. Started saving into an emergency fund. Sustained additional injuries.
May 2015: Started four months of medical leave which was mostly unpaid due to a mix up with the disability insurance (ouch!). Blew through my emergency fund paying bills and had about $100 left by mid-September.
September 2015: Started a new position and received my first paycheck just in time to make rent. Eventually received the missing pay from my medical leave. Again, saved money from each paycheck into an emergency fund.
2016: Old car (a 2000 model) died a slow, expensive death throughout the year. Paid for repairs out of my emergency fund.
September 2016: Old car officially dead.
October 2016: Bought another used car (a 2012 this time) after returning from vacation (caught a respiratory infection that lasted for 7 weeks… oof!). Paid for the down payment out of my emergency fund.
Early 2017: New car breaks down in Arlington. Unexpected hotel stay and repairs were paid for out of emergency fund.
June 2017: Car needs an engine overhaul due to a defect (very luckily it was all covered under the warranty and I received ~$7,000 in repairs for free).
June 2017: Hip pain starts up again. Specialist visits and medical imaging. Physician evaluation shows that my torn labrum has become symptomatic and an operation is needed.
November 2017: Hip surgery. One month of medical leave at 60% of my normal pay. Again, I utilized my emergency fund. Transitioned to a new position.
December 2018-present: Used pay raise from new job position to continue automatically saving into my emergency fund/long-term savings. Started saving automatically into my HSA.
2018: Nine months of physical therapy and monthly specialist visits paid for by HSA and emergency funds. Also paid off my surgery bill over the course of the year. (Talk about an expensive year.)
June 2019: Used my long-term savings to pay for closing on my first house. (Hint: I have a renter to help pay for the housing expenses.)
June 2018-present: Hip pain… again.
November 2019: A second surgery is scheduled.
I continue to balance my living expenses with my medical expenses each month. I regularly review my habits and accounts so that I am constantly adapting. I have, without a doubt, learned the importance of saving and trusting in God’s provision. He has been generous to me and I have, throughout these years, been able to tithe to my church.
Furthermore, one of the habits I have adopted when I know money is going to especially tight is to immediately start cutting out or down whatever I can – gym membership, monthly and annual subscriptions, eating out, alcohol, shopping, etc. If it’s not an obligation or a true necessity, it is gone until I can work it back into my budget sometime in the future.
I save pocket change as well, which has actually been really helpful a few times when money was tight. Those loose quarters and dimes and nickels… well, it all adds up. (Thank you, pocket change, for keeping me afloat in 2015.) Also a note regarding that pocket change…. it’s okay to use it for the occasional small expense. I use the change to buy the occasional cup of coffee at work.
Whether it is $50/month or several hundred, it all makes a difference when life surprises you. And that’s a when, not an if.
Small financial habits add up, even if you don’t get it perfect every day, so what’s one new habit you can start today?