The Never ending struggle Between Saving and Spending

[Jay_Gatsby]

Agree. I certainly don't care what other people who are not friends or relatives do, I just don't get it. I would never mention it to friends or relatives either. I understand that some (most?) people do not need to spend money to be happy. What I don't understand is the almost paranoid desire to save even hoard money if you don't want to ever spend it. Sooner or later you must either spend it or give it away.

No, can't do that. <best Gollum voice> " My PRECIOUS...."

 

[ER Eddie]

I don't understand people who continue to save money when retired. Underspending a bit in case of a downturn is one thing but systematic long term underspending certainly isn't my style

Yeah, that's something I need to hear. I lean towards being too frugal (one of the reasons I'm here, so it definitely has its upside), but I need to remember the whole goal is to enjoy your life, not squeeze every penny out of it, then die rich. That's rather pointless.

It may be different for people who save for posterity -- for their spouse, their children, or for charity. In that case, piling up some more money in the bank makes more sense, because there is a meaning to it. That wasn't the case with the OP's story, but it might be for others. I've heard several stories about people who lived in extremely modest houses, and then left all their money (sometimes over a million) to charity. There's something noble about that.

 

[NW-Bound]

The thread title is about the "struggle between saving and spending", which means the person is torn between spending or not. I think many people are beyond that, meaning they do not think or care about spending at all, and it is not about financial insecurity. They simply do not give a damn about living in squalor. These people usually have no friends or social contacts. Nobody sets foot in their house, and they also visit nobody. So, being isolated from normal people, they develop a sense of normalcy to their living condition and do not see anything wrong with it.

I guess one should not be too much of a recluse, in order to avoid falling into his own isolated sphere of lunacy.

 

[Meadbh]

I don't understand people who continue to save money when retired. Underspending a bit in case of a downturn is one thing but systematic long term underspending certainly isn't my style

I do understand them.

My parents had two good pensions which more than covered their expenses. After my father died, the survivor pensions were lower. My mother continued to LBHM and accumulate savings. Longevity risk was a concern for her. She grew up in the Depression so understood that financial catastrophes do occur. It was simply good risk management as far as she was concerned. She was also fiercely independent and would have hated to ask me for money.

I am of the same mindset myself. I have no problem investing in financial markets and alternative investments. I have no pension and there is nobody to bail me out if I run out of money. At least while I am in the retirement risk zone I will be trying to put something in savings each year.

 

[ivinsfan]

The thread title is about the "struggle between saving and spending", which means the person is torn between spending or not. I think many people are beyond that, meaning they do not think or care about spending at all, and it is not about financial insecurity. They simply do not give a damn about living in squalor. These people usually have no friends or social contacts. Nobody sets foot in their house, and they also visit nobody. So, being isolated from normal people, they develop a sense of normalcy to their living condition and do not see anything wrong with it.

I guess one should not be too much of a recluse, in order to avoid falling into his own isolated sphere of lunacy.

Does not caring or thinking about spending comes from a lifetime of countless money decisions?...it's not the money itself..it's staying warm, eating healthy foods, having a hobby or two Can you become so used to denying yourself everyday things that pretty soon no item seems to be "worth" spending money on? I don't believe that people are born with a pre-set money bias and each person needs to find their own compass. Certainly if you live alone and friendless in squalor and yet have 600K you are not hurting anyone but yourself.

If my cousin had been living that way and had no one and no money, even though we were not friendly I would have reached out to help him. But maybe some posters here are correct and he didn't think he needed anything more in his life.

 

[papadad111]

I think many people are beyond that, meaning they do not think or care about spending at all, and it is not about financial insecurity. They simply do not give a damn about living in squalor. These people usually have no friends or social contacts. Nobody sets foot in their house, and they also visit nobody. So, being isolated from normal people, they develop a sense of normalcy to their living condition and do not see anything wrong with it.

I guess one should not be too much of a recluse, in order to avoid falling into his own isolated sphere of lunacy.

Some do not always have a "choice" in the matter. For some seniors it's a slow downward spiral & many times is caused by undiagnosed mental illness or cognitive decline due to onset of some form of mild dementia. Paranoia and relates fears grow in scale etc etc.

Perhaps the way seniors age /. How they grow old in the future will change - living/being with children in old age, as is the case in Asia, or in community retirement environments such as those in the Netherlands be the new normal again. Maybe that can arrest some of these sort of cases.

 

[hnzw_rui]

Perhaps the way seniors age /. How they grow old in the future will change - living/being with children in old age, as is the case in Asia, or in community retirement environments such as those in the Netherlands be the new normal again. Maybe that can arrest some of these sort of cases.

