After a brief chat with Girl Ninja yesterday, we’ve made the wise decision to stop saving money for the foreseeable future. No, we haven’t hit our $100,000 savings goal yet, and if I all goes according to plan, we never will.
I first blogged about our ambitious $100,000 savings goal in June 2010. Exactly three years ago. And here we are, probably four weeks away from reaching said goal, ultimately deciding it’s time to throw in the towel and give up.
Have I gone bonkers?
Don’t worry, I haven’t gone off the deep end yet. It’s just time I start practicing what I preach.
While it’s true we have not hit $100,000 in savings, we are pretty freaking close. About $3,500 short as of this writing. This week’s blog post about 401(k) loans got me thinking. I like the idea of using a 401(k) loan, but ultimately have decided against it for one reason.
I wont need (or want) a boat load of cash sitting in the bank once we’ve made our down payment.
As I’ve mentioned before, we will likely use between $70k and $80k for a down payment and closing costs. This will leave us with a $10,000 emergency fund and between $10,000 to $17,000 for “other things” (furniture, vacations, etc).
I have no desire to keep more cash in the bank than necessary. In other words, we’ve reached our MAXIMUM savings threshold. I feel like any additional savings would no longer be classified as “being responsible” but instead as “hoarding”.
We knocked debt freedom off the list years ago. Yesterday, we put a check mark next to savings. Now it’s time to make some new priorities. So…
- I upped my 401(k) contributions last night from 13% to 20%, and after I see exactly how that affects my paycheck (thinking about $430/month less in take home pay), I might increase it even more.
- We’ll probably begin living slightly more frivolously (emphasis on slightly). Maybe we go out to a nice restaurant once a month. Take a weekend trip somewhere once a quarter. Or finally update one of our six-year-old laptops. We won’t be keeping up with the Joneses by any means, but it will be fun to splurge every now and again.
- Lastly, and what I’m most excited about, we will take the majority of our discretionary income and FINALLY start throwing it in to taxable investment accounts. If all goes well, we can make some serious progress in our goal to build up some short to mid-term investments. It’s important we get a jump-start on this now, before we have kids, a larger house payment, and only one income.
While it would be cool to actually reach our $100,000 savings goal, I think it’s way cooler to move on to the next phase of Operation Build Wealth.
What an exciting time – congratulations on your financial success! You guys are so fortunate (and smart) to be in this position at your age. And I like the mix of goals that there will be some focus on investments and splurging. Afterall, if you can do it, that’s an ideal life balance.
Have a great weekend Ninjas!
P.S. LOL’d at the Bonker
I think your plan is fine, but I resent that you posted that picture of my living room without my permission.
Best comment ever! Too funny, Larry!
Say…. Larry…. you wouldn’t by any chance have The Snowball (Warren Buffet’s bio) in there that I could borrow.
If you’re going to start putting money in a taxable brokerage, I’d suggest learning as much as possible about Dividend Growth Investing.
A fair point, but honestly just index investing to keep costs low in a broad ETF (VTI – Vanguard’s Total Stock Market ETF, maybe mixed with their international one) is even better in terms of long term growth. Don’t get me wrong, dividend growth investing is nice to create a potential passive income stream….but you still get dividends in VTI, with the added bonus of the growth from companies that don’t pay dividends but instead use profits to grow their businesses.
Congrats Ninja! Definitely think it’s worth treating you and your wife to a nice dinner / weekend trip in moderation. I’m excited to hear about your future investing in the taxable accounts.
I’m in the same boat now where I’m nearly finished saving in cash and about ready to direct all future cash-flows to a mix of my 401k and taxable brokerage account. I figure if I can build both accounts for 15+ years, I should have full financial independence in my grasp.
I moved all my dividend stocks to my roth so I wouldn’t have to pay tax on them each year. Maybe a post that discusses what investment products should be in each type of account is in order. I personally put growth stocks in my taxable accounts.
This should address your question:
I’m the same way. Dividend Stocks in Roth, Index Funds in 401K, Traditional IRA.
$3500 off? Soooo close, ninja! It’s like one more rep doing benchpresses. Not that I disagree with your post-savings goals, but like, you’re almost there! It has to kill you at least a little to just go “you know what, I don’t wanna meet that goal I set and have been working hard towards…”
You’re in a great position! It’s awesome! I’m hoping we will be in a similar position at your age!
Don’t forget about closing costs. To be at 80% LTV, you must put down 20% plus closing costs. You should plan for 5 – 10k .
Very cool that your plan from 3 years ago has come so close to fruition!! While I love your plan for Operation Build Wealth, as a new home owner myself I am glad we went big on the down payment savings. We actually got $20 grand in credits during closing and it is nice to have that cash to upgrade what we want. New outlets, paint, baseboards, dumpster rental, carpet cleaning, demoing lame garage cabinets, etc. It’s only been 2 weeks and we’ve put in $2,000 just on ‘little things’.
Excellent idea to up the 401K contributions. It is a painless way to save and I was surprised at how much less taxes were coming out. (so you will feel less pain than the full $430 coming out of your check. ) I started maxing out my 401k about a 1.5 years before I retired and wished I had started 10 years earlier. The thing that held me back was the company only matched the 1st 6%. After that it was just tax deferred savings… not nearly as much fun.
With only $4K short of your goal I consider it a SUCCESS. Congrats!
I think this is a great decision! (Well, you haven’t stopped saving, you’ve just changed where you are accumulating that bit of savings!) You set a (non-arbitrary) goal for your down payment and EF savings and you reached it. Now it’s time to move on to your next goal! I hope I can do the same with putting a cap on our Roth IRA contributions – right now I have a “more is better” attitude, whereas it might be better to save a little more for mid-term goals like a down payment.
Have you thought about buying a duplex, triplex, or fourplex instead of a home? It would be a combination investment and residence and you can always move to a personal residence. Just a different thought.
I know we are 2500 miles apart (maybe more) but my closing costs were a LOT higher than I expected just may want to keep saving until that moment you buy and then move the money. What’s the worst that happens?
Great decision!! Wouldn’t want to be a hoarder in any way, now would you? 😉
You really wouldn’t consider buying a home in the WA suburbs? Knowing that GN will be a future stay at home mama and you work from home a lot; commuting wouldn’t be an issue.
I know you guys want prime location, but that means high bucks and older, smaller homes. I know you’re looking at home buying as an investment but isn’t that why you buy a house to make it a home above all? I know you mentioned this in a past blog.
I only ask this because today we (me and co-workers) were having debates about home buying in San Diego (where I’m from and a place you’re familiar with), they we’re talking about the old dinky homes in prime SD locations and then buying a new huge house in Chula Vista (off the 805/125 boons). Main issue is commute for all of us.
Your title is a lie 😉 You are still hoarding your money, just in different vehicles.
when I hear Bonkers I think of a cartoon from my childhood: Bonkers the Bobcat….anyone else?!
Yeah, totally nuts.
I am looking forward to the day when I can be accused of being a cash hoarder. That is a title I would put on a t-shirt and wear with pride. I have a little bit of of savings work ahead of me to get to that point though.
You should totally max out the 401K. You have the TSP through your job, right? Those funds are super cheap. I would be dumping $1,458.33 a month to that bad boy before I started accumulating anything in a taxable account.
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