Pembirdie

Tag: wealth

  • How much to save?

    The White Coat Investor and most other reasonable personal finance blogs for physicians recommend saving 20% of gross income for retirement. (People who aren’t physicians usually do fine with saving 15% because they start the process earlier and benefit from more years of compounding.) If you are aiming to retire early, you need to increase that percentage.

    With my current job, I am technically employed by two different organizations, the result being I get two salaries and can contribute to both a 403(b) and a 457(b). But wait, there’s more! One organization provides a 501(c) with a mandatory 5.5% employee contribution and 8% employer contribution, and the other organization contributes an extra 9% of my salary to a different account (I have no idea what numbers go along with that one).

    All together, if I max out my 403(b) and 457(b), and all personal finance sites recommend maxing out tax-advantaged space, taking into account the forced 501(c) contribution and employer contributions, I’m saving 25% of my gross income. And we haven’t even considered the backdoor Roth IRA! We could save another $15,000!

    This begs the question, do we want to do this? Would I ever consider saving less?

    What if, instead of going for a 25% percent retirement savings rate, I went for 20%? This would involve me not maxing out one of my retirement funds, which would feel weird after reading so much about the importance of doing so. It seems like everyone is doing it. (This is probably not true.) Does that mean I’d fall behind? Would I be missing out?

    What would we do with an extra 5%? Would we save it up for something big, like a bathroom renovation, a new business venture, adopting a child? Would we just inflate our lifestyle by eating out more, going on more trips (my husband would hate that) and upgrading our stuff? Would we give it away, as gifts, family assistance or support to organizations we believe are making difference?

    I have, of course, a few thoughts. The first is that, the extra 9% from one of my employers comes with golden handcuffs, meaning if I leave my job before I’ve worked there for three years, I forfeit the money. I don’t plan on leaving my job, but life does weird things sometimes, so in the spirit of not-counting-my-chickens-before-they-hatch I’m not going to include the extra 9% in my savings calculations until I’m past the three year mark. Taking everything else together, and including a little extra that goes into a taxable account, we’re saving right at 20%. Meaning, we can kick this decision down the road for another two years.

    The second thought is that there are a lot of warnings in the Bible about putting too much faith in money. A wise man in Proverbs asks God to avoid giving him too much wealth, lest he put his faith in his riches and not in God. The rich man in Jesus’ parable is foolish for building up his possessions and not putting any thought to the fact he could die any moment and that he has an eternal future on the other side of death. Jesus teaches that our hearts follow our treasure. James castigates rich people for mouthing platitudes while ignoring the poverty of their brothers and sisters. The Bible also teaches that wealth is not a bad thing, but the implication is that it comes with the responsibility to use it wisely.

    I know that I am tempted to derive security from the money I’ve saved up – that’s just I am. Because of that propensity, I believe it will be wise to avoid going beyond 20% retirement savings in the future. Instead of hedging my bets by stashing away another five percent or more, I can ask God to use what we save to provide for our needs. My husband and I will need to have more discussions about it, but I’d prefer to use the money we’d otherwise be saving for the benefit of others. One can make the argument that by saving more now, there will be more to give in the future… but the future is uncertain. I don’t want to wait for a mythical tomorrow that isn’t guaranteed.

    SDG

  • My rich person life

    Growing up, I didn’t think we were rich. Maybe that is how it is for most people who are, in fact, wealthy. In our small town, it was easy to recognize the people who had money: they lived in big, fancy houses and drove big, new cars, and attended the big, prestigious events. In retrospect, I’m not sure how fancy and prestigious you can get in a town of 2,000 people, but there were definitely people at the top, people at the bottom, and a whole lot of people in the middle.

    That’s who we were, middle people.

