How and Why I’m Going to Save (for right now)

When last we spoke, I was discovering that saving in a slow and steady way is, like, totally boring. But I was a teeny bit mysterious about what I planned to do next. Hannah wanted to know if I was going to spend $500 on peaches (reasonable guess! But I ran out of canning jars last week, so, no.) Kate pointed out that being adult means letting money flow to multiple goals (true!) DoubleDebtSingleWoman’s congratulatory post had me remembering how lucky I’ve been to have nothing major go wrong this year that would have interfered with reaching my goal (she’s had health issues lately, sigh.)

As probably everyone has guessed, though my next project is building up my “down payments” fund. To recap, this is not necessarily money that will actually be used for a down payment. I might also use it for a car, should I need one in a hurry, or for an apartment security deposit, or whatever. It’s for Major Purchases or Emergencies That Aren’t Actually Emergencies, I dunno. “Down payments” is good shorthand.

I’ve only been putting $125 in it every month, and I haven’t had it all that long, so it’s not very big. But I decided that in the aftermath of my incredibly boring march to $5000, I wanted to do something different and flamboyant and really go for it with this fund. I want to see how much I can do in how short a time, while not being totally irresponsible about other important goals like retirement and money to travel to see family and very close friends. So, after a lot of back and forth and soul searching, here’s the arrangement I came to with myself.

(1) I’m going to snowball my former emergency fund savings payment of $500 onto my old down payment account contribution of $125, for a basic $625 contribution each month.

(2) This is the controversial part. Since I started this job, I’ve been contributing $1000 a month in pre-tax dollars to a retirement account. I’m dropping my contribution to $500 a month on a temporary basis; I didn’t want to stop contributing altogether but I also really wanted to build up my accessible cash. This isn’t actually all about my impatience, by the way. It has a lot to do with my increasing worry about having so much of my income being funneled away into inaccessible accounts at a time when I have a lot of uncertainty in my life. By next summer, my immediate future (for the next 5 years or so — after that of course it’s anyone’s guess!) should be much clearer to me, but right now it’s not, and I feel like I’d feel better with an extra-big chunk of cash on hand than with a bigger 403(b). I also suspect we are not going to see much market growth, if any, in the next year, so although I could obviously be wrong, this doesn’t seem like a horrible time to roll my contributions back.

Anyway, after tax withholding, this move will net me an additional $400 a month in my paychecks, bringing my basic down payment savings to $1025.

By the way, this change still has me contributing 12.5% to retirement, which isn’t, of course, the awesome 25% rate I had going before, but is also not utterly appalling. I did actually submit electronic paperwork to drop my 403(b) contribution to $0, but ten minutes later I thought better of it and reset it to $250/paycheck or $500/month.

(2a) …When you say ‘temporary basis’ what do you mean? Good question, and honestly I’m not completely sure; my main point is that I don’t regard this as a sufficient retirement contribution going forward. There’s probably a 1-year limit on this arrangement in my mind; next summer everything will change anyway, whether I’m moving to a new city or getting a new salary. However, if in five months I decide I’m definitely not going to buy a house this spring, I may re-up my retirement contributions then. (Or if the market crashes so bad that I have no choice but to get in on the low-buying, which hopefully won’t happen, of course.)

(3) Lastly, up until now I’ve been letting any balance left in my various budget categories roll over to the next month. For the same duration of a lowered retirement contribution, whatever that ends up being, I’m going to stop doing that, and instead transfer any extra to the down payments fund. However, that means that when I have a month that’s more expensive (eg a car repair or a medium sized medical expense like needing to buy contact lenses) I might make a smaller contribution.

To sum up, I’m going to approach this savings account less like I did the emergency fund, and more like I would being in debt again — instead of a measured march to a set amount of money in a set amount of time, I’m going to throw whatever I can at it (barring a [smaller] retirement contribution and my travel fund savings). I’m hoping that, therefore, I’ll find this a more satisfying and motivating experience than saving for the emergency fund was. With my minimum monthly $1025, I ought to be past $5000 by the new year and over $10000 by the end of May, which is about the earliest I’d be doing any house-buying. I’ll be reassessing as I go, of course, based on what happens with my job situation, but whatever happens, a giant bucket of cash doesn’t seem like a terrible outcome.

19 thoughts on “How and Why I’m Going to Save (for right now)

  1. Cindy says:

    I think it sounds like a solid plan. While I agree that retirement planning is important, I think that you have to look at the whole picture as you’re heading forward. Housing is part of that picture. And, in a year or so, if you decide a house isn’t part of your future, you can always start funneling some (or all) of that savings into a Roth IRA. To me, that kills 2 birds with 1 stone: You’re saving for retirement, but you can pull out any amount you’ve invested at any time, with no penalties or extra taxes.

