Sunday, December 11, 2011

The Difference Between Planning and Banking

First off, thanks to all who gave feedback about the nature of the blog.  It really helps me to know that the readers I have enjoy what I create.  Hopefully when my work schedule isn't so demanding and this term of teaching is over, I will be back with renewed energy and increased posting frequency!  xoxoxoxx to all

After several weeks of adjusting to some recent news, I can now admit that Mike and I had been pursuing some job opportunities in another part of the state.  There was an opportunity for Mike that we learned about this summer, and we've been sitting on this knowledge for several months between the job actually opening, the application process, and the interview.

Long, disappointing story short, the job was given to someone else.  I had even applied to a position and it also didn't go through.

One of the chief disappointments with the outcome was either of these jobs would have been a financial golden ticket for us.  Salaries twice as high as they are now, job security, steady opportunities for pay raises and advancement. 

However, Mike and I set us up for even greater disappointment.  You see kids, there's a world of difference between planning for and banking on something.

Banking is much like gambling - it's risky, there are no guarantees, and the house usually wins.

Planning is a responsible approach - you mitigate future risk by your actions today. 

When it comes to finances, you should be planning as much as possible.  Planning applies to your savings account, 401k and other retirement investments, medical expenses, and vacations.

Banking, however, is disastrous.  Banking is making financial decisions today based on something that has a high probability of not happening.  Banking is what Clark Griswold does in Christmas Vacation: he puts a downpayment on a pool because he's banking on a large Christmas bonus that never materializes.

Mike and I knew we were edging past planning and into banking during these last months of uncertainty.  There were so many factors in the air that we began to lose sight a little.  We were dealing with the possibility of a complicated move, where one of us had to stay in order to fulfill some obligations.  That meant apartment shopping and two rents to consider.  There's a deployment in 2012 that was an unaccounted factor.  I'm still knee-deep in medical testing that hasn't yielded any answers yet.

We did two things that we regret.  First, we took Mike's classes down from full to part time, anticipating he might have to pick up on short notice and go.  This cut his GI in half, removing $700 of our income each month.

This resulted in us backing off of reducing our debt aggressively.  We were back to treading water, not moving forward.  This was due to both the lessened income, but also a growing mindset that our income problems could soon disappear altogether. 

This is precisely the problem with banking.  And I would recommend you avoid it all at costs because you could be making decisions that end up hurting you.

We came out of this with little more than a scrape, honestly.  And with a good lesson learned to boot.  In fact, we took what we had been hoarding in our savings account and eliminated 2 credits cards to make up for lost time.  So not a major foul.

The situation also caused us to look more deeply at our finances.  We know that my salary will be fairly static.  I make just over $26k and that's not likely to change in the next year.  We also know that Mike's GI Bill won't change provided he's taking 2 classes every term.  Since he won't be done with school until 2014 (the deployment will push things back a bit), we can reasonably say we'll be pulling in $46,000 annually for some time. 

This leads us to several conclusions.  We need to continue being creative with our money to get rid of debt.  We also have to find some way of funding a savings account with what is already coming in.

It's also made us consider if Cedar Rapids may not be the place for us to settle.  We moved to the area with the intention that we'd be here for 2-5 years, gain some financial security, and then go to the next spot.  Clearly we were ready to move with these job prospects.

However, the only problem we've had here is getting Mike a job.  That's it.  We like the distance from family (2 hrs is a nice buffer) and we're clearly in love with Dubuque.  We can drive 5 hours and hit Chicago, the Twin Cities, St. Louis, or Kansas City.  The bike trails and parks are excellent.  There are cultural options each week and we've yet to explore Iowa City 20 minutes away.

So who knows.  Once upon a time, it was common to have a 5-year plan.  You could reasonably set goals based on this time frame.  No longer, my friends, no longer.

Mike and I have limited our planning to 2012 and 2014 respectively.  Next year will be an unusual one for us.  With Mike deployed, he'll earn in 6 months what I do in a year.  That clearly is a financial windfall and you'd better believe we have some distinct plans for the income.  We are going to capitalize on this with every ounce of energy we've got.  

Next year will also mark my 2-year anniversary with the magazine.  Should I get a pay raise, it might help me establish what I can expect for salary increases in the years to come.

2014 is when Mike gets done with school and will be on the market again.  If he were to find a job, and one that he liked, it would be mighty hard to leave the area and terribly easy to talk about buying a home.  

Now, we aren't banking on that.  Who know what the economy will do in the next three years.  There's a very real chance that Mike will finish with classes, look for jobs, and be without any income at all for an extended period of time.  You can bet I'm planning for that now when I think about our savings account.

So the lesson of the story here?  Recognize the difference between if and when with your finances.  If could leave you down a path of regret. 


  1. Sorry to hear the jobs didn't work out. I'm glad that you came away from it fairly unscathed though.

  2. Thanks! I'm glad we didn't do anything majorly silly. In some ways, things not changing is a form of security - we know what to expect. That's not all bad ...