A Father-Daughter Duo Answers Your Questions: Should We Use Our Money to See the World Now, Or Save for the Future?

a dazzling place I never knew

Dear Meghan and her Dad,

My husband and I live well within our means in a very expensive city. We save what we can in his 401(k) and my Roth IRA. We have some accessible savings in our credit union, however we are not really saving much. We have prioritized world travel as our luxury. We are able to do this in an affordable way, considering the luxury, by often attaching our adventures to his work trips or relying on the kindness of friends who live or own abroad. The cost of the trips pale in comparison to the cost of things like raising a child (or two), or owning things! Would you say it’s worth investing in our lives right now when a couple of thousand dollars allows us to see the world, or put all that money away (somewhere!) to help out a little in the future? To add, we will hopefully make more money in the future. Thanks!

- Living in the Now vs the Future

Meghan says:

Dear Living…,

So here’s something neat (Dad, don’t look): I have no idea what a 401(k) or a Roth IRA are. Feel free to respond, LITNvsF, to explain both. I know they are marks of fiscal responsibility. I should definitely have one (both?). Here, I’ll lob a question back at you: As someone who only recently acquired the ability to save bucks, what is the best way of going about that? Feel free to respond in kind.

In the meantime: look at you, letter writer. You not only KNOW what these things are, you HAVE them. That puts you in the good books. That puts you so far above me that I am sure my dad cringed when reading this. And since you have revealed yourselves to be child-free but expecting that to change, let’s assume we’re roughly in the same age/life bracket. So go ahead: give yourself a huge pat on the back. Pat away. Do you know how rare true financial smarts are? At our age? In a very expensive city, nonetheless? You should relax, I think. You should go ahead and pour yourself and your husband some sangria, and toast to your good choices. I’m really, really proud of you.

Now put that drink down and call a financial planner. Stop drinking, I’m serious. As I remind myself every time I sit down to write, I could always do better. So could you. That’s evidenced by the fact that you wrote this letter. You’re at a life juncture where these questions have become more pressing, and you need to honor and embrace that. I would find someone—even just a friend with more experience—with whom to sketch out what you want the next 5, 10, 50 years to look like. There are SO MANY QUESTIONS you won’t be able to answer, but you can, at the very least, begin to think in a less nebulous way about the life you want to build. Let’s say you realize you’re going to want to start your family in 3 years. How much money will you need to have ready to feel comfortable with that decision? Then, like, half that, because I don’t want you to really panic. But make a few spreadsheets and earmark a few goals and maybe, just maybe, take one less trip this year, and put that chunk somewhere—yes, somewhere! A money market? That’s another thing I’ve heard about. Try one of those, and let me know how it goes.

Okay, calm down again. This is a balancing act. I am not by any means recommending you give up the luxuries you have very intelligently built into your life. Because who knows what might happen. You might skip that trip to Papua New Guinea in favor of putting those funds towards a mortgage and then five years from now we’re all living in ice castles and trading beaver skins for fire sticks. Point being: We can’t foresee every eventuality. You are living what sounds like a beautiful, fulfilling, adventurous life. You should not feel guilty for that. But you should do whatever is in your power to prevent those moments being tainted by your fear of what is to come. You should do what you can to ward off that fear. You deserve it.

Meghan’s dad says:

This is a good question—the kind of a question that a sensible and responsible young person should ask. It is a financial question. It is the type of question that gives those of us in the older generation hope that there is a future for the world, full of sensible and responsible people who ask these sorts of important questions.

So it may come as a bit of a shock to hear that my answer is “spend the money now!”

This is the sort of issue you and your husband should discuss on an ongoing basis because your circumstances will change, and when they do, you need to re-consider this advice. That said, as of today, you are able to make that $2,000 go a lot farther than it will in the future. As parents of one or two or more children, you won’t be able to couch-surf your way across Europe. With increasingly more stressful and time consuming jobs and lives, it will be more difficult to grab a cheap last-minute ticket to Madrid and spend a week exploring the Prado (the museum, not Prada, the bag company), eating tapas and watching odd processions of Catholics in often funny outfits packing large and heavy religious artifacts while walking down the street (nothing like a good Inquisition to tweak your religious fervor). In addition, you will find, as you age, that a good bed becomes a more important component of travel plans, and good beds don’t come cheap; cousin Emma’s friend Sophie’s lumpy couch in Paris just doesn’t cut it. Your travel costs are heading north.

The only real risk with this strategy is that your careers don’t pan out the way you currently expect them to, and as a result you don’t have the resources that you currently think you will have. Doesn’t matter. Trust me—if things are dire in 2024, the $2000 you spent in 2014 to fly to Peru (which, if invested at current interest rates might have grown to $2100) will not be enough to make a meaningful difference in your lives. On the other hand, the memories of the views from Machu Picchu just might.

 

Questions and money market advice welcome at meghanandherdad@gmail.com.