Hmm, that's quite an interesting theory. We used to live with my grandmother but then we moved to the US so she didn't have any children and grandchildren nearby. My uncle lives pretty far from her and could only visit once every 2-3 months. While she's been forgetful for as long as I can remember, she was doing okay when she was still active in her church group. However, due to health issues (physical), she was homebound for some time and it seemed to be a quick downward spiral into dementia from then.

 

[Andre1969]

I don't understand people who continue to save money when retired. Underspending a bit in case of a downturn is one thing but systematic long term underspending certainly isn't my style

My grandparents were always pretty frugal, and a lot of that was probably from Depression-era thinking. Granddad grew up in a family of tenant farmers and was dirt-poor even before the Depression. Grandmom came from a fairly well-off family, where they had a city house, a farm, a car and a truck. She can remember them losing the farm and having to give up the car, but her Dad needed the truck to keep working.

Anyway, throughout the years, they always managed to save, spend less than they earn, etc, and that carried over even into retirement. Even though they both had pensions, plus social security, they saved. I think their goal was to make sure that my Mom and uncle, and perhaps me, would be able to get bailed out if we ever got in trouble...financial, medical, or whatever.

Grandmom had about $350K by last August, when she finally got too sick to live at home. We rushed her to the emergency room, and she went from there to a rehabilitation place, then to an assisted living facility, and then back into the emergency room, and finally to a nursing home next to the hospital. By the time she passed away in May, we had spent about $50,000, although about $14K of that was to remodel the bathroom to make it wheelchair accessible, and put in a walk in tub. Initially, we thought she'd get well enough to come back home.

The Medicare supplement had just run out, and that nursing home was going to start costing about $12,000 per month. At that rate, the remainder of Grandmom's nest egg could easily have been burned through in about two years. I think we only made one of those $12K payments, but then she died halfway through the month, so we got about half of it back.

So, I can understand why older people might be more concerned about hoarding money rather than splurging, worrying about that "rainy day". It may never come, but then again, it might. And, I think some people just get more cautious with money as they get older as well.

 

[Danmar]

So, I can understand why older people might be more concerned about hoarding money rather than splurging, worrying about that "rainy day". It may never come, but then again, it might. And, I think some people just get more cautious with money as they get older as well.

I can certainly understand a desire to save enough for end of life health care. That is rational. I can certainly understand saving in order to reasonably reduce the risk of running out of capital, especially early in retirement. But surely there must be some middle ground between "Splurging" and "hoarding"?

I don't understand buying day old bread to save a few cents when your net worth is $5million (my in laws). Again balance is key.

 

[Sunset]

.... But surely there must be some middle ground between "Splurging" and "hoarding"?

I don't understand buying day old bread to save a few cents when your net worth is $5million (my in laws). Again balance is key.

You reminded me of my mother, the Depression certainly made an impression on her, she would save a scrap of butter, and when I called her out on it, she would say "A penny saved is a penny earned".

The odd thing is she would the next day hire some guy to cut down a tree for $600 , when I could easily cut it down for free.

I think some behaviours were learned during the Depression, and they carried over forever, but new situations brought newer thinking on her part.

 

[txtig]

When my two sons were young, we scrimped and saved to accumulate a college fund for them. My wife was a stay at home mom at the time, and I made a decent salary, but not not even close to being well off. Well, fast forward to today and the youngest son is about to graduate college. Funny thing is that, although I paid all college expenses, I didn't use a penny of what I had set aside as the "college fund". My salary had increased to the point where I could handle the college expenses from current cash flow. Now, the college fund will be utilized for general retirement expenses (or maybe a big boat), but sometimes I wonder if I should not have denied our young family as much as I did in order to establish this college fund. We could have taken some more frequent and/ or more lavish family vacations or other spending that may have made things more comfortable back when the kids were young.


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[golfergirl]

Been lurking for quite awhile but had to register and comment regarding this issue. Both my parents were raised during the depression, with my fathers' family being quite poor. They bought some farmland and worked it for over forty years and were fortunate to retire at sixty-two. They are financially very well off but still live quite frugally. One particular incident brings a smile and laugh to the family when we reference it. My mother makes a delicious chicken salad which calls for green grapes. We were having lunch one day and noticed there were no grapes in the salad and asked her why? She commented that the price of green grapes was currently too high and she wasn't going to spend that much. All of the family looked at each other and laughed. Here is a woman worth quite a bit of money, yet couldn't bring herself to buy some grapes due to the cost. As for my father, he has needed new dentures for years but won't spend the money on himself. I told him if I see him losing weight, he is getting new teeth!

I was fortunate to retire at age 55 in part due to their generosity. Thanks mom and dad!

 

[mickeyd]

I have no idea what I will do with this money once I get the check in my
hand.

