Saving enough?

[jteezie]

Hey everyone,

I feel like I am not saving enough even though I put up max out my 401k and Roth IRA (I treat the 20k or so contributions as expenses). Last year I made an effort to spend more and have less left over and I guess I have somewhat succeeded in that because my total savings hasn't increased. It feels weird as if I am underspending - or maybe overspending.

Is this irrational? I have more than enough set aside for my retirement plans so in theory I should be "wasting" every left over penny to enjoy life, right? I justified by spending in part as "helping the economy recover", but now that it isn't in a spiral of death, I don't have that rationale anymore. Why does my spending behavior feel weird?

[kork13]

I expect your savings are doing just fine. If you want confirmation: How old are you? What are your total savings each month (and to where)? What are your current balances? But as I said, probably an unnecessary concern, based on your post.

For the second part... It's probably just part of how you think of things. I'm the same way... I save nearly half of my paycheck every month, and wonder if it's enough. I know it is, but saving more makes it easier to meet financial goals. The problem is that you sometimes choose not to spend money on what could be meaningful experiences simply to save the money. In such cases, it's often not worth saving the money. That's how I've come to think of it. If I'm interested in doing something, I try to just do it and not worry about the cost (as long as it's not outrageous, which it almost never is anyway). You do have to learn to simply enjoy life and make what you can of it. There are alot of opportunities out there, and so can't waste them away by being cost-conscious to an extreme. Learn to spend on meaningful experiences and you'll be happy about how you're spending your money.

[feh]

If you want to save more, then save more. Just open a taxable investment account.

Spending money just for the sake of spending makes no sense to me.

[jteezie]

I know I've saved more than enough for my age, 27. It just feels a little weird though when my retirement accounts are increasing but not my taxable brokerage. I realize a lot of the problem has to do with the poor market performance causing what looks like no growth even though in a normal market I would be fine.

I don't feel that I am limiting my lifestyle, luckily. As an example, I spent almost $1k in the last week on pictures, coaching services and outings.

I guess my question is: how do you look at your excess money and rationalize spending it?

[feh]

Originally Posted by jteezie

I guess my question is: how do you look at your excess money and rationalize spending it?

My wife and I don't attempt to rationalize unnecessary spending - we save it instead. Every extra bit saved brings the day when you can either retire or semi-retire that much closer.

You are young and apparently have much more income than you need to live on. That's a beautiful position to be in - save/invest that extra cash now and reap the rewards later.

[photo]

Originally Posted by jteezie

I guess my question is: how do you look at your excess money and rationalize spending it?

It depends on how you define excess money. When I am at a cash position of $1,000,000 (and net worth is several times that amount), then I will have excess money. Until then, I spend on necessities and only what I really want.

I also wouldn't even begin to think that a pension plan plus IRA savings (which can only be $5,000 a year) is enough for retirement.

The chances of a person underestimating what he'll need in retirement far exceed the chances of overestimating.

Are you giving 10% of your earnings to charity?

[GREENBACK]

Originally Posted by jteezie

I know I've saved more than enough for my age, 27. It just feels a little weird though when my retirement accounts are increasing but not my taxable brokerage. I realize a lot of the problem has to do with the poor market performance causing what looks like no growth even though in a normal market I would be fine.

You may want to look at rebalancing in your taxable brokerage if it's performing as poorly as you state. Make sure it's in line with what your goals are for it. Investing is a long term proposition for most so it's important not to get discouraged by what we're seeing today or in the last few years.

[kork13]

Originally Posted by jteezie

I guess my question is: how do you look at your excess money and rationalize spending it?

I'm 25 myself, and see what you mean entirely. I wouldn't say I rationalize spending, but I do it "right" (by my own highly subjective standard). Save what I need to, spend what I need to, then I have the rest to use in whatever way makes myself and others happy. Give to charity, go out with friends, travel somewhere new, be reasonably generous with gifts, try something that interests you, and save up for large expenditures when necessary.

Bottom line: I see money as a tool to create a fulfilling life. You work, you earn, you save, you spend. What matters in all of that are the experiences that you remember, enjoy, and learn from.

If your investments are of concern to you, that's an entirely separate matter. You can't make up for a poor investment by simply throwing more money at it. If you're not happy with your investments' performance, take a close look at how you're invested. Maybe you just need a different investment. How does your portfolio's performance compare with relevant benchmarks? Are you happy and comfortable with the asset mix and allocation? Are you invested in quality assets/products/vehicles? You might also consider asking someone you trust for detailed advice... a parent or friend, or sit down a fee-based financial advisor for a couple hours and go over everything. In the end, it's your money -- do what you consider to be "right" with it.

[jteezie]

Kork vs feh - I guess those represent the two positions I'm trying to sort out.

Before I continue, I realize my situation may seem ridiculous, but it's an interesting state of mind that I need to figure out. I'm trying to understand how irrational I am with my position. By figuring out a baseline, I hope to have healthier saving habits. Thanks!

