Sold my car! ...so now what?

[kork13]

So this afternoon, I went through the paperwork and sold my car to a friend of mine (we discussed this previously regarding him getting a loan or not). He ended up getting the loan, and actually paid me ~$500 more than I was expecting. Sweet! Now I'm moving to Japan this month, so I'm setting aside $4k-$5k dollars for a car when I get there. But beyond that, I still have at least $10k on my hands... Now suddenly, I find myself with the money to finish off my EF, top off a few random savings accounts I have, throw a couple thousand at savings for general spending/travel, ... and still have some money leftover. It's an odd feeling not having any pressing savings needs...

Now my problem is determining my way forward. I'm putting 15% of my gross toward retirement, 10% toward a future home down-payment (it'll be at least 2-3 years, more likely at least 5 until I buy), and about 10% more in short term savings. So now what? I'm afraid of saving too much in retirement, because I'm only 24 now, saving somewhat aggressively as it is, and only a couple years into a military career from which I eventually expect to retire and take a moderate pension. Since I'll probably leave the military when I'm 45-50 years old, I don't want to be too heavy in locked-up retirement accounts. Right now, out of not knowing what else to do, I suppose I'll start putting the majority of my excess save-able money into the investments/bonds I'm purposing for a house. Realistically though, I suppose I see this morphing into general "investments because there's nothing else to do".

I guess where I'm headed with all this diatribe (I know, I'm terribly long-winded...sorry) is this: Is it bad to just save for savings' sake? I feel like I'm missing something (am I?), like there's something on the horizon I need to account for. How do you keep yourself motivated to continue with the level of saving you've been doing without having a particular goal in mind? It seems like it would be easy to get complacent with your money, letting it sit around inefficiently, or even feel it's no longer necessary to continue saving.

I'm not sure what I'm looking for in the way of responses, but perhaps just everyone's thoughts about saving over the long haul... I'm a young, inexperienced guy and suddenly unsure of where and how I should be headed forward (financially).

[jpg7n16]

If you don't know where you are going, any road will take you there. -Lewis Carroll

You're at a good point. Time to decide what goals you want for your life.

You are afraid of oversaving for retirement, but you have no idea what you'd rather save towards (or spend on). Do you have a goal in mind that you'd like to hit? Why are you saving in the first place?

I'd suggest you find a noble cause to support (churches, charities, orphanage, etc.).


And another good quote for someone in your situation (by my fav guy - Warren Buffett). Since you were wondering about how "It seems like it would be easy to get complacent with your money, letting it sit around inefficiently":

"If you are not a professional investor, if your goal is not to manage money in such a way that you get a significantly better return than world, then I believe in extreme diversification. I believe that 98 or 99 percent — maybe more than 99 percent — of people who invest should extensively diversify and not trade. That leads them to an index fund with very low costs. All they’re going to do is own a part of America. They’ve made a decision that owning a part of America is worthwhile. I don’t quarrel with that at all — that is the way they should approach it.

Wall Street makes its money on activity. You make your money on inactivity. If everybody in this room trades their portfolio around every day with every other person, you’re all going to end up broke. The intermediary is going to end up with all the money. On the other hand, if you all own stock in a group of average businesses and just sit here for fifty years, you’ll end up with a fair amount of money and your broker will be broke.

He’s like a doctor who gets paid on how often he gets you to change pills. If he gives you one pill and it cures you the rest of your life, he’s got one sale and one transaction, that’s it. But if he can convince you that changing pills everyday is the way to great health, it’ll be great for him but you’ll be out a lot of money and won’t be any healthier."

[Seeker]

Kork, I'm not exactly sure what you are asking, and it could be that you aren't either. I feel that I understand though.

I don't think there's anything inherently wrong with saving for "savings sake" -- it's a good thing to have money to fall back on if you find yourself in a situation of needing to use it.

24 years old and in the military where much is provided, is a great way to save money for the future; there is absolutely nothing wrong with that. Nor do I think that you have to set a goal for every dollar at this point in your life.

When I got out of High School, actually before that, I was working and saving. I didn't have any goals for the money; going to college wasn't really an option because I hadn't saved enough to see me through it and I didn't know what I wanted to study, do or be career-wise. I too, was young and inexperienced; many people are (IMO) when they start out. So I saved, until computers became the reality of the future and my limited interactions with a physical thing that obeyed every command (without arguing) found it's way into my little corner of the business world in the early 80's, and suddenly I knew what I wanted to do. I went to college, using my savings, and I got a degree.

When you are young, you are still exploring both yourself and the world around you. You are probably more an extrovert than I; so whatever you enjoy or want to do later on in life; know that you'll always be in a more comfortable position if you have savings to accomplish those future goals.

Savings essentially means freedom. There is nothing wrong with saving for your freedom to choose your future path that may be a bit misty at the moment. My two cents anyway

[MonkeyMama]

My feelings on the subject?

We were very aggressive savers at your age. In fact, my spouse only worked 2-3 years out of college, and we saved his entire income. IT changed our life dramatically. We had financial security our peers could only dream of, because of those 2-3 years.

People ask me all the time how we are motivates to save - if we get tired of it. What would I be tired of? I suppose it is important to have balance. To us, we have more money for our wants because of our intense savings. More freedom. Nothing I would be tired of!

