Thursday, August 14, 2014

Logic And Gut Feelings Don't Live In The Same House

One of my long term goals in life is to not have to live in a cardboard box when I'm 70. Weird, I know, right?

Because of that, I've always invested in retirement fairly aggressively, particularly during economic downturns and other times when normal folk decide to pull their eggs out of the basket in fear. When stock prices are hovering somewhere between zilch and nada and you're afraid your job is going to go up in a small puff of ill-smelling smoke, the last thing you want to think about is some hypothetical you in forty years. People tend to be rather optimistic on the century-level timescales. Or they don't think about it much, because the future is some unlikely hazy thing that's far off, like a shimmering mirage at the end of a highway arrowing across the desert.

I've never been like that. So, I save like a mofo. Especially during the good times. As a result, the bad times aren't that bad, usually. An emergency is only an emergency when you don't have the money for it. But that's besides the point. I'm talking about goal-setting, here.

I've been reexamining my retirement goals lately and I realized that I could probably retire pretty early if I step up my savings rate. So far so good.

Because nothing much exciting has been happening over the summer, I decided to increase my pretax savings to crushing levels as an experiment. With no taxes on what gets pulled from my paycheck until such a time in the future as I need it, two decades of tax-free compound interest to look forward to, and nothing short-term to really save up for, might as well go for it, right?

Increasing my withholding percentage to the rate my math told me I could handle was extremely satisfying. It was one of the only times I've ever seen the accountant at work freak out. Apparently I broke some kind of company record. She actually made me repeat myself twice. In a movie, it's the sort of scene where someone drops a plate or there's a record scratch.

I held it at that rate for four months.

The end result was fairly positive. Net worth went up gangbusters. My retirement projections are way ahead of the game. I think I'm going to get a fairly sizable tax refund at the end of the year, which will be pleasant--I usually arrange such things so I wind up paying the government, because that's the responsible thing to do. But a tax refund will be a nice bonus at the end of the year, particularly if it's the result of tax-sheltering my income, like the cigar-smoking plutocrat that I am.

But...

Having pulled so much money out of my paycheck before I got it meant that the amount I was depositing into my checking account every week was very small, relatively speaking. It meant that I had to budget fairly closely, keep weekly expenses under control. Even though I could see where the money was going, watch my retirement accounts fly up at a phenomenal rate, I felt broke all the time.

If an emergency came up, I had to pull that money from savings I'd accumulated before I started cranking my retirement contributions.

Basically, the lack of flexibility was driving me nuts.

Logically speaking, I had every reason to keep doing what I was doing. I could think of a dozen reasons, easily, why putting all my money into retirement was optimal at this time. Reasons which would look good on a white board, maybe next to a smiling picture of Warren Buffett.

But.

Any time you set a goal, you have to take into account your comfort levels and gut feelings. Yes, there's every reason in the world you should have six pack abs. You'll look great, that fat you're carrying is unhealthy, the girls at the beach would go "ooooooo" when you take your shirt off. You won't have to pencil them in with mascara and fake it when you take bathroom selfies for Facebook. You get the idea.

All very logical. But spending an entire year eating nothing but salad and tuna fish is probably not a great idea. You'll be a basket case within two months.

Anybody can do anything for roughly a month or two. Three or four if you're a stubborn bastard. And hard goals are worth pursuing every once in a while since they push your comfort levels.

But you need to listen to yourself. Sometimes the best reasons to do or not to do something are reasons which can't quite be expressed in symbolic logic. In my case, it turns out that my short-term financial buffer (which I call my Fuck-It number) needs to constantly be going up or I turn into a mild basket case. It's not logical. My current Fuck-It number is pretty large, by almost any standard you care to name. Logic dictates that I could ignore it in terms of long-term goals.

Logic is not always in the driver's seat, apparently. Since my ability to hold long-term goals is governed more by stubbornness, habit and gut feeling, sometimes logic is not what I need to appease or work around.

So, I reduced my withholding rate again.

There were a few positive spin-off effects of this experiment: one, it really did wonders for my retirement savings. Two, it showed that it's not a difficult thing to change my withholding for a few months and really buckle down occasionally. I'll definitely do this again in the future. Three, it was the financial equivalent of a diet. I feel rich now, which is nice.

And I'm still saving aggressively, but it's at "wow, you really care about the future" levels and not "holy shit, are you insane?" rates.

I suspect finding a balance in any long-term goal is much the same. You can't spend all your free time writing, you have to chisel out time for your own emotional needs. You can't sacrifice sleep and friendship for fitness goals. Even though building that mashed potato Devil's Tower model is a worthy goal, you probably need to bathe every once in awhile. Etc.

It's just that sometimes, when you're prioritizing things, it's tempting to listen only to logic but that's not the only voice to listen to. Sometimes very minor things which seem trivial when you write them down amount to a great deal more over the course of a long-term resolution.

In other news, the novel's going great. And I think this is a short story week. So, there's that to do this weekend.

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