Saving isn’t necessarily “easier” for people who save more: A deliberately controversial rant

One of those bloggers who makes a ton and spends a ton and is always complaining about debt/bragging about purchases/letting other people buy hir necessities often talks about how it’s just *easier* for other people to not spend money on luxuries and trips.  Other people just don’t enjoy such things as much as zie does.  Other people aren’t *really* sacrificing.  Other people don’t know what it’s like, having friends who like to go out and spend money, wanting to go on trips, wanting to buy nice things.

Every time I read something like this, I want to say @#$#@ you.  I mean seriously.  You are not a special snowflake.  @#$@# you.  Sacrifice is NOT fun.

It isn’t easier for me to not have things I want.  I don’t get my kicks from saving instead of spending.  I would *love* to take vacations and eat out all the time and live someplace amazing and buy all sorts of fancy stuff.  But I don’t.

Why don’t I?  Two main reasons:

First:  That feeling you’re always complaining about?  The one where your budget comes up short and you don’t know where the missing money is going to come from?  The one where you’re getting lots of sympathy from your blog followers?  That one.  I HATE that feeling.  I hate it so much that I have something called an emergency fund.  I hate it so much that I set my fixed expenses low enough that there’s some extra every month.  So much that we’ve never had consumer debt and we paid off our loans ages ago.

Second:  You know how your family bails you out when you don’t have money for a broken appliance or the kids’ tuition or a whatever the latest emergency is?  Yeah, I don’t want my parents, my parents who make less money than I do, to be bailing me out as an adult.  I don’t want them to @#$3ing sacrifice their wants because I wasn’t willing to sacrifice my own.  Emergencies happen on a pretty regular basis and you should plan for them.  If you can’t, then you can’t really afford those trips with friends.

So yeah, @#$@ you.  Sacrifice sucks for everybody.  That’s why it’s called sacrifice.

And maybe it’s easy to spend less for people like Mr. Money Moustache or Frugal Woods, but you don’t have to be an early retirement extreme junkie to be responsible with your finances.  And even with MMM and FW, it may just be that their values for the environment or for early retirement are stronger than their desire to spend.  That doesn’t mean they don’t have a desire to spend, just that there’s something more important to them than spending.

It’s not easier for other people to not spend.  It’s easier for you to let people bail you out or to have those regular feelings of panic than it is for the rest of us.

Why DH’s retirement account sent us a check for >$3000

Shortly after DH’s company switched from a high cost retirement provider to Fidelity (which is a better choice for small companies than is Vanguard because Vanguard charges small companies pretty high fees, in case you were wondering), DH got a check in the mail from Fidelity for >$5K.  As a distribution.  Even though DH is well under any possible age for required distributions.

It wasn’t a mistake.

On the back of the statement, it said, “It has been determined that you had an excess contribution…due to your plans non-discrimination testing…”

The problem, as explained to DH by the company’s finance person and also in this post I found online is that DH’s company doesn’t compensate its less highly employees as well for retirement as it does its highly paid employees.  And the highly paid employees are contributing to retirement compared to the less highly paid employees in too high a ratio.  So they failed a non-discrimination test and send money back to highly paid employees so that the overall firm level of contribution no longer fails that test.  It is our understanding that we will pay taxes on that money as if it is income in the 2017 tax year (though it is income from 2016).

So, DH can’t put away the full 18K + employer match (which is going away for the foreseeable future anyway) each year for retirement, but some number less than that.  So it’s a good thing that I can put away large amounts in my university 403bs and 457 plans.

There is a way to make it so the company doesn’t have to pass the non-discrimination testing, but figuring that out and pushing for it didn’t seem worth looking into given the way that DH’s company is laying everybody off at the end of the month.

So, that’s one of the fun things about working for a small company.

Have you ever gotten a 401(k) distribution because your company didn’t pass non-discrimination testing?

Ask the grumpies: How does not wanting to retire early affect your savings decisions?

Leigh asks:

How [does] having careers, not jobs and not wanting to retire early, while still having healthy retirement savings all ties in together. How does that affect how much you put into retirement accounts vs other accounts each year, etc.?

TBH it really doesn’t. But I do think it accounts for some of the calm we wouldn’t be feeling if we weren’t in good financial shape right now.

Back tracking a bit though…

As Leigh notes, we’re working because we want to, not necessarily because we have to.  We do like our high incomes, but a lot of why we work is because we’re trying to make the world a better place and in my case partly because of ambition.  We have no plans on retiring ever, though we may change our minds in the future.  Early retirement is definitely not in our plans.

Right now we’re maxing out all of our hassle-free retirement savings.  So I’m putting away my mandatory match, my 403(b), my 457, and DH’s 401(k) (now with Fidelity and a much better deal!  Asking for change works sometimes!).  We are on an “over-saving” track for retirement at this point given our lack of desire to retire early and my relative job security (though who knows what will happen in 30-50 years!).

