We recently had our piano tuned, and our tuner shared part of his life story with me. He told me that he is “retired” from his job that he worked for over 40 years. He doesn’t “have to work” because he needs to earn money, but he enjoys tuning pianos, so he works part-time. Through his story, I picked out several keys for staying motivated to invest — no pun intended.
Our piano tuner told me that he worked because he wanted to work. He loves music, enjoys working on pianos, and he likes to visit with people. He still has plenty of time to spend with his family and on other hobbies. This works well for him.
In contrast, I know retirees who like to travel. Others like to watch their grandchildren. Some like to garden. Not everyone would enjoy working as a piano tuner. We all have our own interests.
I had a college professor who wanted to volunteer at a local library by reading to children when he retired because he really enjoyed reading to his children. Another acquaintance got more involved in government and became a state senator when he retired from full-time employment. The options are endless!
I’ve been thinking about what my family wants to do in retirement. Whenever I try to do what someone else is doing, I lose motivation. I have to do what’s right for me and for my family. What does YOUR custom retirement plan look like?
He and his wife worked 40 years in their careers and saved for retirement. I’m not even 40 years old yet, so it impressed me that they had prepared for this stage of their life for longer than I had been alive. Even though I know how important it is to save for retirement throughout our working career, meeting someone who did it makes me feel like I can do it too.
I have had other friends and family members who have also retired, and their examples have helped motivate me to invest for retirement. They have me given me hope that my personalized retirement plan is possible — especially when we were unemployed and had to stop retirement savings. Their examples motivated me to start again when we were able.
Having mentors who are in retirement is very helpful because they have already done it and can guide us. Both sets of our parents are in retirement and we see what costs they face and how they differ from costs in our stage of life. Preparing for retirement throughout life gives you freedom to do what you would like to do.
Our piano tuner can make the piano sound amazing when he plays it and tune it. He is a pianist, and his love for the piano shows. He has a good sense of humor and makes piano jokes. I can tell that he completely enjoys piano tuning and interacting with his customers.
His story was a great example of working during retirement. He does something that he enjoys. He makes a good amount per hour, but it really didn’t seem like “work” to him. He is his own boss. He schedules as many jobs a week as he would like to work, and he schedules those jobs around his life. Seeing him enjoying retirement so much motivated me to work towards it.
I have another acquaintance who “retired” from his job of 30 years to serve a volunteer mission for his church with his wife. He had always wanted to do this and was still young, so after he finished that, he worked for a friend doing something else. He has freedom to work how he would like to work. Both are enjoying their work.
Statistics show that so many people are not saving enough to retire the way they want to retire, but it's really so simple. Meeting people like our piano tuner help me to realize this. Why aren't most people saving then? Well, it’s so easy for me to get caught up in the immediate expenses and put off saving for retirement.
Hearing his story helped spark my imagination to think about what job would be good for me at that stage of life. What did you learn from this piano tuner’s story? Who do you know who is retired? How has his or her story influenced you?
Growing up, my family loved watching sports together. My younger brother wrote down all of the players' names and kept track of their stats as the games were played. I hadn't seen a Jazz game for a decade until Ty's boss gave us tickets earlier this year. We sat on the fourth row and were so completely entertained that my kids didn't fight or complain at all! It's exciting for our Utah Jazz to advance in the playoffs and play the Golden State Warriors! But, the most important statistics to us individually don't have much to do with the NBA playoffs.
Have you seen the classic game of Family Feud? Why do the family teams care what the “survey said.” Because, if the families guess the responses that were the most common answers, they can win the prize money. In a personal finance class I just taught, we took a financial quiz. I read a lot of financial surveys to prepare for this class. Three of the statistics from these surveys impacted me the most. More importantly than finding out what the surveys said, is to find out what you think about these statistics!
Could you cover an unexpected expense that cost $1,000? We’ve had a whole lot of rainy days here in Northern Utah the past couple of weeks. We don’t know when, but we know that it will rain. I don’t mind being wet, but I don’t like feeling cold, which always follows my getting wet. We have regular financial storms too. We don’t know when they will hit, but we know that they will hit. An emergency fund protects my family from getting rained on and being left in the cold financially. There are different opinions on how much an emergency fund should be. Because of the emergencies my family has experienced, I wouldn’t feel comfortable with an $1,000 emergency fund, but it’s a great place to start. Do you agree with having an emergency fund? If you were surveyed about having an emergency fund, what would you say? Has an emergency fund ever helped you work through changes in your life? Does an emergency fund matter to you?
