Retirement Planning- The Forgotten Component

As I hunker down this year and focus in on retirement planning, I am learning that I will really need to pay attention to health-care costs when I am older. Prescription medications, special procedures, chronic problems, long term care... the list is long.

So what are the things I can do right now to prepare for that?

Obviously, the first thing about retirement planning is saving money right now, investing it and letting it grow.

But the forgotten thing about retirement planning is investing in your health right now. Preventative measures taken early and sustained throughout life will reap huge dividends in old age- in terms of quality of life and significantly reduced health-care costs.

Ramen noodles may be cheap now but eat them long term and you'll be paying big. Avoiding fresh fruits and vegetables may be easier on your wallet and your tastebuds (for some) but eat them anyway! Living on preservative-laden boxed and canned food products because you can get them practically for free with double coupons and sales may bring your grocery budget down to a fraction of what it was... but be careful! Working long hours so you can bring in more money at the expense of your mental and physical health may be a huge source of regret later.

So when you're tempted to save a few bucks by short-changing your health, don't do it!

Make time and room in your budget for:

• healthful foods such as fresh fruits, vegetables, nuts, lean proteins (and supplements if you want)
  
• menu planning and meal preparation so you're not tempted to buy and eat the easy but not-so-healthful prepackaged or fast food meals
  
• daily exercise where you break a sweat and provide resistance to your muscles
• relaxation and mental health
• quitting addictions such as smoking, drinking, drugs, and sugar (mine!)
  

What would you add to that list?

Found Money

I'm usually pretty good about making a budget with my regular income sources and sticking to it but I've never sat down to account for all the little bits of money that happen to come my way from other sources.

Based on my activities over the past few years and some new stuff I have recently begun, here's what I can reasonably expect over the year:

Credit card cash back: $100
(for living expense purchases I would make anyway)

Mypoints: $50
(just for clicking emails, no shopping. I will get this in the form of a gift card to a store I regularly shop at for living expenses)

Inbox Dollars (referral link): $50
(just for clicking emails, no shopping; you can get $5 just for signing up)

Bond Rewards: $100
(online shopping for some of my living expenses- but this money is in the form of US savings bonds that will mature at a later date)

ING savings account interest: $150
(after accounting for taxes and even if I end up spending some of my emergency fund )

Health Insurance Rebate for Gym Membership : $300
I would maintain my gym membership regardless of the rebate, so this really is a bonus.

Property Tax Rebate: $250

That's an extra $1000 over the year. Not too shabby!

Loving Your Job

I just read a great post by Meg at All Financial Matters entitled Loving Your Job is Overrated. She points out that "it’s not wise to endlessly encourage and promise today’s youth that they can and should LOVE their jobs. They might, and that’s great, but they don’t have to."

"We’ve been taught since we were toddlers that we can be anything we want to be, that we should always be happy, that we can and should find a fulfilling job that entwines all of our talents and interests. Those promises bring extraordinary pressure and set expectations that frankly, not many people can or will ever realize."

The thing is, I love my job. Actually, I LOVE my job. Did I get lucky?

In some ways yes, I got lucky. When I was 6 I knew exactly what I wanted to be when I grew up... and that's the job I got. Most people don't know what they want to be when they grow up. Or they do, but then realize that they should find a more practical job because they won't make much money in their dream field unless they're the best of the best.

In other ways, luck had nothing to do with it. I made some pretty critical choices.

Choice #1: I chose life over money

I was willing to earn very little money as long as I got to spend most of my waking hours doing the things that I love to do.

Choice #2: I chose to minimize societal influences that push me towards valuing money over life

Hello.. TV and magazines anyone? Once you go on a media fast you begin to realize just how strongly you are pulled by the messages around you that make your life suddenly feel inadequate. So when Meg says the promises of a fulfilling and passionately loved job puts extraordinary pressure and sets expectations, she's right. It's because the fulfilling job is in direct conflict with the ubiquitous societal norms of having certain things and looking a certain way; norms that we're not even consciously aware of.

One day, I stopped watching TV. I didn't set out on an intentional media fast, I just didn't get cable. I didn't even bother to get rabbit-ears. And then it became very easy to never turn on the tube. I didn't turn it on for four years. I also stopped buying magazines. I'd walk into the grocery store and flip through a magazine at the checkout counter but have to put it down within 30 seconds because of stimulation overload.

The other thing I did was to move away from the community I grew up in. Don't get me wrong, there are many wonderful things about my community and I go back and hang out with them occasionally. But most of the people I grew up with are upper-middle class. That's pretty rich in my book. They live in fancy new houses, have fancy new furniture and fancy new cars. They look at my fancy degree (which I happen to have) and can't understand why I didn't pick a fancy career to go with it. I don't need that. I chose not to surround myself with that.

