To infinity and beyond

Next pay period¬†I will receive a small raise at work, to the tune of $2,500 (a 3% raise). While I’m stoked to be getting any raise at all, let’s be real, it’s not a life changing amount. In fact, I’m only expecting to net $75 more each paycheck because of it. Big Macs on me tonight guys. Wait… too expensive, dollar menu cheeseburgers on me instead ūüôā

Girl Ninja and I have decided to do the boring and responsible thing and increase our retirement contributions, as opposed to increasing our discretionary cash flow. We’ve been contributing 10% to my 401k, but looks like it’s time to increase it by another 3%? My employer matches 5%, so in total 18% of my gross pay will be going to my 401K plan.

Is that hot or what?

So yeah, technically I got a $2,500 raise, but before I even have a chance to see it in my paycheck, it will be going straight to 65-year-old me via retirement contributions. If that’s not keeping up with the Joneses I don’t know what is.

Since I’m a self-proclaimed PF nerd, I thought I’d run a quick calculation…

If we keep throwing that $2,500 in to our 401K plan for the next 40 years, do you want to know how much extra we’d have come retirement? This example assumes an 8% rate of return.

$732,141.92

You can see the decision was easy. Get $75 extra in each paycheck or have an extra $732,000 waiting for me when I’m older? I don’t know about you, but I’m picking the latter every time.

Lifestyle inflation is cool and all, but if we are already content with what we have, what else is there to inflate besides our savings, retirement, and charitable contributions? I’m not going to go run out and buy another TV or laptop just for the hell of it (pardon my language).

Last time you came in to a little extra money, what did you do with it? If you had to inflate your lifestyle in one aspect how would you do it? (We would probably dine out a little more, or maybe pay for a maid service).

Too much bad personal finance advice out there.

You ever read a blog post that went something like this…

You might want to think twice before you buy that brand new TV. It would set you back $2,000, and will likely only provide you entertainment for a handful of years. What if you invested that money instead? 

If you put $2,000 in to a Roth IRA and let it grow for 30 years, at 8%, you would end up with $20,000. 

I repeat, TWENTY-THOUSAND DOLLARS!!!!

Is that TV really worth $20,000 to you? I didn’t think so. Now go give yourself a spanking and put yourself in time out for even thinking that buying a TV was a smart move!¬†

I can’t tell you how many times I’ve read some iteration of the post above. Maybe instead of a TV, it’s a vacation. Or a boat. Or a house. Or probably the most popular topic for an argument like this to appear, a wedding post.

Consider this my permission to flip those other PF bloggers the internet version of the bird and tell ’em to buzz off. Unless of course, your goal is to be miserable for the rest of your life. Then by all means, drink the kool-aid.

Personal finance bloggers commonly confuse the term financial freedom with wealth. THEY ARE NOT THE SAME THING.

Say I had $1,000,000 in my 401k right now. I am literally a millionaire. But am I free?

HECK NO!

My 401k isn’t going to pay my cable bill, put groceries on our table, or a car in my driveway for another 30+ years. Yeah, I’m a millionaire, but I’m no more free than the dude that bags groceries down the street at the local Safeway. We both still have to go to work tomorrow.

Do you get it? 

You need to be working towards financial freedom, not wealth building.

I think, at 28 years old, I’ve reached that place. My job provides the best work/life balance of anyone I know, I make a reasonable, but still down-to-earth five-figure income. We have a roof over our head. We contribute 15%-20% towards retirement. And we’re content living within our means, no pinching pennies, but we still have to be mindful of our spending. As far as I’m concerned; we’re retired.

It’s a beautiful place to be, and a place I hope you are in, or working towards finding.¬†

Don’t get discouraged by the PF bloggers who talk about how great early retirement is even though they are still¬†slaves to their blog (or their portfolios), who make you feel terrible for buying a new car, or who tell you there is no such thing as saving too much.

Those bloggers suck.

You be the best you you can be. Make a plan. Stick to it. And enjoy the ride along the way…even if that means you end up buying that TV.

You don’t have to be a millionaire to be happy. Promise.¬†

Thursday Poll: What day will the government get its crap together?

