I didn't write about this at the time because I was in the middle of a crazy run of work/travel stuff that ate up the entire middle of this month, but in a quiet moment before an end of the month post, I wanted to talk about a financial move I made a couple of weeks ago.
From a net worth perspective the end of the month is looking good -- I'll save the details for the wrapup post -- but things have moved around some. When the markets were tanking, I took $500 out of my emergency fund and $200 out of my travel savings fund and put it into my Roth IRA, along with another $100 I had already earmarked for the IRA. So, instead of being at $1000 (as planned) my emergency fund will end the month at $500, and I won't have as much available for my spring break trip.
I don't think this was a really bad move; I didn't *quite* manage to catch the bottom of the market (it fell for two more days after I made the move) but overall, I'm pleased to have made a contribution to that account, which I hadn't done in a while (extra income's kind of dried up around here and I'm mostly working with my paychecks right now) and to hopefully harvest some buy-low gains. I'm also not super concerned about the emergency fund as such; it should be up to $7000 by the end of 2015 easily if I stick to the plan and, you know, don't have any emergencies.
I guess what worries me is that I'm still not very good at slow and steady. I've always been a boom and bust person financially, great at going short sprints in both spending and paying off debt and even saving, but I don't really like the patient "allocate $50 a month to this account and build it up over time" thing. I've been having a really hard time not just paying off my credit card with what was accumulating in the savings funds, for example. All the time I look at and think "I could just be done with that!" But that would really drain my tiny-again savings accounts now.
And I have to be careful, because I need to think about having available cash. One of the things I like about the retirement funds is just that they are locked up -- I won't ever access them until I'm, you know, retired. I'd never take out money from them for any other reason; in the event of long-term unemployment, catastrophic debt, etc, I'd certainly declare bankruptcy before drawing from them. They are untouchable for the next thirty years or so. This makes me really want to put money into them so it's "safe."
But I have other goals besides retirement. I might need money for a down payment (on an apartment, if not a house) or to buy a new car or for whatever, you know? I can't just throw every spare penny to retirement; I need to build up significant cash reserves. (It sucks that interest rates on savings accounts are so low.)
I don't know what to do about this, exactly, except be more aware of it and try harder to enjoy funneling small amounts of money to different places instead of making big splashy moves.
I know that this doesn't follow your mantra, but I'd pay those credit cards off! If they're the high interest kind, you'll be saving more a month than you would be making in your savings accounts. Also, yes you may need cash for an emergency, but you could always throw it back on your credit card if you haven't built up your savings again yet and you'd be no worse off for it.
ReplyDeleteIf it were a high-interest rate card I would do that, actually! But it's all on a 0% card that won't start charging interest until March, so it's better to just keep at the slow and steady thing and put something in savings. (I will pay it off in December on the schedule I'm on now.)
DeleteJust took a look up at your sidebar again. It looks like you don't have enough savings to pay off the credit card debt yet and still have some money in your chequing account to pay the bills. I must have mis-read the article, so don't take my advice!
ReplyDeleteOh, and also -- you didn't misread the article! It's just that the sidebar numbers are misleading on that particular point, because they didn't (until I just updated them) show the credit card payments I made in October, and they also don't reflect the paycheck I have incoming.
DeleteThanks for the comment and for looking so closely though!
I find myself struggling with the same thing. I prefer seeing big results, so I tend to focus most of my attention (or money) on one goal at a time. But 6 months later "life happens", and I find myself switching gears. At the beginning of the year, I was saving to pay down debt. But then a vacation opportunity popped up, and I switched to saving for that. Then I was aggressively paying down my student loan. For a month. Then the boyfriend lost his job, and I switched my focus to building up cash for an emergency fund. I wish I was more into "divide and conquer", but when there isn't a lot of extra money in the budget, putting small amounts towards lots of things feels like you're never getting anywhere. I figure life is full of unexpected things and changes; So long as I'm moving forward, I'll be okay. Sure, some choices would move me along quicker than others. But, I'm only human!
ReplyDeleteYou're right -- the moving forward is the important part! I'm going to try to concentrate on the EF next year (post-debt payoff), with the thought that I'll feel better with a lot of money in one account rather than little amounts in a "car fund," "house fund," etc. We'll see how it goes.
DeleteI find if I try and do too many things at once I typically fail. I like the peace of mind the fully funded e-fund provides. You have to find what works best for you. It is tempting to invests when the market dips.
ReplyDeleteYeah, I've never really had an e-fund so in theory I think I'd like the peace of mind...but in practice I seem to want to *do* stuff with money, whether it's invest it or spend it. I don't really like just having it sitting around in a savings account even though I know that's the best thing to do. I just have to work on it.
DeleteBig results are so much easier to get motivated by. Slow and steady kills me... but you have obviously made great strides, even if it doesn't feel like it at the moment. I haven't figured out a way to deal with it, but to keep going (not helpful, I know!)
ReplyDeleteNah, it's helpful just to think out loud about it.... I love big results! They are super motivational. I kind of get why people want to run marathons (even though I have zero ambitions in that particular direction, heh.)
DeleteI totally understand what you are talking about. In fact, this post has inspired me to post on a similar subject. I am a boom and bust person when it comes to debt, which is why I think my new strategy has to be debt chunking, which for me is saving a whole bunch of money (e.g. 5000) and then using those savings to pay off debt. That may help me get over part of this boom and bust mentality. Great post!!!
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