Everything Broke at Once - Why We’re Financially Hunkering Down
20 Apr, 2025
There has been a bit of drama in the Henderson-Simpson whānau this month, meaning our household has to reduce its spending. Jonny and I have a bit going on, and I think we would be foolish not to mind our dollars right now. As of April 2025, with storm clouds brewing, Jonny and I are financially hunkering down.
Before you start to think that The Happy Saver has gone into a tailspin because the share market is particularly volatile at the moment, that’s not our problem at all. We have not reduced the amount we invest each month.
Year-to-date of the S&P 500, which isn’t looking too good, but this means shares are on sale. Source: Google, 17 Apr, 2025
While the cost of everything else rises, at least shares are on sale right now!
You’ve got to find the positives 😉.
What went wrong?
The reason for fiscal caution is that we have some considerable and unexpected costs heading our way. Our car and water heating system decided to break down in the same week. We don’t yet know how much it will set us back. But I know that because these issues were unexpected, we have not saved enough to pay for them.
Our $10,000 emergency fund is about to get a workout. The reason we keep one is to cover unexpected expenses.
Share markets dropped, our car died, and the water heating system broke, right when Jonny and I were trying to decide whether we would sell some investments this year to pay for a holiday.
It seems ridiculous that just two short weeks ago, our biggest concern was whether we should or could plan a big holiday this year.
Ahh, ‘No’ is the simple answer to that.
We won’t be applying the 4% Rule this year.
For the last two years, on May 1st, we have sold off a small percentage of our overall investments loosely in line with the 4% Rule. You can read about how we sold off 4% in 2024 HERE. We predominantly used this tax-free passive income from our ETF investments for travel in 2024/2025, and as May 1st draws closer, all of that money has been enjoyed and spent on some great trips.
We also continued to run a “Holiday” sinking fund. This bank account gets a regular $100 weekly deposit, so some money is always available for smaller trips, if needed. This is the beauty of using sinking funds; they keep refilling themselves.
Due to a few financial commitments (we have already part funded some minor surgery for Jonny this year, plus replacing a bit of tech) and the high cost of travel at the moment, we had decided that we didn’t intend to travel too far from home for the rest of this year, so we wouldn’t need a bigger lump sum of money that international travel requires.
Our decision not to sell off a sliver of our overall investments coincided with the April share market drop created by the US tariff fiasco. Any doubts about whether we should still sell our shares were gone when we saw that drop. Ideally, we don’t want to sell when the markets are down, and both the house and the car needing repairs sealed the deal.
Our daughter is in her final year of school.
Additionally, with our daughter in Year 13, she didn’t want to miss any schooling, so we were limited to school holiday dates, which are when travel is more expensive. Then, it is hard to travel during the long summer break at the end of the year because she needs to work to earn money to help pay for the coming years of study.
Added to our decision not to travel is that it's currently just so darn expensive to do so! As we move steadily closer to full early retirement, we struggle to justify the expense of short expensive stints of international travel.
And finally, we are setting aside money to help with her tuition and living expenses next year and have been considering downsizing and updating our car. Our finances are being stretched in all directions at the moment.
We were mulling ALL these things over right when things started to break. So, to find the positives, the timing was quite good because we had not committed to any of them!
Finances are never cut and dried; there are so many nuances and irons in the fire at all times.
Our emergency fund is about to get a workout.
We’ve just had our friends Bradie and Paul to stay. They retired two years ago, in their fifties. While on a tiki tour of Central Otago, our trusty Skoda’s warning lights lit up like a Christmas tree. Into the mechanics it went for a diagnosis, and the bill is yet to be confirmed, but I know enough about cars to know it will be well into the thousands.
We do have a sinking fund bank account specifically for car repairs. It’s just unlucky timing that we used 80% of it to put $950 of new tyres on our car last month! It hasn't had a chance to rebuild enough to cover the invoice I’m expecting. We keep our vehicles well-serviced and maintained, and I based my Car Maintenance Sinking Fund on the amounts we spent in 2023 and 2024, plus 20%. Even if the account had been fully stocked, I know it would be insufficient due to the repairs required.
