Does it makes sense to ask... how am I doing ?

[syracusa]

I know this is a pretty stupid question but sometimes you just want some validation, especially from financial wizards.

The reason why I am asking this question is because I was quite shook up after reading here a thread started by a 22yo who was asking advice for his financial goal, which was to retire before 50, and who seemed to have a lot of financial knowledge and a high level of responsibility for his age. How impressing!
Then I read some threads about the power of compound interest and the difference between the 20yo who starts saving 100$ a month or so and the 35yo who only starts saving at that age and who, despite setting aside much more, still ends up later with less money than the 20yo.

Weeeell....that being said, I started to think..."so how am I doing then?".
Is it OK if I ask here?

At 20, not only that I did not even know what a check was - but having been born and raised in a socialist system, such financial education made no sense over there, it was not even available and it would have been impossible to apply in that society anyway.
Later (at 24), after socialism, I emigrated in the west and went to study (on scholarships) first in western Europe, than in the US.
All I had in the US at 25 was the right to work on campus as a graduate student (not outside of campus!) and a very small stipend .
Saving from it? Out of the question.

So while I will never be like those smart 20y-olds lucky enough to have been born in a system that at least gives people the chance to find out about and apply such financial wisdom, I am however trying to figure out whether we are doing OK, the past aside.
At least I have no regrets of the "shoulda, woulda, coulda" type because in my case it was simply fate, not personal choice.


So here are my stats:

1. 34 yo, married, 1 child (14 months), 120,000 household income, husband (40yo) and I bring in the same percentage of household income (50-50).

2. No student debt despite endless years of grad school (PhD in not-so-lucrative field)

3. No debt in the family other than mortgage (250,000) and one car (car payments about 250 a month).

4. DH has 401K plan with about 40,000 saved up for retirement up to this point (disappointing at this age, I would say). As an American, born and raised here, he could have been much wiser with his money when younger -especially a few years ago when he opted to use a small inheritance (about 8000$) to lease a luxury car for about 3 years. How smart was that.
I knew little at the time, we had just married.

5. We have 12,000 in an Orange account, currently putting in it 1300$ a month.

6. DH will inherit some land supposedly worh about 200,000$ in tomorrow's money (tomorrow being 20 years from now). At least that's what I understood, it may be today's money, but I am not sure (I know it makes a big difference).

7. We are just about to open a 529 for our boy and start stuffing it up because if I have one obssession in this life, it is good education. Prestigious school helps too, it simply opens doors. I have seen it with my own eyes, having managed to snatch a 1 year grad certificate from an Ivy League institution, again on scholarship, like the poor Eastern Europe I was.

8. We do not plan to retire in the US. It will be somewhere in Europe, most likely in my homecountry, where currently the cost of living is significantly lower than in the US (though many say "not forever").

So...what do you think? I heard that it will no longer be enough to retire on 1 million. But I do not think that we will ever build more than 1 million, regardless.

Is there anything else I can do more than I am doing now?

By the way, no entreprenurial spirit on this side - so only 8-5 or academia type jobs for us, if you will. At least I have an excuse, but my husband, born in the country of the entrepreneurial spirit...not so much.





Thank you so much.

[Broken Arrow]

Well, until the financial wizards chime in, I think you are doing great!

Certainly better than me.

Again, I think some people tend to get too hung up on hitting that million dollar mark. Why that is, I don't know, but it's dangerous to do so as you can begin to lose perspective on why one is working so hard to save and invest in the first place.

To me, money is like fuel for our car. Our goal shouldn't be how much gas we can stock up. Our goal should be where we are headed and enjoying the trip along the way there. In short, it's means to the end, not the end in itself. What good is life if all we see is stocking up a million gallons of gas?

However, I too am impressed to anyone who is young and very financially aware, even savvy! How they do it, I'll never know. I only wish I was like that when I was younger. I'm in my early 30s though, and I am hoping that it's still not too late.

