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

My husband and I were in that situation 5 years ago. He was out of work for a year. In our minds, our savings were meant for exactly the situation we were in – a buffer for bad times. We had built enough savings that we were able to live on them for the duration. I went back to work during that time, first as an office temp, then secured a 6-month assignment (my kids were school age, so my husband was in the home when they returned home in the afternoon) and I also managed to find renters for our guest bedroom for a month. So JD is correct – know the purpose of your savings, and if one reason it is there is to act as a buffer in bad times, go ahead and use it without feeling guilty.

@ Ed #30,

It is not our job to ruin our own finances in order to “stimulate the economy”.

If you have your financial ducks in a row, by all means, stimulate away. But helping the economy should play absolutely zero role in Amandas decision on whether or not to continue with the remodeling.

As for my advice, I agree with several others, not enough information to give a concrete answer. Another way for them to possibly make a little extra money on the side during the husbands unemployment is to offer to watch a few other families kids during the work day, charging a little less than they would pay for day care. Obviously it depends how he is with kids and their home situation, but he could make decent money while giving his own kids some entertainment from other kids.

Don’t dip into savings to sustain lifestyle.

I say this having been there. I did sit down and figure out how long my savings would last (including my severence when I lost my job) with my lifestyle as it was. But then I started cutting back on everything I could, for the simple reason that I didn’t know how long I’d have to live on it. It’s much better to have more money left at the end than you thought you’d need than to run out.

That even meant I ate like a college student for a few months. I didn’t like it, but did it help motivate me? Yes it did. I also did things like turn up the thermostat (it was summer) and everything else I could think of.

To me, putting off things like remodeling is a no-brainer. Those projects will still be there when the job is back. I’ve been putting off parts of a kitchen project until my financial equipment improves, and I still have a job.

Putting off health-related expenses is a tougher call and it really depends on your situation. I’m healthy, so yeah, I went to the doctor less when I was unemployed. My wife has a health condition and neglecting it would have long-term consequences so of course we didn’t cut back on her visits. We were the two extremes, there.

Amanda, if you lost your job, how long is the remaining savings going to last you after you remodel and how long will it last if you don’t remodel? We all have difficulty choosing between needs and wants. I would not spend the savings on the house unless it is a need and not a want, i.e. roof, furnace etc. After your husband goes back to work…and he will, then consider if you still want to remodel.

Does anyone just have a month where everything goes wrong, where you have tons of unforeseen bills? garage door opener goes kaput, eye glasses, car tabs, etc? Sometimes I feel as though writers of these blogs don’t have those things pop up.

Go into survival mode. Ditch your cable tv, scrap the remodeling for now, eat non-organic…in otherwords, is it a “need” or is it a “want”? Ditch all “wants” until you can afford it without tapping into savings. Or else your “wants” will suck your account dry when you really face a “need”.

I don’t like to judge, especially with the imperfect at best info from the email but I would have to say anyone remodelling their home and spending extra for organic foods is not in a particularly frugal mindset. Especially since “organic” doesn’t necessarily mean “better for you” a lot of the time.

If I were in a similar situation I’d be living pretty much without luxury of any kind before I dipped into my emergency fund. No cable, no internet, no cell phones, meals would be carefully planned and eaten at home without exception. In my case, living in the city I would likely sell my car that I rarely use and get some premium back from the insurer although a car is less a luxury and more a necessity for those in suburban areas.

Healthcare is a necessity as far as I’m concerned but living in Ontario we have government coverage (renewed my card today as a matter of fact) and I have a health plan at work for prescriptions and dental and eyecare and all your supplemental stuff like chiropractic or massage and the like so that’s not really an issue for me but it would be a priority if I lived elsewhere or didn’t have the work plan.

I’d pretty much pay for my shelter, a landline, a subway pass, food and as little heat and hydro as I could get by with before I dipped into any savings. Personally even if I had a seperate account for the reno (and I would, I’m big on compartmentalizing) I’d hold off on it just in case it needed to be converted to emergency funds in a worst case scenario.

I don’t think I would ever feel right dipping into my savings. But if you can’t make ends meet, it could be needed. However, I wouldn’t use the money for anything that isn’t either a life need (basic food, rent) or going to help later (a course to be able to find a new job that pays well).

