Why the Parable of the Savers Drives Me Nuts (Or, Late Bloomers and Humanities Majors Are Not Doomed)

NotDoomedI’ve written time and time again in the last year about how much I’ve learned from the PF blogosphere: budgeting, investing basics, debt payoff strategies, frugal tips, and more. But there’s one post in particular that makes me groan every time I see a variation on it. It’s the “parable of the savers,” and you’ve seen it at least a hundred times if you’ve been reading around PF blogs for long. You know the one: John invests $5 a year starting at age 5, and stops at age 20. When he’s 65, this total $75 investment has grown to $3,000,000 through the magic of compound interest. Jane, meanwhile, lives it up, buys expensive cars and too many pairs of shoes, and doesn’t put anything away until she’s 45. She’s making a good salary by then, so she socks away $5000 a year, but she still only ends up with $150,000, and has to live in a van down by the river and eat cat food in her old age. Continue reading “Why the Parable of the Savers Drives Me Nuts (Or, Late Bloomers and Humanities Majors Are Not Doomed)”

Long-range financial goal setting

I did a thought exercise the other day: where do I want to be in terms of finances and possessions in ten years? In thirty years, when I’m 66? I have some possible retirement housing options in mind, but I also want to think about how to get to a point where I have $40,000 in yearly income (in today’s dollars). That plus Social Security should give me a very comfortable life; right now I’m only spending about $17000 a year on life stuff! Add to that $10000 a year for travel and general fun, and I’ll be all set. 🙂 (The rest is for taxes and medical care, of course, and also because I assume I will not end up paying the equivalent of $400 a month for housing forever.) Continue reading “Long-range financial goal setting”

Finding a Home for Future Me: Creative Housing Options for Solo Retirement

Single Retirement HousingI got an email from a reader the other day — which was cool! I love getting emails! — that said, in part:

Hi, I am so happy to have found your blog! I didn’t know if I’d ever find another single woman in her thirties who writes about personal finance and cooking! I [was frustrated] with only ever hearing from writers who are partnered, which makes for a completely different financial context than my own…. It’s so great to see another me out there!

The writer is planning to start her own blog (which is awesome, and I look forward to plugging it here whenever it launches). I’m looking forward to the company! There aren’t that many 30- and 40-something long-term single bloggers out there; it’s one reason why I really appreciate Tonya from Budget and the Beach. Continue reading “Finding a Home for Future Me: Creative Housing Options for Solo Retirement”

OK, I’m Debt-Free. What’s Next?

This is also not my 2015 goals post, although my thinking here may end up informing some changes to that.

Technically, I’ve been “debt-free” since early December, when I put through a $287 payment to my credit card. But I still had almost $900 in business expenses waiting to be reimbursed. This is what my accounts looked like on December 14, with the business expenses plus what I’d spent on various (budgeted!) stuff in early December.

Screen Shot 2014-12-14 at 10.06.54 AMUgly, right? $2000 less than my last published net worth update, between having paid rent, withrdrawn my grocery cash, other early-December expenses, and all those business things.

It got better the next day when my first December paycheck hit, followed by my reimbursement check, and I could pay the card down to zero at last. Woo! Meanwhile I was getting things transferred over here (one of the December expenses I had to pay off was the domain purchase) and processing my feelings.

To be completely honest, my very first impulse was…to buy something. 🙂 Not immediately, exactly, and not something totally crazy and frivolous. I’ve talked before about the really sad state of my wardrobe, but one thing I’ve never had, ever, is a pair of nice black leather tall boots with a heel high enough to be dressy but blocky enough to be “sensible” (and that I can walk long distances in and teach/lecture in.) My birthday is in late January, and I’ve been really scrimping lately; maybe I want/need a reward/present to myself. (Downside of being single: no husband to ask for boots for my birthday.) I’m still kicking the idea around, but I may go try on some pairs when I’m home for the holidays — I have three brands (Clarks, Born, and Frye) in mind as decent possibilities — and run the numbers.

This got me thinking about all the other things that are either worn out completely (sneakers with holes) or getting there (jeans I’ve worn countless times over two years, pilling sweaters and dresses, a coat that needs the lining replaced, and, most worryingly, my laptop, which at just over 2 years old is starting to show signs of the intense regimen I put it through — it’s often in use 10-12 hours a day, sigh. I’ll use it as long as I can, despite the obnoxious spinning beach balls it’s giving me way more often these days, but whenever it goes, it’ll cost around $1100 to replace, because I’m not switching away from Mac to PC for a variety of personal and professional reasons.) I’ve been putting everything off, but I’m going to need to do some spending this year, on my wardrobe and on travel; hopefully I can do all that and health/vehicle expenses without touching the EF, but my net worth might not grow as much as I’d initially thought it would.

