When I last talked about what I was doing with my life, I was working on my Master’s degree, right? And I was going to finish soon.
Well. In the fall, I came down with a non-life-threatening health issue that took about four months to root cause.
We broke $10,000 in raw health care spending before insurance kicked in, for the entire plan year. (Of which, we paid about $1,500 out of pocket since we have good health insurance.) I keep track of my raw health care spending and this was by far the most expensive year I’ve seen yet. The previously most expensive year was $6,000, another about $4,000 and the others averaged $1,500.
I start with it took four months to root cause because it still isn’t fully solved. I’m working on that and I assume that will take another several months and some more health care spending, of course in a new plan year.
Bridget talked about financial black swans a while back. I would say that mostly until late 2016, I had experienced very few negative black swans. In the last two years, I’ve seen two: losing my job and this health issue. Both of those combined have had a huge impact on my finances – I haven’t seen a paycheck in over a year, a loss of about $200,000 in gross income over this time period. There have also been some positives: my husband got a huge promotion to the point that our household income has hardly missed my income and our net worth has grown tremendously since we married. It has, however, created a financial dependency between the two of us that wasn’t there before we got married and we would be further ahead if we had had my income as well, though we are still in a great financial position now.
How did we protect ourselves against these negative financial black swans?
Thanks to huge positive financial black swans like us both having careers in high-paying fields, my parents funding my college education, and H paying off his student loans quickly after graduation (his student loan balance at graduation was eerily similar to the hypothetical one I calculated in that linked post!), we had a great start in our twenties. Before we got married, we each lived off of about half of our net salary incomes and saved all of our bonus income after taxes. We each maxed out our 401(k)s and Backdoor Roth IRAs. One of us aggressively paid down the mortgage (her) and one of us aggressively invested in a Vanguard taxable account (him). We each had strong cash reserves.
Despite having six figure combined expenses in both 2016 and 2017, we continued to max out all available retirement accounts, take on no credit card debt, and watch our net worth steadily increase, which to both of us, feels like an incredible privilege that we not only survived the Very Expensive Fall of 2016 that saw multiple months with credit card bills over $10,000, but our finances continued to thrive during that time. It is thanks to our high incomes and previously more frugal behavior that we were able to swing such large increases in expenses simply with grumbles, reduced savings each month, and no debt. With those large expenses in our rear view mirror and solid health insurance, we are both on the same page that we hope to not spend six figures in one year again for a long time.
The catch with each of us having similar salaries before when we each lived off of about half of our net salary incomes was that we found ourselves spending all or more than the salary income after maxing out H’s 401(k) coming in for a while. We poured over our spending from 2017 and we tried to find areas in which we could cut, before H finally suggested that we reduce our budgets for personal spending since reducing retirement savings at our tax bracket was a silly idea. So far, it seems to be progressing. We successfully budgeted $5 less than the paychecks in January, $500 more than them in February and we are on track to be under by closer to $1,000 in March. It’s nowhere near his previous 50% savings rate, but any breathing room is a welcome change from 2017, when I used savings to cover my half of the wedding and expenses for the first 2/3 of the year.
We’re okay with running things somewhat close to the wire monthly for several reasons. That wire involves maximizing his 401(k) which is a decent chunk each month. H is at a point in his career where his salary is not the majority of his income and our plan involves saving all of his non-salary income. Withdrawing 4% from our investments would already cover all of our non-mortgage housing, food, transportation, and toiletries expenses, aka most of our needs. We also do still assume that I will return to earning an income when I fully resolve this health issue.
So, yes, this is a setback financially, but we set ourselves up well for it and are grateful that this is simply an opportunity cost financially rather than a financially devastating situation for our household.
Money isn’t the hard part of this.
For those long-time readers, you know how staunchly independent I am. This has been an emotional blow to that, despite my husband being pretty easy going about it all. It is so bizarre to go from earning half the household income, to over the course of several years, earning nothing and the household income still being the same. In a way, this experience has shown me that I could find fulfillment when I choose to step away from my career some day. There are so many things I don’t miss about the rat race.
Months where all I could convince myself to do was read books, watch Netflix, read the Internet, and go to medical appointments were not the best. Thankfully, I’m past that point now, which has substantially improved the situation emotionally. I’m slowly starting to climb back out of the withdrawal corner I had fallen into.
Everyone wants to label your status to quickly understand what you’re up to. At first, I struggled with how to answer when people asked me where I am working these days. Thanks to some advice on Twitter, I’ve concluded that I will tell people I’m on a health-related sabbatical at the moment and no, I don’t know when I’m going back to work yet. That seems to worry my in-laws since they don’t know how much H makes, but my family seem to assume we are fine and just worry about my health.
People tend to assume that I am currently wholly dependent on H in order to eat. It’s somewhat nice to be able to hide behind that offline, though I tire of it. I want to burst out that we’re not fully dependent on his income, that this is a team effort. Yes, he’s the one with the income now, but I did so much before. I bought this condo and paid off over half the mortgage. I own over half of our investment portfolio, the portfolio which helps our frugal hearts be okay with our current spending level compared to H’s monthly net salary income. Without my efforts, we would be in a substantially different place today. In some ways, though, his current income and our efforts with it mean that we are in a vastly different financial situation than we were years ago when I made all of those good decisions while single. We can save more now without me working than I ever could single. I keep quiet though and retort all of that after we’ve left the social situation, to get it out.