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Smoothing Out those Bumps in the Road

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A few days ago I talked about those darn bumps in the road. I thought about a few things that can happen once you hit that bump and fall off your bike.

The one I tend to do now is get back on my bike and carry on my way. What I think I would like to start doing is trying to level out that bump and then get on my bike and carry on my way.

Thinking about the roadbumps we have hit during our debt reduction journey, two stick out in my mind: my husband losing his job and our cash flow crunches. If I decide to get back on that bike after hitting the bump after those things happening, I’m not fixing the problem at hand. I can hit that bump again.

But how could I level out those bumps?

For problems with income, there are a few things I thought of:

1.) Diversify streams of income. Instead of having two main sources of income, it is time to look into having other streams coming in. Perhaps even have some of those streams be passive income. Not sure how to do that yet, but diversifying income streams sounds like a good idea and something that I should look into.

2.) Insure our income with life and disability insurance. Right now, I am the income earner and I do not have either of those types of insurance. That’s risky. When I take some time off shortly I will be shopping for insurance. I don’t like the idea of spending more money, but I need to protect what we do have!

3.) Increasing knowledge. This step may get you a raise at your current job, and it can help you find a new job if you happen to lose the one you current have. Also, seriously think about having your own business someday and learn about what you need to do to make that happen. I’m a believer that knowledge = power.

For problems with cash flow crunches, here’s what I came up with:

1.) Build up a reserve. This is money stashed away that would cover at least a month’s worth of income. After a while, build that up to 3 months…then 6 months. I would love to extend that to one year, if possible. When things get tight I can “borrow” from the reserve fund.

2.) Don’t run the checking account so low. I have had a problem with this for as long as I can remember. One could think that I am allergic to having a balance greater than $100 in my checking account. While not allergic, it really does bother me. I think it’s because I’m afraid if the money is there is may get spent frivolously. I really should have a better buffer in our checking account.

Basically what this has turned out to be is ways to protect the income that you do have. I think sometimes it’s easy to forget that our biggest asset that we have is our ability to bring in income.

As for smoothing out the bumps for others, I hope I am doing that with my blog. I hope by documenting our journey, you may find a little bit of inspiration and even learn from our mistakes. Just a note, though, the last thing I would want anyone to do is to follow what we are doing step by step. That’s sort of why I don’t write articles with the tone of “Do this…Do that.”

It’s not in my nature to tell others what they have to do. Everyone’s financial lives are different. A certain success story comes to mind of someone who will remain anonymous. He contacted me letting me know that he’s applied things he’s read from various bloggers and devised a plan for himself. So far, he is hitting it out of the park and doing great. That’s awesome.

That’s what I’ve been doing. I’ve been taking a little bit of this, doing a little bit of that and making a plan that can work for us.

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5 Comments

  • Reply BigBuddha |

    Building up a cash reserve is essential to smoothing out your cashflow ‘bumps’, also spreading breaking down the cost of major expenses you know you’ll have throughout the year into monthly chunks will ensure you’ll have money when the time comes. These expenses may include Car Registration, House insurance etc.

  • Reply Mission Debt Freedom |

    I know exactly what you mean. I created some sinking funds using an online savings account for just that purpose. I budget $200/month to this fund, and allocate the $200 across five or six sub-fund, if you will. Things like the 6-month car insurance premium, annual life insurance premiums, vacations, car inspections, etc. all have their own sinking fund and get their portion of the $200 contribution (higher annual amounts get more of the contribution, proportionally.

  • Reply HC |

    I strongly support #2. I have no dependents, but I still have life insurance because I’d want my father to get some cash if anything were to happen to me and I wouldn’t be around for him at retirement. Since you have a son, it’s even MORE important to have adequate coverage (“adequate” is defined in different ways, but means at least enough to pay off all your debt).

    Disability insurance is just as important, but it’s expensive (because the insurer is more likely to pay out benefits). Shopping around may help. I personally don’t have it, and just save up my annual and sick leave as much as I can as a substitute.

  • Reply Donna |

    We are trying this year to use our flexible spending accounts like savings. We plan on saving our receipts then reimbursing them after they have built up a little then using those to pay off a bill or get needed car maintenance. It helps us to also live off our net income and getting used to the flex payments as savings deposits.

So, what do you think ?