Sometimes, as personal finance writers, we get carried away with the idea that everything needs to be saved, saved, saved. All the time. But personal finance isn’t just about building up emergency funds and maxing out retirement plan contributions. It should also be about learning to enjoy the moment. Thinking that you will be able to amass huge amounts of wealth and then just retire and do whatever you want is nice. But what happens if you are 50 or 60 or whatever, and no longer in prime condition to enjoy the fruits of your years of labor?
Another issue is that of breaking the habits of decades. Many people find that, when they retire, they don’t really enjoy their money because they are still in saving mode, pinching all of their pennies. They are no longer obsessed with saving up for retirement. Now they spend their retirement hoarding money, scared that the money will run out before they die. While this is a legitimate concern, and while financial discipline and saving are very important — vital even — it is also good to learn how to spend on occasion so that you can get some enjoyment out of life. (You might also learn that spending money also helps you live a sustainable frugal life.)
Money as a Means to an End
I like to think of money as a means to an end. I don’t care about amassing great piles of it. I do know that I need money to pay for life’s necessities, and some of life’s pleasures. While you don’t need money to have a good time, the occasional treat for yourself is nice, whether you are buying something you like (my husband’s style) or buying an experience (my style).
Neither of us care about leaving a fat inheritance for our son. We’ve got a 529 for him, but he’s going to help pay for his college, and he’s certainly going to be mostly responsible for his future prosperity. Instead, we want to be able to enjoy a few things now, and live in reasonable comfort during retirement (which will probably be semi-retirement, since we’d go crazy in a full retirement situation). Our retirement accounts and investments are aimed at creating income streams later, and we have a decent emergency fund. Could we be putting more in retirement accounts? Probably. But what good is having all that money later if we never actually use it?
Having a Plan for Spending
This doesn’t mean that we just willy-nilly spend money we don’t have. We still have to be responsible, otherwise we’ll end up in vast amounts of debt, making interest payments directly into others’ pockets, instead of using the money for us. Before we spend money on things we think are enjoyable, we do a few things:
- Pay tithes to our church and make charitable contributions.
- Set money aside for emergency savings and investing (including retirement accounts and the 529). This is automated.
- Pay our bills.
- Fund our long-term goals (finishing the yard, buying new furniture, vacation, etc.).
We know approximately how much we need to set aside for the future, and we have a pretty good idea of what it costs to do the things we enjoy, like seeing movies on occasion, proving music lessons for our son, going out to eat once a week (for lunch), seeing a concert or show, buying a fish aquarium, and traveling a little bit. It’s all about taking stock of your financial situation, and figuring out what money you have for spending on things that you may not need, but that you might enjoy. We live fairly modestly now, and we plan to live fairly modestly in the future, so we don’t really need to reach some large number of accrued assets in order to maintain our current quality of life. So there’s no reason to hoard just to hoard, once we make the appropriate provisions for the future.
It’s true that money can’t buy happiness. But if you plan so that you can spend some of that money now, it can provide a little pleasure.
- E*TRADE IRA - Official Site