Why do we save?

[disneysteve]

On a couple of threads recently, this question has been coming up. We talk a lot about saving and investing and cutting spending and funding 401ks and Roths and 529s and that is all good stuff, but there is another side to the story. There have to be reasons why we are saving and living frugal lifestyles. There has to be some payoff. Otherwise, what's the point?

Of course, there are the usual big goals - college for our children, buying a home, buying a car and retirement. But I think most of us have a lot of smaller goals, too. Vacations, home renovations, gifts for birthdays and anniversaries and holidays, collectibles, furniture, jewelry, etc.

There is nothing wrong with having, and buying, wants as long as it is done in a responsible manner and not at the expense of more important needs. If you are taking exotic vacations each year but have nothing in your 401k, that's a problem. If you have a killer home theater system but no life insurance, that's a problem. If you buy a shiny new sports car every 2 years but have made no plans for your children's education, that's a problem.

But if all of your financial ducks are in order, all needs are being met, future needs are being funded, and you want to go out and enjoy some of the fruits of your labor, go right ahead. That's why we all drag ourselves to work each day.

Sure, most of us could be saving more than we are. We could take no vacations, never go out to eat, never go to the casino, never see a movie or get Netflix, turn off cable and internet, get rid of our cell phones, etc. But what would be the point. It is often those luxuries that make life truly memorable. Hiking in the mountains of New Hampshire, riding rides at Disney World, cave tubing in Belize after hiking through the rain forest, praying at the Western Wall in Jerusalem - those are the kinds of experiences that I will remember for the rest of my life.

Citibank had a great slogan years ago: Build your nest egg but don't forget to have a few omelettes along the way.

[kilapapipa]

Great post, Steve.

What if you die tomorrow, did you have some fun along the way? If you are too frugal, you may answer no.

To some, the fun and challenge is in being frugal. Not me, but I have a friend who loves it.

[skydivingchic]

The biggest reason I save, besides for retirement, is travel. DBF and I try to take one big vacation every year, alternating years out of the country and in the US. So far we have been to a slew of national parks (Yosemite, Yellowstone, Grand Teton, Arches, Canyonlands, Grand Staircase, Bryce, Zion, etc), the rainforest and barrier reef of Belize, and Antarctica. We still have a very long list of places to cover. At any time we generally have a long weekend type trip in the works as well - currently planning for a weekend in Yosemite to do the Half Dome hike with a friend. My next big goal is to take a 3 month sabbatical in Peru, spending about 9 weeks in a Spanish immersion program, and the rest traveling the country to see the sites. That is on the calendar for 2010. While traveling is certainly not a necessity, it is an extremely high priority want for me and I'm therefore willing to give up a lot of things I could afford in order to save enough to fund my next trip. Fancy cars, designer clothes, diamond jewlery, and a big house don't stand a chance against a trip to Alaska or the Galapagos in my eyes.

I could save more by forgoing these trips, but don't see the point. DBF and I have wonderful memories from our travels and are looking forward to many more in the future. Our retirement accounts are well funded, we have adequate emergency funds, and we aren't lacking any basics of life. I think we have a pretty good balance of enjoying life now and saving for our future, which should be the real goal IMHO, not just saving for savings sake.

[noppenbd]

I highly recommend the Half Dome hike to anyone who is in decent shape (it is about a 15-16 hr round trip) and doesn't have a major problem with heights

I have to say I am impressed that skydivingchic has been to Antarctica! I don't have the guts for that one...

[sweeps]

Good post, Steve. We need that perspective occasionally. It's about having worthwhile goals, having a plan and executing that plan.

[fruitbowlk]

So true.

[Aleta]

Steve: I really think that if you haven't read "ALL YOUR WORTH ' by Elizatheth Warren, that you are missing a meaningful book. She talks abouts Needs, wants, savings, debts, etc. I really liked her perspective about life because as strict as she was about needs; she was as passionate about the other areas of our lifes.

After I read her book, I realized that my needs were great and my wants were less. Of course, I live in South Florid and have had to deal with the insurance and tax maize here. Her book moved me out of my complaceny and moved me forward.

I think your ideas about life is right. It is great to save but it is also important to LIVE.

[Fizgig]

TOTALLY agree.

I said in another thread that I'm not frugal, I'm just conscious and deliberate with my money. I'm not at all interested in stockpiling oodles of money for retirement by pinching pennies my whole life. The big stuff in taken care of, I keep my monthly expenses low, and have a savings account for splurges when I want something more expensive.

As for "Why I Save" - it's for a mental sense of security, and freedom. I like having a security net, and the ability to get a big ticket item from time to time.