[tinapbeana]

Originally Posted by Broken Arrow

To me, money is like fuel for our car. Our goal shouldn't be how much gas we can stock up. Our goal should be where we are headed and enjoying the trip along the way there. In short, it's means to the end, not the end in itself. What good is life if all we see is stocking up a million gallons of gas?

However, I too am impressed to anyone who is young and very financially aware, even savvy! How they do it, I'll never know. I only wish I was like that when I was younger. I'm in my early 30s though, and I am hoping that it's still not too late.

i agree: it's about the goal you want to attain. if the goal is just stashing a cool mil, then great. but if the goal is to retire comfortably, sit down and calculate what kind of cash that will take and set your own personal number (might be a cool mil, might be half, or double that).

as for stockpiling a million gallons in gas, well, i'm sure those in the oil biz could think of several good reasons!

and BA, it's never too late. just remember the age-old and cheesy phrase: today is the first day of the rest of your life. GO!

[Gruntina]

I think your doing better than great! You have a wonderful character that shows through your writing and makes people drawn to you. When you wrote about a younger person being ahead in the financial game, you can’t help but wished you did that sooner. I think we all feel that way. But remember, there are many who wish to be in your position right now. Many even older than us are wishing they thought about finances the way we do now and not waited until retirement. Maybe in the financial world, the young who are ahead with investing are the Joneses of the frugal world?

I think a lot of us get confused with our "life purposes" and "life success" thinking they are the same when in fact they are not. It's great to see people succeed financially but it “should” not define who they are. I want to be known as a good friend, good wife, good mother despite how much or less money I have. I try to remind myself that my "life purpose" is valuable to me on days I feel low about my finance status to instill more positive energy and motivations for life passions rather than dwell on the negatives. You never know what life may give you and the blessing you will receive. Many good surprises do happen on the way if you believe.

I often do not understand how life works, but I think that is the point…. It’s not meant to be understood.

[syracusa]

You are both absolutely right. It's just hard to keep perspective with all of scare stories floating around: there will be no social security left, with people living longer and health care costs going up...1 million in retirement will be nothing, college costs will go through the roof, etc.
Panick, panick, panick.

I know we have low expectation in some areas (compared to the American mainstream) and high in others (still compared to the same mainstream).
For example, I cannot conceive of having more than 1 car in the family (and that one, NOT new) but I also cannot conceive living in a far away, ghostly suburb either. I would never desire a big house with lots of space (Europeans are somehow used to squeeze the whole Home Depot in a 2 bedroom condo ) but I would never conceive to live in an area that has no cultural opportunities either. That means close in to the big city, hence pricey, regardless how small or modest the house is.

I hate "shopping as leisurely pursuit" and I hate techy gadgets - but at the same time I could never make myself skip the yearly trips to Europe (and not just going to see family but also visiting around some).
Most American families do not do yearly trips to Europe, this is seen as major luxury here.

Also, we buy much fewer toys and clothes for our son than many (maybe even most) people here do, but we are instead obssessed with saving for college so he can go to DHS (to be read "darn hot school" ).

So I guess it all evens out. My husband says that the only thing that allows him to sleep at night (considering his meager retirement account) is the thought that we will retire in a place with a lower cost of living.
But like I said...it may not be so 20-25 years from now.

I guess you just have to be as frugal as you can by cutting costs in those areas not important to you - and live life to the fullest in those that matter to you, personally.

But then again, I feel like I go around in circles: who's to say that having the latest gadget and shopping doesn't give some people the kicks of their life? It just makes them happy - just like traveling makes me happy.
Maybe for some people, having material possessions enhances their quality of life?...I don't know. It is not usually an accepted wisdom, but it seems to me that some people just thrive on this lifestyle, it gives them purpose, so they choose to live their lives like that. After all, what's the use in being secure in old age when you have lived your entire life in abstinence?
Such people (I mean the ones into spending on material possessions) live their lives to the fullest, in their own way. Would it be correct to assume that?

