Why We Should Save As Much Money As We Can
February 11, 2007
How could you possibly save too much money? There’s been a good deal of discussion in the last few weeks about whether we’re saving too much money. My take is that you can never save enough and I’ll tell you why.
The Unknown Future
Life is an unpredictable journey. We never know what life will bring and how it will change our world. We know where we are today and what we want tomorrow but the truth is that everything we know could be easily flipped on its head.
Best Laid Plans
You can see small examples of this in your life everyday. We find ourselves getting irritated or frustrated when things don’t “go according to plan”. There are many things we don’t know, understand, or see coming that mess with our best laid plans. The small things like slow traffic or an unexpected work assignment are inconvenient but we can adjust and handle them relatively easily. Then there are major changes in your family, career, society, or health that catch you off guard and asking “where do I go from here?”.
Why We Should Save
In these situations, the answer to the question of what comes next has a lot to do with how you’ve prepared for the future financially. Having a money cushion gives you freedom to make your own decisions. The larger the cushion, the more freedom you have. How much cushion do you want to have?
What If?
What if life never changes course on you? What if you arrive at your destination just as planned? What will you do with all the money? Do you really have to ask? It’s yours to use as you see fit. Start a foundation, send your grandkids to college, travel the world, or whatever else makes you happy.
The Alternative
What’s the alternative to arriving at your destination with an abundance of money? Which would you rather have, too much or not enough? Of course, this wouldn’t be a responsible recommendation if I didn’t remind you to live for today but invest for tomorrow. Don’t sacrifice your present at the expense of your future, just remember to keep a healthy live/save balance and to keep one eye on tomorrow.
All posts by Ben Edwards
Ben,
Great post. I will highlight this as my Carnival of Personal Finance pick.
As I have discussed with Golbguru, I would rather err on the side of over saving tnan under saving. The solution to over saving is to spend more in later in retirement. I can do that 🙂 However, the consequences of under saving can be very painful.
As for sacrifice, saving always involves some level of sacrifice – i.e. delaying immediate gratification for a benefit in the future. Each person has to make their own decision on balance in this area. While I wouldn’t give up going out to dinner occasionally, I am happy to give up cable TV. I know that others would make a different choice.
Golbguru, good point on the timeliness of money usage. Finding a balance between the present and future is tricky, unfortunately it seems the future is often ignored or underfunded.
Thanks for the mention.
I agree with you on “Don’t sacrifice your present at the expense of your future.” Often times, when talking about retirement, many get scared as, not just the financial industry, but mainstream media tend to paint a gloomy picture based on various assumptions and predictions. Retirement is personal, and how to prepare it is also personal. A realistic expectation is all we need, not just follow blindly what a calculator tells us. And, what’s the point a giving up life now in order to enjoy it in the future?
Phew..I almost, disagreed with you after reading the first four paragraphs. 🙂
Of course, you should save for retirement…but you should save reasonably. Consider some reasonable factor of safety and save for it. People shouldn’t just pull numbers out of somewhere and start following them blindly.
Sometime in the past, I had a post that said “stop worrying too much about retirement”…by that I meant exactly what you say in your last paragraph: stop putting retirement above your current financial priorities. Of course, you need money for retirement, but that shouldn’t come from compromising your financial obligations in the present.
The value of money comes from whether you spend/give/use it at the right time.
Good post! 🙂