I am a huge proponent of saving for retirement. It was the first line item on the budget I created with my DH when he got a job. Before taxes, mortgage, etc. Retirement. Thus it really bothers me to write that thus far this year we have not contributed to our Roth IRAs. We actually have $10k set aside but my DH convinced me not to invest it yet, and to wait until the end of the year.
So why not invest the money? Well my DH really wants to start his own business. He is currently shopping around and looking for venture capitalists and private investors to fund his company. An important part of the plan is us funding a portion of the start up capital. This is to show investors we believe in the company.
Thus my DH asked me to consider saving as much cash as possible to invest in “our” company and putting some of our normal retirement and saving goals on hold. I’m writing this post because I’m not sure if it’s a good idea.
I understand that we need to invest some money in our company but it hurts to know that we aren’t putting money into our Roth IRA. I guess the real question is do I believe in my DH’s idea? I do. And so do others. Actually my DH has already chatted with 2 VCs and has been generating interest with other angel investors as well.
That’s why I’m supporting this decision we made together. Perhaps it’s a mistake. Perhaps it’ll work out. I do not know. I do know my DH isn’t keen on borrowing money to “fund” our share of the company. Thus why we are stockpiling cash. And we still are footing the bill for his tuition, but that’s almost over. Also if we don’t start the company we’ll roll the money into our retirement account probably at the end of the year.
If you own your own business do you think we’re doing the right thing? Are we being stupid? Risky? Any advice?
Should I slap myself for being stupid? This could turn into a financial mistake, but get ready readers for an interesting year.
Tomorrow I’ll talk about what we’re doing to get it started.
35 responses so far ↓
1 tom // Feb 2, 2009 at 9:11 am
What type of business is your DH getting into?
I think the questions you are asking are the questions everyone asks before taking this type of risk. As for answering those questions, only you and your DH can do that. I think I speak for all your readers when I say best of luck to both of you and we’ll be pulling for you!
2 Miss M @ M is for Money // Feb 2, 2009 at 9:23 am
I have no advice to give, I’d be too scared to start a business that needs lots of capital! I think you have a solid plan, if you decide not to follow through with the business you can invest the money later. It is a rough time to get started, but you would then be poised to grow once the economy improves. Good luck!
3 dogatemyfinances // Feb 2, 2009 at 9:31 am
Depends on the business. The second other people’s money is involved, you have partners. Those partners can control the way you run your business, even though you’re the one doing all the work.
Just speaking from our experience with a 1-yr-old business, I would rather borrow the money personally or start small than take on partners/angel investors/VC. Of course, depends on the business. But if the idea is good and you start small, you’ll grow soon, and you won’t have so much risk.
This is a huge decision. You’ll probably wrestle with this one for a while. You should think about what happens when things go sour with the investors, when he wants to do something they don’t, or if he fails.
4 Kristy // Feb 2, 2009 at 9:50 am
I had no idea he was interesting in starting his own company. I would be hesitant to do so in this economy. However, I think you can always invest in a Roth at the end of the year instead of now. If things don’t work out with him starting a business this year you can just put it in later. Good luck to both of you!
5 Fabulously Broke // Feb 2, 2009 at 10:06 am
Honestly, I’d save the cash. You may need it AND a loan, and you’d be up the creek without a paddle if you don’t have either.
Cash is king for the moment. If you feel secure at the end of the year, then contributing to your Roth is the next step.
Or, you could put 10% into your Roth and 90% saved in cash to dissuade your fears.
Fabulously Broke in the City
“Just a girl trying to find a balance between being a Shopaholic and a Saver.“
6 don // Feb 2, 2009 at 5:12 pm
Why dont you give it to some poor people?
your quote
“I believe that we have a responsibility to our fellow man.”
Why put it in a SELF FUNDED program. You don’t believe in that. Give it to the Social Security fund.
Give it to the poor, the people you want to take responsibility for. The people that don’t take responsibility for themselves. Yeah let’s prop up some more people to make them more reliable on other people and on the govt. Social Security was such a great idea. Medicare and the prescription drug plan, even better. Tons of money there.
Let’s give them pensions so they are so reliable on their employer.
Let’s give them insurance through their employer so they become even more reliable on them.
No, lets just let the govt give everyone healthcare so we become reliant on everyone but ourselves. That is the way to fix America. Socialism.
UGGGGGG!
7 LAL // Feb 2, 2009 at 9:46 pm
Don, you are sounding very angry. I am NOT giving it to the poor because I don’t want to be the poor.
I believe in helping the poor (Hey i’ve been there jerk!), but I don’t want to live on the dole. I believe in helping people move into a better life.
