Late December is a very reflective time of year for me. I avoid setting New Year’s resolutions, but I do take advantage of the slower pace of late December to evaluate the past year and make some loose plans for the following 12 months.
2009 was an interesting year for us, filled with challenges, miracles, valuable lessons, and more. On February 1st of this year, Fiscal Fizzle was born, and launched me deep into the world of personal finance.
Today, I’d like to share with you five money lessons I learned in 2009 that I consider to be essential for us. Some are simple observations, some were life-changing shifts. Here they are:
1. Health costs are the ultimate unpredictable expense.
When I wrote 4 Unexpected Expenses You Can Count On in early April, I underestimated how much of a hit health care could really take on a budget. I’m now convinced health costs are the ultimate unpredictable expense. It’s probably the only industry that can get away with providing services without a complete understanding of the final cost for the consumer. The only predictable stability comes in the form of health insurance. Even that has exceptions that can explode in your face: pre-existing conditions, coinsurance requirements, and just a flat-out refusal to cover.
When my wife and I found out we were pregnant in April, our world turned upside down (largely in a good way, of course). In the last 8 months, I’ve become a health care expert, an insurance expert, a pregnancy expert, and more. And through it all, I’ve realized I know absolutely nothing. I still have no idea how much the whole experience will end up costing us in the end…talk about unpredictability. But I do know that it will all be worth it.
More changes are coming for us personally in terms of health insurance in 2010…but more on that in a few months. I will have a lot of useful information to share with you if you’re on the hunt for new insurance.
2. Without perspective, the “now” is tough to evaluate.
Something I have not mentioned specifically on the blog is my wife’s job loss about 4-5 months ago. One of the reasons I haven’t written about it is how quickly and effectively we were able to adapt to our new circumstances–so much so that the days of two incomes seem remote.
In fact, an interesting thing happened with our thought process that I think is not all that uncommon in families experiencing job loss this year. Under two incomes, we constantly felt the pressure of “not having enough.” Under one income, we’ve realized we have “more than enough.” Taking it a step further, we’re realizing how much we had when two incomes were around.
A running theme this year for our family has been marrying two seemingly competing concepts: personal drive and appreciation. Think about it–how do you motivate yourself to strive for more when you want to believe you already have enough? It’s something that my fellow finance bloggers have tried to tackle over the year, and something I’ll be talking about more in 2010.
Without the appreciation of a smaller income in the second half of the year, it was tough to understand what we had going through the first half. How do we gain enough perspective, enough sense, to handle money effectively? I’ve tackled these issues in 2009 and the battle continues.
3. Envelope budgeting is a total paradigm shift.
When it comes to the most important financial change for us in 2009, taking on the process of envelope budgeting beats out anything else we’ve done this year. The change has been so monumental that all other budgets just seem…well, not like budgets at all. And it’s been so instrumental that I think we would be far from our current position without it.
The particular system you use is insignificant, so long as it fits your needs. For almost all of 2009, I was a huge proponent of Mvelopes. I’m now finding that we can accomplish similar results with YNAB. There are many others available…
What’s important about envelope budgeting are the principles and the mindset. Cash is king. Spend only what you have. Give every dollar a job. These are your grandma’s principles–what got her over paycheck-to-paycheck and able to save a good chunk of her income. They’re back in popularity because they work and they’re timeless.
It’s unlikely that we’re ever going back to anything but envelope budgeting. I’m even toying with the idea of a blog dedicated to the topic. I encourage you to read about it and try it for yourself.
4. Writing about money is different than acting on money.
In more ways than one–let me explain. First, since I’m in the trenches all day long–researching, thinking, reading, etc.–a couple of things happen. I’m more motivated to take a look at our own finances and apply the lessons I’m learning. But I’m also incredibly overwhelmed–the more I learn about money, the more I realize there’s a never-ending stream of advice and so many different angles to take.
More than anything, I’ve found myself trying to apply the brakes this year to money management–giving ideas and new concepts time to stew before I implement them in our own lives. Sometimes, in the name of blog research, I have no choice (at least not if I want to keep things fresh around here). But a lot of the time, I can pull it off.