Throughout the last couple of months, I’ve been thinking of 2015 as my “saving year,” and I certainly intend to make it that — $500 a month to the EF is a must, and I’m not stopping my $1000 retirement fund contributions either. But I’d been kind of thinking of my potential net worth growth as therefore being an average of $2000 a month, and I’m realizing that’s probably not realistic; if I actually spend from my travel fund, buy some clothes, and god forbid need that laptop sometime in 2015, I wouldn’t be able to net $2000/month without some serious luck and/or hustle in the freelance department.

So I’m thinking, now that I’m debt-free, that where I’m going next is: saving and spending. Gee, what a surprise 🙂

On a more cheerful note

My side hustling plan is off to a decent start! So far I have:

(1) made $355.79 from a combination of selling things on amazon and ebay, watching usertesting.com like a hawk, and skimming a little more than $100 off last month’s paycheck. I did that last accidentally, by the way, through double-transferring money from my checking account to the new savings account I set up to fund Roth shares. I am not a financial master of the universe. But having made the transfer I decided to let it stand, rather than pulling it back and using it for cash spending, so even though it is technically from my paycheck, I’m calling it a side hustle I pulled on myself.

(2) Talked to a friend of mine about booking me for a paid lecture in the fall (I am not sure how much this will be, maybe no more than a couple hundred dollars, but every little bit counts.)

(3) Mentioned to a few friends, in a casual and low-key way thus far, that I am looking for writing, editing, and, what the hell, pet- and baby-sitting work. By the way! Anyone reading this: I am looking for writing and editing work! Feel free to get in touch 🙂

(4) Signed up for a new checking/savings account that theoretically will give me $20 a month — apparently in perpetuity — for using direct deposit and billpay. By the end of this year, if this works, that would be $140. Again, repeat after me: every little bit counts.

I am not getting too excited yet, because I still have, uh, $5144.21 to go on my “fund the Roth using extra income” plan, and obviously I’m going to have to acquire more lucrative part-time work than I’ve done so far. But setting the goal and already making some progress feels good; I’m going to buy in $250 increments so I can do the first lot as soon as the money’s available in my savings account.

The Biological Savings Clock

One reason to start this blog is to keep me going as I finish hacking away at the student loan debt (how I acquired it and what I’ve been doing about it will be the subject of a future post.) But another one is to have a space to think through issues relating to making a more conscious turn towards the future: that is to say, emergency funds, savings funds, retirement funds. These things kind of freak me out.

Until a couple of weeks ago, I’d lived my whole adult life without getting into catastrophic debt, but also without any kind of financial margin or plan that looked beyond the next paycheck. From 22 to 34, I lived in the aforementioned giant expensive city; first I was a freelancer, then I was a grad student. Even the year that I made a grand total of $12,000, I did all right. I lived in cheap neighborhoods, with roommates, took public transportation, rarely ate out. But one thing I never did was establish any kind of permanent savings account. I didn’t work for anyone that had a 401(k); I never set up an IRA; I always had a regular savings account, but routinely drained it to pay for either normal living expenses (when I was between jobs) or travel.

You know how some women have the biological clock kick in around my age? They must have a baby right now or they’ll die? Yeah, I had one of those moments two weeks ago, except in my case it was about how I had to have an IRA, right this second.

Really, it felt like a switch flipped in my brain. One minute I kind of vaguely knew that at some point in the future, after I paid off the student loan and built up an emergency fund, I should start a retirement account. And the next minute I was frantically researching Roth vs. traditional, and how do you open the damn things anyway? Suddenly I just could not get enough, and I spent countless hours clicking around the various websites you get when you google “paying down student loans vs. retirement savings” and other search strings to that effect.

Reader, I drained my emergency savings funds again. But this time instead of going to Europe, or paying my rent after a down month, I put $2000 in a Vanguard target retirement fund. (Roth, in case you were wondering. It seems like a way better deal.)

It kind of makes me laugh, because hello, I’m 35, I have no job currently lined up for after July 2015, I don’t really know what I want to do with my career or what city I’m going to end up in…but hey, I guess I have a little something put by. A very little something. But maybe it’ll grow.