Jan 15, 2009

The Weirdest Conversation With My Dad about Saving Money

Maybe my dad's perspective on saving for retirement has changed since he has cancer and may never make it to see the 401k fruits of his many years of labor, but the phone conversation I had with him earlier today about investing was bizarre.

My dad has never been the frugal type, but he made enough money where his spending was reasonable. He enjoyed eating out, living in a nice-yet-modest home in the burbs, and taking a good vacation with the family once a year. Being as he worked as an actuary, his company provided a sizable pension.

Since my dad is the math and finance expert in the family, I've asked him for advice on where to put my savings and how much I should be saving for retirement. His immediate reaction to the question was "why are you saving for retirement now you're only, what, 25?" I'll let my dad off the hook for not being sure how old I am for the time being (I'm not sure if he's 57 or 58, so that's ok), but it kind of irks me that he almost thinks it laughable that I'm attempting to save for the long run.

His response about long-term saving is that I shouldn't worry, that the "inheritance" will "cover" my retirement. (A lot of you were upset at me in an earlier entry when I wrote about expecting a sizable inheritance in the future, but this is where I get the idea from!) Still, I've realized that I'm not going to expect that or rely on it, because who knows what will happen over the coming years. If I end up retiring with a butt load of money that I didn't expect, all the better, I can donate it or give it to my hypothetical kids. In the meanwhile, I want to save $5M for my retirement.

So I go on to ask my dad where I should save the money, if not in a long-term account. He seemed perplexed why I didn't want to spend it. "Enjoy life" were his exact words. Again, the fact that he now has a terminal illness might influence his advice a bit. He wouldn't advise wasting the money on clothes or such (which is a bad habit of my mother), but other things like travel, sure.

That's not to say I haven't or won't spend my money. I spent a lot in the past year on travel. Going home ($300 flights twice a year), my trip to Israel... all of that added up. And to be honest, I'm still not clear on where my net worth ended up for 2008. I feel like I spent a lot. And I did... if my taxes actually were 50% of my total income for 2008 I'd be at a loss for the year (though that's also due to losing "thousands" in the market like everyone else). But I save a lot for my taxes and I'm pretty sure I'll end up getting some money "back" (which really just means I'll move the money from my "taxes" account that I ignore to a savings account that is included in my networth).

2009 is going to be a totally different story. With my promotion at work, as long as I can keep the job (and I plan to) I'll be making quite a bit of money. Of course, it's all relative, and it's super easy to spend it all on things I don't need. My cost of living is really low for someone my age in my location.

But I foresee a lot of major expenses in the next 10 years including, but not limited to, grad school, a house, a "new" likely used car, infertility treatments if I want kids ($20k a kid is not out of the question, and who knows if it will even work), etc, etc, etc.

All of those things cost a lot of money, which makes me so confused about saving. I only have about $1500 a month after taxes and rent/bills, even with my pay increase. Which is a lot, but not a lot, a lot. As I said earlier in this post, it's so easy for me to spend that in a few days at the mall. Or at least a huge chunk of it.

I'm not planning on doing that this year. I want to spend this year, well, not spending. To see just how much I can save. I'm not going to live "frugally" but I am going to live well within my means. I just don't know where to save the money.

I'm so tempted to put a lot of it into the stock market. Worst case scenerio it gets stuck in there long term because the stock market takes a while to recover and at some point it pulls out. That doesn't seem wise. I'm planning on maxing out my Roth by putting $400 a month into the account. So that leaves me with $1000, give or take. $1000 a month isn't that much, if that's going to everything from vacation to clothes and other savings.

And I'm so so so fortunate to have the luxury to ask my dad about what to do with my extra savings. And to ask the finance guy at my company if we'll get a 401k and be embarrassed to admit that I'm maxing out my Roth IRA at 25 and would like another tax advantaged account to put more money away for retirement.

Or maybe all of this retirement savings talk is teaching me the right things and wrong things at the same time. Maybe I should be saving my $5k a year for retirement, but beyond that it might be wise to invest elsewhere, for the short term. I'm pretty sure I want to do grad school within the next 3 years, and that ain't cheap.

