Ah, tax day. Isn’t it wonderful? I filed my taxes back in February but more than a few people I know waited right up to the last minute to file the dreaded income tax statement with the IRS. My sister in law was one of these people.
We were sitting at a family birthday party over the weekend and I asked her if she wanted to come have a margarita after the gathering and she replied pitifully, “no, I need to clean up the house tonight and file my taxes.” Wow, what a way to spend a Saturday night. I was so upset for her that I went home and drank two Fat Tires and a Famosa for good measure (two of my favorite beers!).
Taxes suck and owing the IRS sucks even more. But for many of us, we get a nice return each year; usually due to letting the government over withdraw from our paychecks. So, if you got or are getting a nice return, how will you put the cash to work?
I spent my return in a pure Khakian fashion this year. I could not have been more vanilla or logical if I wanted to be. Due to having another child last year, religiously savings receipts and thanks to tons of government tax credits, I got a whopping $5k refund this year.
I took about $2k and dumped it into my mortgage and put the other $3k in savings for the Super Fund I’m building in the event that I find myself laid off or out of work again. And that leads me to the moral of today’s post.
Today I am getting down to business- pure, logical, Khakian business. If you got a tax return this year, now is the time to start building the Super Fund!
What is a Super Fund?
A Super Fund is a sizable stash of liquid cash, held at arm’s length to act as a safety net in the event of a life changing event or emergency.
At my last job, the one I was let go from last October, my boss used to tell me on a regular basis, “Never have a job you’re afraid to quit.” Up until a few years back he had lived a bachelor’s life, bartending and managing restaurants and only really having to worry about himself. Now I think he had become a little spooked with the new stage in his life. He was nearing 40, married, had a new baby, a mortgage, and maybe for the first time ever was thinking, “Holy shit, I’m actually scared to quit or lose my job.”
That always resonated with me a bit. Never have a job you’re afraid to quit. I used to think, “Wow, that sure would be nice” in a sarcastic wishful thinking sort of tone to myself. But in reality, why not never have a job you’re afraid to quit, or even more importantly, NOT BE AFRAID to be fired from.
Go figure, I would go on to actually experience the wonderful joy of being fired and not having to sweat it. How? I had A Super Fund!
The Super Fund gives you Wings!
Red Bull doesn’t give you wings, but having a Super Fund does. Aside from having a side gig and living well within my means, I had a nice savings net to fall back on. And this leads me to possibly the number one reason a Super Fund is so important.
What if you or your spouse/partner lost your job tomorrow? How many months could you pay your mortgage, utility bills, car and house insurance and any other essential bills without working? Right now, I could float for a solid six months. My goal is 12 months.
If you’re a single income family like mine, the Super Fund becomes all the more important, and if you aren’t a single income family, maybe you should start living like you are one and using one of your incomes to really beef those savings up.
How big should my Super Fund be?
Add up your essential bills for six months and start there. I’m talking about your mortgage, home and car insurance, utilities and other basics. If you currently have a car payment and credit card debt, start attacking those now! Get rid of them. Make believe that you’re going to be unemployed in a year and you’re in a mad dash to prepare, because you might be.
For me, my base Super Fund is about $10k. This gives me some nice wiggle room and time. When I get to $15k, I’ll probably quit building it and divert that cash elsewhere. This is cash that is earning essentially no return, but it’s important to have it sitting and waiting. Consider it an insurance policy.
A Plea to my Beautiful Sister in law and all my fellow Khakians!
I wrote this post because I’ve found many people like my sis in law get very squeamish when it comes to talking about personal finance. Everyone knows I’m a hawk when it comes to money, but I argue there are large rewards to be reaped in frugality. My wife and I combined make less than virtually all our peers, yet we have two children my wife gets to stay home with every day, we travel frequently, and have a great time in life.
What we don’t have are fancy new cars with payments, a giant house, shiny appliances and furniture or an overly expensive wardrobe. In fact, most my furniture is hand me downs from my sister in law!
I see far too many people work endlessly with little to show for it. Too many of my friends and family are resorting to letting other people raise their children, rarely take vacations, and rarely get to enjoy life.
So ask yourself, would you rather have a car payment or yearly adventures to great locales here and abroad with friends? What is more important, new furniture, electronics and fancy home décor, or spending every day with your children while they’re still small and actually want to be around you? Do you prefer the sweet taste of freedom or endless work for material items you think you need.
You’re first step is to create healthy savings habits. Build that Super Fund to create your safety net, learn to live on less, and move on from there.
Happy Tax Day. The government won’t be as considerate with your money.