The main reason we’re putting this much away is to take advantage of the tax advantage and to make it more likely that schools will give our kids financial aid.  We (as of this moment in our current situation) have plenty of money leftover to spend.  But there’s not much to buy around here and we don’t really have the time or energy to go looking for things to buy.  This is the first year that we’re starting to accumulate additional money after the targeted retirement/529/mortgage/sabbatical saving is done since before we bought a house.  If the US were stable, we’d be putting it in lump 10K sums into the stock market (with a 25K donor advised fund that we may still do), but instead we did one lump and now it’s accumulating in savings waiting to see what happens with DH’s job and the political climate.

(As we’ve expressed probably ad nauseum to our regular readers– we have more than enough to live on in our current low cost of living area, but not enough to safely buy a house in Paradise, even assuming we move to Paradise for a high paying job for DH.  But there’s always the chance we’ll want to move to Paradise with only one job and will be very happy that we “over-saved” even if we can’t afford to buy a house when we get there.)

I guess if we wanted to retire early we’d spend less.  I would probably have to actually sit down and figure out what numbers we could retire at assuming different draw down rates and stock market returns etc.  Depending on how early we wanted to retire, I’d have to figure out how to ladder accounts to draw down from (probably the easiest way is just to use the 457).  And I’d probably be freaking out about money more because it would matter for our “freedom” date.  But instead I’m expecting another 30-50 years of work so it’s easier to roll with uncertainty.  There aren’t money worries on top of everything else.

If we get more tax-advantaged space to save for retirement (because of changes to tax laws), I guess we’ll use it, but at some point we’d have to think hard about when to stop maxing it out.

So right now we’re just going with the max defaults because where else are we going to put the money?

Grumpy nation:  Do you have a career or a job?  Are you aiming for early retirement, not retiring at all, or something in between?  How does that decision impact your retirement savings decisions?

How do you remember to pay bills that aren’t billed?

Back in the day, like a month or two ago, I would write out the check for daycare when I was writing out the mortgage check, generally sometime after we got DH’s second payroll of the month but before I got my monthly pay.  It was a nice system.  I’d also do the piano lesson monthly check and the violin lesson check at the same time (both music lessons are supposed to bill us via email, but they don’t always get around to it before daycare is due).  Most of our other bills auto-bill to the credit card which makes life a lot easier.

Our credit card bills, although they get taken out of checking sometime in the second week of the month, actually come at a time that is completely inappropriate for trying to remember to pay the kids’ bills.  I don’t really want to change when we get them because that would also change when they take money out of the account, and I like when they’re situated right now.

So now I have to have some way of remembering that it’s the first of the month and we need to pay these bills.   This month what happened was on the 2nd of the month I dropped DC2 off at daycare (normally DH’s job) and as I walked out the door I noticed a sign reminding us to pay for the month (and that this month is silly sock Fridays).  Sadly, DH never looks at these signs even though he’s the most likely to see them.

DH did put a reminder on his phone google calendar as a back-up plan.  I might also do that on my work calendar, but I usually only look at that at work where I don’t have my checkbook, so it would just add to my mental clutter.

As for me, I need to pin the paying the daycare event to some other event.  It can’t be “I get paid” because that doesn’t happen during the summer (though that’s probably what I’ll be doing in the absence of other cues).  It can’t be “DH gets paid” because his first paycheck is too late and his second is way too early.  This month I’ll be looking for other end of the month/first of the month cues to see if paying the daycare can be added as a new habit.

I am strongly tempted to just prepay for the rest of the year, except that last time I did that the daycare went out of business.

How do you remember to pay bills that aren’t actually billed?

Ask the Grumpies: When to use a tax professional?

Linda asks:

I’m trying to decide if I should continue working with a tax professional for my 2016 filing year. I’ve been working with a tax pro for nearly 20 years now, but I feel like I do much of the grunt work of taxes by pulling all the data together and organizing it. If I just went one step further and filled out the forms, I could be done with the process and cut out the additional cost. If I’m guided by a good tax program, I shouldn’t miss any potential deductions or credits.

But I’m not sure if this is a good idea or a bad idea. So my questions to the grumpy nation are: What works for you: tax pro or personal preparation? Why do you choose to prepare your own taxes? Or, why do you choose to use a professional? If you prepare them yourself, do you use a tax program? Which one do you recommend?

#1’s family does not use a tax professional exactly for the reasons you say– pulling the data together and organizing it is the biggest time-sink and tax programs are pretty good these days.  We do make mistakes from time to time (previously mistakes have been on state taxes back when we lived in a state with complicated taxes), but we’re not sure that a tax professional would have been any better.

That said, #1 has a friend who has a much easier tax return but uses H&R block anyway because she wants their protection if a mistake is made or she’s audited.  For the risk averse, that makes sense.

#2 uses TurboTax

#1 used to use Turbo Tax but then there was that year where they messed up something that would have forced us to spend more money on a different package of their software for something small and stupid, so we switched to TaxAct.

Both our partners do the taxes instead of us.  Because doing taxes stresses #1 out and #2’s DH has weird stock whatevers that only he understands.

DH’s company is going on a break from April-July

So, uh, barring some unexpectedly quick grant turnover (they have a few extant grant proposals out, but it’s unlikely they’ll be funding before July even if they’re accepted), DH’s company is out of money come April.  They will have funding again in July.  So that’s three months of unpaid time off.