Choice #3: I chose to reflect carefully on my work and recognize what it is that I love.
This is one of the more enlightening things I have done in my life. For someone who has known what she wanted to be since she was 6, it was quite a surprise to learn that I didn't need a specific job title to get the same joy from my work. I was able to distill out the features of the work that really rocked my world. I will probably write a dedicated post about this in the near future. But for now, suffice it to say that if we can get over the hump of thinking that it's only be being a writer/actor/chef/artist/athlete/politician/(fill in the blank) can we LOVE our jobs, then maybe we can actually begin to find fulfillment and joy in the work we actually do.

Quality of Life... Now and Forever!

All this talk and thought of money brings up the subject of quality of life. After all, why do I want money anyway? So I can live a certain way.

Beyond the basics of having enough to eat and a safe home etc. what are the things I need in my life to feel that sense of "Yeah! Can life get any better?!" ? I actually know the answer to this because I said that very thing one morning and managed to sustain that feeling for a few years.

So here goes...

Health
When my weight is low, my muscles are lean and toned, when I can sprint up and down steps without getting winded, and can lift boxes and move furniture without help... I look good and I feel good. I don't get headaches or backaches or grumpy aches. When I eat leafy greens and berries and veggies the colors of the rainbow, when I eat brown rice and slow cooked oatmeal and indulge in wild salmon once in a while... my hair and my skin and my smile glow. Oh yes, I need my health.

Beauty
I am a very visual person. The forms and shapes and colors around me can turn me off or turn me on. I need beauty in my home. The intensity of the light, the harmony of the colors, the balance of the forms, the exquisite beauty in the order of things. I can sit for two hours on my living room couch completely blissed out by the arrangement of the things around me. An no, none of them were at all expensive. So, surrounding myself with beauty is lovely. It's like those auditory musician types listening to a symphony or gustatory wine connoisseurs on a winery tour.

Meaningful Work
How I spend my time is extremely important to me. I have found that I need the following components in my work in order to feel that odd and perfect mixture of contentment and exhilaration.
Optimal level of intellectual challenge: When my skills and the demands of the task at hand are perfectly matched about half the time. The other half of the time the demands should be just a little beyond my reach so I have to learn, stretch, and grow.
Service or contribution: I need my work to make a difference in the wider world. It doesn't have to make a huge difference, just as long as it goes beyond me and my small circle.

Alone Time
Yes, I am an introvert. Not excessively so, but enough that the constant company of others begins to rattle my brain a little. I need quiet time alone to reflect on my day or to simply not think at all. Some people call it meditation. I have never engaged in formal meditation but I naturally find myself slipping into a still, restful state of awareness when I give myself the time and remove myself from the buzz of activity. This means I have to make sure I don't over-schedule my day.

Love
Can't live without love. Life without love is a deathly life. So say I. I need a certain level of love in my relationships but to reach the state I mentioned at the beginning of this post I need something special. This is the kind of love that feels so big no hole can empty it. Children often make one feel this way. Some people experience it with their pets. Occasionally we find a friend or lover who falls (or rises?) into that state with us. And sometimes it just wells up from within. However I can get it, I'll take it.

Independence
I need a certain level of autonomy in my life. I consider choice to be my birthright. I need then to be able to recognize my choices, to act on them and to experience the consequences. Granted the consequences aren't always what I expect, but the fact that I have the opportunity to make those mistakes is more valuable to me. The trick to this lies at the recognition stage. I've had enough experiences in my life to now recognize that I always have a choice. When I'm stuck between that rock and the hard place and the samurai warrior and the poisonous snake and the government and the media and the terrorists.... I still have a choice. It's a state of mind and if I lose that... then I won't be able to go bounding out into the sunshine on a balmy day in May and holler "Yeah! Does life get any better?!"

Sunshine on a Balmy Day in May
'nuf said.

And ohhhh look! None of these things require a whole lot of money. Good thing too because I'm just now starting to make what some would call a decent wage.

Here's hoping for health, beauty, meaningful work, alone time, love, independence, and occasional warm and sunny days - now and forever. Now that is a quality life.

That's My Budget And I'm Stickin' To It!

Now that I'm done with my minimum wage dreams post, let's get down to my actual real-life budget.

Income
Job 1 $1500/month after taxes and maxing out the 403b (woohoo!)
Job 2 $500
Total $2000


Expenses
Housing $365/month
Utilities $0 (gas, electric, internet, laundry included above)
Gym $45 (I love my gym and I will get $300 of this reimbursed over the year)
Health Insurance $0
Transportation $80 (for gas)
Groceries $200
Save to spend $100 (includes savings for annual/quarterly payments like car insurance, car registration, home maintenance etc.)
Student loans $85
Other debt $1,000
Wiggle room $125
Total $2,000

By the end of the month I will have moved some money out of old investments to fully fund a Roth IRA.

I already have $4K in my emergency fund.

By December all of my non-mortgage debts should be paid off if I stick to this budget. I mean, they will be paid off because I will stick to this budget!

How Would I Live on a Minimum Wage Income?

