I recently read a piece from Liz Weston about how it’s vital to multitask with your money. Basically, the idea is that “as soon as” — as in, “I’ll start saving for retirement as soon as I’m done paying off debt — is dangerous. It can lead you to miss out on important things like compound interest. Not to mention that focusing on one thing only doesn’t really mirror life. We all routinely multitask: work, kids, marriage, friends, etc. Why wouldn’t we do the same with our money?
So rather than putting all of your savings into one thing, it’s important to spread out money over a number of goals rather than working on each one individually.
I’m both proud and a little ashamed of where I am on that front.
We unfortunately did put off saving for retirement until after we got out of debt. But our situation was relatively unique: Tim’s unemployment had an end date, and we had to make sure we’d paid off the debt before it ran out. This is back when I was on disability myself, so we weren’t even sure how we’d survive on that little money, let alone repay debt.
So we ignored retirement except for a token $100 a month that I threw into a Roth IRA. It was all we could afford at that point. But at least it was something, which is what Weston’s sources urge people to do. One quote suggested that even $5 a week toward a goal is worthwhile.
While $100 is a darn sight better than $5, it was still pretty low. Had I known that I’d end up being able to work from home, I’d have made retirement more of a priority. But I didn’t.
When things got easier financially, I was able to diversify our savings a bit.
We started a vacation fund, then a car fund. Heck we even started a washer/dryer fund, putting in $2.50 for each load. Meanwhile, we also made sure that we were paying extra on the house.
But here’s where money diversifying is bad: It distracted me from maximizing retirement.
I was so busy making sure we’d put away some money into other savings buckets — Tim’s teeth ($26,000), new, not-original-to-our-1969-house windows ($10,000), etc. — that I didn’t put enough emphasis on retirement. That’s been a huge mistake that I’ve regretted. Yet I still haven’t gotten around to maxing out my IRA. My anxiety has driven all of our other goals to compete with what I know — and have long known — I need to do, so I haven’t made retirement enough of a priority.
Originally, I wasn’t too worried about it because I planned to never fully retire. I just don’t know what I’d do with myself all day. But recently competition in my company’s industry has exploded. While we’re still plenty healthy, I worry. I no longer have a smug feeling of job security. So it’s time to ramp up my retirement savings.
To that end I (finally) started a SEP IRA. Success with that has been mixed. I wasn’t able to put in any money in September or October. I made up for that somewhat in November, but December will see a $0 contribution too. Sigh.
My goal is to put at least $100 in every month in 2019. I’ll be shooting for significantly more, but I have no idea how much is feasible. So it makes sense to start with a very achievable goal.don’t want to make a resolution I can’t keep. Better to start smallet my sights too high and end up discouraged.
Around the time the car hit 60,000 miles (it’s up to 71,000), I increased the monthly car fund savings to $300 a month. My hope is to save enough to pay for a new car in full, but if I do end up having to finance, at least I’ll have already budgeted for $300 a month.
I’m also still socking away money toward a new washer/dryer. There’s more than enough in there to replace one or the other, but not enough to replace both units if they were to die simultaneously. Unlikely, but you never know. With any luck (ha!), both machines will last another 5 years or so. But since I can’t control that, all I can do is keep putting away money each time a load gets done. Eventually I’ll have enough to comfortably replace both.
Meanwhile, I also need to push harder to pay off the house. As I said, we’ve always paid extra, but not all that much extra. About $160, which definitely shaves off a few years. But I can do better.
I want to increase my payment to around $300 extra a month. That should get the house paid off in 8-10 years. If I can throw even more money at it, I will; but retirement comes first for a change. I still have 25-30 years of compound interest to take advantage of, so I’d better act now before I miss out on even more.
How do you feel about money multitasking? How do you allocate your money to various goals?