One of my friends who doesn’t invest in the stock market was confused when I said that I do. She asked me recently “Don’t you need all of your money for when you buy a condo?”
I tried to explain to her that while I would pay off a mortgage quickly, I’m still investing for retirement at the same time and I don’t really believe that putting my money into certificates for retirement is my best option.
My friend asked me again “You really don’t need any of that of money for the next few years?”
This particular friend knows that I am good at saving, but I don’t think she knows how much money I have or nearly how much money I do make.
I have $24,100 in cash reserves that aren’t going anywhere. That would be enough for me to get into a car accident, get the entire contents of my apartment stolen, max out my health insurance, and live for 6 months at my current level of spending (or a few more if I cut back on some things). The majority of my savings (beyond my down payment fund) go to investments, of which about three quarters is in stocks. This is money that I don’t need in the near future. If I was planning on quitting my job, I would probably keep more of my net worth in cash than I do now.
After maxing out my 401(k) each month, I have just under $2,000 in positive cash flow. I definitely don’t have a need for the money going into my 401(k) until I’m 59 1/2, so that’s a good place to put stocks as well.
When I was a kid, I put all of the money I didn’t need immediately into savings, which I decided was 80% of my net income since my parents gave me a pretty good allowance. When I was in college, I would put the money that I didn’t need right away into certificates for the time period that I didn’t need it. When I realized that I had money that I didn’t really need in the foreseeable future, I started putting money into certificates in retirement accounts instead of just in normal certificates.
In my first year out of college, I didn’t max out my 401(k) because I did want a good portion of my money that year to buy a car in cash. But once I bought that car, I decided that I would rather max out my 401(k) now since the contribution room goes away and I could put off buying a condo/house until I had the cash savings to do so, which also would buy me time to figure out where I wanted to live exactly.
I wish I could show my friend that she doesn’t need ALL of her money RIGHT now and I think that would help her feel better about life. I know that that feeling is definitely really freeing for me.
Readers, how did you get past the feeling of needing all of your money right now?