The only time I dipped into savings was when I got married. And it took some effort before I could stop feeling bad about it. And we’re talking about money I saved especially for the wedding and honeymoon!

I think each person is going to be different about it. When is it okay to spend your savings? I would say, when you’re in the situation the savings were intended for.
If you saved money especially has a fund in case you lost a job, then they’re here for that. Don’t feel too bad about using some of them. Do realise that they’re an /emergency/ fund though. Any way you can think of to avoid spending it at all, try it.

Remodeling a house might sound like it’s unneeded. however, if your house is in such a state that it compromises your health or your happiness, then it’s important enough. And you said your husband is doing the work, so no salary to pay. Could be a good thing to spend on it, an investment. Using a bad situation (unemployment) and spinning it into something good (enough time to remodel).
I’d suggest going further and seeing if your husband can help other people remodel their houses – for a price. This way he can split his remodeling between your house and others, and use what he makes that way to pay for your remodelling.

That’s one idea, but I’m sure you can come up with others like that, to fully take advantage of the situation.
Good luck.

discretionary spending = lifestyle

no discretionary income = meet basic needs until you have discretionary income

basic savings = meeting basic needs

discretionary savings = lifestyle

Well, “eating organic” sure gets a lot of ridicule here but my sense is that many people by that simply mean “not eating at MacDonald’s”. And that is something I would support, even if it meant dipping into saving ’cause it is related to health hence general quality of life.

As far as remodeling, lion’s share of costs for every remodeling projects (and close to 100% of change orders / cost overruns) are due to contractor’s labor costs. Well, not counting large scale HVAC work and electrical work, I guess. But most everything else can be done by a handy homeowner and the cost of labor? Zero! The husband has an incredibly valuable resource that many of us employed don’t have – time. It is hard to put a value on it but it is probably between $30~$60/hr, depending on what he’s doing and how good he is at that. Clearly less efficient than a pro but my guess is that he’s saving as much as he’d be earning at a job picked up in a hurry amidst recession AND he won’t need to pay taxes on money saved.

Since this is about economics, I’m not going to bring up the value of time spent with kids, which you cannot buy for money

Also, on the matter of the remodeling: yes, we don’t know the extent of work being done but I have a feeling that it is not extravagant or frivolous. In such case the couple would not have sought any advice on how to better spend their money. So, my guess is the remodel may be reasonable and may even be mostly on the “repair” side. You know, those pesky small repairs you put off when you don’t have time because you are busy working for ‘da man’.

So, I’d say eat healthy while you can and do work on the house where you can.

Lastly, about spending more time looking for a job: what kind of job you are most likely to land in a recession? Filler of a job for the husband just so their budget is not so tight may not be exactly the thing the family needs right now.

I found a peace with all of this recently. It has taken me 27years. I read for the last 5 years on this very subject since I have never been able to find the answer within myself.

First, let me say this, you did tap on something when you wrote if we did not have savings the answer would be easy.

Second, my research has concluded this is the answer.

Everyone has to have their own personal top three reasons to tap an Emergency Fund and or Savings or even Retirement Fund, in this economy.

Overall two of the answers for everyone will be the same.

#1. Tap it for Transportation reasons… reason being without transportation your life does not move forward and everything in life is about moving forward.

#2. Health … Serious health problems for anyone in your immediate family… I personally define this by Hospital type illness and or time.

#3. This one would be personal but should rank right up there with the top two.

Reasons not to tap,

We need to get out of debt
We need groceries, I have learned the hard way, You can cut grocery cost for even a fammily of four to as low as $40 per week, and that kind of money can be made even on odd jobs. So this is not a reason for further debt and or tapping a Emergency fund.
We need to help out our child with college,this one I have also learned the hard way is wrong, a child can borrow money for college a parent can never borrow money for retirement.

As 20,30,40 and 50 plus year olds we need to start thinking about the days when we are no longer able to work. For every penny we spend while we are young we are likely to be that much more of a burden on someone else later in life.

Best of luck with your dilema I hope you find your own personal peace with this.

PS: Many of my friends have noted that their personal number three is to tap the money only if they are going to put it into a personal business that will grow more money for them one day.

My partner has been unemployed for several months, but we still have some income because of EI (here in Canada). We have been saving up for home renos for over a year, so we are going to proceed with them, even on a single income. We have an emergency fund of a few thousand, plus my income, so we feel pretty secure.

