Saving Versus Living

The Balance of Saving Versus Living

 

This month’s blog will be personal as I’ve seen and heard so many stories being a financial advisor for 18 years regarding how to balance saving versus living.  I’ve seen people that chose to “live life” and build up stuff like a nice house, a nice car, nice clothes, and I’ve seen depression era people that don’t self indulge in anything and save every penny.  I’ve talked with people happy about their life and people unhappy about their life.  What I’ve found to be fascinating is that it has no relation to the amount of money that they have saved or the income they made during their working life. 

When I started my career, my goal as a Wealth Manager was to understand what my clients goals were and plan out a way to achieve them.  I viewed it as a math problem to be solved.  Over time, I came to see how impactful this really was and how my influence could make a huge difference in their happiness.   I have one client in her mid 80’s that grew up seeing her parents struggle in the Great Depression and she saved every penny.  She has saved well over $500,000 dollars,  her home is paid off, she has a pension for income, and she never takes withdrawals from her account.  She now physically struggles with household chores and her daily routines.  When I come visit her, she is frightened to spend money on something like a housekeeper or a home health aid.  Regardless of how many times I tell her that it is fine and she SHOULD spend her money, she fights it.  Her fear of running out of money and losing everything drives her thoughts and she would rather struggle than spend money to make her life better. 

On the other end of the spectrum, I have met clients that spend everything they make (and more).  I have had clients making six figure incomes with huge credit card debt and problems reigning in their spending.  One particular story comes to mind about a lady in her 40’s who made over $120,000 a year, who would come into my office and cry.  Cry because she was behind in her savings, she felt like she was going to have to work until she was 70, and she had so much debt.  She felt there was no hope and looked to me to give her hope and advice.

After hearing so many stories throughout the years and running hundreds of financial plans, I came to a conclusion.  The conclusion is that if you start young and save 20%-25% of your gross income per year, then you will be financially fine.  I have a few low income workers in blue collar jobs that have never made more than $25 an hour their entire life that have more money saved then the lady above who made $120,000 a year because they saved 20% of their income and started young.  I volunteer in my local high school teaching a financial education course through Junior Achievement and my message to those kids is simple, “I don’t care what you do with your careers and your life as long as you’re happy and you save 20%-25% of your income per year.”  That is the key that I have seen time and time again.  I used to think that being a high wage earner and making lots of money was the key to happiness and success.  Now that I’m older, I see the opposite can actually be true.  For example, the high school my step-daughter goes to is in the most affluent neighborhood in Fort Collins, CO.  The kids that go there all come from successful families and they have everything they could want in life.  However, I have come to find out that particular high school has the highest suicide rate of any high school in the entire county.  That reality was the final straw in changing my mindset that money doesn’t create happiness, but rather living life and creating strong relationships does.

So when it comes to saving versus living, I suggest moderation.  If you are saving 20%-25% of your gross income per year, paying your taxes, then spend the rest of your income on whatever you want!  Go out and enjoy life. Create a travel fund, buy that nice car, buy the bigger house, buy nice clothes, take that expensive vacation with the family, and get out and create memories.  However, if you are not saving that much, then you need to cut back and live within your means.  And if you are saving more than that, then cut back and live your life.  However, if you are 50 years old and have nothing saved versus 20 years old, then the reality is that you will need to save more.  So that’s my advice…  Life is fragile and I’ve had completely healthy clients that I’ve considered friends go from no medication and healthy  to stage 4 cancer and gone within a year.  I’ve had chain smokers with health issues live into their 90’s.  You never know what life is going to bring, so just save what I suggest and enjoy the rest!!

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