[syracusa]

Oh, yes - one more thought. Deep thought, mind you

I am not sure I would be 100% ... let's say "jealous"... on someone who, at the age of 22, says "I HAVE TO be retired by the age of 50".
Well...that means that the person plans to, or assumes that until 50, he will probably work in a job that he will be happy to drop as soon as this becomes possible.

At the age of 22 and with so much awarness of life - wouldn't it be wiser to focus on finding a career more like a "life calling", that you would have a hard time quitting at the age of 50 simply because you love what you do so much?

That shouldn't be incompatible with financial success...but why retire at 50? Why not find something to do all this lifetime between 22 and 50, that you would hate parting with at the relatively young age of 50?...

[Ima saver]

My husband loves building houses, so he has no desire to retire in his 50's. I think saving $1300 a month is very good, but could you do better? We live on less than half of what you make. You mention you have no debt other than mortgage and car payment of $250. Where does the rest of your money go?
You both need to open roth ira's as soon as possible.

[creditcardfree]

I think you are doing fine, but you could do better. You said it yourself, that DH only has $40,000 in his 401k. On your income you could probably save more. Based on the $1300 per month you are saving 13% of your income. Why not try to bump it up a bit. We save 15% and make half of what you do.

Also, one never knows where they will retire. Health issues could come up that make you want to stay in another country for retirement, ect.

Open up an ira...a roth if you qualify...traditional if you don't. Putting $8000 ($4000 each) each year would get your savings rate very close to 20%

[Broken Arrow]

Originally Posted by syracusa

I am not sure I would be 100% ... let's say "jealous"... on someone who, at the age of 22, says "I HAVE TO be retired by the age of 50".
Well...that means that the person plans to, or assumes that until 50, he will probably work in a job that he will be happy to drop as soon as this becomes possible.

Yes, I agree that such a plan isn't well-thought out. But then, if it was a statement made by someone who is in there early 20's, I would usually cut them some slack. After all, they're still more financially aware than I was in my early 20's. That and there's always time for them to become more aware and revise their plan as they go along.

When I hear people say that, I typically encourage them to use that motivation and do what they can to save and invest. I'd rather not poop on their parade just yet.

[syracusa]

Ima saver and credit card free,

Well... with your help and a phone call - I just found out from DH that we actually are saving 23% of our income, not 13%.
He jumped at me quite indignant saying that "he knows about this kind of stuff" and "that we are OK".
All right, all right then !!!!! Geeeeez....
Actually, he worked as a financial planner at the begining of his career, it's just that he does not have a financial planner mentality, not an overly frugal guy, but definitely not irresponsible either.

He currently contributes about 400$ a month to his 401K (actually I knew that but I forgot to mention it) and he is about to up contributions a few hundred dollars a month or so from January when we will be saving a total of 23% of our income, according to him.

Also, he said that the land is worth 200,000 in today's dollars, not 20 years from now. Yey.

As for where the money go...well, I am sure we could make adjustements but not without my husband having a fit about it. We have a pretty fluffed up cable package - I would drop it at the drop of a hat but not DH.
To him, cable TV is like air.

A lot of the money go into the mortgage payment (relatively big city, good neighborhood = pricey). Then childcare 500 a month.
International phone calls galore (I have to talk to my family and we have a big mouth unfortunately.

As it stands right now, on my side I have 600 dollars left to spend on diverse things each month, such as baby-related stuff, clothes and whatever miscellenaous things may come up, including my recent foot surgery which, even with insurance and all, still cost me 2000$ out of pocket.

These miscellenaous things, after fixed budget, always somehow come up and quickly eat all of my discretionary 600$, and even a bit over at times.



I just can't see how we could be doing better - other than fixing a few things here and there such as the electric bill and the food bill. We don't always buy the cheapest food, for example I cannot eat that 99c mushy, packaged bread for the life of me - and we are major bread eaters. I also consume a pretty indecent amount of fresh fruits and vegetables and these are not inexpensive at all.
But we also cook in the home and I have recently cut back on cafeteria eats at work. Actually I bring lunch with me everyday.

Any other tips?...Thank you so much for your replies.

