Should I Be This Worried and Saving this Much Money
Let me start off by saying I am very nervous about the economy because I am in my early 20's and this is my first major economic downturn I've experienced as a worker. I usually save about 30% of my monthly paycheck but currently I'm saving over 45% of my monthly pay.
I'm usually a thrifty person but now I am refusing to spend money even though my job is stable and I've already been promoted and given a 10% raise this year. I think about going out to a movie or buying a shirt and then change my mind because "its too expensive". When shopping for food I refuse to buy meat (ground beef, chicken, pork) because its "too" expensive at $3 lbs. I hate the cold and this winter I even refused to turn my heat about 63 degrees during the day.
My only debt is $80,000 mortgage with a monthly payment of $925. I have no credit card debt, car is paid off, and no student loans. My electric bill is about $150 a month and I have about $200 in other utility bills. I only spend like about $50 - 60 a month at the grocery store and less than < $15 a week eating out.
The two main reasons I am scared is because my 401k, mutual funds, and stocks are down $35,000 and because this is my first major economic downturn I've experienced. The investments were for retirement so I really haven't lost because I never planned to actually use that money for another 40 + years.
Should I really be this worried and obsessing 24/7 that I don't have enough money even when I'm saving between $1,500 and $1,700 a month? I don't even understand why I am saving this much money because I have no plans for it. I'm just saving it so the bank account number keeps rolling up but refuse to ever actually use the money. It's become ridiculous where I refuse to out to eat, even to subway, unless I have a gift card or pay less than $3 for the entire meal. I am also worried that this behavior is having an adverse effect on my health because I've been losing weight lately, after maintaining for 5 years.
It sounds like you're very fiscally responsible, which is rare in the 20-something age group. I'm right there with you, I'm still in school and taking Finance classes. So all I can offer you is advice from my professor, and from the articles that I read. I would suggest seeing a financial planner. Someone who you can talk money with and who will help you to decide where to put your money. In the current climate, a savings account might be safest, but if you consider how much money you (and others) have lost, and think about if the stock market rebounds even halfway, and if you invest when prices are you, you could be making double returns. It's all about risk. If you do decide to see a financial planner, I would suggest seeing a Certified Financial Planner (CFP), because you know that they have the correct credentials. They have a website where you can look up CFP's in your area. Some might even give you a free first meeting! Good Luck!!!
Really, save all you want, but to not eat meat because it's $3 a pound is a bit out there, don't you think?
What's the point of having money if you're not around to enjoy it? You'll soon be spending it on medical bills and lost time from work if your health falters.
Eat at home and buy some food. I also keep the thermostat at 60 to 63 degrees, but I cook and eat real food.
I graduated in 2007, in a stable industry, with superlative reviews, an excellent company (never had lay offs before), super raise 6 months into my job. As recently as 2 weeks before the lay offs hit we were told, "We're very happy with current staffing levels and anticipate no changes at all. Don't worry." Then I was let go due to the economy. There aren't any jobs out there - at least not in my field, at anything like the pay I was receiving. I'm still looking. The only saving grace we have is that we had a nest egg saved up.
Personally, I think that being thrifty right now - and through the end of the economic downturn - is a safe and secure idea. I never thought I'd lose my dream job - every indicator said it wouldn't happen - but it did.
P.S. We don't buy meat when it's $3 a pound either. There are cheaper sources of protein. Then again, until our garden produces, we won't have fresh produce either - the cost is just too high given our thrifty nature.
Most of us have been told to save 10% of our income, so I'd say you're doing great, especially if your job is secure. If you have enough to get you thru for a year with no further income, then you do need to try to relax a little. Don't deny yourself the basics. Food is necessary and cheap food will cost you even more later, just like cheap shoes. You can pay for the shoes now or you can pay an orthopedist later.
It is scary right now. I've been through them before, but, was too young to really understand what was happening. Still, my parents were doing well and saving so we didn't have to do without. Papa always saved where he could and Mom always spent where she could and did her part to keep the economy moving. They balanced each other well.
Sounds like you need to find your balance. I agree that you should talk with a CFP just to put your mind at ease. How you deal with this downturn could affect your relationship with money for the rest of your life. Try to keep it all in perspective. Good luck.
Last edited by Operator265; 03-10-2009 at 08:06 AM.
Most of us have been told to save 10% of our income, so I'd say you're doing great, especially if your job is secure. If you have enough to get you thru for a year with no further income, then you do need to try to relax a little. Don't deny yourself the basics. Food is necessary and cheap food will cost you even more later, just like cheap shoes. You can pay for the shoes now or you can pay an orthopedist later.
