Pandemic Finances

Raise your hand if you’re completely floored that we’re six months into this pandemic and still don’t have a handle on it. Go ahead, I’ll wait…

Back in March when we first sheltered in place, I felt confident that it’d be cleared up by the end of April, Memorial Day tops. And yet, maybe some little part of my subconscious knew that it was going to turn out to be a total shitshow because almost immediately, I made major changes to my budget.

You may remember that my financial priority for the last 12 months has been paying off debt. As of March, I had paid off a total of $6,200 and had about $5,300 left to go. Finishing the payoff by the end of 2020 felt solidly within reach.

But then the stock market took a dive and I realized, holy crap. As a freelancer, my services would likely be one of the first things my clients got rid of if they had to make cuts. I started taking everything I’d been paying toward my debt—basically every dollar not allocated to bills—and putting it in savings.

High Yield Savings Accounts

Let’s pause for a second and talk about high yield savings accounts, or HYSAs. Mine is through Ally, a company I love. Although interest rates are dropping faster than Trump’s chances of reelection (OHHHHH!) earning a little bit of interest is still better than keeping a large amount of cash in a checking account earning nothing at all.

If you don’t have a high yield savings account, I highly recommend opening one ASAP. I only keep about $100 in cash in my checking account at any given time and move the rest immediately over to savings so it can earn interest.

Ally offers a great feature that allows you to put your money into ‘buckets’ if you’re saving for several different things within the same savings account. Right now I have buckets for pet expenses, upcoming vacations, home repairs, taxes and the baby’s arrival.

Surprise!

So back to savings. I’m so glad I shifted my budgeting strategy when I did because not more than a month later, I found out I was expecting. Talk about one more huge reason to stash away funds!

As a freelancer, any time I take off work means no money is coming in. And yet, I’ve always been adamant that whenever I finally had a baby, I was going to take a proper maternity leave. Over the last six months, I’ve been able to put away enough that we’re comfortable with me taking a full three months off from work, maybe longer depending how far we’re able to stretch one salary.

I have a feeling I’m going to get antsy and want to start working again sooner than three months, at least picking up a project or two here and there, but who knows until she gets here. It’s really nice to have that cushion.

Another Not-So-Fun Surprise

Another savings bucket I mentioned is pet expenses.

We sadly had to say goodbye to both of my cats, Ricky and Lucy, within a year of one another in 2018 and 2019. Though they were getting older, I hadn’t properly planned for just how much their end-of-life care would cost. In fact, Rick’s medical expenses were one of the biggest things that got me into such a huge amount of credit card debt.

After Lucy passed away in December, I immediately made a savings bucket for our first dog, Bo, that Johnny and I started contributing to each month. At almost eight years old, he’s still got some solid years left with us, but pet insurance is prohibitively expensive at this point. So, I wanted to make sure that when the time comes that he needs care, we’re not forced to make decisions based solely on money.

Well, if you follow me on Instagram, you know we had to tap into that bucket sooner than I ever would have expected. Last week, Bo, the living garbage disposal, gave us a major scare when he stopped eating out of the blue. He was vomiting and generally acting miserable, so we knew something was very wrong.

Several vet visits later, they found the problem: a piece of tennis ball lodged in his small intestine. Since it had already been several days at that point, the vet recommended emergency surgery, and of course we told her to go for it. The bill wasn’t as bad as I would have guessed, but it was still a big unexpected expense. I was glad to already have some money in Bo’s savings bucket to put toward it, which took the sting out of the cost.

Isn’t it great how having savings makes life’s little disasters so much less stressful? The more I learn this, the easier it becomes to put money away for a rainy day instead of getting Seamless for the fourteen hundredth time.

One of the first things I did when we brought home our second dog, Tiki, in April was to get pet insurance on her so this is less of an issue in the future. Pet insurance is a much more affordable option if you get it within their first year.

Retirement

The last thing in my budget that I’ve shifted since Covid hit is my retirement savings strategy, which is to say I created one.

Up until this point I’ve had a couple small 401(k)s from previous jobs, and I opened an IRA (individual retirement account—basically the self-employed person’s equivalent of a 401k) when I started working for myself, but there hasn’t been any rhyme or reason to how much I put into it or when.

I used a retirement calculator to find out how much I should be putting away each month if I want to one day stop working, and guys, it’s a lot. And without an employer-sponsored 401(k) or match, I’m responsible for footing the full bill. At 32, it’s time to start taking this more seriously.

Over the last six months, I’ve been steadily increasing my monthly IRA contribution to reach the target amount the retirement calculator gave me. If you’re going to do this, I suggest trying a few different calculator sites to get an accurate ballpark, because some factor in Social Security, some don’t, some handle taxes differently, etc.

While it’s a challenge, I know that every month I wait to tackle it will make it even tougher to achieve my retirement goals. On the converse, the sooner you can start prioritizing retirement savings, the easier it will be thanks to compounding returns.

I just opened a Roth IRA (another type of retirement account with different tax advantages) in addition to the two IRAs I currently have, and plan to start splitting my savings among these accounts moving forward.

Current Debt Tally

One silver lining of the pandemic is that our discretional spending has been wayyy down. Two of the biggest nonessential things Johnny and I spend money on in “normal” times are going out to eat and traveling, which have been cut to an almost nonexistent level. Not drinking alcohol has helped immensely, too. We’ve been very lucky to both keep our jobs, and believe me, I don’t take this for granted.

Because of these things, I’ve still been able to put a bit of money toward my debt while saving for the things I mentioned above. As of today, I have $3,787 left to pay off. This feels a lot more manageable than the $11,500 I started with, so I’ve felt comfortable reducing my debt payments in favor of saving for other, more imminent things like the baby.

Don’t get me wrong, it’s still a big balance, but it’s on an interest-free credit card (more on that here) so it’s not doing any harm just sitting there until I get to it. I’ve come to accept that this may not happen before the end of 2020 like I had originally intended, but sometimes life has other plans. Like a second dog. Or a baby. Or, you know, a global pandemic.

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