My dad has mentioned that when he can get into his 401k he'd "help" me out with grad school costs, but a part of me doesn't want the favor. It's tough to say "no" to that kind of offer, but I'm at a point in my life where I take pride in paying for my pursuits. I didn't do that all through undergrad, and everything seemed worthless. I mean, I knew it was expensive, but it wasn't something I paid for, something I earned or would have to earn in the future. Now my life - it's really mine. Because I pay the bills. Because I have the choice to go to grad school and take out a loan, and pay it back. I guess I just want to feel normal, when it comes to finances. I grew up so spoiled in relation to the rest of the world and I'm tired of it.

But I'm also terrible at spending on big purchases, even if it's things I really want but don't need... like laser hair removal on my face (I have a hormonal disorder called PCOS that causes hair to grow where it shouldn't which really sucks) and maybe Lasik for my eyes. I did pay $300 for Brite Smile this past year (I'll post a review about the treatment tomorrow) which was huge for me, but I wanted to treat myself. Instead of wasting the money on clothes. I'd waste the money on brightening my teeth a few shades. Waste of money? Maybe. But it felt better than wasting money at the supermarket on things that went bad before I got around to eating them.



8 comments:

Scribbles said...

Just had to delurk and say I'm a PCOSer too! I love reading your blog, keep doing what you do!

her every cent counts said...

Aw, thanks Scribbles. Glad that you like my blog. PCOS sucks. :) But it's always nice to know we're not alone dealing with everything that comes with it! I have another blog called www.pcosspot.com but I need to update it... I run out to time to update all my blogs, so I try to keep this one fairly updated.

Fabulously Broke said...

Well, I think you're extremely smart for starting to save for retirement so early. Inheritances disappear or get lost or used up some how, so I never and will never count on anyone to bail me out, esp not my parents.

Fabulously Broke in the City

"Just a girl trying to find a balance between being a Shopaholic and a Saver."

Anonymous said...

Well I think you have you answer in the last thing you wrote. You're already ahead of the game in saving cash for your net worth. Another type of investment is in yourself. I don't think anyone regrets getting something fixed that's been bothering you. Go for the laser hair removal or eye surgery. And once you get it done, nothing can take it away from you. you'll keep reaping the rewards and it doesn't depreciate in value.

Aya @ Thrive said...

It looks like your father's outlook on things changed quite a bit, but I think it's great that you're still able to take his advice but also override it. Seems like you know what you're doing and what you need to do. Maybe your father's bizarre advice can be helpful in a different way, and it's nice that he's supportive of the choices you'll make.

MEG said...

My dad's a bit of an investment "expert" as well, as he was a stockbroker with Merrill Lynch for 15 years before I was born. He's always encouraged me to invest, though not necessarily for retirement. We had a similar strange conversation recently where he was giving me some stock tips and I commented that I didn't have spare cash to put in the markets - I only had around $5K in savings at the time. He couldn't believe I had so much "just sitting" in cash, and of course I'm like "but it's not even 3 months of expenses!"

He veritably scoffed at me, and pointed out that even if I lost my job I could easily replace my income since I was still working entry level. Plus there are credit cards and home equity and my stock funds and my family who would step up in a real emergency. "What do you need 3 months of cash for?" I was kind of stumped - but I'm still clinging to my modern day cliche PF goals - have 6 months expenses in cash, max Roth IRA, get 401k match , et al.

MEG said...

Oh, but I totally get your situation. I have more short term goals than long at this point - a theoretical wedding being one, a car, new appliances for my home, potential rental property vacancies, etc all might very well occur within the next 5 years. Retirement is 40 years away, at best. Yet I still am putting 20% in my 401k and maxing my Roth IRA at the expense of regular savings.

I know I should just get my 401k match and save more cash. But my cash savings have a way of disappearing once they exceed $5K or so (on travel and other purchases) - I know I won't touch my retirement investments. And also the stock market is so low now that I feel like I should take advantage and shovel money into stocks/retirement.

So I feel your pain. But hey, it's a good problem to have when you have extra money and have to figure out where to invest it.

her every cent counts said...

@MEG I'm glad I'm not the only one who has these weird conversations. I feel so guilty that I have a family that would "step in" if I ever needed that emergency fund, esp in the PF blogosphere where it seems like everyone is in debt. Thanks for your comments!

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