As a financial planner, I work with a lot of young professionals who are very serious about saving for the future. It might be because they grew up without any money and vowed never to live paycheck to paycheck again. Maybe they saw their parents work until they were 80 and never get to enjoy retirement in a traditional way. Sometimes saving-focused individuals or couples are coming from a place of fear because they’re worried there won’t be enough money in the future to accomplish their big financial goals.
Whatever your reason for saving is, it can be easy to get wrapped up in an overly aggressive savings strategy. This is especially true if you’re earning a higher-than-average income, and have the extra cash flow to throw at a savings goal like retirement, or purchasing a home. Unfortunately, spending all of your extra resources saving for some day in the future has some downsides that many financial planners might not have you consider.
The Downsides to Aggressive Saving
I’m about to share an unpopular opinion with you:
It’s not in your best interest to only save for the future.
This idea might be revolutionary for you. Every blog post, YouTube video, or podcast out there seems like it talks about how important it is to start saving, or how you need to be saving more than you already are if you want a comfortable retirement, or to achieve your other big-picture lifestyle goals.
The truth is that aggressive saving, or a savings-only focused financial plan, has several drawbacks. First and foremost, it’s tough to stick with. If you want a chance for your long-term plan to work, you have to give yourself some wiggle room. Although pouring all of your time and energy into saving for “someday” makes sense right now, it gets old fast.
At some point, you’ll want to let loose and enjoy some of the hard-earned money you’ve been working for. If you’ve only focused on saving up until now, you’re at risk for not just overspending a little bit – but completely falling off the metaphorical financial plan wagon.
One minute you might be comfortably saving, and the next you’ve gone out and taken a loan from your 401k to pay for a car you don’t need, or a month-long vacation that’s way out of your budget. Allowing some space to enjoy your money in the day-to-day helps you to feel confident about your other savings decisions, without feeling the need to stop saving altogether and overspend.
Why You Still Need to Plan Ahead – Even When You’re Frustrated
Although I don’t believe that only saving for the future is the way to go, it’s still important to plan ahead. For your family’s financial security, having a plan in place for goals such as the following makes sense:
- Emergency / job mobility fund
- Paying off student loans, mortgage, etc.
- Financial independence / retirement
- Children’s education
The beauty of having a balanced savings plan is that you can still plan to enjoy your wealth – and you don’t have to wait until retirement to do so. Putting together a plan to save for travel, a car, gifts / holidays, or other lifestyle goals might mean that you save for a few months or even years until you can afford to pay for them with cash.
While it’s important to save for financial independence and other long-term goals, it’s equally important to make room in your budget to accomplish exciting goals in the short-term, as well.
A Final Thought
If you struggle to allow yourself any “fun money” in your budget, you may be too focused on “someday.” Whether “someday” for you is a time period in the future when you’ve achieved a big goal, or it’s the day you decide to retire from your full-time job, it can be exciting to plan for the future. I understand why you want to save for someday, and I’m excited that you’re so dedicated to setting yourself up for success.
However, as much as nobody wants to think of this worst-case scenario, it’s possible that the “someday” you’ve envisioned for yourself and your family may not come around. There are a wide range of reasons this might happen: you could be in an unexpected accident, you might get sick during retirement and be unable to achieve all of the exciting travel plans you made for yourself and your spouse, or you may just have an unplanned divergence from your original path that re-organizes how you plan to spend your days as a future empty nester.
It’s impossible to fully plan our future. So, when you spend all of your time and money saving for the future, you may be saving for the idea of a lifestyle that might not happen the way you had planned. This gives you all the more reason to commit to saving and planning for the future as best you can, but to also give yourself the flexibility to enjoy your money today. You deserve to live a life you’re happy with and proud of – and not just during retirement!
