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