I recently mentioned I have not yet contributed to my Roth IRA this year. If you haven’t been living under a rock, I’m sure you’ve noticed the markets are down a couple hundred points as the Republicans and Democrats are being a bunch of drama queens. I would never advocate trying to time the market because no one can predict the future, but almost surely one of two things will transpire over the next week…

Option A) The government shutdown continues, and for the first time in the Nation’s history, we will default on our national debt obligations. The economy will likely see an immediate and sharp decline. If I buy in today, with the dow at 14,800, it could easily be thousands of points lower a month from now if the economic crap hits the fan.

Option B) Republicans and Democrats continue bickering, but ultimately strike a deal. Either the national debt issue is pushed back for another few weeks/months, or the debt limit is permanently increased and the shutdown ceases. The markets will react positively to this news.

What’s going to actually happen?

No one knows exactly. But, I’m pretty sure no elected official wants to be part of the nation’s first debt default so I’m betting a deal is struck before default becomes a reality.

Now is the part where you, the reader, can help me out.

I want YOU to pick what day I should make my Roth IRA contribution.¬†Ideally I will contribute on the last business day BEFORE The House and The Senate strike a deal (right before the markets would make a nice little jump). Only problem is, I don’t know what day said deal will be made.

To have a little fun, I’ll let you do the picking for me. Whichever day gets the most votes, will be the day I drop $4,500 in to my Roth (side note: I’ve already contributed $1,000 to regular IRA).¬†

This could end up being the greatest idea I’ve ever had, but it could just as likely end up being the worst. Haha. Should be fun either way right?

So reader…

[poll id=”22″]

 

Financial laziness.

I’ve been a big sack of laziness lately when it comes to keeping up with my retirement planning. Apparently the calendar has decided to say it is September (when did that happen?) which means I could have contributed to my Roth IRA as early as nine months ago for the 2013 tax year.

Had I just invested the $5,500 Roth IRA contribution limit on January 1st like a good little Ninja, that amount would have grown by $935. Or in other words, basically my $5,500 contribution would be $6,500 right now. 

How lame am I?

Answer: only kind of lame because at least I’m realizing my lameness as opposed to justifying it?¬†

…Okay, well part of me wants to justify it for the following lame reasons…

  1. I upped my 401k contributions this year quite a bit.
  2. We bought a house, which hopefully will have some investment aspect to it.
  3. I’m lame.

It’s time I give myself a swift kick in the butt and get my Roth contribution in.

Have you needed to give yourself a kick in the rear for being financially lazy in any capacity?

  • Avoiding paying down debt faster than you could/should?
  • Not contributing to retirement when you have the means? ¬†
  • Paying for two cable boxes when you haven’t turned your basement TV on in months?¬†

How many of you invest outside of retirement?

investing

I’m currently of the mindset that Girl Ninja and I have enough job security and enough liquid assets we can afford to quit saving money. It’s a fun place to be in for sure, but it is also extremely intimidating. Throwing excess income in to a savings account each month takes virtually no effort. Investing money in short-term investments, however, requires one to be much more proactive.

I could take the easy way out and just increase our retirement contributions to some insane amount, but that doesn’t really help us much. Sure, we’d be super rich when we are all old and wrinkly, but what good does that do my 40 or 50-year-old self?

I’ve said it before and I’ll say it again…

  • I’d way rather have $1,000,000 waiting for me on my 50th Bday (side note: today is my 28th birthday) and $2,000,000 in my retirement accounts, than just having $5,000,000 waiting for me at 65.

That’s just me though.

Maybe you’re different? Who amongst you ACTUALLY is being proactive about investing in shorter term assets? Throwing a couple bucks at some random stocks isn’t what I’m talking about. Strategic, consistent, and significant allocation of discretionary income is what I’m looking for.

If you don’t, why not? If you do, what specifically have you chosen to invest in?

 

I get high.

I’ve been doing a lot of blogging lately about real estate and the stock market. The last twelve months have been insane for both markets. Epic and unsustainable are some of the adjectives that come to mind for the recent ¬†gains.