So, a little more background on what brought about this post. I usually contribute my $5k roth IRA contribution upfront each year (I still consider it dollar cost averaging and some research shows that this strategy generates higher returns), but this year I'm debating whether or not I should contribute on Jan 1st because I do not want to reduce my "cash" position too much. I have about 90k in Roth 401k and Roth IRA combined and 23k in a taxable brokerage account (aka my "cash" position). Again, I'm 27 years old.

What bothers me is that in a "merciful" market (no appreciation) I would have 30k in my taxable brokerage account and I wouldn't mind transferring the 5k on Jan 1st. However if I did the transfer, I feel I would have too much put away (granted I could always take the money back out since it's a Roth, but psychologically that's not a smart move. Once it goes in, it shouldn't come out except in an extreme situation, right?)

Another way to look at this is... It feels like I've spent $5k more than I earned last year, which is definitely a bad path to travel down. (the market clearly isn't going to slide indefinitely, but it might another year or two)

Other considerations, if the market continues to seesaw, it might make sense to keep the money in taxable status to claim the tax losses (mitigating risk, *sigh).

Maybe I'm a bit too risk adverse? On the upside, I may actually get up to as much as 10k from work around Feb (I hear that my new group has really big bonuses, and I also expect a tuition reimbursement), but for now I feel like I haven't advanced anywhere with my "cash" position.

One last thing to clarify, when I say I max out my Roth 401k, I mean that I contributed $15.5k.

[jteezie]

I forgot to note that yes I do contribute to charities and other non profits. This year I paid for a months worth of bus rides for needy children, fed some hungry people, contributed to my university, supported 2 NPR stations, then got tricked to support another school in my university...

[feh]

Originally Posted by jteezie

Kork vs feh - I guess those represent the two positions I'm trying to sort out.

Before I continue, I realize my situation may seem ridiculous, but it's an interesting state of mind that I need to figure out. I'm trying to understand how irrational I am with my position. By figuring out a baseline, I hope to have healthier saving habits. Thanks!

So, a little more background on what brought about this post. I usually contribute my $5k roth IRA contribution upfront each year (I still consider it dollar cost averaging and some research shows that this strategy generates higher returns), but this year I'm debating whether or not I should contribute on Jan 1st because I do not want to reduce my "cash" position too much. I have about 90k in Roth 401k and Roth IRA combined and 23k in a taxable brokerage account (aka my "cash" position). Again, I'm 27 years old.

What bothers me is that in a "merciful" market (no appreciation) I would have 30k in my taxable brokerage account and I wouldn't mind transferring the 5k on Jan 1st. However if I did the transfer, I feel I would have too much put away (granted I could always take the money back out since it's a Roth, but psychologically that's not a smart move. Once it goes in, it shouldn't come out except in an extreme situation, right?)

Another way to look at this is... It feels like I've spent $5k more than I earned last year, which is definitely a bad path to travel down. (the market clearly isn't going to slide indefinitely, but it might another year or two)

Other considerations, if the market continues to seesaw, it might make sense to keep the money in taxable status to claim the tax losses (mitigating risk, *sigh).

Maybe I'm a bit too risk adverse?

You have to choose the investments you're comfortable with. Everybody has a different level of risk tolerance.

Personally, if I were in your shoes, I'd be awfully aggressive. Try not to fret over monthly or even annual returns. You probably won't need this money for at least 20 years.

[ecoadapt]

What can I say? You shouldn't be spending more and saving less! Somehow,if you think you have enough for the future think again,the price of the things you essentially need will never be the same tomorrow! It increases,thus saving for your future will be a good option!

After all,it will be you and your family (future) who will harvest the benefits!

[amarowsky]

I suppose u can never have too big of an EF. and if you to get more than enough of an ef, and still have excess , maybe consider consider donating it to a very respected and meaningful charity . A good piece of mind and conscious from doing so could be worth more than the money could bring u on a personal level possibly .

[photo]

Originally Posted by amarowsky

I suppose u can never have too big of an EF.

It's a liberating feeling to be able to buy almost anything you want. We have a large cash reserve because, in part, we have kids in college (plus one more coming up) and our cars are old.

People who can buy almost anything they want become that way because they don't actually buy almost anything they want.

There's a connection.

[Brownstone]

I think you need to enjoy some of your excess money. I do think there's such a thing as too big of an EF. How many months of expenses will your EF cover? Do you have a mortgage or plan to purchase a home soon?

When you look back on your twenties, will you have exciting memories, lots of fun times to remember?

[SeanH]

I hear you on the low returns this year. A month ago my Target Date Fund had a change in value of 0.0%. As of this month its now up 4.5%.

[photo]

Originally Posted by SeanH

I hear you on the low returns this year. A month ago my Target Date Fund had a change in value of 0.0%. As of this month its now up 4.5%.

That's actually good for this year. I've had some stellar years, but this has certainly not been one.

[charlieh]

You are only 27. Are you able to buy your own house yet? Seems until you own your home in full, have enough aside for retirement, and have some passive income then you have not saved enough.

That being said you also need to live a good life if you can. Take a vacation - see the world - there is a lot more out there for everybody to know about.