Pause Investing For A Luxury?
Heath wants to know where to save for a large expenditure in the Baby Steps. Dave says it depends on what sort of expenditure it is.
QUESTION: Heath in Waco wants to know where to save for a large expenditure in the Baby Steps. Dave says it depends on what sort of expenditure it is.
ANSWER: You would save for it outside of Baby Step 3—depending on what it is. The first time you can lighten up a little bit and breathe and move out of a beater into a decent car, replace the couch with the springs coming through, and that kind of thing is after you finish your emergency fund. If we're talking a big luxury vacation, then we're asking ourselves the question, "How much of our investing do we not want to do in order to go on vacation?" And that's a question you can ask yourself out loud.
What I would like to see you do on that is to just allocate a percentage of your income toward play money and, in spite of that, still put 15% of your income into retirement. If you slow down on paying off the house to take that once-in-a-lifetime vacation, I'm cool with that. I'm a little more nervous about you slowing down on investing into your retirement. You can run the numbers and look. Just crunch the numbers out, and you're making a value-based decision. The whole thing with all of this is just handle your money with purpose. Once you get to the point you're at where you've gotten past the get-out-of-debt thing and you've got the emergency fund, now we're down to paying off the house and saving money and enjoying our money, and we're investing for retirement. You can do some give and take and play back and forth. It's not as hardcore at that point. But until you get past Baby Step 3, you've got to be hardcore.