It’s easy to feel inadequate when it comes to your retirement savings, especially since there is no lack of motivation to make you feel that way. Bloggers like me get to sound smart when we scare you with what is essentially basic math; investment companies get to come to your rescue with savings vehicles; and there is, of course, the inconvenient truth that many of us are lacking in actual savings.

This is not the normal sort of thing you’ll hear from me on this site, but I think it bears mentioning. Investing is a great thing, as long as you have the rest of your financial house in order.

The Set Up

It goes something like this: Responsible Rex graduates college with about $2 in student debt and begins saving 50% of his $80,000 starting salary, while Flighty Fran waits until she turns 50 to start saving 5% of her $30,000 salary. Responsible Rex retires with billions at 55, while Fran retires at 92 and moves into Rex’s basement (which he is renting out for extra retirement income so he can afford a nicer yacht.)

Some of us want to be Rex and others are afraid of being Fran, but either way, we swallow the story hook, line, and sinker and scramble to increase our retirement savings contribution and make it our number one priority. In the process, we may neglect the more foundational areas of personal finance.

Obvious Fact: Saving is Important

I write about investments, so (as you might imagine) I’m a huge fan of Retirement Saving. I would let Retirement Saving autograph my shirt at a concert, an honor previously reserved only for Bruce Springsteen (who has not yet taken me up on it, but I am persistent.) But the blazing neon sign of Retirement Saving can blind us to less visible figures like Budget and Emergency Fund, or even Retirement Saving’s archenemy, Consumer Debt.

I am not a fan of being scared into doing anything, no matter how inherently sensible it seems. It isn’t necessarily smart to rush headlong into Investment Land if you haven’t spent enough time in the Kingdom of Basic Needs. Don’t be so worried about tomorrow that you fail to take care of today.

The Pyramid of Financial Needs

Retirement saving is a big topic these days, and for good reason.  But it's important to make sure you have the basics covered first.

Arguably, the most common visual for the hierarchy of financial needs is a pyramid (because pyramids are structurally hierarchical. It makes sense.) The base of the pyramid is cash management.

Quite simply, cash is first because it will determine your success at every other level of the pyramid. It’s impressive to be saving 30% of your income for retirement. It is less so if you’re racking up debt at the same pace. For some of us, keeping this level in order comes naturally, but most of us have to work at it. If you are in the former category, try to keep the smugness to a minimum. It’s annoying. If you are in the latter, accept it and move on. There are worse things in life.

Most immediately, successful cash management means that you have the funds to protect yourself from risk. When most of us think of risk, we immediately think of insurance. And there is definitely insurance at this level – life, health, disability, property, and casualty insurance are some major categories, with additional liability for some of us if circumstances warrant. Another piece I put at this level is your emergency fund. (Others may argue that the emergency fund belongs with cash. I’m fine with that as long as you have one.)

Once you’ve put a harness on your spending and protected yourself from the unexpected, you are ready to begin saving for your future.


Now that I’ve laid out this neat, logical plan, I’m going to mess it up with a few exceptions to the general order of things. First is 401(k). Responsible Rex may be annoying, but he’s not entirely misguided. If your employer offers a 401(k), go ahead and sign up. If your employer matches your contributions, then contribute at least to the match. Why? Because it’s FREE MONEY.

Another area where you might consider jumping levels is life insurance, if you have dependents who will not be able to fend for themselves in the event of your demise.  None of us is guaranteed tomorrow, so regardless of where you are on your climb, make life insurance a priority.

Today vs. Tomorrow

To quote a character from my daughter’s current favorite movie (and the inspiration for this particular post), Seymour S. Sassafrass, “It’s important to dream about tomorrow, but you have to take care of today. It’s a classic today/tomorrow problem.”

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