I recently went through a cash crunch. It was not something I’d care to repeat anytime soon.
No matter what I did, I couldn’t get the math to work out. 4200 minus 2000 always equaled 2200. I’m pretty good at math and yet I was being defeated by 2nd-grade math. I don’t remember the last time I had a balance on my credit card at the end of a cycle.
The last few months have been pretty rough for me in new and inventive ways, many happening at the same time! So fun! (Narrator note: It was the opposite of fun.)
Opportunities were there with the potential to improve just about everything in my life. I was in a new place, newly single, gainfully employed, the pandemic restrictions were starting to die down, and then life tubthumped me. Y’know, the song? “I get knocked down, and then I get up again”. I practically turned into a weeble wobble with all the getting back up I did.
First, moving expenses were slightly more than I anticipated. The cost for the movers went over the estimate I was given due to more boxes than expected (fair) and the elevator being further away from my unit (not so fair). That was $2k. Then I had a chance to buy an amazing dining room set that included 6 chairs, a table with two leaves, and a sideboard. The 1960’s mid-century modern Danish rosewood set matched my new apartment perfectly and set me back $1,300. (I call it a great buy as I saw the exact same table with 3 leaves instead of 2 the next week for sale at a local retro furniture shop for $2,375 that didn’t include any chairs or matching sideboard.)
Shortly after that I had to buy my flights for my Ecuador trip. All told, the total was just under $1800. Now, I did get reimbursed for some of those flights so I didn’t have all that money gone forever. Still though, I had to front a fair amount.
Then I was driving in my car on some errands when my right front tire entered what I can only describe as the Grand Canyon of potholes. My tire hitting the other side of the crater sounded like someone shot my wheel. I almost made it to Costco to get it swapped out, but I fell less than a mile short and was forced to change my tire on the side of the interstate. I’m very grateful to have friends in St Louis who will come out and help me get back to functional. Because my tires were on the old side and getting a little thin, I couldn’t just replace one tire. No no, I had to replace both front tires. That was an extra $430.
It occurred to me my friend’s wedding was rapidly approaching. I didn’t have flights booked yet so that was an extra $450 on the old credit card. (Fortunately I am sharing a hotel room with friends so my costs there will be lower than they otherwise could be.)
My new car insurance premium came due. Thanks to a ticket (.….….…. or two…) and driving a newer red vehicle, my car insurance costs are higher than they used to be. I had to shell out another thousand dollars.
For those counting along at home, that’s nearly $7,000 on things outside my usual budget. My take-home pay is $4000 a month and that needs to cover rent, car payments, utilities, gas, food, and cat supplies. I had to carry a balance on my credit card for nearly two months until I got enough money to take it back to zero.
Now, it was stressful to carry that balance. I had to cut back on a lot of things I usually do. I ate my way through my pantry, didn’t go out to eat, minimized my car usage as much as possible, and cut out nearly all shopping expenditures. I knew, however, that what I was facing was a temporary cash crunch. The cash was flowing out at a much higher rate than it was coming in, but it wouldn’t always be that way. I knew I would have my usual steady paychecks from work coming in. I was set to get a cash award for extra work I had to do at my job. I was going to get a hefty tax refund from the government thanks to owning the house. I will get a big check from my portion of the equity of the house I bought with my now-former partner when he assumes the loan and takes my name off of everything.
So, yes it was stressful but there was a light at the end of the tunnel. I can buckle down and be super frugal for a little while when I need to. I had a roof over my head, food on the table, and my utilities on. I have so many free options for entertainment that I probably don’t need to ever leave my place between my Steam library, Switch games, and games from various sports that I like.
What caused the biggest issue was the internal turmoil caused by not having any extra cash on hand to pay off that credit card bill. A pretty big chunk of my self-worth and self-esteem comes from Being Good With Money. I am the money-savvy friend. I am the coworker you can ask about the best investment options in our 401k or when is the best time of year to retire. For better or for worse, I take a lot of pride in having saved a ton of money for retirement and having that big net worth.
But, what good does having a high net worth do me when I can’t even pay off my credit card bill? Sure my net worth hovers somewhere between $300–350k depending on the whims of the market, but I am over here making sure my bills go to my credit card and don’t hit my bank account directly because I need that money in there to make my rent that month. I’m not even sending every spare dollar to retirement accounts anymore. My current deductions are 10% to my Roth 401k.
I am very glad I made the conscious decision to recognize my Coast FI status and back off the extreme saving levels when I did circa 2019. It turns out I really enjoy having a higher quality of life now. The last time I checked, I’ll have roughly 2 million dollars in retirement accounts and a hefty pension when I am 55. I will have plenty of money in retirement so it’s better for me to not hoard every penny at this stage of life. I am incredibly grateful to be in such a good spot for retirement at the tender age of 31.
