There Is No Ideal Time to Contribute to Retirement

“Do you really think you should be voluntarily putting money into your retirement account?  It just seems like there are so many other things you could be using the money for right now.  Why don’t you wait to contribute to your retirement until you get more financially stable?”

Recently, I was lamenting our financial situation to a good friend.  I just had a dental procedure at a periodontist, I was just told my 6 year old has 8 cavities (that’s another story) that will cost $400 out of pocket to fill, and that my 10.5 year old will need braces to the tune of $5,000 or so.

Add on top of that the fact that our car has 150,000 miles on it, and we refuse to borrow for a new one, and well, I’m looking at a lot of financial stress.

Still, these expenses don’t have to be paid immediately.  I’m saving money every month for a new-to-us car when our old one finally gives out.  I may be able to wait a bit to get my son braces.

I just wanted to vent a bit to my friend and express my frustration.

I was really surprised by her answer.  She simply couldn’t understand why we would contribute to our retirement when we have so many impending expenses.

Yet, as Tracy Chapman sings, “If not now, then when?”

Good Time to Contribute to RetirementThere’s no good time to save for retirement.

You could always use the money for something else.

When my husband and I were newly married 14 years ago, I made a little over $30,000 a year.  We lived in the suburbs of Chicago, which wasn’t cheap.  My husband was a graduate student and didn’t work.  We were flat out broke.

And my employer had a mandatory rule that 8% of my gross income would go to my retirement savings.

I HATED that rule.  There were so many other things that I could have used that money for, but I had no choice.

Eleven years later, when I left the job and walked away with 11 years of retirement savings at 8% of my gross salary plus an equal match by my employer, I was ecstatic that I was forced to save for retirement.

Now, my husband is working for an employer who has the same rule, and we’re happy that 8% of his gross salary goes to his retirement account.

We’ve learned our lesson so well, in fact, we are also contributing to our Roth IRA even though money right now is T-I-G-H-T.

But really, for most Americans, money is almost always tight.

I would rather scrimp and save now, while we still have many working years left before retirement than scrimp and save during retirement, constantly worrying if I had enough money to last me until the end of my life.

So, no, my well-intentioned friend, I don’t think I should stop contributing to my retirement.  In fact, there’s no better time than now to save for retirement.

If not now, then when?

Do you continue to contribute to your retirement when facing large expenses, or do you wait to contribute until your finances improve?

Are You Teaching Your Kids to Follow Your Financial Habits?

My oldest is 10, and he does chores around the house to earn an allowance.  He works hard, and we’ve taught him to set aside a percentage for investing (10%), for saving (20%), and for giving (10%).  That leaves him to spend 60% of everything he earns.

And spend he does!

He finds it extremely difficult to let his spend money sit and grow so that he can buy something bigger.  Instead, as soon as the money hits his hands, he wants to spend it even if it’s a fairly insubstantial amount and can’t buy him much.

He just can’t seem to save up for the things he wants.

Instead, he’s enticed by advertisements.  He reads the newspaper and magazines to find free catalogs to send away for, and then he wants to spend his money on any little thing.

Teaching Financial HabitsIt’s driving me crazy.

His money, his life.  I should let him spend the money and be disappointed when he has no money to spend later.

Actually, that’s already happened.  When we first moved to Arizona, he saw a 2015 calendar at Costco for $15.  This calendar had scenic landscapes of Arizona and was quite pretty.  I told him to wait because as 2014 came to a close, he could get calendars cheaper.  But he couldn’t wait, and then in December and January, he was disgusted to find how cheap calendars got.

Still, his behavior hasn’t changed.

As a parent, I wonder how much I should interfere.

You see, when I was young, I was just like my son.  I spent every Saturday at the mall, my money burning a hole in my pocket.  I HAD to buy something, even if it was just a pair of socks I didn’t need.  Every week, I walked through the same stores, buying stuff I didn’t need, just like my son buys the stuff he doesn’t need now.