I recently read a post entitled How to Get Wealthy on Minimum Wage by Jacob over on the Early Retirement Extreme blog.

I am all inspired to try to tackle life with a minimum wage income. I have no intention of actually earning that little, but I wonder if I could handle it if I did.

Income
The minimum wage in my state is $7.15/hr. Using the hourly paycheck calculator at paycycle it looks like I could bring home about $219/week after taxes if I work 38hrs/wk. If I figure I won't work for about 3 weeks of the year for sick/personal days my average monthly take-home would be about $900. Ohkaay... can my living expenses fit within that? Let's find out.

Assumptions

Family I am single so I only have to cover my own expenses. If I had someone else to take care of I would definitely be working a lot more hours.

Health Insurance I will assume that health insurance is not provided. My employers have intentionally kept my hours below 40hrs/week so that I wouldn't be considered full time.

Location Exactly where I am living right now. I know the cost of living here.

Debt I will assume that I am carrying some consumer debt. I don't know much about how minimum payments are calculated at different interest rate levels so I will leave this part fuzzy until I do some further research.


Expenses

Rent This is easy. I actually own my house and rent out one bedroom for $325/month which includes all utilities, wireless internet, and laundry. My roommate has free use of the rest of the house as well. If she could find this deal, then I will assume that I would be able to as well!

Utilities Included in the rent.

Health Insurance I have pretty low risk tolerance so the thought of going without health insurance would be a huge source of stress for me. I would sign up for a high deductible health plan. I can find a state sponsored plan administered by Blue Cross & Blue Shield for $115/month without Rx drugs. I very rarely get sick so I would be willing to accept that risk. I would also budget another $35/month to put into the attached Health Savings Account (HSA) to use towards the deductible if necessary. The great thing about an HSA is that even though it is tax deductible like an FSA, you don't lose it at the end of the year if it is unused. You can withdraw any unused money at retirement age for any purpose without penalties (but it will be taxed at that point). So $35 out of my monthly budget would actually mean that more is deposited into the HSA.

Transportation I imagine that if I made minimum wage I wouldn't own a car like I actually do. My current gas budget is just over $75/month so I will use that for bus fare. I live within safe and easy walking distance to two grocery stores which will even help with comparison shopping. Bonus! I would also look around for a used or freecycled bike that I could use during the summer months.

Groceries I have lived on a $1/meal budget before and I could definitely do it again. However, I do believe strongly in the importance of good nutrition so I would make sure to include sufficient fresh fruits and vegetables which can raise the cost per meal significantly. I would budget $200/month for groceries. This would have to include toiletries and supplies etc.

Debt I could budget $100/month to pay my debts.

Retirement I would sign up for an automatic investment plan for a Roth IRA and deposit $50/month. Earnings on a Roth IRA grow tax free but I can withdraw my actual contribution any time I want without paying penalties. I like this option if I am earning such little money in case I need to tap this money for an emergency.


So where does this leave me?

Rent $325
Utilities $0
Health Insurance $150
Transportation $75
Groceries $200
Debt $100
Retirement $50

Total Expenses $900
Total Income $900

The fact that this budget leaves me no wiggle room is unacceptable.



Must...have...wiggle room!

One thing I won't compromise on is taking three weeks off from work. No human being should have to 'work' all 52 weeks of the year. I like my personal time. Time to stare at the wall, time to walk in the grass, time to visit friends and family. Not giving that up!

I am, however, happy to work a lot more hours per week. In fact, as a salaried person I currently work an average of 50-60 hours every week... and love it.

If I want wiggle room in my budget, I would add an extra 10 hours of work each week. This would pump up my take-home pay by about $260 each month.

Where would I spend my second-job wiggle-room money?

Debt I would add another $100 to snowball debt repayments.

Emergency Fund Another $100/month would go to an emergency fund

Wiggle Room $60/month... just in case! If I don't use it up one month, it goes into the emergency fund.

Once the emergency fund is fully loaded, I would focus in on eliminating debt. (f I wanted to get serious about blasting that debt I would be working an additional 10 hours a week.) Once the debt is eliminated I would put all of those payments now totaling $300/month towards the retirement fund or towards improving my education if I wanted to move up the earnings ladder.

What about entertainment and special toys and luxuries? If I want anything that doesn't fit into the budget, I'm going to have to go hunting for more hours or get some entrepreneurial juices flowing.

Of Renting and Ranting

Renting
I am very excited. I found a tenant who has signed a lease for my rental house. This means I can talk to my 403b administrator this week and make the necessary payroll adjustments so that they take out $1290 from my paycheck each month.

Ranting
I've been having a funky vibe about this tenant :( One of my goals (not mentioned on this blog yet) is to simplify my life and this tenant looks like he might be high maintenance.

Okay, so that wasn't technically a rant. Oh well. I'm going to keep a positive attitude about this and not worry unless something actually happens.

Yay! 403b here I come!