Earlier this week I walked into our HR office and asked about maxing out my 401k contributions. Up to that point, I had been saving exclusively in a Roth IRA because my company did not match contributions (they contribute a portion of salary rather than a percentage of employee contributions).
I felt pretty good about myself. We have already maxed out Roth IRAs for 2010, and now we were maxing out the 401k at my job. To celebrate, I decided to skip the brown bag and head out for lunch. And then it hit me like a glass of cold water smacking me right in the face. Why did I just sign up to have $16,500 in annual salary diverted into retirement savings? Aren’t there other things I could do with that money?
I guess you could call it “saver’s remorse,” and I had it bad. I choked down my lunch while trying not to think about how much lighter my next paycheck would be. I replayed the events in my head and it finally occurred to me that I had made the move in an effort to sort of pat myself on the back. Hey, look at me…I’m maxing out my 401k!
My gut reaction was to fly back to work and withdraw the form before payroll started siphoning away hundreds of dollars from my check. However, since I was already guilty of one emotional decision that day, I decided to let it go and reflect on what I would do with that money.
Saving With Purpose
After starting Frugal Dad two years ago I started day dreaming of trading in the corporate badge for a full-time writing career. Unfortunately, a couple things stand in the way of that dream. First, I’m not a particularly great writer. Second, I don’t make quite enough here to replace my full-time income. And finally, we have many aggressive financial goals that require more than a modest income to fulfill. Indirectly, these goals have prevented me from making the leap to a full-time blogger. And for the first time in a while, I don’t resent that fact.
My savings goals, like many others, have always been rather nebulous. Saving for retirement, or kids’ college expenses, or even a “rainy day” have no real definition. It’s like saying, “I need to lose weight.” I finally accepted the reason I’ve been floundering, financially, even after paying off debt, was because I never actually sat down and identified my savings goals. I was starting to do smart things with money, but only because they sounded smart – I never applied them to our situation and made the goals personal.
Just think of all the “smart” advice we hear from financial gurus. Save 15% of your income for retirement. Put 3-6 months of expenses aside for emergencies. Pay off your mortgage early. The list goes on. But none of these instructions come with a “why.” Why are we saving 15% of our income towards retirement? What are we going to do when we get there? Why 15%? Why not more…or less?
Take some time to reflect on why you are saving money. Your list should be comprised of both short-term and long-term goals, from saving for next year’s Christmas shopping, to funding a retirement still 20 or 30 years away.
A New Series Here at Frugal Dad
Beginning next Monday, I plan to share some of our personal savings goals with you in a series I’m calling, “Saving With Purpose: How To Live A More Intentional Financial Life.” It’s my hope that by sharing our goals with you, I might inspire you to put pen to paper (or finger to keyboard) with your own goals. As the saying goes, “If we aim at nothing, we’ll hit it every time.”