By the way I’m trying to not be reliant on the government. But obviously Don you’ve never been in a bad position.
8 LAL // Feb 2, 2009 at 9:49 pm
Tom, I prefer not to mention it right now.
Miss M, I’m not entirely sure how much capital we need but I think it’s $500k for the first year.
Dog we’re not sure if we could even get a loan. There is no way around it. It’s a lot of startup capital.
Kristy, I think we decided that life is not without risk. Right now people are losing their jobs day by day. We get emails weekly from friends in different sectors. So it’s always a risk. I want my DH to be happy, so I am supportive.
FB, we’re in the investigation stage. We’ll see. I think the business competition would be a great way to see how he stands with the plan.
9 Don // Feb 3, 2009 at 7:29 am
Yes, I have been poor. My parents didn’t take a dime from the govt and relied on themselves and family. I worked fulltime through college and was young and stupid and got into financial problems. I worked my way out of them. When I was unemployed I did side jobs instead of taking money for nothing. Now I am rich because of my hard work and not relying on others, expecially the govt. Make it easy for people and they will not succeed. That is the problem with America today.
Easy home buying with nothing down.
Easy credit etc.
I believe in helping people too. I just don’t believe in socialism and ENABLING people.
The govt extends unemployment benefits. WHY. So people can wait around. My area has all kinds of jobs. Not the best jobs but jobs. Get out and work and dont thing you are ENTITLED. ENTITLED to the the good life. You have to work for it.
10 tom // Feb 3, 2009 at 9:47 am
Don,
What are you talking about? This has nothing to do with what LAL wrote about.
11 LivingAlmostLarge // Feb 3, 2009 at 9:58 am
Don, I hate to break it to you but were you bathing in an outhouse? Were you heating water with wood? If you weren’t living in 3rd world conditions, I doubt you were poor. You might not have been rich, but you certainly weren’t poor.
By the way, my adopted dad, he was raised during WWII and live without food for many, many days. Hence the lack of growth and poor nutrition. So we’re not poor. My grandparents as well lived through bombings.
So I doubt you were poor. Poor in the US is still richer than most places. Also working through college? Who didn’t?
And by the way unless you were picking cans off the side of the road for food money, going to child services, etc, you weren’t poor. Not many places hire a 10 or 12 year old to work legally.
I believe that we should be helping people. I don’t care if you think I’m entitled. We didn’t have to go on government food stamps or welfare, but we did raise our own food, hunt, and eat it.
I can kill a chicken and pig can you? I can milk a goat because cows are too expensive. I can go in and get eggs from a chicken. Can you? So exactly how poor were you?
There are many families who are struggling to survive. There are many families ashamed of even considering help. But perhaps they’ve been decimated by medical bills #1 cause of BK in the US.
So hell ya, I think we should help people. I’d rather not see a kid starving or needing medical care.
Don for someone who was poor you have very little compassion. I notice really poor people always feel the plight of those in the same situation. It’s not easy to escape and it takes a lot of work and sometimes a lucky break.
12 Kristy // Feb 3, 2009 at 10:05 am
I have to disagree with you about poor people having more compassion. I grew up poor as well and I don’t feel as much compassion as you do. I donate to certain charities, including donating food to poor people, especially in these economic times. However, I don’t feel that socialism is the answer like you do.
Some people have brought this on themselves, we as Americans have been living beyond our means for quite some time. So of course when one loses their job it is tough to make it work, these people have no savings and have been living paycheck to paycheck.
13 LivingAlmostLarge // Feb 3, 2009 at 10:16 am
Yep, but on another blog, the comment was we’re not only living beyond our means, we’re dividing into the haves and have nots. The middle class is fast disappearing. When you could live on 1 salary blue collar job and still live happily. Now? It doesn’t exist.
Not knocking it, but even living within our means, now if you were a blue collar worker and 1 salary it’d be hard to make ends meet.
I notice working at the food bank a lot of people are coming by that seem rich but are either scamming the system, or more likely have lost jobs and are scraping by.
14 Kristy // Feb 3, 2009 at 10:24 am
People can’t live on one salary nowadays because the standards have changed. Most people think that they have to own a home, 2 cars, send the kids to college, buy the kids the most expensive toys, buy the big screen tv, etc. Hence, people live beyond their means. Society has changed, so trying to compare us to a time when you could live on one salary is not comparing apples to apples. Back then, there was only one car, people didn’t take vacations every year, they may have had 1 tv, not one in each room, etc. It is just not the same.
