Making the Most of Missed Opportunities

Roth IRA Challenge: Making the Most of Missed Opportunities

I can’t express how excited I am to have Ms. Our Next Life on the blog today. She blogs over at Our Next Life and has one of the best, most grounded, reassuring perspectives on the journey to early retirement out there! Seriously, if you’re not already a fan of Our Next Life, it’s time to figure out what all the buzz is about! Go! On top of that, though we’ve never actually met in person (yet!), she’s one of my real friends and I’m delighted to feature her and a bit of her journey here today…

Before we dive in, I just have to share with you guys that Maggie is one of our very favorite humans in PF blogland. She will never tell you herself how awesome she is, but it’s true. I’m especially grateful for her friendship and support since our blogs were both baby blogs – and, of course, all the Clueless GIFs. So needless to say, I’m thrilled to be here.

I’ll start with a confession that’s appropriate to the Roth IRA Challenge: Mr. ONL and I have never invested a penny in a Roth anything, and I’ve saved a grand total of about $250 in any IRA in my life (though it has grown to almost $500 – wohoo!).

The “why” is the very definition of a first-world problem: We’ve been over the income threshold for IRAs since before we got our financial act together, and haven’t been eligible to invest through them. I know, poor us. Please play us a dirge on the world’s smallest violin.

We’ve done some other things right along the way, maxing out our 401(k)s for a bunch of years for example, but ever since we got serious about retiring early, we’ve been kicking ourselves for missing out on IRAs when we had the chance. Like seriously, we couldn’t have saved ~$5000 a year back in the day when we did travel plenty and eat at trendy restaurants practically every week? We for sure could have done it if we’d thought to. Skipping two meals out a month probably would have gotten us there, and that’s without touching the other mindless spending that we hadn’t yet addressed. #lattefactor

But those opportunities to invest in IRAs are gone, lost to us forever. Dwelling on that now doesn’t get us those years back. So how do we make the best of those missed opportunities?

 

Perspective Is Everything

I’m discussing a problem we’re suuuuuper fortunate to have. By earning above the IRA income limits, we’re able to save so much more than we could if we earned less. We clearly come out ahead, even if we didn’t make the most of the chance to put tax-advantaged money away when we were younger.

But let’s say we were talking about a true missed opportunity. Like how we wish we’d bought a second rental property before the housing market heated up again, or how we could have saved more aggressively overall at an earlier age if we’d known the FIRE math and be retired already.

It’s easy to put the lack of IRA savings into perspective by remembering that we’re saving a lot faster at this income level, but what about real missed opportunities? For us at least, perspective is still key to moving forward.

In personal finance blogs, we like to lament the debt we got ourselves into, the years we lost to mindless spending, the poor decisions we made when we were young and dumb. But what about celebrating what we gained through those spending decisions, or by not jumping on opportunities? When we get down on ourselves for missing out, here’s what we try to keep in mind:

Buying a second rental property might have stressed us out. Our tenant in our lone rental is a close relative who’s pretty much the best tenant we could ever hope to have, and makes it really easy to be landlords. If we had bought another property, we’d have to rent to a stranger, and with work as demanding as it is, we don’t have time to be good landlords. That might mean needing a property manager, which could mean not getting positive cash flow on the property, or at best squeezing out a small margin. Instead, by missing the opportunity, we’ve slept better at night than we might have if we had that added money stress, even if the stress was for a good long-term reason.

We made so many great memories with the money we didn’t save for early retirement. We’re huge believers in enjoying the journey to early retirement, and not sacrificing everything fun in life to get there faster. And before we got really focused about saving, we pretty much lived that motto. But thankfully we didn’t buy a ton of stuff – instead we took lots of ski trips, traveled to some wonderful and memorable places across North America and Europe, and ate some truly life-changing meals. Though we’d love to be retired by now, we wouldn’t trade those experiences to be at our goal already.

Working a little longer has had other benefits. “Longer” is relative, of course, since we’re still on track to retire in 2017 at 40-41 and 37-38 (depending on which month we quit!), which we know is not that special among FIRE bloggers, but is super crazy rare and awesome out there in real life. We don’t know anyone from our offline life who’s done anything close to what we’re doing, and we know how lucky we are for this to be an option for us. But by working these past few years, and into next year, we’ve piled up more travel miles on work trips that will take us around the world when we retire, something we’re grateful for, and we’ve gotten to visit some cool places on our clients’ dime too. Pretty sweet.

 

Moving Forward Financially

Of course, sometimes there is truly no upside at all, like if you got conned into investing in a pyramid scheme and lost your life’s savings. I won’t try to tell you to look on the bright side if that happened. That’s when all we can do is focus on moving forward with as much positivity as possible. And that can be done a few different ways:

Resolve not to repeat the same mistakes. Tough as it can be to see a mistake or missed opportunity this way, we try hard to see it as a valuable lesson we couldn’t have learned any other way. And the way we make that lesson count is by making sure we really learned it. That might mean developing our radar to sniff out bad information, or tracking our spending to make sure we learn our trigger points.