However, my mom never stepped in.  She gave me a wide amount of freedom.  Whatever money I earned was mine to spend how I liked.   She didn’t even ask that I set aside a portion of it for savings.

I was a responsible kid and bought my own car, paid my insurance, paid for gas, and also bought my own clothes.  I think she figured that I was handling my money well, so it was up to me to decide what to do with the rest.

When I was a teenager, my friend and I used our money from our job to go out to eat and see a movie every Friday.  Sometimes we’d go out to eat on the weekdays, too.

What a waste!

Imagine if I had instead invested just a small portion of that in a Roth IRA.  Or if I had saved it to pay for part of my college education.  Maybe I wouldn’t have graduated with $25,000 in student loan debt.

Even now, I have a hard time saving, though I am getting much better.  I’m finally able to stick to a budget and make saving a priority.  It’s taken me 40 years to break bad spending habits that I learned in childhood.  Let’s be honest, getting a hot deal isn’t really a deal if you don’t need the item and it robs you of the ability to save.

I want to teach my son this lesson now, so he can be more financially responsible than I was for many years.  But that lesson is oh so hard to teach.

How much do you guide and interfere in the way your child chooses to spend money?

 

What’s Your Financial Weakness?

We all have a financial weakness.  That one area where we struggle to do the right thing.  We might even struggle with deciding what the right thing is.  If we remain unaware of our financial weakness, it can wreak havoc throughout our financial life, as my weakness did mine.

However, knowing your financial weakness, your financial Achilles’ Heel, so to speak, can help you become a better manager of your finances.

My Financial Achilles’ Heel

Me?  I like to squirrel things away for the proverbial rainy day, but when the rainy day comes, I don’t like to dip into my stash.

My husband and I have an emergency fund.  True, it’s smaller than we’d like, but we do have one in place.  Considering 28% of Americans don’t have any emergency fund (CNN Money), we’re glad to have our small one.

Financial WeaknessThere are other ways I squirrel away things.  We buy produce in season at lower cost by doing creative things like renting an apple tree.   Then we store it away for the cold winter months.  (It makes me feel a bit like a pioneer.  A pampered pioneer, but a pioneer, nonetheless.)  Right now we have a deep freezer in our basement that is filled with plums, grapes, blueberries, strawberries, and applesauce.  If we didn’t have money for groceries, we have enough fruit to easily last us for two to three months.

Having an emergency fund as well as a stocked pantry doesn’t sound like a problem, right?

Right.  I’m being financially responsible and preparing for a time when money will be tight.

Here’s the problem.

I don’t like to dig into my stash.

If I have a financially lean month and I’m faced with a large expense like a car repair, I don’t do what would be logical–dip into my emergency fund.  Instead, my first inclination is to put the repair on my credit card and leave the emergency fund intact.

If I have a month where I don’t have as much grocery money, I’m more likely to put groceries on my credit card than make a significant dent in our food stash.

My behavior makes.no.sense.  No sense.

And yet it took me years to figure out that I do this and to realize that I have to fight the natural inclination to go in debt rather than dip into my reserves.  Part of why my family struggled with credit card debt is because of this irrational behavior.  Now the credit card debt is paid off, and I have a chance to start anew, well aware of my weakness.

What’s Your Financial Weakness

So, what’s your financial weakness?  What completely irrational behavior do you exhibit?  Are you even aware of what it may be?

Honestly, finding the chink in your armor, so to speak, may take years.  I think it took me nearly 15 years to figure out mine, and I made a lot of financial mistakes during that time.  I’m not sure why I exhibit this behavior except that perhaps growing up, I always saw my parents struggle with money.  They never had money to create an emergency fund.  Credit cards were their emergency fund, and they had to use them frequently.

I’m guessing for most of us, the experience is the same.  Financial behaviors we saw in childhood and learned as normal become the basis for some of our adult decision making.

What is your financial Achilles’ Heel?