Ask the Readers: When Is It Okay to Spend Your Savings?

I would wait till crossing the point of having more income then expenses, even if you have to do it with with one income.

I don’t take to much stock in them, but economic forecasts aren’t pretty. Depending on what the savings is invested in, it will dwindle anyways in the next few months.

I have to say that it’s a juggle when you’re going into your savings to avoid making the sacrifices that others feel you should be making, i.e. remodeling, etc. Everyone has options, and it’s up to you to make those decisions for yourself. I’ve been there myself years ago and hot dogs with mac/cheese 3-4 days in a row isn’t the ideal option to take, but I kept my eye on the prize nonetheless. Decide what’s best for you and stick with it.

Your savings should help you when you need it. Your savings is not for everyday expenses like ‘eating organic’ and cell phones. You need to have those things built into your budget. If you cannot afford those kind of recurring expenses, you need to figure out how to cut them. As for healthcare and dental, if they are unexpected expenses, this could be appropriate. Remodeling the house can be done anytime. Why spend unnecessary money when you are unemployed in a recession? It just depends on how comfortable you are with depleting your safety cushion.

Unless I knew that the reduced income was a temporary situation that would definitely be resolved before the money was gone, I would not spend like that. Because it sounds like you are tapping your emergency fund, so how will you be prepared for actual emergencies? What about when your car breaks down or crashes, or god forbid some huge medical bill? I think you would regret using your savings to pay for things like organic groceries at that point. You don’t want to end up tapping a credit card or loan that you wouldn’t have needed otherwise. When you are financially secure and not spending more than you are earning, that is the time to save the funds designated for a home remodeling job, and then spend it as such. As JD points out, if you had a budget for the remodeling project, and you saved money specifically for that, then this question doesn’t come up. You would also have an emergency fund saved that covers all your typical expenses such as phone bills, groceries, etc. for a very conservative estimate of how long it could take to find a job. (i.e. if you think it will take 1 month, save up 3 months)

If hubby is good at remodeling work, instead of fixing your own house he ought to see if he can’t get paid to fix other homes. With all of the foreclosures out there, perhaps he could get some work getting them ready for resale.

Even if I had saved specifically for the purpose of remodeling and an emergency fund, I would put those plans on hold. While he seems to have extra time to do this work now, he needs to focus on getting to work.

If my monthly expenses cannot be covered by current income, then I would do everything I can to reduce that deficit. Switch cell phone to pay as you go, or dump it. Discretionary medical/dental expenses get put on hold. Organic groceries get replaced with Angel Food Ministries purchases AND if at all possible home grown – many communities have garden plots available for their residents.

No one knows how long hubby will be unemployed or underemployed.

In my opinion, I would be trying to get my recurring expenses down to the level where it could be sustained without dipping in to savings. In terms of the specific situation that Amanda is asking about, there’s not enough information to really give a meaningful opinion. We don’t know the level of savings, the outlook for her husband’s job search, or the amounts being withdrawn. On a general level, I’d avoid spending that money on “luxuries” like organic foods or decorative remodeling. Assuming that it was a low percentage of the overall savings, I would probably use some money for remodeling that fixes any costly problem with the house. Health care is a gray zone. If my husband and I had no kids and were very healthy, I would probably choose to gamble having no insurance, rather than pay the awful COBRA fees. If we had any type of chronic or recurring condition, I’d obviously keep the insurance active.

I think there are too many factors we don’t know about to make judgements about Amanda’s situation.

Personally, I consider health insurance an absolute requirement and yes, I dipped into my savings to pay for an out-of-pocket plan back before I was covered by my current job. I’d also cover dental work — doing dental work early prevents much more expensive work down the line. (I once took an archaeology class where the main takeaway was Take Care Of Your Teeth. A disturbing number of people in pre-antiquity died of complications from absessed teeth.)

There may be ways to compromise on other expenses without giving things up entirely. If a cell phone is necessary because of emergencies, a pre-paid phone may be enough. And there are places to save on organic groceries — Trader Joe’s in particular is great.

Seriously, if someone is laid off, what are they doing spending money remodeling the house? That is certainly not survival mode. Plus, to dip into savings to do it is very poor judgment. Instead of spending time and money remodeling the house, the focus should be time and money spent on printing resumes and looking for a new job.