Prepare yourself for the next opportunity. This one is a biggie for us. We missed the chance to invest in IRAs in our main career, but we expect to get this chance again when we retire next year and our income goes way down. So we’re building IRA and Roth investments into our retirement spending plan – it’s not quite the same as having saved in them in our 20s, but it’s the next best thing. And as for missing out on a second rental property, we want to put ourselves in a position to pounce whenever the housing market goes down next – we haven’t decided yet what that looks like, but we’re working on it!

Overdo it. For us at least, the best peace of mind comes from knowing we’re not worse off for making a particular choice. And while it may not always be possible to get to that point after missing an opportunity or making a financial mistake, the next best thing is overdoing what we do now to make up for those past whoops moments. So even though we could have stopped contributing to our 401(k)s more than a year ago because we’d already hit the level at which they’ll sustain us forever once we reach age 59 ½, we’ve continued to max them out to make up for not investing in IRAs when we were single and earning less. The 401(k) limit is much higher than the IRA limit, especially with employer match included, so we’re pretty close to feeling like we’ve made up for our past missed opportunity.

Is it Time to Quit Your Job?

Is it Time to Quit Your Job?

In the book Born for This by Chris Guillebeau, he recommends setting a date to resign from your job each year. On that date, you commit to resigning if your job is not the best fit. This exercise forces you to re-evaluate every year with an ultimatum. Are you miserable? This is quitting day! Things going great? Reset the calendar reminder for next year and carry on.

What if?

Many advocate that if you prepare for the absolute worst case scenario, you’ll get over your fear. So, what if you lost your job tomorrow? What is the worst that could happen? Your family goes hungry. You lose your house. Jobs are scarce. Keep the thought experiment going. What would you actually do?

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The Privilege of Being Santa

The Privilege of Being Santa

Thanksgiving has been devoured and that is the official start of the Christmas season in the Banks house. My kids are dancing to Christmas music and throwing stuffed snowmen back and forth as I type this. And they look forward to the coming of Santa Claus, as most children do.

Santa is Magic

As an adult, I tear up a bit when I’m talking about Santa Claus. For me, Santa is the embodiment of what I wish the world could do all the time. Santa is a worldwide agreement that for one night, everyone will help make the world a magical, wonderful place. When my kids ask me if Santa is real, my response will be: “We have the power to create magic and Santa is the perfect example. The actual person named Santa does not exist, but he exists everywhere and now you get to be a part of the surprise and help create that magic for your younger siblings and for others!”

In Alaska, Santa is VERY REAL. We have been to his house in North Pole (a pretty elaborate gift shop).

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Grateful Money Amounts

Grateful Money Amounts

I enjoyed the Halloween tweet-storm so much, I decided to do a Thanksgiving version. I asked people to give me one amount of money they are grateful for in 2016:

I thought about this a lot myself before tweeting it out and have an answer that fits in a variety of categories. For each category, I add my own answer and the Twitter responses I got that fit in that category as well.

Experiences

My $276 amount to see the second ever showing of Harry Potter and the Cursed Child would fit in this category. It was an amazing, historic experience.

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A Grateful Year in Review

A Grateful Year-in-Review

In preparation for Thanksgiving this year, we’re going to do a practical gratitude exercise. This is Thanksgiving week. (YAY!) Think about where you were last year at this time: how old were your kids? who was with you Thanksgiving week? where were you? what were you working on? what things were you wishing you were doing better?

Do not focus on the negative. Life happens. Maybe this year had a lot of bad things happen. Now is not the time to talk about those.

Focus on the growth. Pick (at least) 2 things that are better this year than last year.

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Max it out, no excuses!

Roth IRA Challenge: Max it Out! No Excuses!

Today, Ms. Montana is here to take the Roth IRA Challenge. She writes over at Montana Money Adventures and is currently in the middle of a year-long family sabbatical! Not only did Ms. Montana take the Roth IRA Challenge, she has annihilated the challenge! Remember how we’re failing on maxing out our Roth IRAs this year? What’s our excuse? Well, uh… Yeah. Now read all of the setbacks the Montana Family had. After this, I hope your resolve for 2017 is much greater (mine is!). Take it away Ms. Montana…

Mr. Mt and I wasted nearly 3 years before we started maxing out our Roth IRA. There were other things we felt needed taken care of first. Credit card debt.  Emergency fund. Student loan debt. Medical debt. Yeah, we had a lot of debt. $50,000 to be exact.

But now I regret that.

While it sounded smart at the time to tackle the high interest rate, urgent stuff first, in reality there will always be something “urgent” to put that money towards. There is no need to speculate what those things could have been for us. Here is a recap of all 14 years we have been married and all the things that could have prevented us from saving for retirement. You know, till later.

Excuses from before we started.

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Coloring Your Finances

Coloring Your Finances

Today we’re going to have a little drawing lesson. Don’t worry, even my 2-year-old can do this! For the purposes of this lesson, color=money!

*Special thanks to Mr. T for drawing our awesome moose-piggy bank for this demonstration!*

Coloring Your Spending

When you spend money, stay within the lines

When you spend money, you should “stay within the lines.” Only spend money that is actually in your moose bank. Think about this picture.