People could still live on one income, they choose not to. You could do it if you want, I could do it if I wanted to. Would it change anything? Yes, my standard of living would go down, but it’s doable. I wouldn’t be planning on paying for my kids college, but we could live on my husbands paycheck alone. This is a CHOICE that we made. It’s all about choices and as a whole country, we have not made the right ones.
I know plenty of people who scam the system currently, whether it be welfare, disability, etc. It happens, probaby more than you realize or want to believe.
15 fengshui // Feb 3, 2009 at 8:57 pm
“Some people have brought this on themselves, we as Americans have been living beyond our means for quite some time.”
Not all of us were TAUGHT to be “savers”, etc. I’ve talked on here about growing up poor and watching my parents always having a car payment, a house payment, a tv payment, etc. I learned that people went to work, bought things with loans, and made their payments. I was never taught about saving and investing. It wasn’t until I was already in college with student loans, a car loan, and cc’s that I realized that it just plain SUCKED to have to work so much just to pay everyone else. When credit comes easy, people will borrow. It is human nature. In order for people to NOT live beyond their means, they have to basically be unable to borrow…. unfortunately.
16 fengshui // Feb 3, 2009 at 9:02 pm
“Society has changed, so trying to compare us to a time when you could live on one salary is not comparing apples to apples. Back then, there was only one car, people didn’t take vacations every year, they may have had 1 tv, not one in each room, etc. It is just not the same.”
I do agree with this, however. Even though we are guilty of buying with no money down, we bought a home that is only $175k and we make $95k a year. It is small, with a 1 car garage. I thought that was a home that was affordable for us, and each of us can pay all of the bills on one salary. We only have 1 tv, and not much furniture. But we do have 2 cars. One nice one and one clunker. But I admit that I like “nice” things for my home like organic bedsheets and nice fluffy pillows, pillowtop matress, etc.
17 LAL // Feb 3, 2009 at 10:35 pm
Right now there is the woman in CA with octuplets and the 6 kids previously. Do I think it’s a bad idea? Yes, I mean how much time can she give each child? She is likely on government dole. How else can you afford the medical bills?
And yet I can’t blame the kids because they certainly didn’t ask to be born. Yet this woman wants many, many children. But is it really right to limit the number of kids she has? Should we? Do we say well you are on assistance then you can’t have more kids.
Unfortunately what about families with 1 or 2 kids who are on assistance like WIC or food stamps because of job loss then want another child? Is it okay for them because it’s child #2 or #3 but not #15?
Definitely our lifestyle expectations have changed. Well for some of us. But I’ve meet many people who don’t travel, will live on one income, and not pay for college for their kids, and have blue collar jobs and say it’s hard. So I gotta wonder if it’s not because of where we live? Metro areas? With mostly white collar friends?
Everyone I know back home is mostly blue collar and living on one income. They are struggling and don’t have big tvs, etc. I think Fengshui in the midwest likely knows many of the same type of people with high school or maybe AA degrees.
And they certainly aren’t traveling. But they also aren’t eating organic food, or eating out, they aren’t sending their kids to expensive colleges.
It’s a different lifestyle. But they aren’t on government handout either.
18 fengshui // Feb 4, 2009 at 1:37 am
“Unfortunately what about families with 1 or 2 kids who are on assistance like WIC or food stamps because of job loss then want another child?”
If a family is already on public assistance and cannot afford another child, then I don’t think that they should be having anymore children. Period. Why? Why have another child, another mouth to feed? Another child who may not go to college and have a bright future. That is just my opinion. I’m 32, and I have not had a child yet because I haven’t been able to afford one. I feel that is my “responsibility” to feed, clothe, and provide medical care for my child. And if I can’t, then I won’t have one.
19 Kristy // Feb 4, 2009 at 5:01 am
My question is, whoever said life was supposed to be easy? All of the people who live on 1 salary and work blue collar jobs, those are choices. They chose their profession and if they don’t like it or want to earn more money, they are free to do something about it. They could have the other spouse work as well.
Why should everything be handed to you becauase its supposed to be easy?? Please.
I have worked hard to be where I am today, grew up poor, struggled through college, worked full time while attending college, worked 80 hour weeks in the summer, paid my own way. There are people that choose not to do this and that’s fine, but it is a choice.
Living in a metro area is also a choice, sorry but it is.
20 Kristy // Feb 4, 2009 at 5:57 am
Fenshui – I wasn’t taught how to save either, but that doesn’t mean that you can’t learn. There are a number of people that were not taught, but learned anyway. I am not saying it is easy to live within your means, but it is not the governments responsibility to teach you to spend what you make, not more than that. The government can’t make everyone save. It is a personal choice.
21 tom // Feb 4, 2009 at 9:36 am
Kristy,
I completely agree with your point that’s not the Government’s responsibility.
