No, I don’t need all of my money right now

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?

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15 thoughts on “No, I don’t need all of my money right now

  1. I loved the way putting money away made more money for me. (Remember back when interest rates on CDs were 5%? Probably not!) That was a really heady feeling, especially when I had very little money. Earning $200 just for having money in an account for a year was amazing.

    I did not feel comfortable spending all our money until we had a really healthy emergency fund… and that came after paying off DH’s high interest unsubsidized student loans. So we cut everything to the bone for several years in graduate school. Then when we worked as RAs and got rent free it was a huge boost to our income, too much to spend all at once, so that turned into natural savings, which, in the stock market, turned into enough for a downpayment on a house once we graduated.

    • I do remember when certificate rates were 5%! I have been putting money into certificates for 10 years now :) In fact, I have one that is maturing soon at 5%, which makes me sad because it will be renewed at a much lower rate.

  2. I’ve always saved as much as possible for retirement, although by always I mean post college. So not as early as you! However it’s only since we’ve gotten all our non-mortgage debt paid off that I feel like we have ‘extra’ money to put towards the long term.

    We also have ‘too’ much money in cash which is part of the process towards realizing we have more we can save for the future. I thought we’d lose more on our condo sale and wasn’t sure how big of a down payment we’d want to make so it’s something I’ll have to think about soon. If interest rates weren’t so low I wouldn’t worry about it, and we will likely keep a large cash cushion. But I need to more thoughtful on the specifics.

    • I’m definitely realizing that at $24,000 in cash, I have more than enough to withstand a washer breaking and needing to buy a new one or any other emergency that could happen, so that gives me more money to put towards long-term savings. If, after buying the house, you think you still have too much money in cash, you can always make a pre-payment on your mortgage or invest in your taxable account.

  3. Wow you’ve been a saver your whole life! I always wonder what would have happened if I started saving early. I have about just as much as you for my e-fund and I really don’t feel that I need it now. I contribute in my 401k and roth IRA but I have looked into CDs. I put most of my money in my e-fund right now since I’m going back to school and may need it, but later when I work again, CDs may be a good option if I’m maxing out my retirement accounts. I also buy stocks from my company at a discount.

    For me I try to think of the future, and whatever I do not spend now is a step towards financial security in the future. I’m much more concerned for my future self and future family. That’s what keeps me going.

    • Yup, I opened my first certificate in 2002 with about $400 :) I have pretty much always been a saver. You should see my charts and spreadsheets from when I was 16!

      CDs are a *great* option when you definitely need the cash soon and you have an idea when you will actually need it.

  4. I don’t really like the idea of investing my after-tax funds in the stock market. So now that I’ve maxed out my 401k and Roth IRA I’m saving up my after tax money for another real estate purchase. What other investment do you only have to put up 20-30% and you still get 100% of the returns!

    • Good luck with that! I love hearing about other people who also max out all of the retirement accounts available to them :) I don’t really want more than the one real estate property, so I’m going to work on paying down that mortgage and investing in the stock market.

  5. You’re always so good with your money! I need to be more like you. I should’ve started saving early and not wasted so much money on frivolous items. For me, it is hard to get past that feeling.

    • You’re still pretty young and have time to work on that :) For me, looking at savings projections is pretty motivating.

  6. I don’t know, good question. I still go along feeling like I need the money despite the emergency fund. I guess that’s why I don’t invest all I can and yet love the Roth IRA! Yes, I’m guilty of tapping 10K out of my Roth’s to make my final mortgage payment!

    • Well, it’s taken me years to get to this point, although I think you might be a bit older than me. I would probably consider using cash savings or part of an emergency fund to make a final mortgage payment, but not my tax-deferred/advantaged accounts. Those are staying put :P

  7. I would continue to maximize your tax deferred savings going forward. BUT outside of vehicles that give you a bigger income tax return or shelter future gains from taxes, the best bang for your buck is to pay off your mortgage. In the states, sure, interest is tax-deductible which makes it less attractive but, even still, interest is money down the drain. If you do this, you will pay your mortgage off so quickly it’ll make your head spin.

    • Honestly, I don’t count the interest as being tax-deductible in any of my calculations. Sure, you can deduct the mortgage interest and the property taxes, but I only save my marginal rate in taxes on the amount paid past $6,000 in mortgage interest and property taxes. I don’t see myself saving more than $1,000 on taxes a year by itemizing and I can easily save more than that in mortgage interest by pre-paying, so….

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