But here I am, CoastFI and telling my friend I can’t come to her baby shower because I don’t have money. I had to temporarily disable emails from my Meetup groups because it made me upset to see events happening that I couldn’t afford to go to. There’s a dichotomy between my high net worth and the need to live on a shoestring budget. I don’t think my base expenses are too crazy for my income. Being temporarily unable to absorb an extra $15 bowling night made me feel ashamed and stressed out. If I was experiencing these feelings and emotions even though I knew it wasn’t long term, how do other people feel when this is their every day life? It is this that made me decide to speak up about my budget shortfall. I am Good With Money, and even I still run into money issues occasionally. No one really has it all together all the time and it can happen to the best of us. So, if you find yourself in a cash crunch, identify your most important bills and make sure those get paid. If you can’t do that, call the different companies and see if they’ll work with you to delay payments or break them up. See if you have any items that qualify for extended bill pay. I had the option to break up bigger payments into smaller monthly installments on my Chase credit card but I chose not to use it as I didn’t feel I was in A Big Enough Crisis. In the end, I only paid about $45 in interest on the card I was unable to pay off which is a small drop in the bigger picture.
I’m doing just fine now on cash flow thanks to my $4,000 federal tax refund, my $500 cash award at work, and a $400 check from a Facebook settlement. My credit card balance is once again back to a reasonable level and I’ve been able to loosen the tight grip on my wallet somewhat. This has been an incredibly humbling experience and I’ll be making even more of a point to not let it happen again.
Until next time!
As always, thanks for reading! Have you been in a cash crunch? How did you get out of it? Sound off in the comments below!
Glad you are feeling comfortable cash-wise again and that it was just a temporary pinch!
Just curious, what are your thoughts on emergency funds? Do you keep one and, if so, how much do you keep in it? If you have one, is there a reason you decided not to dip into it when you were low on cash?
With high inflation it’s painful having money sitting in cash in a low interest earning savings account right now and I keep going back and forth about how much I really need sitting there (vs. investing the cash during a down market). Thoughts?
Gwen [Fiery Millennials] says
I don’t keep much faith in emergency funds. I have money sitting aside that’s not earmarked for anything in particular that gets used in emergencies. Just not when I have so many things happen at once!! I’m less concerned about losing money to inflation because I usually don’t have enough on hand to invest outside my usual employer retirement accounts.
You’re not alone. It seems like everything all kinda comes at once, planned and unplanned. Like over the past month I have had to: renew car insurance, renew renter’s insurance, renew my registration, renew my passport, buy a new mattress and sheet set, oh and my cat was hit by a car. All in a month. Fortunately, she is ok and didn’t break any bones or have internal injuries, but I spent more in one month on vet bills than I have over her entire life.
But as I’ve matured a bit over my FI journey I’ve come to realize this is why we FI. Even after all these expenses hit in one month on top of usual life expenses, it’s nothing more than a minor inconvenience. Now I don’t have extra cash to stuff in my brokerage account for a month or two waahh first world problems.
I know for some people a 50 dollar parking ticket is all it would take to start a death spiral of payday loans, default, eviction, and homelessness. Being safe from that hanging over my head is such a relief.
Don’t feel too bad about the interest, one month of credit card debt is ok. Just imagine you went out to eat and got food poisoning, 45 dollars down the toilet. Pretty much the same thing. Just remember these sort of things happen, and that’s why we FI.
Gwen [Fiery Millennials] says
I’m comforted to know I’m not alone, but it’s unfortunate you were in a similar position! I’m glad your kitty ended up okay in the end. And you’re exactly right, this is why we get our finances in order so we can weather storms like this. I probably waste $45 multiple times over the course of the month on various things, so it’s minimal in the grand scheme of things, but it still stings to see it categorized as interest.
Stop Ironing Shirts says
Great read — I’m going to be discussing our lack of financial runway / liquidity in the late 20s and early 30s in my upcoming CampFI presentation. Over optimization caused me both unneeded stress and missed opportunity.
Gwen [Fiery Millennials] says
I hope the talk goes well! I wish I could be there!
Are you still saving for retirement, or are your current savings enough?
Gorgeous table, BTW.
Gwen [Fiery Millennials] says
My current savings are projected to be enough as is. Because I have trust issues, I’ll also have one big pension from my current job, a small pension from a former job, and some kind of social security payment. I’m still saving though, because you never know what can happen or how my life will change between now and then. I’m only saving 10% in a Roth 401k right now.
J. Money says
Life always making sure you’re paying attention 😉
That sunrise yoga looks hecka sweet though!!!! and i don’t even do yoga!
Also reminds me of FinCon the year it was there… those were fun times.
J. Money recently posted…Bliss Consciousness ☀️
Gwen [Fiery Millennials] says
You’re welcome to come back to St Louis anytime! And you can get in some cousin time too 😀
I know its after the fact, but if it happens in the future I would go ahead and break those larger payments down into small “monthly” payments through your credit card. Usually when you do this you get a much lower interest rate for those items, and you can pay them off early with no penalties. It can save you a small amount in interest expense.
Thanks for talking about this. I also moved recently.