The past few months have been a whirlwind. I’ve experienced numerous setbacks towards my financial goals. It has been said that life is what happens when you make plans. Well, that saying has been true for me recently. I’ve seen my credit card debt rise week by week. My spending has been out of control. Also, my emergency funds have been depleted. Sometimes when you’re traveling on a road, you experience road bumps. In this journey we call life, sometimes we experience setbacks. But, the key question is, how do we deal with the setbacks once they occur?
I’ve experienced setbacks in two financial areas. Those are my credit cared debt, and my emergency fund. Let’s discussed what has happened with each.
Credit Card Debt
I have several credit cards, but only two are worth discussing for this post. The first credit card has a balance of $3000. I had a zero balance on this card in April. I’ve since maxed out the card. This clearly has affected my credit score and continues to bring my score down. I wrote more about that topic in my post, Credit Score Went Down.
The reason for maxing out the credit card included huge unexpected and expected expenses. I was deemed to be at fault for returning a rental vehicle that was damaged. However, that only accounted for $700 on my card. The good news is that I am waiting for a full refund from my credit card company. Approval is almost complete. They are just waiting on getting a release from the rental car company saying they won’t come after me for anything else. I also had another $600 in annual expenses that were totally expected. The good news here is that my job will be reimbursing me for half that amount, but I won’t receive that until sometime in August.
If you add the $700 for the rental car and the $600 for the expected expenses, that only totals $1300. That means the remaining $1700 stems from me living ABOVE my means. Let me be absolutely clear on this point. If you want to get ahead financially, you have to learn how to live BELOW your means. That means, you spend less money than you take in. It’s good advice that I failed to follow for the past 3-4 months. As a result, I’ve seen my credit card being maxed out.
For the other credit card, that has a limit of $5000. I’ve already used $50 on that card. I’m basically using my credit card for living expenses because I ran out of money before my next pay check. I clearly have to learn to rein in my spending. But, keep reading. It gets worse.
I have money in emergency funds in several places. I use Qapital and Digit as two locations for my emergency funds. They each had about $1000 in them in April. Now, Digit has about $100 left and Qapital has about $200. AAAHHHHH!!!! Yea, that’s me screaming across the internet. What the heck did I spend money on? The answer includes, a vacation, way too many expensive drinks, rental cars (because I don’t own a car), eating out EVERY day, audio books (about dividend investing), etc. I didn’t make a big purchase or anything. Its just small everyday expenses that add up to a huge amount. There is a snowball effect to debt, much like there is for direct reinvestment plans or DRIPs. Over time, little by little adds up to a lot.
As I’ve mentioned, I have my emergency funds in several places. One of those places includes Robinhood. The balance in my Robinhood account is about $1500. It’s not the greatest of places for an emergency fund, but I’m fine with the fact that the money is invested for short term and may go down when I really need to access it. But, if push comes to shove, I can liquidate my Robinhood account as well. Of course, the simple solution is to control my spending. That will help me turn the tide against my setbacks.
In life, sometimes we fall. But, what’s important is for us to get back up again every time. I’ve since stopped saving with Qapital. During the above period, it withdrew an unexpected large amount from my account which caused my balance to go negative. I had so many rules set up with Qapital that it was hard to keep track. I prefer Digit. I’ve used Digit longer and the amounts withdrawn doesn’t hurt as much. I know I could use Qapital with fewer goals and rules, but sometimes simplicity is best. I’m completely fine knowing that an unknown small amount of money will be withdrawn from my account on a regular basis. It makes it harder to budget, but I’m fine with that.
To overcome my setbacks, I must control my spending. I just started a new position at work and so I expect that my income will rise. I also expect my expenses will fall, even though I will still eat out every day. Sorry, I haven’t cooked consistently in decades, and doubt I’m going to start now. However, I can spend less money eating out and that’s what I intend to do. Quite frankly, I fully expect my living expenses to be MUCH less just because of life’s circumstances right now. For example, I don’t have a car payment and won’t need to rent a car for the foreseeable future.
With my next paycheck, I will be paying down the credit card with the smallest balance to bring it back down to zero. I am going to go back to my version of the envelop system. That’s where I decide exactly how much money I can spend per day. If I decide that amount to be $20 per day, I can use that $20 on anything I want, but I won’t go over it. My next main task though is to pay off the credit card that has the $3000 limit on it. It may take me a couple months (maybe three), but that’s going to be a top priority.
What about my Dividend Portfolio? Well, I intend on maintaining my current levels of investing. Arguably, I could have cut back on those levels to avoid some of the debt. Between my retirement accounts (401k and IRA) and my dividend portfolio, I am really saving a large percentage of my paycheck. I haven’t done the math yet, but I might be saving more than 50% of my income. It’s definitely at least 40%. It’s important for me to maintain that level of savings.
Also, with my renewed focus on reigning in my spending, there is a decent chance that I might increase the contributions to my dividend portfolio with excess cash. I’ve been thinking about increasing my savings goals for 2018, but might start a little bit earlier. More on this in a future post.
Setbacks are bound to happen. Building wealth through dividend growth investing takes time and patience. It also takes discipline. I know I’ve written about my setbacks before. But, blogging about it helps to keep me honest. Accountability is one reason why I blog. I’m happy to share the successes of my monthly dividend reports, etc. But, during tough times, it’s important to share those as well. When setbacks happen, you just have to learn to deal with it. As the saying goes, there’s no use crying over spilt milk. We just have to keep on going.
Did you incur any setbacks recently? How do you handle setbacks when they do occur? Let me know in the comments below.