I’m a 35-year-old editor living in New York. About a decade ago, my dad died (my mother was already dead), and I received a life-insurance payment. It was enough for me to purchase a one-bedroom apartment in cash. Having a paid-off home in New York City has been really helpful financially, especially since I work in media (not the most stable industry) and don’t make as much money as some of my friends.
However, it’s also a weird situation. People love to talk about real estate in New York, and when they find out I’m a homeowner (especially if they know I’m single and an editor), they’re usually surprised or express that I’m “lucky”. But my ability to afford it is directly tied to my parents’ death, so I don’t feel that way.
I have such mixed feelings about this, all the time. I feel grateful about not having to worry about rent, but I wish it hadn’t come at such a huge cost. On a more logistical note, I’m not sure what to do with the bulk of my income that isn’t going toward housing expenses. I’ve been maxing out my 401(k) each year and socking away as much of my post-tax income as I can into my robo-advising account, but I’m not sure if it’s the best decision. Should I be diversifying more? Also, for someone who’s not planning to have kids, how can I best prepare for financial security, especially if I don’t wind up settling down with a partner?
It’s human nature to want to “deserve” the things you have and to know that your rewards are commensurate with your labor. I earned this new sweater because I did a good job at that presentation yesterday. Or, I brought in a bunch of new clients this year, so I’m going to ask for a raise. Conversely, people feel uneasy (or angry, or embarrassed) when that calibration seems out of whack. Economists call this “equity theory” — the natural urge to seek balance between what you give and what you get. Psychologist J. Stacy Adams, who coined the term, found that humans pursue this sense of equilibrium even when it’s not necessarily in their best interest: In his research, people who were “overpaid” for a task went on to increase the quality and quantity of their future work to compensate for it.
But the truth is, it’s impossible for anyone to fully deserve what they have and what they don’t. It’s all too subjective. Sure, you didn’t “save up” for your apartment, but most people who can afford to buy real estate in New York probably got a leg up in life somehow. In your case, that boost came with a terrible blow: the death of your dad. There’s no world in which those two events are comparable in value, and the insurance money you received doesn’t make losing your parents any less awful. Nothing can compensate for that.
You know all this, intellectually, but on an emotional level, it seems like you’re still trying to make your situation feel more “fair.” But it never will be. Meritocracy is a wonderful, orderly concept, but in reality it’s full of holes. Luck and tragedy strike at random, and nice things (a New York apartment, a life free of rent) almost always come from a combination of our circumstances and our efforts. I agree that people should be more open about acknowledging their privilege, and your honesty is admirable — transparency tends to be infectious, and makes other people feel more comfortable in opening up about their own financial hang-ups. But you don’t have to carry that moral burden at all times. If you’re not in the mood to disclose your homeowner status (and the story behind it), then don’t. You don’t owe anyone an explanation. In fact, you don’t owe anybody anything at all.
However, you do owe yourself some credit for doing all the right things with your money — and it is yours, regardless of how weird you feel about that. Maxing out your 401(k) every year, investing other savings in index funds, and padding an emergency fund are all gold-standard choices. You’re a financial advisor’s dream; keep doing what you’re doing. If you need further back-patting, plug all of your accounts into a retirement calculator; it always helps to get affirmation from an impartial tool on the internet.
I do understand your anxiety about being on your own, and I’m sure you’ve envisioned a worst-case scenario in which you’d be really screwed without someone to lean on (say, you lose your job, the market tanks, and you’re forced to sell your apartment at a loss and move … where?). For that reason, I encourage you to build up a larger-than-average emergency fund, perhaps enough to live off for a year or longer (keep it in cash, in a high-yield savings account). And if you’re still worried about being prepared for retirement, open an IRA (ROTH or traditional), which will allow you to put away an additional $5,500 per year that will grow tax-free.
Your cautiousness around finances is not only smart; it’s also part of a behavioral pattern that psychologists have observed in people who inherit money after a loved one dies. A 2009 study found that people who receive a windfall that’s tied to a negative experience tend to be more vigilant with that money than they would be with regular income or, say, a random gift. “In particular, they avoid hedonic purchases so as not to exacerbate their negative feelings,” wrote the study’s authors, Jonathan Levav and A. Peter McGraw. “When possible, they attempt to use the money for relatively virtuous or utilitarian expenditures to alleviate or ‘launder’ their negative feelings.”
I’d bet you’ve always been responsible with your money, but this insurance payoff (and its precipitating causes) may have pushed you into overdrive — constantly looking for “virtuous” ways to manage your savings instead of considering its ultimate purpose. For that reason, I think you could stand to loosen up a little bit. You’re in your mid-30s with a great career and a home in the best city in the world. Especially if you’re not going to have kids, that gives you a ton of autonomy, financially and otherwise. What do you want to do with it? Having money isn’t just about guarding against disaster; it’s also about freedom.
To me, your conflicting feelings about money are tied to a fat, floating question mark in your own future. Your parents never reached advanced age, so you don’t have them as models. This is sad for many reasons, but also, it gives you a blank slate. Think big — you get to choose your own adventure. Do you want to become one of those elegant old New Yorkers with a closet full of fabulous hats and season tickets to the Philharmonic? Or do you want to sell your apartment and retire to a llama farm in Pennsylvania? Or buy a little cabin upstate where you can escape to write fiction on the weekends? While you’re at it, try to imagine beyond your own life, too — what do you want your legacy to be? These are intimidating questions, and your answers will change over time, but try to have fun with them. You definitely deserve that.