Because my partner is the ‘homemaker’ at this point, at renovated kitchen would make his job/life much better and more productive. With this bit of positivity, the job search becomes less of a burden. In the current economy, jobs are understandably scarce. So whatever we can do to make our home even better is worthwhile to us.

Focusing on savings for specific needs in different accounts – ING is ideal for this! – makes this question ‘mu’, as they say. We have the funds set aside for specific goals, and can makes those goals, even if they are ‘wants’ rather than ‘needs’, a reality.

Fabulous post, JD! Got the people talking!

#60, Bob: of course everyone has to deal with unexpected expenses and repairs. This is why you have that emergency fund, or should.

Your examples are poor: if the garage-door opener dies, pull the release and open/close it by hand. Need new glasses? If they’re broken, get them repaired or use your old ones; if your vision has changed, fine, but this isn’t an emergency. Car tags are an annual expense and not a surprise.

Amanda needs to get her priorities straightened out. She doesn’t provide much detail but what she’s said tells me that having hubs preoccupied with home renovations is more important to her than him looking for work, and that’s kind of messed up. Renovations may help home value, but only if you consider your home an investment instead of shelter, and right now that’s a bad idea. Get the income stream re-stoked and to hell with the house stuff.

I had to comment, that it is a real shame that it costs more to eat healthy than it does to eat crap. A suggestion to the OP, we buy our produce through a CSA (community supported agriculture) and the produce is actually less expensive than regular produce at the grocery store. Not all of our produce is certified organic but it is locally grown (the farm is located in our county), we are supporting local farming and we reduce our carbon footprint because we are not buying produce grown half way around the world.

#75: Jan – Working full time does not necessarily mean that you need to hire someone out to make repairs. However, it may make sense for some people in certain situations. For instance, you do not know how to perform the repair (or may not feel comfortable doing it – some people are more handy than others), you may not have the equipment to do it, the job may be too big for you to do, it may be too time consuming for you to do (whereas a professional might be able to do it in a very short period of time due to experience), or it would be cheaper to hire someone else to do it than to take time off for you to do it. Also, some people are better than others with following through on projects in a timely matter.

As an example, my father believes strongly in doing something yourself if you can. However, he also chooses to work 3 jobs (one full time and 2 part time – even though he doesn’t need the extra cash), so he doesn’t have a lot of spare time. So at one point growing up, my family ended up having 2 out of our 3 bathrooms unusable for well over a year, because my dad had too little time to work on them when he was at home. They only got finished at all because my mother ended up paying someone to finish them. They were done in under 2 weeks.

Generally speaking, most common repairs are something a homeowner can handle because most are small and simple. However, a renovation can be far more complex and costly, and they tend to make the home a bit unlivable while they are in progress. If you are working full time, reducing the amount of time that your house is a mess may be a priority. Also do-it-yourselfers tend to make mistakes the first time they attempt any particular task; it can be far more costly to do something wrong and than fix it than to pay someone to do it right the first time around.

Again, it depends on the job and the person, but working full time can make it difficult to find the time to devote to a project.

Organic food. Organic food. Cutting ito your safety net for “organic” food? (As opposed to rocks, I guess.) How about buying pedestrian, ordinary food for now, and a couple of bottles of vitamins, instead?

I’m sorry, I think that’s a really poor use of resources. I’m pretty skint myself at the moment, and trying to pay off my debt this year – the economy worries me. I manage this by buying bagels by the dozen (because they’re cheaper that way). This is important, because they’re what I’m living on. Plain bagels (that is, no butter, cream cheese, fillings, etc.) and vitamin pills. It’s boring, but at least I won’t get scurvy. I don’t anticipate having to do it for much more than a year. I hope. But it’s not as if there’s going to be money to fling around after that, either; it needs to become an emergency fund. One that I probably won’t dip into for organic food.

That’s what you have an emergency fund for. The other savings you ABSOLUTELY do not touch.

My grandniece and her husband both absolutely have to work. Neither one of them makes all that much money, but with care, they make it.

My grandniece recently lost her job and was out of work for four months. Because they had their emergency fund, they were ok.

I’m impressed with them both. They’re such a nice couple. She babysits on weekends for extras such as clothes and money for gas, for her older daughter’s school trips and such.