If you’ve been reading this blog for any amount of time, it’s not a secret that we are now located in the state of North Carolina. It’s been my dream for almost a decade to live in the Research Triangle, and we finally achieved it! I feel blessed every day to be literally living my dreams.
I also happen to have a full time job working for the state of NC. This comes with some lovely benefits like extra paid holidays, pretty decent healthcare coverage, and state-mandated raises. Now, this could be a double edged sword.
As things on the financial playing field of America are in constant flux, and state and federal budgets keeps seeing more and more cuts, the state has the power to enact hiring freezes, salary freezes, or downsize however is needed to balance the budgets. And NC does not have the best history of worker treatment.
However, the good news is, the current Gov. Pat McCrory is supportive of state workers, and knows that to attract and retain good employees state positions must become and remain competitive with the private sector.
In order to keep up with inflation and keep workers happy, NC employees across the board got a small raise in June 2017. For me personally, this meant an extra $1000/year. Hooray!
What would you do with $1000 extra dollars?
For some people, that could be a literally life-changing amount of money. That could get a family of 4 a few months of groceries, or buy all the necessities for a new baby. That could help pay down medical, credit card, or student loan debt. That might be an extra month’s rent payment that you don’t have to worry about. For a lot of people, living at-near-below poverty level, $1000 is a big deal.
Or, you might start planning an epic weekend getaway to a beach to beat the winter blues. That adds up to a whole lot of eggnog and whiskey, or a year’s worth of fancy dinner dates once a month. Some people would scoff at $1000, thinking that is barely enough to make a dent in loan payoff, or their yearly spending totals.
Would you go on a shopping spree? Get some new boots for winter? Or, you know, the holidays are coming, how about getting extra twinkle lights, some cute Santa blow-ups for the front yard, and maybe a couple extra-nice gifts.
You could just let lifestyle inflation creep in, and $1000 higher yearly spending becomes the new baseline. Maybe move into a bigger apartment with more amenities, buy more house than you should, lease a fancier car, and go out shopping every weekend.
But What Did I Do With the $1000?
I did something very boring. Something Americans in general are really bad at doing.
I invested it.
Yup, without even letting it register in my checking account, I funneled that ‘extra’ money right into a target retirement date investment account.
Now, we could argue all day about different types of accounts, tax advantages, Roth vs IRA vs 401K, fees and mutual funds and bonds and stocks etc etc ad nauseum. I am by no means a sophisticated investor. I barely have a clue about the world of finance and shares and dividends. Reading articles about why rebalancing your own portfolio is easy just make me feel sad and defeated.
What I do know?
Having some money invested is definitely better than none over the long term. Will I lose some possible gains to fees over time by using a robo-advisor? Probably. Could I personally do better by choosing my own allocations and rebalancing yearly or quarterly? No way, because I know myself and I just. won’t. do it.
The Moral of the Story
Avoid Lifestyle Inflation.
And Know Thyself.
I love automation. I am probably the most forgetful person I know by a long shot. If it isn’t written down, on the calendar, in my phone with at least three alarms set, if probably isn’t getting done. I’ve forgotten my mom’s birthday, both my siblings’ birthdays, the dog’s vet appointments, and more passwords than there are stars in the sky.
To set myself up for success rather than financial crash-and-burn, I automate everything I possibly can. Mortgage. Water bill. Internet. Savings account transfers. Credit card payments. Investments. All set up with a few clicks of a button, and then I don’t have to think about it ever again. Well, okay maybe like once a year or so I make sure it’s still working. But that’s it.
Not giving into lifestyle inflation is really hard. Trust me, I know. I took WAY longer to pay off student loans than I should have, and delayed our now-future-FIRE plans because I chose to take several cruises during grad school, and dropped another 3 grand on LASIK eye surgery (ok that one was actually 100% worth it).
When you’ve spent several years living in dorm rooms, literal garages and attics, eating ramen and tuna noodle casserole, you desperately want to feel like you’ve “made it” as an adult. You want your own space, your own bathroom, a nicer car, you need “business casual attire” for your big kid job, and on and on.
My husband (then-boyfriend) and I definitely could have stayed in a one bedroom apartment for a few more years rather than upgrade to renting a house for $1300/month, and then $1650/month (CT prices though… that number still hurts my soul).
But those choices were made. That money was spent. And we learned from it.
When we decided to relocate to NC, and were looking to finally buy our first home, we set a very conservative budget range. We knew we did not want to live outside our means. And now we have the peace of mind that comes with knowing that even if one of us lost our job (or chose a mini-retirement?) our monthly expenses would still be covered.
That peace of mind is worth every penny we didn’t spend on a bigger house in a nicer neighborhood, or continuing to drive our fully paid off 2004 and 2005 Honda cars. We hope to stay in this house for a very long time, and pay off the mortgage sooner than 30 years. No matter how many raises we may get.
And that is why being given $1,000 did not change my life.