So we've been talking a lot recently about our priority list for savings. I feel very strongly that we need to prioritize retirement savings over other kinds of savings, even to the point of squeezing the present a little bit. My thinking goes like this:
We already have a downpayment on a house ready to go, and are just trying to decide whether it makes good investing sense to buy rather than keep renting and invest our downpayment in equities. Therefore we have the freedom to do what we want using just the savings we already have. I want to put our savings in the next few years, before we have kids, into retirement savings. There are other ways that we could save, and decide later what to use it for, but I think retirement savings has several distinct advantages. a) It's easier to not feel the pinch of aggressive savings if it comes out before you ever see your paycheck. b) The money will grow a lot more if we do it now rather than in 10 years; a corollary to this is that money for other more short term things won't grow nearly as much if the same savings are contributed to those "bins" instead. c) By the time we make enough money to max out our accounts without feeling the pinch (it's not even a possibility to max them out now), there won't be enough years with maximum contributions to let us reach even a modest retirement goal. Therefore we should be aiming as high as we can now, when we have no other pressing responsibilities. Besides utilities and rent, we have no other fixed financial responsibilities, and if there were a financial downturn (job loss etc) we can change our lifestyle in a hurry to lessen those burdens. When we have a mortgage and additional mouths to feed, we're not going to be able to downsize our life very easily. I feel like Ramit pretty much hit the nail on the head when he wrote a post titled It Never Gets Easier Than Now. I think now should be focused on retirement savings, even to the point where we make it a tight squeeze in the short term, and then basically allow raises and inflation to lower the burden of our monthly contribution over time so that the most painful period is the next couple of years. By then we'll be so used to saving that we will end up saving more without really meaning to, which can then start to cover other, more short term expenses. However, it's hard to convince my husband that voluntary sacrifice for this goal is going to be a good thing. He hasn't really caught the PF bug the way I have. Future posts may get more into relationship dynamics around money, since that's a big interest of mine, but for now we'll leave it that I'm having a hard time getting him to be as enthusiastic as I am.... But maybe we'll find a middle ground. As long as it's higher than our current contributions, I'll be pleased.