When making Aliyah at a young age, Israel has the appeal of a bold new step and a plan for developing a life on a new sheet of paper. But when making Aliyah at a slightly older age and with a family, it is not enough to just come and soak in the surroundings; one has to plan for a new life in the context of the life one already has.
Generally speaking, there are three important financial steps one has to take in order to adjust to Israeli life: (1) get out of the American mindset (2) thrive in Israel (3) plan for retirement.
(1) Getting out of the American mindset. Financially, living in America is like living in a crack den. Technically you are in control, you don’t have to take drugs – but on the other hand, the longer you live there, the more you are affected by the environment and the greater the odds are that you will. Americans are brainwashed consumers fighting crack dealers at every corner. Debt is the most aggressively marketed item in the US and instant gratification is okay as long as you’ll be able to make the payment. And because the United States is so far behind nearly every other western country, it is permissible for children to be brainwashed at the youngest of ages so that their financial irresponsibility will follow them throughout their entire lives.
Americans olim, particularly those with families of all ages, need to actively undo the brainwashing of American financial irresponsibility. The most important financial lesson that American Olim must learn in Israel is the most important financial lesson never learned in the United States. Spend less than you earn. Nothing I can say can make up for this simple fact of life: if you spend less than you earn, you will always have more money. As a family, you must agree on, understand, and stick to a budget every month. Having a budget allows you to adjust financially to Israel while understanding how you choose to live.
“But Jon, my family and I just made Aliyah, we need to just have some freedom to spend until we adjust to life here!”
And what exactly will make you adjust? There is no shortage of people who want to take your money, and there is no lack midst the plethora of ways to spend it. So every day you will spend “only” ₪ 25 on shwarma (with a reasonably priced ₪ 10 can of soda) – and then go out for some nice dinner because “it’s just another couple of shekels and isn’t a shekel just a quarter anyways?” Well, quarters add up. Your expenses will begin to pile, you’ll make less and you’ll spend more because you feel bad about the money you don’t have, but continue to spend.
Make a budget. Even if you decide to budget more than you earn and dip into your savings a bit as you gradually budget down each month until you finally spend less than you earn – make a budget. Train yourself to live on less. Just because it is kosher does not mean you have to eat it. You can buy some school supplies at the ₪ 1 store. Spend time in Israel’s beautiful parks and begin to focus less on the materialistic and more on the religious / personal / spiritual. Isn’t that why you came here as a family in the first place?
(2) The next step is to thrive in Israel. Once you get your expenses under control and you begin to settle in, it is time to work on your Israeli lifestyle. Do you need to get any additional licensing to advance in your field? How’s your Hebrew? Are you from a community where, generally speaking, children marry younger, and if so, will you be able to offer support? Can you adjust your work schedule to make more time for learning? This is the time to ask these questions. Set goals for yourself financially, socially, and religiously and live the life you made Aliyah to live.
(3) The third, and perhaps most ignored step, is to plan for the future. Find out how much you’re going to need. Not sure how much? Ask an old person.
Don’t just throw money into some investment and assume it will pay you enough to retire with dignity. Unautomate your finances – take a hands-on approach and watch your investments. Put some money into kupot gemel in order to have a lump sum when you retire and put money into your keren pensia in order to have the proper annuity you’ll need in order to live out your days.
I know these words sound all complicated and Hebraic, so let me clarify what these mean and how to do it. A kupat gemel is a providence fund.
“Hey Jon, I just checked wikipedia, and they’ve never heard of a Providence fund?!”
You got me there. The ministry of finance chose the term “Providence Fund” even though it is a made-up word that means nothing except what it is translated to mean, much like “firmament.” What it really means is a long term mutual fund that you an only cash it at retirement age (currently 64 for women and 67 for men.) These will help you get that lump sum you’ll need when you retire.
And how will you live after that? Either from a ton of cash you have in a nice off-shore bank, or like most of us, from a keren pensia. I would take the active approach and call the keren pensia and describe your situation (physical health, age, etc) and ask “how much do I need to put in before retirement in order to have an annuity of ₪ X per month?” Odds are you won’t get an answer at first, but keep pushing and get an approximate amount. Remember in Israel, “no” means “not unless you make a big deal out of it.”
The amount you’ll be told will depend on many factors including how the market is doing, so it is really hard to know an exact amount; play it safe and always be conservative with your money. Also, keep reading as I continue to delve into the pension system here and explain how to understand the pension system here.
So now you know you want to have ₪ X for your kupat gemel and ₪ Y in your keren pensia. Now it’s a race to get the money. You have a goal; plan around it, try to get the money into these accounts as soon as possible and reach your goal. Remember, these funds have compound interest, the sooner you put in the money the more interest you get.
“I advise you to go on living solely to enrage those who are paying your annuities. It is the only pleasure I have left.”
“Don’t simply retire from something, have something to retire to”
– Harry Emerson Fosdick