Friday, July 5, 2013

The Value of Savings

Trey Smith

In financial terms, Della and I have been members of the working poor for more years than I care to remember. Over the past decade, there have only been one or two years in which our gross annual income was north of $20K or so. In today's modern world in the US, $20,000 isn't a lot, but we've been able to keep our heads above the waterline.

To be fair and truthful, one of the reasons this is so is because we've received a lot of assistance from a variety of taxpayer-funded programs and services. We have been on Food Stamps for quite a long time. I've been on Medicaid for over 3 years (which includes help with the cost of transportation for medical and mental health appointments). We've received assistance for our home heating bills a time or two. We have a subsidized mortgage and, due to my disability, we receive discounts on property taxes and city-provided utilities.

My dad and step-mother also helped out big time a few years ago when they bought us a new car when our latest lemon died. This car has been our main source of transportation ever since.

While these various forms of assistance are the major factor for why we haven't been homeless or living in a slum for the past several years, there is one other factor that has played a significant role: My penny-pinching ways. Regardless of how much or how little our monthly income happens to be, I have sequestered a certain portion of it. It sits there in our interest-bearing checking account, but in terms of the monthly budget, it is as if it doesn't exist. When I factor up our available non-discretionary and discretionary expenditures, that money is invisible.

About a year ago at this time, Della was working a lot of hours, between 180 - 200 a month. In terms of our meager overall income, we were swimming in cash. With a greater income than usual coming in, more money was added to our sequester pool. It is precisely because I raised the sequester threshold that we remain slightly above the waterline today. Those saved dollars are being used to supplement our current miniscule monthly income of $756. It is why we have been able to keep a roof over our heads and why, barring some costly emergency, we probably can make it in our current circumstances until, maybe, October or November. (Of course, we may be thrown out of our soon-to-be foreclosed on house before then!)

I am bringing up this notion of setting aside money when times are relatively good because, too often, governments do not do this. When times are good and the money is rolling in, governments have a tendency to use up the vast majority of the largesse (either in transfers to the elite and/or in adding/expanding current government programs). Far too many governments don't set up a Rainy Day Fund.

For instance, my little town has kept very little revenue in reserve. When the economic downturn hit, the annual budget was decimated. Our streets are not in good shape and utility rates have gone through the roof. If the local council had saved more money during the more plentiful years, they could have augmented our decreased annual budgets in such a way that the rug wouldn't have been pulled out from under we citizens so abruptly. But they didn't set up a sustainable Rainy Day Fund and now we are reaping the painful consequences.

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