[Ima saver]

Well, if you are saving 23%, you are doing pretty well. I forgot that you have to pay for child care. I would suggest that you write down everything you buy in a little notebook for a month. Look at see where that $600 is going??
also, it is more important to save for your retirement now than a child's education. i know you don't want to hear that, but it is true.
You can borrow for schooling, but you can't borrow to retire.
I think it is very important that you both open roth IRA's and contribute the full $4000 each. That is $333 a month for each of you.

[Squantum]

I think you are doing well! You could cut out cafeteria eats, entirely, of course. And bake your own bread -- a lot cheaper than buying good bread.

And your child care sounds very cheap to me -- where I live, childcare costs $1,000 - $1,400 a month.

Readers here need to remember that cost of living varies widely. Buying a house in many East Coast cities or California cities these days would result in a mortgage way more than $250,000.

[Ima saver]

Yes, I agree that child care costs seem pretty cheap. Yes costs do vary widely. You can hardly buy a house around here for under $200,000.

[sakigt]

At 23, I wish I was as financially saavy at the age of 19. You can never win, can you?

[syracusa]

Originally Posted by Squantum

I think you are doing well! You could cut out cafeteria eats, entirely, of course. And bake your own bread -- a lot cheaper than buying good bread.

And your child care sounds very cheap to me -- where I live, childcare costs $1,000 - $1,400 a month.

Readers here need to remember that cost of living varies widely. Buying a house in many East Coast cities or California cities these days would result in a mortgage way more than $250,000.

Well...the childcare is actually a family arrangement - my relatives help us, this is why it looks so cheap.

[syracusa]

Originally Posted by Ima saver

Well, if you are saving 23%, you are doing pretty well. I forgot that you have to pay for child care. I would suggest that you write down everything you buy in a little notebook for a month. Look at see where that $600 is going??
also, it is more important to save for your retirement now than a child's education. i know you don't want to hear that, but it is true.
You can borrow for schooling, but you can't borrow to retire.
I think it is very important that you both open roth IRA's and contribute the full $4000 each. That is $333 a month for each of you.

Very, very interesting point, I will keep it in mind, thank you.
Both my Dh and I have accounts with some retirement money from previous employers, but we can no longer contribute in those specific accounts from what I understand. I am still not very versed in the financial world - all I know is "behave yourself and do not buy with money you don't already have".
Should we open new IRA-s and roll over that money and make regular contributions?

Thank you so much again

[creditcardfree]

Originally Posted by syracusa

Should we open new IRA-s and roll over that money and make regular contributions?

Oh, yes! I think that idea is a good one. It consolidates your accounts and gives you a new pot to feed!!

Hey I feel better now that I know you are saving 23%!! Much better based on your income! And I did forget about the land...

[kealina]

Originally Posted by Squantum

And bake your own bread -- a lot cheaper than buying good bread.

i think you are doing well too... if you eat a lot of bread you might want to look into getting a bread machine, or baking your own like the squantum suggested, because it might help you save money in the long run... we don't eat that much bread so we buy our whole wheat bread cheap at the bread thrift store...

[syracusa]

Originally Posted by kealina

i think you are doing well too... if you eat a lot of bread you might want to look into getting a bread machine, or baking your own like the squantum suggested, because it might help you save money in the long run... we don't eat that much bread so we buy our whole wheat bread cheap at the bread thrift store...

Arghhhh...the bread machine. I have it - and I have done bread in it but...it comes out good for only a few hours. The next day it's crumbly and hard and then we just throw a lot of it away. I gave it up at some point because I was craving better bread.

There are areas where I can't scrimp too much: the bread, the fresh fruits (I eat tons of them and they are anything but cheap) and salads (tomatoes, cucumbers, lettuce, etc).

[creditcardfree]

Originally Posted by syracusa

There are areas where I can't scrimp too much: the bread, the fresh fruits (I eat tons of them and they are anything but cheap) and salads (tomatoes, cucumbers, lettuce, etc).

You will definitely be healthier for eating the way you do. So probably less medical bills down the road. So really its a positive thing!