Is saving money a good thing? Most people would say yes, and many will wonder why you are asking such a stupid question. Saving money is essential for building wealth and protecting us from catastrophe. But as with all things, nothing in life can be defined in absolutes. Even the act of saving money can be detrimental under some circumstances. How is this so?
The value of money to you in the present will not be the same as its value in the future. We all know the concept of compound interest and how powerful it is for growing your wealth. For compounding to take full effect, it needs time, and a lot of it. We are encouraged to save and invest as early as possible to reap the benefits of compound interest.
However, in addition to time, there is another element that determines how much wealth is worth: your capacity for life.
People accumulate wealth their entire lives only to give it to their grandkids and to charitable causes when they get old. Giving money for this purpose is deeply rewarding. But is it the only reason why we do it? Or perhaps because we no longer have the capability to enjoy that wealth? Do we find we are now too old and weak to do the things we wanted to do while we were younger?
Window of Opportunity
Last year, I booked a couple nights stay at a picturesque place near my hometown. I went with my family and my (now aging) parents. The location was nice, but it required some walking to reach the different attractions. Towards the end of our stay, my mother said that she cannot do something like this again in the future, and that this is the last one for them. Her knees are giving up and what was previously a leisurely walk for her is now a tortuous march.
That event taught me that our time is limited and our energy and capabilities diminish sooner than we think. The goals and experiences that we want should then take into account the age we can optimally pursue them.
It would have been more enjoyable if we did those things when my parents were younger. More money cannot solve things if even getting off a chair is a painful endeavor.
The Dark Side of FIRE
According to Bill Perkins, the author of the book Die With Zero, we should be optimizing for net fulfillment, not net worth. This is easier said than done because we will be replacing something that is easily measurable and tangible with something subjective.
The definition of fulfillment differs depending on who you ask. It could be family, travel, food, career, and so on. In comparison, money and wealth can be measured easily. You either have lots of money in the bank or you don’t. Since money is easily measured, this is the thing we tend to manage and optimize. We focus on wealth building instead of determining what makes our lives really fulfilling. As humans, we are always drawn to the easier path.
Almost a decade ago, I started my journey in personal finance by following materials related to FIRE (Financial Independence/Early Retirement) and concepts popularized by Jack Bogle. Through years of constant exposure, eventually the thought of spending money on non-essential items feels like a sin. The habit of saving money eventually becomes a hindrance to using that money. It essentially prevents the person from reaping the fruits of their labor (which was the goal), as spending feels “wrong”. Ironically, once you achieve your savings goal, your new goal often becomes protecting and growing that stash rather than using it to enrich your life.
Ramit Sethi, known for his I Will Teach You To Be Rich brand, highlights that we should not only be good at the saving part, but also on the spending. Why aim for a rich life in the future when you can have one right now?
Your Capacity for Life
After retiring with a sizable nest egg, where will you spend it? Can you even climb mountains at 65 years old, after decades of working hard and prioritizing your career over your health?
I am not saying that we should abandon saving and just spend all our money to get the maximum fulfillment possible. That is irresponsible and destructive, especially if you have others who depend on your resources as well. This is to highlight that we should not box ourselves for most of our productive years just working hard and saving. Life is what happens when we are not working.
Some experiences can only be fully enjoyed at certain times in our lifetime. So instead of agonizing over an expense that you truly want, celebrate that you have the capacity to obtain that thing or experience. You are not guaranteed a future, and the value you exchange now for money may be exponentially greater than if used decades in the future.
Photo by Markus Spiske on Unsplash