My first reaction (this announcement wasn’t completely out of the blue, so any potential shock value had worn off) was, “Yay!”  See, I have a bunch of projects that really need to get done/started, and DH is coauthoring on a couple of things and we could get a LOT of work done in that time.  Papers pushed out the door.  It would be lovely.  I am incredibly selfish.  (Not surprisingly, this has also been the reaction of all of my professional friends that I’ve told.  Apparently we all value our spouse’s time over money…)

The problem, is, of course, that while DH can afford to take a few months off unpaid (or, if he’s willing to look for work, laid off with unemployment), most of his coworkers cannot.  So they’re looking for new employment now and will no doubt find it before July.  The one exception is DH’s direct boss who is in a similar situation to ours– lots of savings, not a lot of expenses, and a high earning wife.  DH’s direct boss is pretty awesome and so DH thinks it will be worthwhile to stick with the company so long as his boss sticks with the company.

This break doesn’t quite overlap with our summer leave (kids get out of school later), but it is also possible that DH (and maybe the rest of us) could spend a couple/few months in a furnished apartment in Paradise (in a crappy school district) doing full-time contract work for one of the major companies in his industry.  DH would probably find that more professionally fulfilling and it would increase the chances he’d be able to work for that company remotely in the future.

So yeah, I am having a hard time seeing a downside to this so long as his boss sticks with the company.  But DH has a hard time with change and doesn’t really want to think about it right now.  He wants to focus on getting his projects done (all of which are due in March) until we know for sure those outstanding grant proposals aren’t getting funded.

If all we cared about was money, DH would be job searching right now, would get laid off, would take unemployment while job searching and I dunno, we might move.  It is nice to have the luxury of being able to take it slow.

It is true that our average monthly spending is greater than my take-home pay (once you adjust for my salary only being for 9 months).  Still, I’m not planning on fiddling with retirement savings– it won’t hurt to turn some of our taxable savings into tax-advantaged savings.  (Plus I’ll be getting a month of summer money which will make up for some of the loss.  I love summer money so much.)  Our emergency fund already takes into account paying for an unpaid summer and we’ve been banking extra cash since the election and will be banking more before DH’s paychecks stop.  I do wonder if we should cut back on the 529 saving, but I’m not sure that we need to at this point.  We will revisit the 529 saving if our plans change.

So… yeah… guess I won’t need to write those posts about what to do with extra money piling up.

Ask the grumpies: Where should a teenager put extra money?

Miser mom asks:

One of my sons is going to come into a temporary cache of a lot of (for him) money: he’ll be getting something like $700-$800 each month for about a year. Where should he put this money?

He is 18 and lives at home — and will continue to be living at home, in high school, until he’s 20 (by which point, the money will have stopped coming in. We’d like him to set the money aside so that he can use it when he starts out on his own, by which we mean post-secondary education (most likely, a school of technology, where he’ll learn something like welding — not a 4-year college).

He has a savings account at our credit union, but that earns like zero-point-zero-zero-something interest, PLUS it’s accessible via his ATM card, which is a remote temptation for him. CDs? E-banking? Roth IRA?

I should mention that he has 529 plans and UGMA accounts that will *more* than pay for his education, so the money will eventually just be spending money. Or possibly the seeds of his retirement account.

Unfortunately, when you need money in the short term there aren’t a lot of good options.  So if the plan for this money is to put down a rental deposit for an apartment, then his best option is a CD or term share (the credit union version of a CD).  The rates on these won’t be great but it will lock up the money so it is difficult to get to until the date it is needed.  And generally the rates are a little bit better than most savings accounts.  You may want to shop around to see what’s out there.

He can only save for retirement in an IRA (Roth or otherwise) if he has earned income.  (Social Security and Disability do not count as earned income.)  Retirement is a great place for this money to go since jobs requiring physical labor often also require earlier retirement ages as they wear the body down, though who knows what life will be like in 30 or 40 years.  If he has earned income, whether to choose the short-term savings or the IRA (invested in a Vanguard Target Date fund or a low fee Total Stock Market Index) depends on whether or not you plan to help him with his housing when he starts post-secondary education because renting an apartment can require some combination of last month + deposit + realtor’s fee in addition to the first month’s rent, which can be pretty hefty for someone just starting out.

If you’re definitely planning on having him use it at age 20 even if it gets used for housing, then choose the CD/termshare option.  Short term savings needs to be in safe, non-risky savings vehicles.  You can take on more risk with long-term savings.

If he doesn’t currently have earned income and you do plan on helping him out with initial housing expenses, another possibility is to lock this money in a CD or savings account until he starts earning income of his own and then putting this money into a Roth IRA (again in a Vanguard Target Date Fund) while living off of his earnings.  His future self will really appreciate that he’s done so at age 62 or whenever in the future he is wondering if he can ease off of full-time work.

As always, we may be wrong, we’re not experts, consult with actual experts and/or do your own research before making any important monetary decisions.

What do you think, Grumpy Nation?