@Ed–”I love this site, but I get tired of reading the same ‘liberal’ junk. Saving money to ‘eat organic’.” I’M NOT LIBERAL, AND I EAT ORGANIC. “Who are these people and where do they come from?” I COME FROM TEXAS. “I don’t know if they are trying to impress people by what they consume but it’s annoying.” I’M NOT TRYING TO IMPRESS YOU, AND I’M SO SORRY IF YOU ARE ANNOYED THAT I SHOP AT FARMERS’ MARKETS.

Sound like you have some issues, there.

Anyway, back to the actual topic of the post, I think JD is right about considering your husband’s job prospects. Is he actively searching and getting good prospects, calls for interviews, etc.? What is the demand like for a job in his field? What is the local economy like?

I would take a look at where you spend your money each month and categorize the areas by importance. For me, the most important expenses are food, shelter, basic utilities, and healthcare. If it was me, I’d continue eating organic, since you brought that up, but I know my husband and I eat a lot of “fancy” foods that we could cut if needed…artisan cheeses, wine, etc. We could eat meat less often, and cook more rice and beans.

Then next in line might be other bills–cell phones, Netflix, etc.–things we can live without.

If money was running low, I’d start cutting at the bottom of my list and move up.

It’s hard to give advice, though, since I don’t know how long your savings will last or what your husband does for a living. Also, if you’re using emergency fund money to remodel, I’d really reconsider. It’s nice that he has the time for the project, but money is money, and in your situation it’d make me nervous.

Also, I don’t get why so many consider healthcare to be optional. After basic food and shelter, it’s the most important thing you could buy. One accident, one diagnosis, and you could be in hundreds of thousands of dollars of debt, possibly with ongoing medical bills.

I would cut back almost every other expense if it meant keeping health insurance.

Not knowing enough about your situation (amount of savings, scope of remodeling projects), it’s hard to provide specific recommendations. If you’re living on the edge, then the stark “don’t spend you’re savings” might be right. If you’ve both been working and saving for years without a hiccup in earnings, and this is the “rainy day” you’ve long prepared for, then this is the time to intelligently and strategically use your savings.

I’d suggest that you get your basic expenses (including health care) in line with your current income. If you haven’t already, I would also suggest increasing your take-home pay by increasing tax withholdings and reducing retirement contributions (401(k) or whatever), at least temporarily. Given that you don’t know how long your current situation will last, it would be good to get out of negative cash flow on the predictable stuff, to make your savings last longer.

However, maybe you and DH have been planning and saving to remodel for a long time, and have a sizable savings account dedicated to that, in addition to your emergency fund. If that’s the case, and you aren’t in negative cash flow, I don’t see a problem with DH doing the work while he’s home. It’s nice to accomplish something concrete during a job hunt/household management gig (which is a neverending cycle of half-finished tasks). Sanity is worth something too.

Good luck!

In the generic case, I think you’ve hidden the keyword in plain sight: Lifestyle. Unless your lifestyle is attached to your income (as it is in a few select cases), I cannot think of a good reason to spend savings on lifestyle.

As for Amanda’s specific case, unless the home remodel is with the intent of selling the home within a short time, that project is no longer a “need” but a “want” and should be deferred.

I think that dipping into the savings is a really bad idea unless it is for truly unexpected things. I did have to have an unexpected crown and subsequent root canal last year to the tune of nearly $1000. I did take out some money from savings for that. But I would NEVER take out savings for groceries or my cell phone bill. I don’t know what would be worse: charging them on a credit card and paying interest on it or taking out money like you have done so that you lose money on the interest. I also don’t see the point in renovating right now unless you have dangerous or hazardous things in your house that need fixing.

You can eat really healthy yet inexpensively. Only buy foods organically that are known to require a lot of pesticides (that list is widely available online). Eat less meat and more beans. There needs to be a balance and buying everything organic seems overkill. My area has a food salvage store that sells organic brands ridiculously cheap. Maybe your area does too.

If for some reason you lose your job, you are going to soon find that all the stuff you thought was necessary really isn’t.