I am a fan of having an emergency fund for many reasons, but I’ll share the most recent experience with our emergency fund. My husband Ty changed jobs 6 months ago, and we had a two month waiting period to enroll in the new employer’s health insurance plan. Ty’s employer generously offered to reimburse us for the cost of the COBRA health insurance coverage for the two month waiting period. However, we had to pay for the insurance first before it could be reimbursed. Our emergency fund allowed us to pay for that insurance coverage. When we were reimbursed, we deposited the money back into the emergency fund so that it will be there the next time that we need it. The emergency fund relieved and prevented a lot of stress for us. I recommend an emergency fund to you because it has helped my family adjust to life's changes.
Again, it doesn’t matter whether this survey is accurate, it matters what is true for you. Do you have a retirement savings account? Are you saving regularly for retirement? Just like the rain is sure to come in springtime in Utah, retirement is going to happen as we age. If you don’t have retirement savings, or if you haven't saved as much as you wished you had, it’s not too late to make a plan and work towards retirement.
Am I saving for retirement? Yes! Have I saved enough for retirement? No, but we are making progress. With so many financial emergencies and financial pressures, I understand how retirement can slip into the background of your finances. My husband and I try to keep them in the forefront and make retirement a priority for our family, but to be honest, sometimes we have to cut back our retirement savings. Our retirement contributions increased when our income increased and decreased when our income decreased. Although I’m not retired, I have mentors and friends who are retired. They advise me to save for retirement throughout my working life, and I trust them. I believe in saving for retirement!
Do you talk about money with your friends and family? If you have children, do you give them opportunities to save, share, and spend money? Do they understand that a $20 bill is worth much more than a $1 bill? My kids may think that I talk with them too much about money. I talk about it all the time because we use money all of the time.
My 5 year old daughter and I ran a lot of errands this past week. I told her we were going shopping and encouraged her to bring her Hello Kitty purse and five dollars. On the way to the store, she told me that she wanted a ball. I let her spend her money as she wanted. At the first store, she bought some cotton candy. The price rang up higher than the price listed. It turns out that the cotton candy was in the wrong spot on the shelf. I asked her if she still wanted it. She bought the overpriced cotton candy, and she was excited that she still had money left. At the next store, she saw the bulk bins of salt water taffy in the middle of the isle and bought that. She used her last few quarters to ride the Clifford ride at the front of the store. Although it was hard for me to watch her spend money on candy, I let her experience spending her own money.
I think she learned a lot that day. By going on the Clifford ride, she learned what a quarter looks like. (The machine only took quarters.) Even though I didn’t agree with her spending choices, I felt proud of her for learning what a quarter was and being able to spend money on her own. At the last store, she saw a tiara that she wanted badly, and I explained that she had enough money at the beginning of the day to buy the tiara, but she didn’t any left. She replied, "But I didn’t know they would have this.” We talked about figuring out what she wanted and then not getting distracted by other items.
Surveys are just one tool to find out how our personal finances are going. Are the statistics from these surveys true for you?
As you cheer for your favorite NBA team, I hope you think about the most important financial statistics for your life.
According to ycharts, the average personal savings rate in the U.S. at the end of 2016 was 5.5%.
That is what my family was saving, so we are average savers right now. Savings doesn’t happen without strategy, so this statistic shows we are prioritizing savings, but we can improve this percentage.
Eight years ago, my family had a savings account with a few thousands of dollars in it. We emptied the account in order to pay for a new roof. We saved for a couple more years and then we emptied it again to pay for a fence in the backyard, which we justified as an “emergency.” It felt like we couldn’t get ahead because we were filling and emptying our savings and couldn’t ever move on.
At the same time, I was feeling pressure to save for retirement, vacations, and my childrens' future college and marriages. I wanted the time value of money to be working for us in all of these areas. That resulted in me using that marriage fund for another expense. We only saved a couple of hundred dollars for college, and our retirement savings was minimal.