What I don’t agree with are your views on choices.
“They chose their profession and if they don’t like it or want to earn more money, they are free to do something about it. ”
I would say that’s true in a “normal” economic situation, but currently, there is no amount of “choosing a new profession” that will get them new jobs, or even find a job after being laid off. Some people don’t have any choices.
You could have made all the right choices in life, but none of that matters, especially these days. It can all be taken away in the blink of an eye, and that’s not a choice.
22 Kristy // Feb 4, 2009 at 9:40 am
Tom, I agree that in this economic downturn that you can no longer choose to change careers. And while I agree that being laid off is not a choice, I have to say that people should be semi-prepared for this situation. Isn’t that what an emergency fund is for? Shouldn’t some of the people being laid off have some sort of emergency fund for this type of situation? I realize that it is taking longer for people to find jobs, but the government is extending unemployment benefits and people should have saved for this.
23 LivingAlmostLarge // Feb 4, 2009 at 9:55 am
Fengshui, I’m just not sure we can put those limitations on procreation. I don’t know what the religious right would say if you said, if you are getting WIC, government provided insurance, food stamps no more kids. How would you even enforce something like that?
Kristy, I agree there might be a choice in your profession, but sometimes not. According to Boomie of Wastrel Show/AllDoors, her husband was “unemployed” for 2+ years and they ran through their EF and savings. She said no one would hire him. So was he choosing not take any job or was there no job available?
Is that a choice? Or is it circumstances? She says it was “forced” upon them because of the technology bust so someone in their 40s like him had a hard time finding a job.
So I agree an EF is good, but was her circumstances normal or abnormal? Do people really not find jobs? And now according to her blog, he no longer works in high powered profession, he was an executive with Disney. And now does handyman work. So was he forced or did he choose?
24 Kristy // Feb 4, 2009 at 10:10 am
I don’t know the exact circumstances of Boomie and how her husband was unemployed for 2 years…so I really shouldn’t comment. My guess is that he was looking for something in an industry that wasn’t hiring and didn’t take another job? Who knows though? My guess is that is an abnormal situation. She is fortunate that they had enough savings to last a few years…most people can’t even last a month.
My dad is a good example of choices. He is almost 50 and has been working the same job in a union for 30 years. He has talked about being layed off or looking for another job, but he fully admits that he is not educated enough to find something else. I asked him the one day why he didn’t better educate himself instead of staying where he was. You know what his reply was…why should I? He knows that he will not make the same $$ if he becomes unemployed, but he is not willing to go back to school either. That is a choice.
My stepdad is another example of choices. His company has been laying people off since November. He fully anticipates being laid off this month. Do you think he has started looking for a job yet? Nope. He doesn’t even have his resume together…..that’s a choice. My guess is that neither set of parents is prepared for a lay off and my step dad is about to be. Should I feel bad? Should I help them out? He has known for 3 months that he needed to prepare for this!
While I wouldn’t expect most people to have years of expenses saved for an emergency, I would think that 6 months of expenses would be adequate for most families.
25 tom // Feb 4, 2009 at 11:44 am
Kristy,
You cannot be prepared for this type of situation. Unless you have an emergency fund that will cover you for years, you will not be prepared. 6 months is nothing. Many people do have emergency funds, but those have long been depleted. Unemployment benefits only cover a fraction of your income. Yes there are a lot of bad examples out there of people who sit on their butts and don’t do anything about it, but a majority are out there actively searching for new jobs, while using up whatever savings they have. No amount of education or re-training will help you find a new job when jobs aren’t available. Also, re-training and additional education take a lot of time. That’s time people don’t have. So my point is, this has nothing to do with choices anymore.
26 Kristy // Feb 4, 2009 at 12:11 pm
Tom, most people don’t even have 6 months savings. Here is an article about living paycheck to paycheck:
http://www.bizjournals.com/sacramento/stories/2008/09/01/daily17.html?ana=from_rss
I also know people who are actively looking for employment and this downturn in the economy is not something that one prepares for. However, most American’s don’t prepare for anything, they have no life insurance, no disability insurance, some don’t even have health insurance. This is not something that just started because of the recession…this is something that has been going on for quite some time.
While I agree that we are in different economic times and a change in career is not always possible since there are not many jobs, I still think that many Americans do not prepare properly for an emergency. While some people would be unemployed for quite some time, a year or more, that 6 months of savings sure would come in handy wouldn’t it?
27 Don // Feb 5, 2009 at 10:39 am
finally someone else with some sense on here and can explain it well. Americans, we choose to be lazy. Lazy in saving, lazy in coming up with alternate incomes, lazy in networking, lazy in education, etc. We live for today and not look down the road and prepare.