At first blush, remodeling seems like a silly expense to take out of savings. However, a long stint of unemployment gives a rare opportunity for a normally fully employed adult: time. However it also costs money to pay for tools and supplies. Perhaps a good approach would be to make up a list of the remodeling tasks that need to be required, and tackle tasks that require a lot of time and not a lot of money to complete, and delay the more expensive tasks till later.

Having something to do besides looking for a job is key to maintaining sanity. Spending a few hours in the morning on a job search and spending the afternoon on renovations could be useful.

As for things like cell phones, eating organic and so on, switch to a prepaid plan (or cancel), and (gasp) buy conventional. Or, if you want to keep the organic, drop some convenience foods and have hubby use his ample time to make more things from more basic ingredients.

However, without a detailed full list of expenses, there is no way to tell what’s really going to get cut.

And, of course, if you aren’t doing a monthly budget and sticking to it, you should start doing one.

I don’t know the particulars of Amanda’s situation, so I won’t weigh in with advice. I would like to say, hang in there! Things will get better. Eventually, your husband will find work. Be as frugal as possible and remember to prepare for this when you’re back on top.

I agree that we don’t know all of the facts. My response to many of you folks who say she shouldn’t do the remodeling is that you folks are all contributing to our harsh economic times. If we all clam up and don’t spend our money, how will our nation escape these troubled times. Yes, please save money and live frugally, but at the same time, spend and help boost our economy.

There is not enough information here or as another poster said mu! : ).
Map out what part of your savings are emergency savings. Do not touch that money! As most will advice, in this economy better to make that a larger versus smaller cushion. Then decide what you are dedicating the rest to. Unlike some others, I don’t think that remodeling is that bad of a thing to be spending money on if it was planned, your husband has the time and it can save money in the long term. If you do want to dip into savings for miscellaneous “lifestyle” things, make it a set amount. Once it is gone do not take any more from savings. After that you will either need to rebudget how you spend, earn more money or both because you don’t want to be in a situation where month in and month out you are living beyond your means.

I think you’re absolutely correct that goals have to be set. Without goals, aimlessness and non-focus are the order of the day. Financially, that means wasted money. Physically, that means wasted time. I’ve personally made some big strides in figuring out where I want to be in ten years time. That one goal alone accounts for everything I do now, each and every day.

As far as Amanda’s situation is concerned, knowing what I know now, I would not be spending significant savings on home remodeling with questionable return. That would have to wait until the husband found a new job. This economy is too unpredictable.

@Ed,

I agree with you in principle, that there are many people who’s budgets are stable, who have stopped spending out of nothing but fear of the economy, and that has on overall effect of weakening the economy. Amanda’s case is different in that she already is spending more money then her income is providing. In that case she HAS to make sacrifices. To me, remodeling the house is a “want” not a “need”. Unless of course ,the remodeling is due to a deficiency in the home itself the NEEDS to be corrected, or will directly lead to greater saving in the future (insulation, more efficient heating, reduced water use etc.) My solution would be: Cut back on the remodeling to a minimal point necessary to complete the project, and cut back on other “wants” as well.

As we don’t know the particulars, it does seem hard to offer concrete advice. But what have I learned so far from this blog? That money is more about psychology and less about numbers than people make it out to be. Losing a job is incredibly stressful, and it seems to me that you can make it a lot more stressful by IMMEDIATELY switching to a sort of survival mode by cancelling all fun and switching to (what I view as) poorer-quality food….in other words, if they have savings that were meant for the case of someone not having a job, why not use it to maintain their lifestyle for as long as possible? This is of course a big “if” which also depends on various factors that have already been pointed out, i.e. how long hubby expects to be unemployed.
personally, I am trying to save 12 months of expenses where organic food and hobbies are actually budgeted in–I would be depressed enough in such a case and a sudden lifestyle-reduction wouldn’t make me any happier. (And going one step further: do depressed, poorly-fed people have lots of energy to go find a job? Um, no.)

Yes, there’s no indication if the “remodeling” is spending $100 on paint or $15,000 on a new kitchen/bathroom. Even unemployed, I could justify the painting (with some other accommodations from other spending — cut out Netflix, go to a prepaid phone, scrutinize grocery purchases, cut coupons, no meals/nights out, etc)

But this should definitely be a discussion between husband and wife, with spending priorities clearly outlined, the written budget, and tracking of expenses to ensure that it stayed absolutely on track.