    1. thesingledollar says:

      Yup — if I go in a different, non-house direction, I can always put some of the giant pile of cash into retirement vehicles next year. The key will be not spending it on a European vacation, but I’m sure the blogosphere will keep me on the straight and narrow 🙂

  2. I like this plan. I’m a big fan of tossing any excess onto the pile of choice, whether it be debt or savings.

    One thing you could think about for your 403b: If you get to next summer and wish you had saved more for retirement, you could max out your 403b and live off your savings.

    1. thesingledollar says:

      The sinking funds were just not doing it for me! Good point on the 403(b) — it didn’t occur to me that I could work the transition like that, but I totally could. I’ll keep that in mind.

  3. Hannah says:

    I think this makes sense. We did something similar a year or two back when we stopped all investing except for 15% to retirement. This helped us build up the cash that we needed for our renovation. As it turns out, we could have been a lot less aggressive with this saving as we’re spending it more slowly than expected (not that it costs less, just not getting things done as quickly as anticipated).

    1. thesingledollar says:

      Yes, it may turn out that I’ve totally overdone it on the cash, but I figure I can always invest it later. I’m glad you think it’s an ok plan; I think you’re very fiscally sensible.

  4. I think that makes total sense to have accessible cash on hand for some kind of non-emergency goal. Go get it lady!

    1. thesingledollar says:

      Thanks! I’m going and getting, I hope 🙂

  5. I like your “flamboyant” savings idea. And here’s the thing about savings: they can always be transferred. So if you end up thinking, “Dang! I wish I’d put that money into my retirement savings after all,” (not a likely scenario), you can invest a chunk of it into retirement savings. You’re setting yourself up to have the freedom of choice next spring. Good move!

    1. thesingledollar says:

      Yeah, that’s what I figured — I can always invest the $$ later. 🙂

  6. I’m with everyone else who already commented – how boring! It’s not like you’re throwing the money at fancy clothes or something fairly frivolous. Savings of all kinds are good, and you can use them however you ultimately decide – which could be plugging them back into retirement funds.

    1. thesingledollar says:

      I so want to just spend it all on cheese!

  7. Alicia says:

    This all sounds cool to me. I completely understand where you’re coming from on the access to cash thing. I mean, my retirement account is going like a rocket lately but I can’t access it (well, I could, but I’d have to be pretty desperate and it’d be a bad decision with lots of taxes, etc). Aside from that, I only have about $5k sitting around for the things that will come up. Granted, a lot of that could be cash-flowed to an extent. “Worst case scenario” for your money hoarding challenge is that you throw it in an Roth IRA (that’s the right one for after tax dollars, right?) once you’re comfortable with the size of your account. You’re still saving, it just isn’t tax-advantaged.

    1. thesingledollar says:

      Yeah, it was just starting to freak me out a bit, that so much of my net worth is locked up (as you could say, I could access it, but it’d be an awful idea; I’d borrow from my parents first, and I’d rather not do that, really.) And yes, I figure that if I over-hoard, a Roth would be where I’d put it. Or I guess I could just start a taxable investment account at some point too. The trick will be not to spend any excess on fun stuff 🙂

  8. MJ says:

    Hooray for giant buckets of cash!

    I am completely impressed by your aggressive retirement savings. You made big strides in little time. The bucket of cash does sound more fun – but I like those aggressive projects more than the steady ones, too. And you’re not completely wiping out retirement. Sound all around:)

    1. thesingledollar says:

      What do I love more than the idea of giant buckets of cash? Not much! 🙂

  9. Jordan says:

    Some important points here. Saving your money might be hard in the beginning, but you in the future will thank you for starting early. Thanks for sharing your thoughts!

  10. Jason says:

    I also think this makes a lot of sense, especially if it is temporary. You are lucky. You live in a state that contributes to social security. My post on Monday was about Teachers Unite because a lot of us have only one retirement leg to stand on. Good luck on saving that money. And depending on where you live you should be able to save up for a nice little down payment for a house in a fairly short amount of time. If you want even further info I can tell you what we did as professors to get that down payment.

    1. thesingledollar says:

      Thanks! I don’t work for a public university, so the social security thing isn’t an issue for me, but it is for my brother and sister in law, who work for a public university in another state. It really sucks. Thanks for the good wishes!

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