And Tom and others, I hate hearing this over and over about no jobs. Bullcrap. maybe not in your exact field and city but you planned it that way. High Demand jobs on healthcare everywhere. Nursing too. Welders needed in every city and area in America paying sometimes $100,000. do a search. Truck drivers $60,000. Look at Fedex and UPS, hiring customer service, couriers, fedex ground drivers, etc. Everyone is always looking for sales. some of these require training or education. THAT IS WHERE THE PLANNING COMES IN. You work for DHL in a small town where they are the only employer! and you are surprised when you lose your job and can’t find another. PLANNING. You see the auto companies losing billions and know when the next recession comes, which they always do, that you might lose your job! But the unions will protect us by paying our salary for a year even when we aren’t working?????!!!!! we deserve it. give me a break. People are stupid and we as americans should be ashamed of our irresponsible selves.
28 fengshui // Feb 6, 2009 at 5:17 pm
“Fenshui – I wasn’t taught how to save either, but that doesn’t mean that you can’t learn. There are a number of people that were not taught, but learned anyway. I am not saying it is easy to live within your means, but it is not the governments responsibility to teach you to spend what you make, not more than that. The government can’t make everyone save. It is a personal choice.”
I’m not disagreeing with you- I have never been bailed out of anything, and I’ve never missed a mortgage payment and feel that I am being responsible by not having children until I can afford to…… I’m just saying that I was never taught to be a saver, and had to learn the hard way how to be one- the hard way being that it took me 8 years to pay off cc debt, etc.
29 fengshui // Feb 6, 2009 at 5:23 pm
“Tom, most people don’t even have 6 months savings.”
Kristy is right. I don’t have 6 months worth of expenses in savings! 6 months of our income is almost $50k. That is a lot of money to have sitting in a savings account. We only have a fraction of that….. We are fortunate that we don’t have a lot of bills….. but still….
30 Kristy // Feb 7, 2009 at 5:26 am
Fenshui- Typically an EF contains enough money to cover your expenses for 6 months, not your income. I don’t have anywhere near 6 months of our income in a savings account, but I do have 10 months of expenses and that’s if both of us would lose our jobs.
33 LAL // Feb 9, 2009 at 12:49 pm
Kristy, I’m not sure about boomie, but she often has stories about hitting “rock” bottom and then coming back. That they were very broke. I have no idea why he couldn’t get a job and she didn’t work. Yes it is a choice, but if you ask HER, she’ll tell you no one would hire him.
I’ve found that 6 months of expenses gets burned up fast in many cases. Have a disabled child and you quit your job to stay at home to care for them? Then the medical bills? Or become disabled yourself? Disability insurance won’t cover 100% and it does have a lifetime cap.
Tom, I agree there are lots of cases where 6 months is not enough. But then there are always credit cards to run up.
Kristy definitely people are living paycheck to paycheck. But what about the responsible people who aren’t? Who do try to live on more, but accidentally get stuck? Personally my mom ran up a lot of credit card debt when I was ill from medical bills. We struggled for years paying them off because of my seizures. She was not living paycheck to paycheck, but she just couldn’t make ends meet. And we didn’t take welfare because she refused (pride).
She easily could have quit her job and said I have a sick kid gimme handout. But instead we had debt. Most people now would likely have looked down on us as a family in debt. I know my mom tried really hard, but we were in debt and we knew it was bad. But what other choices were there?
And we were not alone. Most of the people in our neighborhood were in that situation. Blue collar, low income people, trying to not be paycheck to paycheck but struggling. Most of the people were young couples not educated like my mom, which is how she was able to afford our house on 1 income. Other people were making a lot less than her with 2 incomes.
These people still live next door as neighbors 30 years later! They have paid for home, cheap cars, and I bet they have never left the rock (hawaii). Actually I’m pretty sure having talked to some of the kids my age.
But they struggled and ended up okay.
34 LAL // Feb 9, 2009 at 12:52 pm
Don, I don’t think that everyone you are talking about is lazy. I believe they do work hard and are trying their best.
I was in debt growing up and I don’t think my mom was LAZY. Sorry that she wasn’t working more than 1 job, when she was pulling tons of overtime. Sorry that she charged medical bills. Sorry that she was a union worker.
Actually, many people are not lazy and they certainly are working hard. I have to question Kristy, her parents sound blue collar. Are they lazy? Or fenghui? Lazy?
35 LAL // Feb 9, 2009 at 12:53 pm
Fengshui, it’s a learning process. We all make mistakes. If everyone was perfect and made no financial errors life would be boring.
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