    Sure, my dad’s family owned thousands of acres of land and raised 3,000 cattle each year. But my dad worked 7 days a week in punishing weather conditions and was lucky to get a week off a year. (On Sundays he got up early to double feed the cattle before church.) Sure, we bought new Suburbans with a custom pink stripe on the side. But then we drove them for 10 years or 200,000 miles, whichever came first. (Later, we moved on to a new Sienna with the same pink stripe.) We rarely ate out; Dad said, Why go to a restaurant when your mom makes meals just as good or better? (There were also just four or five places to eat in town.) On trips, we ate from the Dollar Menu at McDonalds, and when Dad discovered $5 Little Caesar pizzas, that become the trip meal of choice. Our family vacations mostly consisted of driving to visit family in Michigan, Colorado and Washington. (We did go to Disney World once.)

    I remember one summer when Dad did a “series” on our family values. We had devotions every day after lunch, and similar to Rechab giving a charge to his children to avoid drinking wine and living in houses, he gave us his rules to live by. He mentioned that if we wanted to, we could afford to buy a new vehicle every year, but he and Mom chose to give the money away instead. This did not leave much of an impression on me, mostly because buying a new vehicle every year seemed like the peak of foolishness. Why buy a new vehicle when the old one is working perfectly fine?

    In retrospect, maybe I should have been more impressed. Over the years, I have become more aware of the wealth my dad’s family possessed. This became more evident when Dad died, and Mom suddenly had a lot of money, millions of dollars, on her hands. It became more evident when my paternal grandfather died, and the long process of selling the ranch began, the end result being the distribution of high seven-figure amounts to each of his five children.

    I worked in high school and had a very, very, part-time job in a lab for a few years in college in addition to working summers, but I never used that money to pay for anything I actually needed. I got a scholarship that covered college tuition, but my parents covered the cost for student housing, my car, parking, and insurance. When I was home for three months looking for a job after my dietetic internship, I didn’t even consider offering to pay rent while I lived at home. Half of medical school was paid for with scholarships, but the other half was covered by Mom. When we moved to our current location, Mom bought our house with cash, and we’re in the process of paying her back.

    And, to be honest, this seemed pretty unremarkable to me. Yes, I realized I was lucky to have my parents pay for my tuition, but the rest of it seemed par for the course. (Not the house thing, but it wasn’t surprising.) What are parents for, if not to help their kids out as they get started in life?

    I am slowly realizing that the only way this can seem normal to me is because I have grown up as a rich person. Kind of how a fish does not think it is remarkable that it lives in water.

    This realization has not happened due to an internal process, but rather because I married my husband, who I thought was a middle person like me. As it turns out, he may be a middle person, but growing up he was a middle person whose family was constantly flirting with the bottom.

    My husband likes to remind me that he grew up in the ghetto. The nicer part of the ghetto, to be sure, but still a place where he learned early on how to distinguish the sound of gunshots from the sound of fireworks. In my husband’s mind, a dishwasher is a signifier of luxury. His parents had six kids, and between number two and three made the decision that his mom would stay at home with them- something that no doubt had a positive impact on their lives, but also significantly reduced their bottom line. When able to, the kids went to work, and portion of their paychecks went toward paying bills. I was astonished to learn that one of my sister-in-laws, who had gotten a full-ride scholarship in college, took out loans so she could give the money to her parents. Every child has a story of finding money missing from their bank account. This is treated as a matter of course – the bills needed to be paid.

    As two people who both saw themselves as middle people (now- I think my husband would have seen himself as coming from the bottom earlier in his life), there have been moments where we learn things about each other that seem unfathomable. His sister’s college loans story, for me. My mom giving us $15,000 to buy a car when mine abruptly stopped working, for him. I was grateful, but not surprised; after all, she was going to do the same thing for my brother. That someone would have $15,000 available to gift was almost more than my husband could comprehend.

    Two years out from fellowship, I make a very nice salary. My retirement accounts don’t have too much in them yet, but we’re starting to make up for lost time, and I don’t worry that we won’t have enough. I don’t think I’ll ever reach the level of wealth my grandfather or even my dad had, which is fine with me. I still think of myself as a middle person, although I joke with my husband that he married a rich wife.

    And really, I guess I am.