I have some other news which you probably will not like: you do not get to spend the remainder on whateverthefuckyouwant. You have two other things to worry about:
- What happens when you get fired from your shitty-ass busboy job.
- What happens when you retire.
Saving for retirement is probably a tougher case for me to make, but I promise it's just as important. I'm sure you've heard all this math bullshit before, but here it is again:
Suppose Ernie and Bert are both 25 years old. For ten years, Bert puts $1000 into a retirement account every year, and Ernie puts none into a retirement account. When they turn 35, they reverse roles; Ernie puts away $1000 a year until he retires, and Bert never contributes another penny to his retirement account. When they turn 65, which of the two will have more money?
If the answer were Ernie, it wouldn't be worth asking the question. And indeed, the correct answer is Bert, assuming that they were pulling in 7% in interest every year (which is a pretty trivial requirement).
Not that tables are particularly fun or interesting, but you need to look at this one:
|Age||Ernie Adds||Ernie's Total||Bert Adds||Bert's Total|
In the end, Bert has more money, even though he only ever put in $10,000. Ernie, on the other hand, put in a total of $30,000 and in the end has $10,000 less than Bert. ADA, this is why you can't afford to wait on saving for retirement.
Just as important as saving for hardship and saving for retirement, though, is taking care of yourself. What good is saving if you hate being alive, right?
So here's what you're going to do, ADA. You're going to take that disposable income, and you're going to put it into three separate accounts:
- 1/3 of your money will go into a savings account for hard times.
- 1/3 of your money will go towards your retirement plan. I'll talk more about choosing a plan in a later post.
- 1/3 of your money will go into an "allowance" checking account. Spend this on whatever the hell you want. Go out with your friends, buy a new TV, purchase Smurf memorabilia on eBay. Do what you can to keep your sanity by spending this money on fun things.
ADA: In some upcoming posts, I'll tell you how you and your totally hot wife have worked out finances in this dimension; and I'll tell you how to pick a retirement plan.
Enjoy your allowance. Don't spend it all in one place.