Adjusting to One Income
by Gary Foreman
"So George, how's the job hunt coming?" John was sincerely interested in his brother-in-law's situation. They had become good friends over the years. Recently, George had lost his job in an electronics manufacturing company.
"I've got resumes out everywhere. What they call an 'outplacement counselor' says that I should be calling all my friends and contacts telling them that I'm available. So that's what I've been doing. What really worries me is our finances. We've always been pretty comfortable living on two incomes. After my severance runs out, I'm not sure how long we can go on with just Janice's salary and unemployment coming in."
John understood. It was a concern shared by many families. "Have you figured out how much money is going out each month and how much is coming in?" George admitted that he had been so busy looking for a job that he hadn't taken the time to try to figure it out.
John went on to explain how he and Mary had reviewed their income and expenses. When they realized that they needed to make some changes, they compared their spending to national averages to get some idea where they might find some savings.
"But John, we don't have a little problem here. My severance stops in about four weeks. We're never going to get our budget to balance without my income." George was convinced that he needed to find a job in just a few weeks or his family faced some severe hardships.
They talked for awhile and George agreed that he and Janice would put an estimate together to show what they thought that their annual expenses were and what income was coming in. Since the families were so close, John and Mary would work with them to try to brainstorm a solution to the problem.
One week later.....Janice and George have joined John and Mary at the dining room table. They all had copies of the income and expense record that George had prepared. The record covered the first six months of the year while George was still working. It showed that the Jones family would be about $3,000 short each month if George's salary was replaced by unemployment.
"I don't know where you can cut $36,000 out of these expenses." The more Janice thought about the problem the more concerned she became.
John was the one who began to break the logjam. "OK, let's start with the obvious. If John's not working, he won't be paying income taxes on his salary. We can take the amount for income taxes and cut it in half." The adjustment was worth a little over $10,000. Adjustment to FICA withholding added another $2,400. "What else changes because George isn't working?"
"How about lunches? It's not much, but you eat lunch at home now and that's a saving." Janice calculated the difference between eating out and at home lunches and made a $750 adjustment.
"Transportation! George, you were filling the car with gas at least once a week when you were working, now the car hardly ever leaves the drive." Mary did the math this time. "Let's see, ten gallons a week at $1.25 per gallon times 52 weeks is...$650."
One by one they reviewed each area. Many areas had been effected by George's layoff. Each change was calculated and adjustments made to that area of expenses.
Some weren't so obvious. When they thought about it they realized that the Jones' didn't eat out nearly as often as before. Since George liked to cook (he was one of those liberated guys!), he had been making dinner from scratch. They were actually eating better for less by not going through the fast food windows!
When they got all through they totaled the reduction in expenses. Janice's expression drooped when she realized that they were short of the goal. John announced the results. "We've reduced about $19,800 from the total."
Although George felt better than when they started, he was still concerned. A yearly shortfall of $16,000 would eat up their savings pretty fast. "See John, the only solution for this is to find another job."
John was sympathetic to his brother-in-law's feelings, but he knew that there was more that could be done. He had done some reading on how to modify your budget. If you need to cut spending, first look at the simple things. Items that aren't a major part of your lifestyle.
He also learned that if the smaller things didn't provide enough savings, the next step was to look at lifestyle changes. These are major items like cars and homes. Things that would make a major difference in the way you live.
"Let's do some unconventional thinking here. What would you do if you couldn't go back to work? Say you were disabled or something. What then?" Janice listened intently. In the back of her mind was a desire to be a stay-at-home mom. She always felt that it was just a dream and yet every once in awhile the thought returned.
John started cautiously. "What would happen if you sold your second car?" You could almost read the changes in George's face. At first was clear rejection of the idea. Then you could see him mulling over the details in his mind. Finally he looked like a man deep in thought.
"I suppose it would work. If it was a day that I needed the car for an interview or something I could take Janice to work and pick her up. But how much would we save?"
They began to make changes to the auto expenses. That included maintenance and insurance. Since the car was paid for they realized that there would even be a boost to savings from selling it.
Janice was next with a proposal. "What if we gave up the child care? If you get a job soon we can just put them back in. If it takes awhile we'll save quite a bit." Once again the sound of calculator keys clicking filled the dining room.
"How about you guys sell the house?" John didn't look up as he spoke. "Only kidding, George! Just wanted to see if you were paying attention." As the color returned to George's face he playfully shook his fist at John.
They were nearing the end of their work. Roughly another $8,500 could be saved by additional steps. Janice was surprised. "I thought that this just wasn't doable. I had pictures in my mind of us losing the house and all kind of horrible things! Who knows. Maybe after George finds another job, I'll just stay at home..." She left the thought trail off for her husband to absorb.
Perhaps the most comforted of all was George. Being 'in the red' by $7,500 each year was nothing to sneeze at. But, he knew that they had some savings to tide them over. Now he was really glad that they had begun that regular savings program a few years ago.
He was surprised at how successful they were at thinking outside of the normal boundaries. It had never occurred to him to sell a car or give up the day care. Left alone, George concluded that he probably wouldn't have come up with any solution outside of looking harder for a new job.
They hugged each other as Janice and George called to their pre- schoolers and headed for the door. It was nice to have a close family. It was especially nice to have a close family that also understood how to use a family budget to solve problems.
We're still paying off last Christmas and worry how we'll afford the holidays this year without charging it again! Tell us: Yes, we could use help getting out of the debt trap we're in! or No, debt is not a problem for us but I'm always looking for ways to trim my family's expenses further!