If you wanted to get the money out, you would have to break the moose bank (awwww… but he’s so cute!). Think of this cute moose every time you go to spend money. Does that mean you should never spend money? NO! But before you spend money from your cute moose bank, you need to get into the habit of pausing and thinking about it first.

Is this purchase worth breaking this cute little moose face? Ask yourself does this spending align with my goals? If it does, break that little moose face and go for it, but don’t spend more than is in there… looking at the picture, that isn’t possible, right? There’s no other money anywhere. Remember this. It’s really that simple. If the money isn’t in the moose, you can’t spend it!

Coloring Your Savings

When you save money, spread the color all over the place

Savings breaks all conventional rules. There’s no need to “stay in the lines.” The most important thing is to save. You want lots of color!

Imagine just dumping the color all over. Will some of it end up in your moose bank? Yes! Will some of it end up in emergency funds, retirement funds, brokerage funds, etc. Yes! We can argue about the nitty gritty details about which moose bank needs which colors, but that’s not important. Pour that color!

Until you increase the amount of color on your savings picture, you don’t need to worry about the details. If you’re pouring color, you’re moving in the right direction.

Mr. Moose Bank Says: “Stay in the lines for your spending, go crazy on your savings!”

Kindness

On Kindness

Did you know that the incidence of psychopathy in CEOs is 4 times that of the general population? Apparently a lack of empathy and kindness is great material for climbing the ladder all the way to the top!

I’m a firm believer that your selfish vs. altruistic mindsets are firmly cemented the more actions you make. For example, if we spend all of our working years actively chasing early retirement and choosing not to give (after all, one donation could mean 2 weeks/months/years more work!), we’re not going to one day wake up and decide the time is right to start giving. On the flip side, if we get into the habit now of charitable giving, it will become a habit and doing good with money won’t be difficult later.

Just as I think giving money is a habit, kindness is also a habit. Kindness may not make you rich, but it will definitely enrich your journey. Today, I want to make a case for being kind. There is enough rhetoric in the world about how to be cut-throat, ruthless, step on the little guy to get a leg-up, and not looking down on your way to the top. The world doesn’t need more of that. And if that’s the requirement for being successful, I’m happy to be a failure.

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Northern Expressions

Northern Expressions: On Democracy

Democracy is the worst form of government except for all those other forms that have been tried from time to time.

“Democracy is the worst form of government… except for all those other forms that have been tried from time to time.” – Winston Churchill

He’s right, you know. Democracy is horrible, unpredictable and wonderful. At the end of it all, we celebrate our right to vote. We celebrate the freedom the people have to choose a leader.

Also, on Veteran’s Day, we celebrate those people that have made that freedom possible. It’s worth the fight and I thank you. Sincerely.

Lessons for my Children

Along with that democracy comes the expectation to listen. We vote for people to represent us. We like to throw around the phrase “Every Vote Counts” and then ignore people outside of ballot numbers. A few things I hope to teach my children emerging from this election:

  • If someone expresses that they feel unsafe or scared, our first response should NEVER be “get over it” or “you’re making a big deal about nothing.” Our first response should be “how can I help?” or “You’re safe with me.” Maybe we’ve never felt threatened. That doesn’t make their threat any less real. (I will be wearing a safety pin to represent this. Maybe it will mean nothing. Maybe it will comfort one person feeling alone. I’m going to take that chance.)
  • Stories need to be told. If I only listen to the group of people with a very similar background or ideology, I learn nothing new. You wouldn’t come up to Alaska and just know how to mush dogs or dipnet. You would learn from a local. Everyone has knowledge and talents that we don’t. We can learn from them. More voices = more knowledge.
  • Humans relate best based on human need. We spend too much of our interactions arguing about things like politics where we struggle to find common ground. Can we hug? Everyone needs that. Can we share a meal? Everyone needs that. Can we play a game with a kid? Every kid needs that. Can we be kind? Every heart speaks kindness.
  • My son needs to be a champion for women in this world and know what toxic language exists and how to change it. And my daughters need to know that they are strong and capable and fierce and that’s not only okay, it’s wonderful. They can stand up for themselves and be a voice in this world. They may need to shout a bit louder, but they shouldn’t stop trying to shout.

On Wednesday, I sent my kids to school with a charge to be extra nice. I give that same charge to you grown-ups. It’s okay to hurt. I’m here. No one should apologize for how they feel. We should just try to be aware. Before you speak, listen. Before you judge, hug.

You people are the best people. I know it. I’ve read your comments of encouragement and love. The world needs that now (no matter what your political views). The world needs your goodness.

Go, friends. Be the light.

Love, Maggie

 

Perfect Gets in the Way of Good: Finances Edition

Perfect Gets in the Way of Good: Finances Edition

I’m sure you’re familiar with the phrase “Perfect is the Enemy of Good.” I’m experiencing that in my financial situation here at the end of the year. Last week, I calculated our projected taxes for 2016 (PRO-TIP: Do this earlier than November!) and realized we’re set to owe nearly $7,500! Yikes! (It doesn’t help that I am self-employed and our PFD and Energy Program Rebate are both taxable.)

*Rewind* *Rewind*

(blatant Hamilton reference, yes)

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