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« Money Commandment #2 | Main | An Easy Way to Save Over $1,000 a Year »

April 14, 2011


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My initial reaction is just to be disgusted with your ex...

Congrats on taking control and moving in the right direction now. And congrats for not being married to a jerk anymore. I hope your savings plans go exactly as planned or better. I also hope your life is filled with nothing but happy memories from here on out!

I would get rid of your whole life insurance and get term insurance. Invest the rest in a Roth IRA or your 403b. I am a grad student so I know how long and hard you must have worked to get to the position you are in now. I might put $5000 in a Roth IRA and open a traditional 403B for $5000. Might as well cut taxes down a little. Also, I might go to a fee only planner and see if you are putting the investments in the best places, considering taxes. For example, non-dividend mutual funds are best in taxable accounts whereas bond funds do best in tax sheltered account (403b or IRA).

Congratulations on getting your finances on track after the divorce. I know that can be difficult, especially when you had to split everything despite you being the only "saver" of the two. It's great that you like what you do and will find enjoyment working until 67 or 70; you are very fortunate in that respect. Good luck and thanks for sharing your story!

Thanks for sharing your story. I understand why you are putting all your monies into ROTH 403(b). Just for curiosity, is it possilbe to put some monies into regular IRA or 403(b) so as to minimize the upfront tax and let the savings grow tax deferred? Just a thought.

"lived on ramen and vegetables for months--it’s not that terrible." I know exactly what you mean. Isn't it amazing that when you are so poor, 5 or 10 dollars can go so far in the grocery store. ;-)

Nice example of how to overcome a setback (divorce). I also think you provide an interesting perspective on personal finance with your hippie roots. Keep on truckin...

I also loved that comment about living on ramen and veggies not being that bad. It really isn't...although I think couscous is a healthier, if slightly more expensive alternative!

I also loved that last statment: "I think your self-worth and happiness have to come from living with integrity and doing something worthwhile and from something inside yourself." TOUCHE!

I'm not sure about the benefit of pre-paying a mortgage that's that small at 4.5%. It seems to me you are throwing away liquidity for a (very) small savings in interest. Also, your return from putting that money into the mortgage is only the post-tax savings, which is probably around 3%. You can do better than that with even pretty conservative market investments. If you were just a short time away from retirement, I could see where having the house paid off would be a very attractive thing, but given you have 20 years or so until you retire, I would stop pre-paying on the mortgage. Just my two cents.

Otherwise, it sounds like you've weathered a storm in life and come out on the other side pretty well. Kudos.

I love this post...I couldn't have said it any better. I, too, am a child of the 60/70's and I can really identify with so many of her comments.

There was one thought that was a "aha" moment. I was raised by my single mother from the time I was 6. We had very little in the way of possessions. I had a friend in my 20's, Betty. Bet went to private school in England. She had horses, and was fair royalty. She was salutorian of her class. The last time I talked with her she was $35,000 in credit card debt. Had a vehicle loan and just lost her secretaial job. She was raised with "stuff". It was important to her. So much so she mortgaged her financial freedom and peace of mind. What a contrast between the author and my friend. What a contrast between my friend and me.

Thanks for sharing.

From someone in a somewhat similar position, congrats on doing a great job rebuilding your life.
I'm wondering if you are a little underfunded in the area of life insurance. A financial adviser tried selling me the life insurance as savings vehicle, but the first four years of savings contribution was only paying off the commission.

Hi everyone, thanks for the encouraging and helpful comments!

Bad_Brad: re prepaying my mortgage--yes I know--my financial advisor says the same thing! However the difference between prepaying vs no prepaying isn't very big because my mortgage is so small, and psychologically, I prefer paying it off. Also, lately even 3% is a pretty decent return. Liquidity isn't a problem for me--all of my non-retirement savings are already liquid.

Ginger & Norma: my whole life policy is actually a benefit paid for by my employer--I just take advantage of the guaranteed savings plan that is available with it. I think $400K life insurance is enough because I don't have to support a non-working spouse or keep the house if I die. The kids would go live with their Dad, but they'd inherit my entire estate in addition to the life insurance (via a trust)--plenty of money to see them well started in life.

I am very confused about how you are able to put 22.5 k into your 403b. I thought 16500 was the max this year. Is it some kind of age based "catch up" contribution? Also do you mind sharing if you work at a public or private institution? Don't they have some kind of tuition waiver for your kids or reciprocal agreement with other institutions to aid in college costs? Also, does your salary vary based in grant funding? Thanks!

This story emphasizes something that I have always believed in but that is very difficult to put into practice.

It's basically:
1) Get your education right the first time.
2) Get your career right the first time.
3) Get your marriage (or life partner) right the first time.

It's a lot easier said than done since one error or case of poor judgment can have a profound impact on your life and in this case on more than one life.

I am 76, my wife is 78 and we have now been married for 55 years but I very nearly derailed it during year 27 when I took part in a 5 week group trek around the Annapurna range of the Himalayas. I had the 5 weeks vacation but my wife did not and our youngest child was still living at home at the time. It was something that I really wanted to do and my wife raised no objection. When I returned home it took a lot of discussion to repair some damage to our relationship for which I was solely responsible and I feel very fortunate that my wife forgave me. Looking back after all these years I realize that if we had decided to split up it would have been a gigantic mistake for both of us because now after 18 years of a wonderful retirement we are happier than we have ever been, we need and care for each other more than ever, we each have a great relationship with our children and grandchildren, and we didn't suffer the large financial setback that often takes place after a divorce. In fact, our finances really took off after year 36 when I retired because I then had the time to start managing our finances myself, and as the Internet grew it produced the bubble and I was able to put my math, engineering, and computer skills to work very successfully to analyze market trends rather than analyzing rocket motors for ICBMs.

@ Monica: Yes it is an age-based "catchup": Because I turn 50 this year, I am able to increase my annual 403b contribution from $16.5 to 22.5K.

As a tenured faculty member, my salary does not formally depend on grant income, however, my job definition requires that I bring in enough grant money to cover my salary and all the costs of my research lab, so same difference.

I am not paid much for teaching. I do a lot of teaching because I like it & it's a good way to recruit students to work with me, but like most tenured faculty I am specifically NOT paid for teaching. Currently 3% of my salary is from teaching. I get the high level of 3% because I teach many courses, serve on >10 student thesis committees, and direct a large & popular student development program--most faculty members get nothing at all for teaching. We also don't get paid anything at all for the time we spend on teaching-related administration (ie writing training grants, serving as department chair, student job counselor, or dean). Although if we switch to other types of adminstration in the institution we would get paid for that (ie head of development, or school president). This is the traditional faculty salary structure at most universities. That's why most university faculty don't care about teaching classes--we aren't paid for it.

To run my research laboratory, I am required to obtain enough grant money to pay for the salaries, benefits, research supplies, & equipment for everyone working for me (with the exception of grad student stipends which are paid for by other grants that the institution obtains--which are also written by faculty like me). In addition to obtaining direct costs, also have to pay the institution back for all the overhead costs associated with running my laboratory--space, heating, administration, equipment depreciation, etc. My lab is fairly typical in size (1 technician + 3 students) and it costs about $500K/yr in direct costs plus an additional $250K/yr in indirect costs to operate.

I don't work in my lab anymore myself--I spend most of my time writing grants!

The father of one of my friends from HS was a university professor. After high school, she was able to attend the same university tuition-free since her father worked there. I am wondering if you would get the same benefit for your kids.

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