Which Type of Savings to Cut?

[Anonymous]

Both husband and I are getting furloughed this year and it will be about a 10% reduction in salary between us (his more than mine). Right now, we put almost everything in savings of one sort or another, other than what we need to pay bills and have a little fun money (very little fun money). We've paired a lot of our daily living expenses down just because we've got kids and are trying to be wise, so the only place I can think of cutting expenses is to reduce savings contributions. What type of savings would be least harmful to cut?

529 plan for kids' college
457 retirement (which is in addition to a contributory pension that will continue)
short-term savings for things like car repairs, vacations
long-term savings for job lay offs, etc.

We've got about 10 months of expenses saved up in case one of us loses a job, but still contribute to that account. I thought reducing savings to this account might be best. ?

[Anonymous]

I would cut the 529 first, my second choice would be the short-term savings for repairs and vacations (you can always skip vacation and depending on where you live you can do without a car for a little while).

Good Luck

[Anonymous]

I would also take another hard look at your expenses and see where you can cut.
Cable bill?
Consolidate some phone service?
Rethinking your meal planning [we recently made a change in diet do to health reasons and cut out all meat. WOW did we reduce our grocery bill]

[Anonymous]

OP here. We don't go out to eat and don't really have date nights. We make most meals from scratch which is a huge savings over buying prepared foods. So a lot of our entertainment "is" cable, unfortunately.

True, we can go without a car for a while. I was thinking about selling one, which I guess we could do. It wouldn't be ideal (we're in the burbs and have to drive), but we could do it.

The short-term savings is for vacation among other things, but we aren't taking one this year.

I'll take a look at the menu. I'm all for alternate protein options, but husband loves meat unfortunately. Doesn't mean I have to eat it though.

[Anonymous]

No question, the 529, untill you're really comfortable with your emergency savings. Since your job situation is a little up in the air, though, I'd keep that savings going. You can always redivert some of it to the 529 at a later date.

[Anonymous]

Cut in this order:

-529
-Short Term Savings
-Retirement
-long term savings for lay offs

[Anonymous]

you can always borrow for kids college but you can't borrow for your retirement

[Anonymous]

yeah, I would cut anything except retirement. I might cut 529 first because that would be the hardest to get to if you needed it.

[Anonymous]

I don't automatically agree about cutting the 529 first and then retirement. I think it depends on the situation, your age, etc. Do you own a house that when you hit retirement age you could sell and downsize to a small condo for example? College comes sooner than your retirement, so if you think that's a possibility down the road I would just reduce (not eliminate) retirement contributions. But again, this depends on your situation. I would rather be able to pay for my kids college (and not have them feel the burden) and have a less nice retirement, but that's just me.

[Anonymous]

I think your plan to reduce savings to the emergency account makes sense, since you already have 10 months savings built up. Unless of course you have reason to believe that layoffs are a serious concern.

[Anonymous]

Thanks for all the feedback. Yes, layoffs are a serious concern for me for sure. Not my husband.

[Anonymous]

Anonymous wrote:Thanks for all the feedback. Yes, layoffs are a serious concern for me for sure. Not my husband.

In that at case, I'd redivert everything but retirement savings that get an employer match to the long term emergency fund. You can always use those funds to pay for college/retirement (although without the tax advantages) but it makes sense to stay liquid now.