It is scary right now. I've been through them before, but, was too young to really understand what was happening. Still, my parents were doing well and saving so we didn't have to do without. Papa always saved where he could and Mom always spent where she could and did her part to keep the economy moving. They balanced each other well.
Sounds like you need to find your balance. I agree that you should talk with a CFP just to put your mind at ease. How you deal with this downturn could affect your relationship with money for the rest of your life. Try to keep it all in perspective. Good luck.
Honestly, I could easily live 1 year without further income and not have to touch my investments. BTW I don't agree with your cheap shoes comment. Shoes are shoes are shoes.
annieoh
Are you speaking of Microsoft? I also graduated in 2007.
Boy, this economy has all of us a bit scared, doesn't it? But you can't stop living NOW for fear of having nothing LATER.
You're in great financial shape. There's no reason why you can't buy meat or anything else you need/want when you go to the grocery. Money needs to go OUT as much as it needs to go IN.
AnAbsoluteDiva is right......the stress of this will kill you long before you run out of money.
I have asked myself this very question, since my husband and I had the "worst case scenario" discussion last month, as we don't see this economic situation getting better any time soon. I think we are in for the long haul on this one. Like you, I was obsessing over every penny, trying to cut our grocery bill down to $50 a week, only eating out once a week and so on. It has definitely helped. we also save around $1500 every month in anticipation of several things... one being just building up our nest egg/emergency fund in the event that one of us gets laid off. Both of our companies have assured us that they are not going through layoffs, but my husband works in the aerospace/defense industry and those jobs can be shaky. It used to be that six months of your salary was enough, but I think 1-1.5 years of your salary is better, especially with the lack of jobs these days. Like you the only debt we have is our mortgage. That definitely helps!
We are also in our mid-20s and kind of like fish out of water here because it's our first economic crisis, too. But I think the best advice is to just bide your time, wait it out, and continue being fiscally conservative. I know it's easy to get riled up (my 401k is down 24% from last year), but we've got LOTS of time to recover those losses. Remember, this is not money you were planning on using a year from now.. more like 40 years from now. And it's best not to pull it out of the stock market because WHEN the market rebounds, you'll make some of the biggest gains by keeping it invested. There is a good article in Kiplinger about this: http://www.kiplinger.com/magazine/ar...your-401k.html
Just bide your time. It never hurts to be fiscally conservative, and it sounds like you're doing a good job. Sooner or later this thing will end (I hope).
Boy, this economy has all of us a bit scared, doesn't it? But you can't stop living NOW for fear of having nothing LATER.
You're in great financial shape. There's no reason why you can't buy meat or anything else you need/want when you go to the grocery. Money needs to go OUT as much as it needs to go IN.
AnAbsoluteDiva is right......the stress of this will kill you long before you run out of money.
I absolutely agree. And this is from someone who just came out of a miserable unemployment. I'm in my 20's too, and this has been a good lesson in saving for me.
I was watching Ben Stein, who has a nice way of putting things into perpective. He said basically, "92% of us are employed and 95% of us are paying our mortgage on time. That's not so bad, is it?"
I think this economic "meltdown" (could they have chosen a MORE hysterical word?) has sent us over the edge and the media going into hysterics hasn't helped at all. I've had plenty of reasons to not sleep at night over the past few months, but you are working, you are smart with your money, and you have money in the bank. I don't think it's worth it to go without food.... yet.
I have asked myself this very question, since my husband and I had the "worst case scenario" discussion last month, as we don't see this economic situation getting better any time soon. I think we are in for the long haul on this one. Like you, I was obsessing over every penny, trying to cut our grocery bill down to $50 a week, only eating out once a week and so on. It has definitely helped. we also save around $1500 every month in anticipation of several things... one being just building up our nest egg/emergency fund in the event that one of us gets laid off. Both of our companies have assured us that they are not going through layoffs, but my husband works in the aerospace/defense industry and those jobs can be shaky. It used to be that six months of your salary was enough, but I think 1-1.5 years of your salary is better, especially with the lack of jobs these days. Like you the only debt we have is our mortgage. That definitely helps!
We are also in our mid-20s and kind of like fish out of water here because it's our first economic crisis, too. But I think the best advice is to just bide your time, wait it out, and continue being fiscally conservative. I know it's easy to get riled up (my 401k is down 24% from last year), but we've got LOTS of time to recover those losses. Remember, this is not money you were planning on using a year from now.. more like 40 years from now. And it's best not to pull it out of the stock market because WHEN the market rebounds, you'll make some of the biggest gains by keeping it invested. There is a good article in Kiplinger about this: http://www.kiplinger.com/magazine/ar...your-401k.html
Just bide your time. It never hurts to be fiscally conservative, and it sounds like you're doing a good job. Sooner or later this thing will end (I hope).