The general¬†consensus¬†amongst PF nerds is that one should strive to buy low and sell high. Today, I’ll make the argument that one should Buy low AND Buy high.

One of the Seattle Real Estate blogs I read repeatedly says this is a terrible time to buy a house in Seattle because of the recent market appreciation. This bothers me for a few reasons: 

A house is a home first, an investment second.

I have to pay to live somewhere, right? Real estate is one of the only investments I can think of that satisfies a basic human need, shelter. Even if my house lost all of its monetary value, it still provides ME value. If your WaMu stock loses all of its monetary value, you have nothing.

We are looking at houses within our budget.

Just cause the market went up doesn’t mean our budget did. If we find a house that we like – in our price point – I’m not going to refrain from buying it just because it was $20,000 less last year. Milk was also cheaper in 1995, so should I not pick that up at the grocery store today?¬†Which leads me to my next point…

Buying high is a good thing.

I mean, that’s they way the stock and real estate markets works right? They should both be setting new highs every day. Okay well maybe not every day, but over the long haul the trend is supposed to be (and always has been) up. Why do we act scared or surprised when the Dow sets a new record?

THAT’S WHAT IT IS SUPPOSED TO DO!!!!

I get that one might argue the importance of buying low and selling high when it comes to short-term investments. But who the crap buys a house with the intentions of selling it two years later? That’s stupid, or at least¬†speculative¬†at best. Two years from now the housing market may be down, but I bet you a billion dollars twenty years from now the market is up. I don’t really care if my house is worth $300,000 or $320,000 today, when it is going to be worth $700,000+ thirty years from now. Sure, it would be nice to time the market, unfortunately no one can do that without taking a gamble.

Moral of the story kids: The market being at all time highs should be reassuring that the market is performing as expected.

Well, we officially quit saving yesterday.

After a brief chat with Girl Ninja yesterday, we’ve made the wise decision to stop saving money for the foreseeable future. No, we haven’t hit our $100,000 savings goal yet, and if I all goes according to plan, we never will.

I first blogged about our ambitious $100,000 savings goal in June 2010. Exactly three years ago. And here we are, probably four weeks away from reaching said goal, ultimately deciding it’s time to throw in the towel and give up.

Have I gone bonkers? 

bonkers

 

Don’t worry, I haven’t gone off the deep end yet. It’s just time I start practicing what I preach.

While it’s true we have not hit $100,000 in savings, we are pretty freaking close. About $3,500 short as of this writing. This week’s blog post about 401(k) loans got me thinking. I like the idea of using a 401(k) loan, but ultimately have decided against it for one reason.

I wont need (or want) a boat load of cash sitting in the bank once we’ve made our down payment.

As I’ve mentioned before, we will likely use between $70k and $80k for a down payment and closing costs. This will leave us with a $10,000 emergency fund and between $10,000 to $17,000 for “other things”¬†(furniture, vacations, etc).

I have no desire to keep more cash in the bank than necessary. In other words, we’ve reached our MAXIMUM savings threshold. I feel like any additional savings would no longer be classified as “being responsible” but instead as “hoarding”.

hoarding

We knocked debt freedom off the list years ago. Yesterday, we put a check mark next to savings. Now it’s time to make some new priorities. So…

  • I upped my 401(k) contributions last night from 13% to 20%, and after I see exactly how that affects my paycheck (thinking about $430/month less in take home pay), I might increase it even more.
  • We’ll probably begin living slightly more¬†frivolously (emphasis on slightly). Maybe we go out to a nice restaurant once a month. Take a weekend trip somewhere once a quarter. Or finally update one of our six-year-old laptops. We won’t be keeping up with the Joneses by any means, but it will be fun to splurge every now and again.
  • Lastly, and what I’m most excited about, we will take the majority of our discretionary income and FINALLY start throwing it in to taxable investment accounts. If all goes well, we can make some serious progress in our goal to build up some short to mid-term investments. It’s important we get a jump-start on this now, before we have kids, a larger house payment, and only one income.¬†

While it would be cool to actually reach our $100,000 savings goal, I think it’s way cooler to move on to the next phase of Operation Build Wealth.