What If I Save Too Much?
This is the section of the pod where I explain a little bit about the concept which is the topic of this show.
I call it the "What" section.
Even though this title sounds very much like a ridiculous question, some people ask it!
A question that made its way to the CBS-owned Marketwatch is "I have a seven-figure nest
egg. Am I saving too much for retirement?".
Another one is "I'm a 32-year-old stay-at-home mom, and my husband earns $150,000 a year. Will I ever be able to enjoy a retirement?"
These are from a list of real questions!
And they're missing the point.
Even though the well-meant answers include the "advice" that some people postpone certain areas of their lives in order to reach their end game, the real question is "Will I ever be able to enjoy a retirement?". The bits about being 32 with a husband earning $150K a year is meaningless distraction from the goal.
Remember, retirement is when you don't need income from a primary job. That's it.
There are many ways to achieve that, which is a different topic for later.
Retirement accounts can be specific and individualized investment advice, which requires a special federal license on this or any other platform.
Don't confuse the two.
We will not get caught up in complicating ideas such as "enjoy today", "live for the present" and especially not "you deserve".
I agree with the idea of yielding to the present.
I separate that though from living for the present.
Having an emergency fund is important. You really should have some emergency money, but that's not the key word here, and we're not about to come up with an exhaustive list to do that, either.
Listen. This is quality of life I'm talking about
If that sounds self-centered, well, it is a little bit.
But not too much.
We all need to be a little bit self-centered, just not so much that we trample on other people.
We can be a little bit self-centered and still have that all-important growth mindset.
And we can enjoy today in respect to our personal goals without that being an absolute sacrifice of tomorrow.
It also means we don't need to focus on the expense of today, not because no one should, but because we've got that covered.
Remember our super simple method of answering the "When Can I Retire?" question. Determining retirement age, it turns out, is not all that hard. Having money in retirement is not that hard either.
In our growth mindset universe, we don't have eithers and ors.
Our advertising is just Simple answers and approaches.
That's the complete list.
It's not always that easy though.
Financial advisors, and remember I can say this because I used to be one...
Financial advisors are trained to, airquotes "walk you through deep dives" into your situation.
It can be worth the extra money, but tell me if this sounds familiar:
"If you want to retire at age 64, you're going to have to be prepared, at least for the first few years, to give up those annual vacations and reduce your rate of etc, etc, but then, dot dot dot".
It sounds great, I admit.
I cannot tell you, however, how many times I've watched people's eyes glaze over as they silently plead for their "big brained" advisor, and in recent years their big-brained advisor's analytics activities and analytics providers, to get to the point, not another speech about unexpected expenses, financial security and a good financial plan.
But first, the "kicker"! You're not even spending any of that retirement savings!
That's distracting, but they call that financial advice.
But the reality is a cost 100 times worse.
Keep it simple.
And I don't mean sort of simple.
I mean really simple.
A question like "What percentage of my current income will I need to replace once I retire, and how will that number change throughout retirement?" is NOT simple.
Similarly, a question like "How much will I need to withdraw from my savings in order to meet my cash-flow needs in retirement?" is NOT simple.
That one is simpler, but it's still not simple.
I'm reminded of the iDVD story, where Apple had acquired this company who made what became the personal DVD burner. Their original product took a genius who could apply something like 500 steps to a difficult piece of machinery and they were proud that they'd reduced the number of steps before meeting with Steve Jobs.
Jobs took zero looks at the existing product. He said, I want a product where a user can drag and drop one file onto the thing and a correctly burned DVD comes out.
That's it.
And that's all the harder saving for retirement has to be.
Now, a more reasonable thought is that it's possible to save too much for retirement, by doing things like making general assumptions, or worse, ignoring months of expenses, and you can take steps to refine and improve your projections if that's your thing.
But even that isn't the worst that could happen in life, right?
So what if you save too much?
I mean, sure you need to enjoy life now.
But really, you need to enjoy life then too.
And it doesn't have to be either/or, like I said.
So, back to saving too much.
What does that mean?
What does your browser tell you?
You have to give more to your kids?
You have to give more to your favorite charities?
And worst of all,
You might have actual choices!
3 Signs you are saving too much money
1. You have stacked up savings but no investments
If you’re debt-free have money constantly going into your savings account and an emergency fund but have nothing invested, that’s a problem.
Investing is one of the best ways to build wealth, but people often avoid it because they’re scared or don’t know where to start. The good news is that it doesn’t take much to get started
with investing.
All or a portion of the money you currently have going to savings can be reallocated to investments. You’ll find that investing can be more fulfilling and exhilarating than regular savings. Your money makes so much more when it’s invested.
2. You are saving but you are not focusing on paying down debts
Finance experts recommend having some money saved before aggressively paying down debt, but it doesn’t need to be a large amount.
You’re likely spending more on interest with your credit cards then you are gaining interest on the money in your savings account. Funny how that works.
Get $500-$1000 saved and then shift your focus to paying down debt. You can get further by focusing on one goal at a time.
3. It's making you miserable
Saving money is always wise, but enjoying life (in moderation) is wise too, and makes for a happier life. You’re saving too much money if you’re in a good financial place but never treat yourself to anything.
Life is too short not to enjoy yourself on occasion. Include fun spending in your budget, so you know you can afford it and it’s already planned out.
After all, what’s the point of all that sacrifice if you hate your life while you’re doing it?
How do we overcome?
The key to overcoming the over saving habit is to get strategic about your saving. Rather than living in this panicked feeling of “I have to save every single dime I possibly can,” create some money systems!
Coming up with saving targets, establishing a spending plan and automating your money are all great ways to introduce strategy and systems.
Savings goals can be especially helpful, because they can lend purpose to all that saving, but they also create an end point you’ll eventually meet. Limiting and directing your savings in this way can help curb the habit and assuage your anxieties. You can reward yourself for your hard work.
We’re changing the way we look at things, and
Remember, “THAT’S GOOD”.
Also remember, this is Financial Life Coaching from A Happiness Perspective! Coaching Happiness.