We will wait to see the final bill, and I’ll consider it when setting the budget for car repairs next year.
The second significant expense undergoing diagnosis is our house solar hot water system, which has given up the will to live. We still have hot water, thanks to our electric cylinder, but solar has saved us a significant amount of money over the years, and we would like to have it fixed. Again, repairs will likely be in the thousands, but as I write this, we are still working out a repair plan.
Because we built our house in about 2013, it’s still relatively new. While I’ve had a budget category in PocketSmith called “House Repairs”, I’ve never felt the need to have a Sinking Fund bank account where I specifically set aside money for this purpose. Over the years, repair costs have been minor, and we have always just cash-flowed them. This is something I will rethink once things settle down.
Not a crisis, just an inconvenience.
One step forward, two steps back. Our year had been financially ticking along nicely as we planned 2025 and 2026. We’d already saved and paid cash for a few expensive things, and all was going to plan.
These car and house repairs are annoying, but when you own houses and cars, although they haven’t shown us any signs of trouble, things break occasionally.
We have $10,000 in our emergency fund savings account for these very things. And don’t get me wrong, I don’t want to spend any of it, but that’s what it's there for, to save our bacon when an expense occurs that we have not otherwise been able to save.
Our plans are being adjusted.
With some big bills ahead, we are scrutinising every other expense closely.
International travel was shelved, but we had already booked to go to Rakiura, Stewart Island this Easter. The flights had already been paid, and money had already been set aside into our Holiday Sinking Fund, so we carried on as usual. We are staying with a friend, so we will give her some koha for putting us up, but other than that, it won’t be an expensive trip. On the island, you really do have to make your own entertainment (I’m planning to run the Rakiura Track), and many things are free. Apart from eating at the famous and delicious Kai Kart, we will cook for ourselves.
However, we also had plans to head up to Auckland in the winter to visit our whānau and take a tiki tour to places we had never visited before. That won’t be happening now.
““We can afford to do anything we want, but can’t afford to do everything we want”. ”
One big decision put on ice was potentially replacing our car this year, the one that's now in the workshop. With our daughter leaving home and our whānau no longer having a huge dog that travels with us, we had planned to downsize and update. It’s worth about $14,000 if we sold it privately. Now that we are about to spend perhaps a third of that value repairing it, economically speaking, it will probably make more sense to keep it. It’s an evolving discussion.
The school formal is weeks away, but the money is already there to cover that expense, and our daughter is chipping in too. I’ve got a friend visiting from overseas, and we’ve got some tramping organised (we're doing the Kepler and Milford Great Walks). However, the money was already set aside for that, and we're doing them out of season, so it's more affordable. I considered cancelling, but opportunities like this don’t come around often.
I’m not a person who sits still for long, though. I can find cheap or free fun, and we’ll still get out and about, but it will be local day trips or trips to visit and stay with whānau in Te Waipounamu, South Island, instead.
But, safe to say, Jonny and I are a tight team when deciding what expenses stay and what goes.
While we are waiting, we might as well save up cash.
While we await the final diagnosis of car and house repairs, the right thing to do is to stockpile some money. We have turned the saving tap on and turned the spending tap off. In times like this, the most straightforward answer to “Should we buy this thing?” is NO.
The more money we can save and put aside now, the less we have to pull from our emergency fund.
I’m so adamant about it because once we use our emergency fund, we will have to spend the next couple of months restocking it for next time. There will always be a next time, and we need to be ready for it.
While we wait, we continue to invest.
The concept of “paying yourself first” is often mentioned, but frequently misunderstood. It means setting aside a portion of every paycheque for investments that will compound and grow over time. To my whānau, ensuring we continue to invest as usual is as essential as buying the groceries. If we stopped investing every time a financial problem cropped up, we would never invest. Money needs ‘time in the market’, so I’ve got to keep investing.
We will take every opportunity to work.
Before this, we had the luxury of turning down paid work, but right now, if it comes up, we will take it. No reason not to. As luck would have it, I had recently been filling in for five days at my old workplace — the automotive workshop where our poor car is currently parked — and Jonny had already been asked to work a bit extra, too. Great timing!