I think some of it will come into focus as you get older. Life quickly gets more complicated and expensive when you buy a home, have kids, etc., etc. You will laugh that you ever thought you might be saving "too much."

All that said, I do hope you are enjoying some of your income and looking for that balance. It is certainly possible to way over-save and never enjoy any of your money. I wouldn't recommend that, at all.

[snafu]

I see no point in spending for spending sake. You're smart and your time in Jpn will broaden your horizon. I don't know where you'll be posted but having a car is often more trouble than it's worth as parking can be a nightmare. Most locals use their excellent public transit.

What is your take on interest rates? If you believe they will slowly increase, bonds become more risky as when interest rates increase or even are perceived to be increasing, bonds lose value. Just now the gurus tout Dividend Funds. Perhaps you could be persuaded to research an International ETF or Mutual Fund. What is your risk tolerance? Monies not assigned for 5 yrs are candidate for investment. Less than 5 yr. window can be deemed speculating.

[cypher1]

Congrats on selling your car and having additional options to save. My friend came back from Japan (2 years there) while in the Navy, very similar situations (living and financial).
You mentioned possibly buying a car over there for transportation. Besides awesome public transportation, you may want to consider a buying bicycle to save even more money (not that you have to). My friend/his navy buddies did that (we all laughed at him at first), but he made a good point of the convenience for mobility, even though he did have his drivers license over there too.

[kork13]

Thanks everyone for your thoughts thus-far, I do appreciate it. To respond to a few points....

You are afraid of oversaving for retirement, but you have no idea what you'd rather save towards (or spend on). Do you have a goal in mind that you'd like to hit? Why are you saving in the first place?

I'd suggest you find a noble cause to support (churches, charities, orphanage, etc.).

I do have a general idea of a retirement goal, and right now I'm on track to easily overshoot it. However, it's all so far away that I can't really make very good estimates anyway, so it's kind of a WAG right now.

I like the idea of finding something to support... When my older brother died a number of years ago, my family started a small scholarship in his memory. I recently found some information about how it's doing, and I may start making regular donations to that to help expand it and keep it going...

Savings essentially means freedom. There is nothing wrong with saving for your freedom to choose your future path that may be a bit misty at the moment. My two cents anyway

I guess this is the philosophy I need to adopt. I know that continuing to save aggressively will only make my future finances more flexible, so it's really just a matter of maintaining inertia...

All that said, I do hope you are enjoying some of your income and looking for that balance. It is certainly possible to way over-save and never enjoy any of your money. I wouldn't recommend that, at all.

This is really a problem I've run into over the last couple years, but as I've built my savings, I'm starting to be more willing to spend for experiences/travel/enjoyment... Thankfully, I'm still enough of a cheapwad that I don't think I'll ever go overboard in this arena

What is your take on interest rates? If you believe they will slowly increase, bonds become more risky as when interest rates increase or even are perceived to be increasing, bonds lose value. Just now the gurus tout Dividend Funds. Perhaps you could be persuaded to research an International ETF or Mutual Fund. What is your risk tolerance? Monies not assigned for 5 yrs are candidate for investment. Less than 5 yr. window can be deemed speculating.

I am looking at other investment options, but I'm taking that kind of slowly just so I can learn more before I take a leap. Right now my bonds are only ~10% of my investments, half in a MF and half are federal I-Bonds (which don't suffer from value volatility).

You mentioned possibly buying a car over there for transportation. Besides awesome public transportation, you may want to consider a buying bicycle to save even more money (not that you have to). My friend/his navy buddies did that (we all laughed at him at first), but he made a good point of the convenience for mobility, even though he did have his drivers license over there too.

I'm actually really glad to hear you say that. I did recently buy a bike, and it's on the way over there right now. I'm hoping to be able to ride my bike for transportation about as regularly as I use a car, so hearing that you have friends who did something like that is really good news.

[cypher1]

I'm actually really glad to hear you say that. I did recently buy a bike, and it's on the way over there right now. I'm hoping to be able to ride my bike for transportation about as regularly as I use a car, so hearing that you have friends who did something like that is really good news.

Best of luck over there. Not sure of your commute/work, but if your on base, or not, a bicycle is definitely worth it. I don't think my friend ended buying a car there, and he's more into cars than I. Financially though, you definitely have some great options in the long run, so take advantage and save...for anything

[jIM_Ohio]

First- when I was young I chose to keep money outside of IRAs. I somewhat regret that, but it was a minor problem and easily corrected.

Second, You should focus on "financial efficiency" and building a high net worth.

Financial efficiency means work the tax system (if you can) by using 401ks and TSPs and similar tools to save and lower your tax burden. Keeps more money at your finger tips.

Second is have a plan for your investments- meaning allocation of X% stocks and Y% bonds for retirement, then another allocation of A% stocks and B% bonds and C% cash for taxable accounts. If you have this plan at minimum it keeps you between the white lines on the investing road. If you see the need to change one allocation or the other, do it, but have a reason for doing it too.

It appears you are spending less than you earn- this single criteria is what to focus on to build a high net worth. If you are efficient with how you allocate your savings, then the net worth builds faster.