In 2010, we decided to focus on one savings goal and invest 3% towards retirement. We decided that our first goal would be to fully fund an emergency fund, which we would only use for emergencies. (Home improvements didn’t count as emergencies for us anymore!) About a year and a half into the goal, we had saved ¾ of our goal amount. I felt tired as we hit a savings wall. I started to justify that we had enough saved, but our commitment to this goal helped us to stay focused on it and climb over the savings wall. About a month after hitting that wall, Ty received a promotion and large raise from his employer. This raise was 5X bigger than any raise he had ever received in the past, and it allowed us to reach our savings goal within a few months.
I remember the Magic Eye 3-D images that required me to relax, focus, and disregard all of the distracting images in order to see the 3-D image through the busyness. You have to be committed to finding that 3-D hidden image. That’s what happened when we focused on one savings goal. We were able to ignore all of the busy distractions. We relaxed and focused in order to see the goal realized.
I don’t know who to give credit for the term “savings snowball.” When we were going through our Savings Attention Deficit Phase, I knew about the debt snowball. This focused on paying one debt off at a time while paying the minimums on everything else, and I thought it would be great to do that on the savings side so that we could avoid debt. I googled “savings snowball,” and found the phrase several times, so I wasn’t the first to coin it.
Think about how we make snowballs. My kids have been making a lot of snowballs. They can make a lot of little ones for a snowball fight, but to make a snowman, they have to focus on one and roll it until that snowball gets bigger and bigger. Pretty soon, we have a large snowball to use to build the base of a snowman. Once the snowball is big enough, we can move to the next snowball, which doesn’t need to be the same size as the first. We decide how big it needs to be, and then we roll it until it gets to be that size.
We started doing this with our savings. After saving for an Emergency Fund, we saved for a trip to Disneyland, which was a much smaller goal that we reached quickly. Then we saved for a minivan. Now we are saving for an SUV to replace my husband’s SUV. The savings snowball has worked well for us because we see progress in reaching our goals in a relatively short amount of time.
This method also helped me relax and focus. I don’t goal hop anymore or try to do everything. The percentage of our income that we saved has changed. We started with about 5%, and each time we got a raise, we put it towards savings until we were saving 20%. Then, with our job loss, we weren’t saving at all for a short time. Then, once again, we started saving 5%, which is where we are now.
Look at your budget to determine what percentage number is right. As you free up money by reaching your savings goal or increasing your income, you can add to that. What other savings strategies have helped you?
I am not ready for Christmas, so why am I thinking and writing about retirement? Our parents are both retired, and it came fast. I remember when my parents were my age. Even though it’s Christmastime, I’ve been thinking about retirement.
Over the years, I’ve tried every retirement calculator tool available. I’ve estimated my family’s expenses. We have met with financial planners. I have concluded that there are a lot of unknown factors about retirement and have accepted this.
According to the Social Security website, currently full retirement age is 67, which is close to the age of our parents. I’m fascinated with young retirees I’ve heard about. Retirement doesn’t have to mean “age 67.” I understand it to mean the time when we are not actively earning money and living off passive or saved income. This could be any age.
My husband plans to work as long as he physically can. He loves to work so he will probably work during retirement, but it will be a different kind of work. He worked construction for his first job, which was very physical. His current production job requires physical labor, but not at much as construction required. I assume that he will do less physical labor but still work as much as he does now.
During retirement, some passive income will come from investments that you made earlier. So, we need to decide what type of investments we will make.
What kinds of expenses will you have? The best way I know to estimate retirement expenses and income is to look at those who are retired. My parents and inlaws have these expenses:
I realized that our parent's expenses are pretty similar to ours but the amounts are different. These amounts can range from a little to a lot, which is why it’s important to think about your personal plans.
This Wasatch Peaks Retirement Calculator was a great tool to use after I figured out what I think our expenses will be. The calculator said our investments need to be $300,000 to $400,000. This number depends on interest rates. Also, I didn’t calculate in social security benefits. So, it might not be an accurate number, but that is ok. Just figuring an estimate helps our family prioritize saving now. We are relatively young and there are a lot of urgent expenses we have in raising our family like clothes, braces, and Christmas to name a few. Retirement savings can easily be put on the back burner, which I have done plenty of times. Knowing this number helps me prioritize saving now in order to build to the necessary nest egg we need for the time when we don’t actively work and earn money.
A financial planner once told me that planning for retirement at my age will open up options. I want you to have a lot of options in retirement. Please join me in spending a few minutes planning for retirement.