The second thing I’ve noticed is a disconnect between my writing and my actions. I’m sure a lot of personal finance bloggers have the same experience. I try to practice what I preach every day, but we often fail–sometimes in little things, sometimes miserably. It’s rarely intentional–there’s only so many things we can all keep track of at once. Some of the strategies I write about that I know work and I’ve done in the past, I may not simply have the time or need to do now.
One thing I’ve never done is simple make up stuff for the sake of writing–everything is rooted in reality, whether it’s something we’ve been doing for years, or a conceptual idea that has financial applications.
5. Recessions are good for you.
That’s right. After the panic and dust of layoffs, stock market crashes, and everything else has settled, many of us are realizing how thankful we are (or will be) to have gone through the experience.
Recessions have a funny way of reconnecting us to our true values. Timeless principles suddenly become evident again–saving for a rainy day, spending less than you earn, balance, time with family, the fragile nature of “work.” We have a new appreciation (see #2) for what we had, what we have now, and what we hope to have in the future.
As we emerge from the ashes, I only hope that together, we can stay focused on these principles and not return to our old, “average” ways of over-spending, over-borrowing, price-inflating, and sheer craziness.
Have a Happy and Healthy New Year
Those are five important things I’ve taken away from this year and into the next. If you’re around today, I hope you’ll share yours.
From our family to yours–we hope you have a happy, healthy, safe, and ejoyable New Year’s Eve and a wonderful New Year to come. We’re going to kick butt in 2010! 🙂
Photo by Optical Illusion
Fiscal Fizzle 
I completely agree with number 5 – getting a hard lesson early in life (and watching a number of people lose the ability to support their chosen standard of living) is a learning experience that has stayed with me ever since. Invaluable.
The other positive thing about recessions is that you have an opportunity to buy assets very cheaply. The longer terms benefits to retirement planning are huge (even though the short term pain can be intense).
.-= traineeinvestor´s last post: Monthly Review – December 2009 =-.
Indeed! Unfortunately, that very opportunity often correlates with a reduced ability to contribute to retirement savings. Those who still have the opportunity to continue or even increase retirement savings should most likely take it.
Wojciech – Absolutely Brilliant! I especially agree with your first point on healthcare, it’s the biggest variable most of us face. My wife lost her job at the end of November and she carried the health plan for us.
This has been our biggest issue. We can handle the reduced income, but that added big nut each month is a problem. We’re now investigating options beyond COBRA, which will be 65% subsidized for 9 months, then we’re on God’s good graces for where we go from there. There are no inexpensive options here.
I also fully agree that tough times have made us better. It’s only when you have to live within very definate limits that you truly appreciate true value.
.-= Kevin@OutOfYourRut´s last post: One Good Reason NOT to Cancel Your Collision Coverage =-.
You’re right–there are no inexpensive options, but I am finding a lot of less expensive options to consider. Hopefully, some of my research will be able to help you.
Our family has experienced a great deal of change over the past year as well and it has been difficult to find a clear perspective when the ground kept shifting below us. Like you, however, we have found that we have enough in spite of a rather drastic income reduction. We are in a far better position than many as a result of low debt and some savings.
Many thanks for your insights and all the best in 2010!
.-= 2 Cents´s last post: 20 Cents From December 2009 =-.
And the same to you for 2010!
It definitely helped to be prepared ahead of time for bad economic conditions, even to a minimal extent.
I certainly agree with #1. Health care costs can hit you like a brick if you’re not prepared. Especially if your a klutz like myself.
And an interesting insight into recessions. You do indeed learn to prepare and adapt during tough times. What doesn’t kill you makes you stronger 🙂
.-= Derek´s last post: New Years Party on a Budget =-.
I had an interesting conversation with an insurance agent the other day. A very popular method of insuring families, apparently, is for the dad to take on a “hospital only” policy, while the mom and kids get full coverage.
But it sounds like both of us get a fair amount of use from the health care system. 🙂
Oh yeah, 5 broken bones, fractured skull, ruptured spleen, and countless muscle related injuries. I’m pretty sure they have a wing dedicated to me in the hospital, or at least a Mercedes or a summer vacation home out there somewhere.