Photo: fdecomite

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16 Comments / Post A Comment

Allison (#4,509)

If you’re good at living within your means I’m sure you can handle traveling within your means and it will be so worth it.

halloliebchen (#5,373)

Awww I love this dad’s advice! I wish my dad were this thoughtful. Especially this part:

Trust me—if things are dire in 2024, the $2000 you spent in 2014 to fly to Peru (which, if invested at current interest rates might have grown to $2100) will not be enough to make a meaningful difference in your lives. On the other hand, the memories of the views from Machu Picchu just might.

Nibbler (#5,331)

@halloliebchen Stellar advice.

OllyOlly (#669)

My view at this is I have a savings goal of 20% per month. Once I reach that, I put any extra into a travel fund. It motivates me to be serious about saving since there is a reward, and allows me to spend money on travel with less guilt.

Take that trip!

Marissa (#467)

I’m not planning on having kids but I know my circumstances may change in any number of ways in the future. I want to travel long-term (and I will be later this summer!) so my way of getting to that was starting an emergency savings account with a specific goal. Once I reached it, I opened up a separate account for travel. Some of that account is allocated for “resettlement” funds when I return. It’s nice to know I won’t be totally broke when I get back. When I do get back and (hopefully) find a new job, I plan to start contributing more to the original emergency account.

gyip (#4,192)

Travel now. Seriously. Outside of any lifestyle choices you make (starting a family, other obligations, etc), the older you get, the harder it gets. I’m almost 29 and already think this. And as Meghan’s dad points out: INFLATION.

My pretty frugal mom told us the secret was to skimp elsewhere and save for travel. She felt that skipping luxuries like new clothes or restaurants during the year was made up by the mental improvement in getting away. I think if you value travel, that would ring true for you.

Lori (#6,778)

A good rule of thumb from Elizabeth Warren and Amelia Tyagi:

Balanced Money Formula based on your net income (take home pay):
50% needs- housing, food, utilities, transportation costs, insurance
30% wants- cable television, restaurant meals, concert tickets, books, clothing beyond the basics, etc.
20% savings- target 10% for retirement accounts (IRA, 401k), rest for down payment on home, travel, wedding, building 6 month emergency fund, paying off debt

+1 Meghan’s Dad’s advice to travel now

chevyvan (#2,956)

I was really happy to read Meaghan’s Dad’s answer. I have the opportunity to visit a friend on another continent next year, and I figure I might never have that kind of opportunity again. I already kind of feel guilty because my savings goal could be more sensibly used as an emergency fund. Maybe if Meaghan’s dad knew that, he would tell me I can’t go.

honey cowl (#1,510)

I’m a little worried that you write on this site routinely but don’t know what a 401k is????

MeghanNesmith (#5,767)

@honey cowl YUP. I’m worried, too. What I appreciate about the Billfold is that they welcome the uneducated, like me, and speak to us in a way that isn’t condescending. And that when I admit to not knowing, Mike offers to explain in words I understand :)

lisaf (#3,089)

@honey cowl I don’t know either, and it’s nice to feel like I’m still welcome here and that the Billfold will eventually help me figure it allllllll out. I like that Meghan admits what she doesn’t know!

honey cowl (#1,510)

I know little about how to actually manage my Roth or 401k, so I am not an expert :) But you can do it! Make Mike teach you!

eemusings (#6,021)

Everyone’s priorities are different. For me, I realised I would be sadder to die not having travelled the world than to die not owning my own house, so we took off six months and backpacked around the world in 2013. Zero regrets.

kellyography (#250)

Everyone who is a world traveler: can you tell me how you do that? Anytime I go anywhere, I do a ton of research and still don’t know where to go/stay/what to see, etc., and with international travel, the culture differences and the amount of time I would need to take off from work scare me off the whole thing.

OllyOlly (#669)

@kellyography In terms of things to do, I usually start with a guidebook or tourism website to get a main idea of what the big spots may be. Then I start a personalized google map and start saving things in different categories. Once I have a general layout, I will go digging for smaller things, blogs with restaurant reviews. Once I get to a city, I will pick an area of explore for a day, and with the map, it will hopefully have several different options near one big cultural site. It doesn’t set me to a schedule, but prevent lots of lost time wondering what I should be doing.

In terms of feeling intimidated. I just try to remember, everyone knows you are a tourist, they won’t expect you to know all the cultural etiquette details. Be respectful and people tend to be respectful and helpful back in my experience.

Allison (#4,509)

@kellyography I visit friends I met on the internet and stay with them. Which is uh…not necessarily universally helpful advice but is a good start. Definitely check out the guidebooks (physical or websites) for ideas and ask around!

A friend who was in the Peace Corps and ended up traveling around Europe solo in her free time also suggested when traveling alone: have some idea of what you want to do, but also ask bartenders. They’ll know what’s up.

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