Does your husband work for Lockheed Martin Space Systems in Colorado? I work at Lockheed in Virginia.
lol, he does not, though I have several colleagues who work for Lockheed. He works for Goodrich Corp. I believe they have a corporate office in VA.
So you can empathize with our worry about defense spending being cut, and/or another 9/11 happening.
A little but not really. Obama doesn't plan on cutting anything of ours and we just got a contract renewal and more than likely stealing a contract from another competitor. If I do lose my job most of the other defense compaines I work with would pick me up. In my field everybody knows everybody for 20 years because if one company loses the contract and lays everyone off the company that won the contract hires the people who got laid off.
I think you are in great financial shape. I'm not going to tell you to go out and spend, because you are clearly uncomfortable doing that. But I will agree with the others and tell you that you need to take care of yourself. You know how when you're on a diet and you deny yourself chocolate all week long, and then you finally get some chocolate and you totally binge? I think that same thing can happen with spending too. So allow yourself a pound of ground beef and a movie once a week, or something.
Actually, you can give yourself an allowance. My husband and I do this. This is just cash that we can spend however we want. Right now I allow myself about $30 a week. I get that cash out and spend it guilt-free. You should try something like this too, IMHO.
Financial responsibility is important but I also believe you should find a comfort level for yourself in spending money. I think setting up a budget for yourself would be helpful. You can ID how much money is spent for 'fun', how much for food, etc. Be reasonable with yourself. Do you know your overall financial goal?
The market works in cycles and we are definitely in a down cycle but history shows that where there is a down, there is an up. Being in your 20s versus being in your 60s is a big difference in terms of 401ks and retirement accounts at this time.
. BTW I don't agree with your cheap shoes comment. Shoes are shoes are shoes.
(thread hijack for a second, I'll get back to the original topic in a moment)
I would almost bet that you're male and/or under thirty. I wore extremely cheap shoes for the first 25 years of my life. $5 imitation "keds" style tennis shoes (no arch support and no shock absorption), and then in my mid-twenties, started getting plantar's fasciitis (feels like the bottom of your feet are on fire, and resting only makes the pain worse, lovely). Ever since, I've had to buy more and more expensive shoes. For a while the only shoes I could wear without pain were birkenstocks and New Balance (at the time, you couldn't get either for less than $100).
Some people (whether due to luck or genetics) can wear cheap shoes for a lifetime without consequence, but there's no way to predict whether you're one of the lucky few, so it pays to assume you're not. I wish I had. The price isn't really the issue, it's cushioning/shock absorption and arch support, but very few cheap shoes have these characteristics. You may not have to buy top of the line (especially if you are taking care of your feet, before you have problems), you can even buy used shoes, if they're in good condition (and you're not squeamish about wearing somebody else's shoes, even after you disinfect).
Taking care of your feet, is an excellent investment.
Ok, back to our regular scheduled program:
I like watching Suzie Orman (the financial guru), and she's always said that one should have enough in savings to be able to live on, for at least 8 months, should you lose your income. In this economy, I don't think having a year's safety net is unreasonable, that being said, only you can decide how much savings is enough, and how much attention to finances is sufficient (or excessive).
If you're stressing and worrying, I'd say you need to find a way to stress and worry less. That doesn't necessarily mean spending more money. If you're comfortable with your sacrifices (even if some of us would call them necessities rather than luxuries), then that's terrific. If you feel deprived and miserable, then loosen the purse strings.
Hubby and I are on disability, so some of our frugal ways are out of necessity (though I did much of this when we were both working), but we also rarely pay $3 per lb for meat. One of the best books on the market for frugal living are the "Tightwad Gazette" books. I bought the complete three volume edition from amazon.com or a garage sale. I don't remember which. That and the "Good Cheap Food" cookbook (also amazon or a garage sale) are my "frugality" bibles.
The issue isn't whether you're saving "too much" or not spending enough - it's whether you're comfortable with your lifestyle, and if not - then finding your optimal comfort zone is the real issue. Are you saving your money out of fear, or are you saving money for something more important (and do you know what that is, or is it a vague "I might need it later" feeling)? Does giving up the small luxuries make you feel good, or disappointed?
I think your questions are ones for which there is no correct or specific answer. Ask 100 people, and you'll probably get nearly 100 different answers.
Should I Be This Worried and Saving this Much Money
They balanced each other well. 