If you are ever looking for someone to interview or ask questions for a blog post, I know quite a few experienced insurance agents, business owners, benefits specialists, and credit counselors who would be happy to oblige. Don’t hesitate to send me an e-mail.
.-= Derek´s last post: Gift Card Spending Guide =-.
🙂 Thanks Derek, I might take you up on that offer.
Wojo – a great post. Completely real, utterly honest, and 100% accurate. You’ve definitely become my favorite blogger-that-doesn’t-get-as-much-recognition-as-he-deserves for 2009.
A few notes:
1. If you can get through underwriting, private health insurance is ridiculously more affordable than COBRA. And if you can’t, there’s always short-term insurance to fill the gap until you get employed or can pass underwriting.
2. The secret to happiness? The word “enough.”
4. Yes, it’s true … I think part of the reason we write about money is to force us to act in the way we write. It’s a check on our own behaviors and helps to keep us in line.
.-= Jason´s last post: How to Start Smart Financially in 2010 =-.
Thanks so much Jason, comments like that are what keeps me going. Hopefully, I can change that recognition in 2010. 🙂
Underwriting scares me, but I’m confident we can get through it. I have two Plan B’s on the back burner that guarantee insurance just in case, but more in that in a post next year!
Jason–Have you written a post about health insurance? You have some good knowledge that could help a lot of people. I’ve never heard of short term insurance and would like to know more!
.-= Kevin@OutOfYourRut´s last post: One Good Reason NOT to Cancel Your Collision Coverage =-.
Kevin – I haven’t, but I probably should! Thanks for the idea.
.-= Jason´s last post: The Best Argument Against Stock Picking Experts =-.
Great write-up Wojo! I reasonate with so many of the points given here. I think as PF bloggers we do hold ourselves to a higher accountability mainly because we want to practice what we preach. And yes, the recession has taught us all a valuable lesson. I’m just so thankful for strides my husband and I had made by the time the recession was in full swing.
I love the word Jason wrote above…”enough”. There is so much power in that one word. Happy New Year to you and your family 🙂
And a happy New Year to you and your family as well!
I definitely hear you about the higher accountability. My finances have “cleaned up” considerably since I started blogging, because I really do try to implement every strategy I write about.
Happy to hear you were able to beat the recession–we were in the same boat, starting to make many positive changes 6-12 months before everyone else realized it was time to make them.
Looking forward to hearing more about how you’re liking YNAB! Like I mentioned before, we’re currently using Mvelopes, but I did download the trial of YNAB 3 (we’re Mac users so couldn’t use YNAB before). Since it’s only a 7-day trial it’s hard to really put it to the test, but I’m hoping it will meet my needs since it’s obviously much cheaper! The only real beef(s) I have with it right now is the lack of Direct Connect (I love that Mvelopes automatically downloads my transactions so I can match them up with my manually entered ones, and on the off chance that I didn’t enter a transaction, it shows up and I can then account for it). And also, no mobile version (yet!). I guess I’m deciding whether to make the leap anyway and just patiently wait for the online connectivity and iPhone app (which are both supposedly in the works).
.-= Alissa´s last post: Mvelopes =-.
I had similar concerns as you when starting out with YNAB, so my upcoming review should hopefully address some of that.
Lack of Direct Connect was my big beef with version 2, and continued through version 3, but long story short–I don’t miss it as much as I thought I would. It’s easy enough to import transactions every week or two.
Very nice article. Perspective is a big one. It’s very easy to think “we need more” or have the perspective that “a little more income” will make you more comfortable. But when that next milestone is reached, you start looking for the next one, and so on. It’s good that you and your wife were able to take a step back and recognize the situation for what it is. It can be difficult to do that!
Best of luck this year! 🙂
.-= Patrick´s last post: Cloth Diapers vs. Disposable Diapers =-.
Thanks Patrick! I think the key is separating the level that makes us “comfortable” from the level that makes us “complacent.” Understanding that we have “enough,” but driving forward to the point where we can someday be financially independent.