[disneysteve]

Steve: I really think that if you haven't read "ALL YOUR WORTH '

I think the formula they propose in that book is a very good one. I don't remember the exact percentages - do you?

[Aleta]

Yes, it is 50% needs,
30% wants
20% savings and debt.

She also has the TWO INCOME TRAP that is good for todays modern families that have to face.

[maat55]

On a couple of threads recently, this question has been coming up. We talk a lot about saving and investing and cutting spending and funding 401ks and Roths and 529s and that is all good stuff, but there is another side to the story. There have to be reasons why we are saving and living frugal lifestyles. There has to be some payoff. Otherwise, what's the point?

Of course, there are the usual big goals - college for our children, buying a home, buying a car and retirement. But I think most of us have a lot of smaller goals, too. Vacations, home renovations, gifts for birthdays and anniversaries and holidays, collectibles, furniture, jewelry, etc.

There is nothing wrong with having, and buying, wants as long as it is done in a responsible manner and not at the expense of more important needs. If you are taking exotic vacations each year but have nothing in your 401k, that's a problem. If you have a killer home theater system but no life insurance, that's a problem. If you buy a shiny new sports car every 2 years but have made no plans for your children's education, that's a problem.

But if all of your financial ducks are in order, all needs are being met, future needs are being funded, and you want to go out and enjoy some of the fruits of your labor, go right ahead. That's why we all drag ourselves to work each day.

Sure, most of us could be saving more than we are. We could take no vacations, never go out to eat, never go to the casino, never see a movie or get Netflix, turn off cable and internet, get rid of our cell phones, etc. But what would be the point. It is often those luxuries that make life truly memorable. Hiking in the mountains of New Hampshire, riding rides at Disney World, cave tubing in Belize after hiking through the rain forest, praying at the Western Wall in Jerusalem - those are the kinds of experiences that I will remember for the rest of my life.

Citibank had a great slogan years ago: Build your nest egg but don't forget to have a few omelettes along the way.

The payoff is that we strive not to be idiots living paycheck to paycheck. Being wise with money can be as enjoyable as spending it. financial freedom and security is better than a boat. As a late starter, I have to be more persistant than others, so please don't tempt me.

[disneysteve]

The payoff is that we strive not to be idiots living paycheck to paycheck. Being wise with money can be as enjoyable as spending it. financial freedom and security is better than a boat. As a late starter, I have to be more persistant than others, so please don't tempt me.

That's why I said "if all of your financial ducks are in order" then you can enjoy some luxuries. If you are living paycheck to paycheck, if you have credit card debt, if you aren't saving for retirement or don't have an emergency fund or are falling behind on your bills, that's totally different.

Not everyone can have financial freedom and security AND still afford the boat, but if you can, it's okay to have both if you want to.

[LivingAlmostLarge]

I think you have to enjoy life. It's too short to squander and take for granted. A friend/classmate last year in August 2007 was diagnosed with Breast Cancer. She was 31 years old.

Her wedding was postponed while she is undergoing chemo/radiation. She froze a dozen eggs just in case.

We discussed a bit about finances. Her thoughts? It's nice being responsible (she is/was), but sometimes you gotta enjoy and grab at life. It can end very quickly.

I am much more relaxed about some stuff now. It's a tremendous perspective to be so young and yet examine your own mortality.

[Snave]

A thread that makes me feel like it is OK for me to put the patio and lanscaping on the back of my house that we want for the summer. With my ducks in a row and my wife doing a lot of the quacking as well, I won't feel so guilty. I was someone that remarked earlier that I often felt there was an anti-spending sentiment in a lot of threads. Again, I know this is savingadvice.com, but if you can't enjoy the fruits of your labor now and again, what is the point. I look at this expenditure as I do at all of my other savings goals: I am saving for my son's college - and one day I will spend that savings. I am saving for retirement - and one day I will spend that savings. Plus, it is money that is going in to the house so I guess we would probably be getting some back if we ever sold (at least that is what I am telling myself so I feel even less guily!).

[disneysteve]

I look at this expenditure as I do at all of my other savings goals: I am saving for my son's college - and one day I will spend that savings. I am saving for retirement - and one day I will spend that savings.

There was a thread a few weeks ago where someone asked if money that you plan to spend still counts as savings. I replied that any money that you don't spend soon after getting it counts as savings, even if it gets spent later. I used the same reasoning as you. Our college savings will get spent. Our retirement savings will get spent. Our car savings will get spent. Our vacation savings will get spent. That's why we're saving it - so we can spend it when the time comes.