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Ask anyone close to me: I don’t have the best memory. Some of those people would suggest it’s because I don’t listen, and she’s not entirely wrong. I remember weird stuff and moments that force me to think differently. And inevitably I later recall those moments when the challenge to my thinking becomes more deeply personal.
“You can’t put a price on memories,” the client said unironically when describing her family’s decision to make yet another trip to the Magic Kingdom. Her husband didn’t look convinced and neither did I as we combed through their finances sometime around 2010.
Were they tens of thousands of dollars in credit card debt? Yes. Did that dampen the impact of the price-of-memories argument? I’ll let you decide.
Yet, there I was last week reciting this former client’s justification for spending an inordinate amount of money on a family experience.
I’ve shared this with you before: One of the great privileges of my life has been having a front-row seat to witness thousands of others make very difficult financial decisions. The goal was always to help guide wise decisions, while avoiding the temptation to judge and vilify the decisions. But the reality is, I got to learn what to do and what not to do.
If you’re anything like me, unsaving saved money doesn’t feel so great. The illogical part is, there are certain accounts I’ve saved money into, with no specific purpose, and yet nearly every specific purpose I present to the funds gets smacked down as illogical.
A couple of weeks ago, we came to the realization that we have three summers left as a family of four before our oldest heads to college. Oof.
Then the statement echoed through my brain: “You can’t put a price on memories.” Oddly, that nearly 15-year-old phrase still doesn’t ring true to me, but it did force me to actually put a price on creating memories then realize I really did have the money to do that. You see, you CAN put a price on memories, and if you have saved and saved and don’t really know why, it’s so you can buy memories.
If you’ve wondered exactly why you’re saving particular money, now is a good time to be more specific about what you’re willing to use the money for. Some accounts are easy, while other accounts prove much more difficult.
Let’s start with your tax-qualified accounts, or retirement accounts as they’re more commonly called. Most people use these accounts for retirement income. This category includes traditional IRAs, Roth IRAs, 401k(s), 403b(s), 457a(s) and a few other slightly esoteric account types. You can actually use them for whatever you like once you achieve the age of 59-1/2, but if you get too liberal with your spending, you’ll find yourself with a quickly dwindling balance.
Next, if you have children, you have your college funds. Again, it’s pretty easy to conclude these funds are meant for college and college alone.
On the other end of the scale, from a tax standpoint, you have your boring old emergency fund. The money can reside in all sorts of accounts.
On to non-qualified investments. This group of monies doesn’t have specific tax advantages, as it wasn’t necessarily saved into tax-advantaged accounts. Without a doubt, this classification is the biggest catch-all. It can include home down payments, major purchase money, additional emergency money, and one other very important category—early retirement.
Given that you can’t easily access qualified money prior to 59-1/2, if you desire to retire before 59-1/2, you’re going to need a way to fund your expenses. And a giant pool of non-qualified investments is typically the way people do that if they don’t have a pension.
This is where the rubber hits the road.
If your non-qualified funds are more than enough to fill the pre-59-1/2 gap, you don’t have an intense desire to retire early, or you simply have a different plan to retire early, some of your non-qualified money is theoretically freed up to fund other goals. This is where fun happens. This is where you can put a price on memories.
Being able to sort through these different goals and different accounts is a superpower. It will allow you to enjoy the fruits of your labor and also create the memories that do, in fact, have a price tag.•
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Dunn is CEO of Your Money Line powered by Pete the Planner, an employee-benefit organization focused on solving employees’ financial challenges. Email your financial questions to askpete@petetheplanner.com.
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