And, of course, there should be a time budget set up for him to look for a job. If he’s watching small children and he feels some need to complete the renovation project (spoken or unspoken), there is probably not sufficient time to look for work — which can easily consume a few hours each day. At some point, you can only do so much, that’s where a project of some kind can be extremely helpful.

The overall goal, though, should be “how do we get by on your income alone?”. And if organic food is a priority, then something else is going to have to go — maybe the cable box or maybe the iPhone. Or perhaps the car that’s not paid off. People’s pains and pleasures are all different, the only way to “win” is to get things straight with your spouse. Sure, the rest of the world may consider you insane, but as long as your spouse is on the same page as you, then you’re likely doing pretty well.

I guess it depends on what the savings is saved for? If you were saving to pay someone to fix the house for you and now you can do it yourself for cheaper that’s less than you would have taken in the first place.

But if you’re cutting back in other areas (are you still on a $150 a month cable TV play?) and doing work around the house and not paying for day care, I’d feel better about it (if I were you).

If she is asking for advice on the four items- i would say give up organic or learn to eat the least expensive organics at a coop-like grains and beans, get the cheapest pay as you go cell- and don’t use it except when needed(no chatting or texting nonsense)- but do not give up health insurance and do not skip dental work. We are learning how dental problems cause heart problems and a lot more- getting false teeth or implants later does not make up for dental work that should have been done when needed. People die from neglected teeth as happened to a child in a shocking story here in Md(and I am sure it happens more)

It’s interesting how everyone’s first reaction with the question of organics is “that’s an unnecessary expense; don’t bother.” So to do a bit to offer some balance here, let me echo what Andrea just said: look for the most cost-effective organics. Buying organic blueberries in January at Whole Paycheck probably doesn’t make a lot of sense. Buying organic beets and cabbage from a local farmer probably does. If you’re looking at a potentially long time before DH goes back to work, maybe now is the time to include making space for a garden as part of the remodeling, and grow your own organic produce (which is definitely the cheapest way to go!)

Savings are for rainy days, right, and it seems like these are your rainy days. But now that you’re here, it’s probably a good idea to think carefully about every expense, how it fits with your overall plans and values, and explore creative ways of getting meeting your needs without sacrificing your values.

I think that there may be something else to this story: the interactions between partners with regard to their finances. She is starting to ask questions, which is good, but it may annoy him or he simply won’t listen (so she posts on websites? ). This might eventually end badly – for example: she quietly stops buying non-essentials and stops bringing it up, and he carries on spending. Maybe it is not relevant to this particular couple, but stuff like this can very easily happen. Imagine earning $75k each, but still racking up credit card debt, and not wanting to have another argument about about money so keeping quiet and never buying a thing that wasn’t essential while he spends like there is no tomorrow. That was me and my ex. I am a lot happier now and have savings and easily get by with much less than I was earning then.

I have been out of work twice. The first time around, even though I was collecting unemployment, we lived off my wife’s salary. I couldn’t tell how long it would take to find work, and sooner or later the unemployment was going to run out so we didn’t want to learn to rely on it. This was early in our marriage so we didn’t have a ton of savings to live off of.

The second time was more recently, in October. We had some debates about what we should do. The facts of the matter were that we had saved a lot in our emergency fund. But we couldn’t live off my wife’s salary because she puts almost all of it into retirement accounts. (she works for the government so she has a lot of tax-deferred savings options.) I would again collect unemployment, but in the last 6 years our expenses have creeped up such that unemployment isn’t quite enough to cover our expenses. We decided to wait until the end of the year to make any changes to her tax-deferred accounts. While unemployment wasn’t quite enough to cover our expenses, it was close and so we wouldn’t deplete our savings *too* much in 2-3 months. And I convinced her that that’s why we had the savings in the first place, though I had to call in a nuetral third party (a friend of ours) to help convince her. I ended up finding a new job after only 6 weeks, so we never spent more than what was in our checking account.

Still, either way, we always plan for the possiblity of a situation continuing on indefinitely. You never know what’s going to happen. If this really is the next great depression, you’re sure going to regret eating organic food when you can’t afford food at all any more. Extreme, but you always want to leave yourself an out.