Finance

Did You Start Spending Now That Stocks Are Doing So Well?

[ Day 77 of 2000 ]

I am well aware of what the stock markets are doing right now. Before I started the blog, and actively tracking it, I would have had no idea. I update that tracker on the right side every Monday. We just had a week where neither of us got paid, and our net worth still went up by about $5971.88 in a week. Isn’t that awesome?

It is very likely that you have seen similar increases in yours. Are you doing anything about it? Like, say, spend more?

I think I have to tell you about Jen. Jen is a friend – may be more of an acquintance. Or rather, somewhere in between.

I ran into Jen last week, and she told me that they were renovating their house. I have been there before – it is a lovely colonial, not too far from where I live. It is slightly old, and shows the age. And she wants it to look perfect. When she mentioned tearing up some walls, I asked for details. I was really interested – their floorplan is very similar to ours.

Turns out, they are removing some walls to turn it into an open concept home. They are moving some closets to make the layout better. They are also getting new flooring throughout and some ceiling lights. The contractor is going to start sometime next month. I am sure the house is going to look great. They want to renovate the house while they have years left to live there. And I agree with that sentiment. If you are anyway going to spend money on your house, do it while you are going to enjoy it and not just when you are looking to sell.

She told me that she was so glad that the stock market was doing so well. I was pleasantly surprised – we had never talked about money or stock market before. To be honest, I don’t normally see a lot of women talking about the stock market. And then she told me something that made me ask “WHAT?”

They looked at their 401(k) balances and saw that it had a nice big total. And since fixing up the house was important to them, they decided to do just that.

As such, it is fine. Jen and her husband both work well paid full time jobs. They have access to some money, and decided to spend it on something that is important to both of them. After all, money is just to get you stuff that you want.

Honestly, I wish I could do that. If there is one thing I want in my house, it is a direct door to the garage. We have a garage right next to the house, but no connecting door. That wall has electrical connections and baseboard heating on it. I haven’t even got an estimate for that. May be, I will. Some day.

The reason I was shocked was because Jen and her husband are no where close to being 59.5 years of age. That means that to withdraw from 401(k), they will pay a 10% penalty, and taxes on top of that. My guess is that they will pay 32 or 35 % taxes on that.

I brought it up, and they seem to have thought about it. Jen put it to me this way – The stock market has three places to go. Go up, go down or stay the same. If it goes up, the fact that they took out some of the money shouldn’t matter too much. They will make more, and they get to enjoy the new home. If it goes down, they made a good decision by taking it out at the right point. If it stays the same, they would feel great that they could enjoy their new home much longer.

I also don’t know how much they have saved up in 401(k) already. For all I know, they are 401(k) millionaires multiple times over. Or they could be withdrawing the whole thing. I sure hope that they are not taking it out of 401(k) while they have post-tax, penalty-free money invested elsewhere.

However, I don’t think I agree with them. I would rather have my money invested. Withdrawing an amount from 401(k) and getting to spend slightly more than half of it is not acceptable for me. If it was an emergency, I would probably do that. Fixing up my home is not important enough for me.

In one way, I am glad that we aren’t too close. I would have tried my best to dissuade them. As the case is, we are not close enough for me to keep talking about it. What is hard for me to grasp sometimes is that what is important to me is not as important to them. They probably won’t understand why trying to retire early is so important for me. Not that they know about it – All they see is us not spending much money πŸ™‚

I am also glad that they have thought about it, and made their decisions (good or bad) based on that. Too many people make big decisions without thinking enough.

I probably wouldn’t have written about them if it weren’t for this article. Looks like Jen and her husband are not alone. There are others making similar decisions, and hopefully they have thought about it. I don’t know.

What do you think? What would you have done? And what do you think about the door to the garage – Should I get that?

Don't miss any post; Subscribe!

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

About BusyMom

Mom, Software Engineer, Dreamer - Can't wait to be less busy! . Please leave me any feedback you can think of. I am still learning and anything you can tell me about making this blog better is very much appreciated. .
View all posts by BusyMom →

11 thoughts on “Did You Start Spending Now That Stocks Are Doing So Well?

    1. We haven’t changed anything. When the big sale comes, we will stop paying extra towards the mortgage and invest every cent we can spare. Who knows when that sale is coming. I don’t know if it makes sense to stop investing.

  1. As a former homeowner who did not have a garage door that connected to the outside (we could access it from inside the house, only the inside), it was really weird and frustrating…I’m all about functionality. If it’s an organizational improvement that would improve the resale of your home, go for it, and you are comfortable with the numbers & pros vs. cons, go for it!

    I think I got a lil’ stressed for your friend Jen. If I was talking to her, I think I would have had the Brittany Spears awkward smile, and try and throw in as tactfully as I could, “ya’ll doin’ what?”

    Projects like that need to come from other, unpenalized funding sources! Yikes!

    1. I did try telling her what I thought. That is when she launched into the long discussion on where the stock market was going. I just couldn’t emphasize it more.

  2. Hi busy mom, that’s crazy taking money out of a retirement account and getting penalized even if the markets are at all time highs. Renovating a house, IF DONE CORRECTLY can be a good investment but should be done with unregistered investments.

  3. If they really have thought it through and understand what they are doing, then each to their own, and if it works for them, then fair enough. Even though I hate debt, a loan could have been an alternative option.

    However, maybe your friend is really a financial genius and she’s withdrawing when stocks are high, and will be laughing at us when she buys them back cheaply if there’s a crash??? Admittedly, I may not be taking the tax part of the US system into account. Time will tell!

    Garage door? That’s a tough one. Given your 2,000 day target, perhaps a luxury for another day.

    1. I don’t know which end of the spectrum she is. Time will tell us.

      About the garage door- I think of it as a luxury too. I really wish for it about ten times a year, not more than that. But then the cost will be about a week’s pay. We managed for almost three years without it. Ten more to go, at least. Easier to not do anything, so that may win! πŸ™‚

Leave a Reply

Your email address will not be published. Required fields are marked *