This post today is a response to a few comments I saw on different Facebook feeds and other blog posts regarding planning for retirement. The basic conclusion I received from these comments are two-fold: 1) they could not afford to put any money away for retirement; 2) they didn’t have the time right now to deal with the situation. And in that same vein, similar people were responding to different posts and articles about vacations and the like (e.g. where they were going, how much time they were spending, travel hacking, etc). I have several responses to these posts.
First, more Americans should take their vacation days. The average American only takes 1/2 of their vacation days because they believe that they will be replaced if they do so. Taking a benefit that is given to you and then being fired for it would be highly dubious and I think would be grounds for a lawsuit. So if you have vacation days folks take them! You earned them! If it is just taking the day off to go to the movies or whatever.
Second, if you have time to plan a vacation then you have the TIME to look at investing. Americans have admitted in surveys that they spend more time planning a vacation than retirement. To me that is just bonkers. Are you kidding me? I know the reason why. Retirement is not immediate, a vacation is. People think they have all the time in the world. But an ounce of prevention is worth a pound of cure. Part of my reason for writing this blog is to get people talking about money, particularly my academic colleagues. It is imperative we discuss it. No topic maybe more important to your personal financial future than this subject. You cannot NOT talk about it and think about it. You have an obligation to your family, to society, and to yourself to think and plan more. I know there is a lot of info and it is easier to do a vacation, but it isn’t that difficult. You can do it and it doesn’t have to be complicated. You can just have a couple of mutual funds and that would be a balanced portfolio. So please spend some time thinking about retirement.
Third, there is a legitimate amount of people out there that cannot afford some retirement savings. I am talking about the family that is living below the poverty line or the single-mother trying to make ends meet working two jobs. This post isn’t directed at them. Last year, an article was written in the Atlantic about the secret shame of the middle class. In essence, the article argued that most Americans could not handle a $400 emergency. And I greatly sympathize with those people. However, the person who wrote the article, in my opinion, is not the right messenger for advocating change. You can read my post here about what I thought was wrong with him being the person to write it.
Finally, if you can afford to take a vacation (and I mean going away somewhere) then you can afford to save for retirement. Most vacations if you are packing the kids in the car, driving somewhere, and the like will cost hundreds, if not a couple of thousand dollars for hotels, food, etc. I want you to have a vacation. However, if you can afford to do this vakay then you can afford to put some money away for retirement, even if it is $100 a month. It just has to be a conscious decision. In fact, I would rather you save for retirement and not go on a vacation (just take your vacation days). Maybe that will make me a pariah. But I know what the math is on compound interest. Would you rather spend $3000 for a vacation where that money can grown to potentially $30k (and I am not kidding about that) or do something else with it? I know some of you would say the vakay. However, I want to implore you to think about what your money will/can do for you.
Moreover, I don’t think it an either/or. I think if you can be diligent in saving for a vacation then you can be diligent in saving for retirement. You can do both. Split the difference. Maybe put 1/2 of those vacation savings into a Roth IRA, 401k, IRA, whatever and then the other half into a trimmed down vacation. But this mindset that people cannot save for retirement and then turn around and brag about the vacation they are taking drives me nuts. When it comes to that then it is about priorities. And I personally think our priorities need to change a bit in those situations.
The Bottom Line: If you can afford the time to plan for a vacation you can afford the time to talk and learn about investing. If you can afford to take a vacation then you can afford to invest. The two don’t have to be mutually exclusive, but unfortunately we often do only one at the expense of the other.