Disclaimer– This is a hard post for me to write. I have actually been avoiding it for several days. It is not hard because of regret, I stand by our decision but it is hard because it is not the conventical choice and it requires that I admit how far in debit we really are.
History– With my recent job change, I needed to decided what to do with my retirement. For the past 10 years, it was mandated that I place 2% of my earnings in a retirement account. The best news is that the hospital matched this 2%. In addition because of my length of employment, I was fully vested. I was given a choice of simply leaving things alone with a small percentage based fee every quarter. 2nd option was rolling the monies into my “new” retirement system or similar, or 3rd, take a partial or full withdrawal facing the penalties.
Choice made– After much thought, prayer and comparison, we chose to take a full withdrawal from my retirement. The penalties include 10% Federal tax, 5% state tax and 15% early withdrawal penalty. My logic for this decision is that I am not losing any money that I placed in the account. My employer match covered all the penalties and still contributed to my final pay out. Matt’s logic was a little different as although this was a HUGE boast to our budget, in retirement it was not enough to cover a full year, really a small drop in the bucket.
How we spent– I really wanted to use this money in a way that would affect us in a positive way. I did not want this to become a decision that even a year down the road, I looked back on and regretted. I spent HOURS planning and working and re-working the numbers. First, my new job is awesome but I will actually be bring home around $400 a month less than previously. I did set up a summer savings account which will “pay” out the two months that I don’t receive a pay check. I will receive 12 paychecks a year which allows budgeting to be much easier. We loosely based on decisions on the “Dave Ramsey 7 Baby steps”
First we established an Emergency Fund of $1000 dollars. Next we paid off all outstanding medical bills. Matt will not be covered by my new insurance so we decided to also set aside some money to off-set any medical cost we will incur. We also will all a line to our budget on a regular basis for medical cost. Our next step was to pay off credit card debit. We have been able to reduce our debit by half. We do have two remaining debit that we will continue to pay at with the goal of payoff within 2 years. We have also used some of the funds to fix/ repair/replace items around the house and with our vehicles. Several of these are large purchases such as a car and both a new push lawn mower and a riding lawn mower.
The Result: We did a total budget reset on September 1st. I am excited to begin “fresh” we were able to start with a cushion for both groceries and gas. My pay schedule is once a month at the end of the month. This is exciting for me as we are leaving on last month salary and using a more cash system. I plan to share the budget in detail very soon! But for now… the clean start is working and feels awesome!