Being agile like this is an excellent practice for when we are fully retired. Remaining flexible, which includes taking on paid work from time to time, is a valuable tool in our toolbox for achieving financial independence.
Whereas any extra income would typically be invested, this additional income will now be set aside for car and hot water repairs.
It’s such a shame the share market is down.
What are the chances that expensive things break and must be repaired, right when the share markets are down and everything is on sale? So annoying! Whenever the share market drops, I take this as an opportunity to buy more units in our funds more cheaply, but unfortunately, on this occasion, we won’t be able to take advantage of this share sale as much as we would have liked. We’re still investing as usual; there is just nothing extra being invested at this time.
Sinking Funds and Emergency Funds let us breathe.
When the car's warning system lit up like a Christmas tree, and the hot water cylinder released its contents on the bathroom floor, I groaned. I’ve since taken a few long walks to think. Whenever something like this happens, I’m just so grateful to our former selves that we have financially planned for such events. No, we had not saved enough specifically for this, but we saved money in an emergency fund to cover the unexpected.
To say that this is a financial inconvenience and not a financial crisis is such a gift, and it's not lost on me for one minute that we are so incredibly fortunate to say that.
I spent some time thinking about how much worse this could be if we could not find the money to cover it. We would have had to use credit cards, bank loans, buy now, pay later (BNPL) options, or mortgage debt to cover it. Taking on debt to cover a bill you can’t pay is the worst kind of debt because you have only temporarily solved the problem. Now you need to work out how to pay it off, including interest and set-up costs. And while you do, the thought lurks in the back of your mind that another huge expense could easily crop up. What then?
If you’ve not got the message before that sinking and emergency funds save you in a crisis, please listen now and begin to create your own. They take time to get cranking, but every $100 put aside will help you breathe more easily.
No part of me wants to spend our $10,000 emergency fund fixing stuff, but thank goodness we can.
Whatever drama befalls you and I, life carries on around it. Having the money ready to fight these financial fires means that all other bills continue to be paid as usual. There is no robbing Peter to pay Paul.
We don’t have to sell our ETF investments.
Interestingly, these expenses happened while the share markets were down and we were having the whole “should we apply the 4% Rule this year” kōrero in our whānau. I have entertained the thought that we could just sell some shares to pay these expenses. Had the markets been up, I might have considered it, but instead, by having sinking funds and an emergency fund, we have had the opportunity to cash flow these repairs, without having to sell shares in a down market.
I am ALWAYS planning. You should, too.
Money is never ‘done’. There is no endpoint, just a moving array of income and expenses. Even while we cope with this setback, I’m still planning, being intentional, and being proactive.
I’m always thinking about what’s coming up, both good and bad. When I meet people, I’m always so curious about what they are doing with their money because I’m thinking about what I can learn from their experience that I can apply to my own life. I’m sharing my current situation so that you can learn from me.
One of the reasons we are particularly mindful of our spending now is that next year we have several ideas on the go. The main one is our daughter heading off to tertiary education, which is looking increasingly likely. I’ve written about tertiary education before, our reluctance to see her burden herself with student debt at 18 years old, and the fact that Jonny and I intend to cover any financial shortfall that she can’t cover herself.
I’ve met too many former students, women in particular, who, without thinking, take on large student loans, and these loans then loom over them and impact their lives for the next two to three decades. They may be interest-free, but they are not without consequence. We don’t want that for her.
So, while we await the diagnosis and cost from the mechanic and the plumber, we are saving hard.
But at the same time, we are still scanning the horizon for future problems and opportunities:
While we might just keep driving the car we have, we would still like to explore downsizing.
While we have just replaced Jonny’s computer, mine is nearing the end of its life.
We would love to travel internationally again with a whole world to explore and just the two of us at home in 2026.
Downsizing our home in 2026 to release equity and become fully financially independent, and work optional is definitely on the cards.
We would love to attend an international financial independence conference somewhere.
So many ideas and opportunities pulling at every dollar!
Such is life.
Jonny and I continue to plan for the worst and hope for the best, and being the optimist and problem solver I am, we always work it out.