I have had this question posed to me also and the answer that always works is: Put the money in a savings account and do not feel obligated to do anything with the $ for 6-12 months. After a good long wait, you will have decided what to do with the money. BTW, if you need a washing machine today, don't feel bad about buying a new one today before putting to rest in the bank.

Good luck.

 

[hnzw_rui]

I don't understand buying day old bread to save a few cents when your net worth is $5million (my in laws). Again balance is key.

Assuming you're not eating the bread still warm and fresh from the oven, it just seems practical to me. It's not like I'll notice much difference between bread baked today and bread that's one day old. Now what doesn't make sense to me is if you don't buy bread at all because there's no discounted day old bread available.

 

[Danmar]

Assuming you're not eating the bread still warm and fresh from the oven, it just seems practical to me. It's not like I'll notice much difference between bread baked today and bread that's one day old. Now what doesn't make sense to me is if you don't buy bread at all because there's no discounted day old bread available.

I can certainly taste the difference. Baguettes (bread I normally buy) are hard as rock after a day. Anyway, it was just an example of their cheapness. Plenty more where that came from, believe me.

 

[CaliforniaMan]

When my two sons were young, we scrimped and saved to accumulate a college fund for them. My wife was a stay at home mom at the time, and I made a decent salary, but not not even close to being well off. Well, fast forward to today and the youngest son is about to graduate college. Funny thing is that, although I paid all college expenses, I didn't use a penny of what I had set aside as the "college fund". My salary had increased to the point where I could handle the college expenses from current cash flow. Now, the college fund will be utilized for general retirement expenses (or maybe a big boat), but sometimes I wonder if I should not have denied our young family as much as I did in order to establish this college fund. We could have taken some more frequent and/ or more lavish family vacations or other spending that may have made things more comfortable back when the kids were young.


Sent from my iPad using Early Retirement Forum

Planning would have been easier if we had known the future. So now you just have to plan how big the boat

I think for all of us this is the dilemma described in the thread. How do we life life to the fullest now, while making sure there will be enough for a full life tomorrow. Of course I don't have a clue about the answer, but for us we just spend all we have allocated. What we don't spend this month goes into a short term "savings" account for travel or other large purchase later. We never go over our budget, but are pretty much forced to spend what we have planned. That way we try to stay frugal (never going over our budget) and yet not miserly (spending what we have allocated to spend).

It works out, if we have extra in the "savings" what might have been a two week trip to Europe, can be a three week trip, etc. When we are coming up short, we cut down our spending for the month. But the bottom line is to enjoy life, not continually worry. So far the idea of spending a preset amount seems to be working (eliminating stress) for us.

 

[Danmar]

Planning would have been easier if we had known the future. So now you just have to plan how big the boat

I think for all of us this is the dilemma described in the thread. How do we life life to the fullest now, while making sure there will be enough for a full life tomorrow. Of course I don't have a clue about the answer, but for us we just spend all we have allocated. What we don't spend this month goes into a short term "savings" account for travel or other large purchase later. We never go over our budget, but are pretty much forced to spend what we have planned. That way we try to stay frugal (never going over our budget) and yet not miserly (spending what we have allocated to spend).

It works out, if we have extra in the "savings" what might have been a two week trip to Europe, can be a three week trip, etc. When we are coming up short, we cut down our spending for the month. But the bottom line is to enjoy life, not continually worry. So far the idea of spending a preset amount seems to be working (eliminating stress) for us.

Seems like a pretty good approach as long as the spending allocation is reasonable, ie not unreasonably constrained ( doesn't appear to be in your case).

We take a similar approach in that we budget to spend divs and pensions actually received. At some point we will probably increase this a bit if markets are favourable. People with large portfolios who only spend 1-2% each year will in all likelihood leave a very large legacy. If that is the plan, no problem. If they are just being overly conservative and haven't considered any legacy, not so much.

 

[ejman]

I know this is anathema to the total return folks but I've always felt that whatever money drops into my checking account is fair game and have no problems spending that. Thus I've structured my portfolio to where all distributions from my taxable accounts (Div, CG) are directed to my checking account. And I've structured my taxable investments where taxable accounts primarily produce tax advantaged dividends and CG (Stock mutual funds). As it turns out current living expenses are pretty much covered between taking SS early and Div and CG.

Now when it comes to actually selling investments for living expenses I do have a huge psychological "don't touch the principal" problem so I fully understand why some people will go to extremes and although not there (yet anyway) I can see how some people would easily slide into some of the extreme behaviors mentioned @ this thread. In fact now that I think about it, some (if not all) of my extreme reluctance to convert my IRA to a Roth is the knowledge that whatever is converted will never be touched by me. On the other hand, RMD's will send money to my checking account and then it's fair game. Oh dear, the games we play...

 

[mortal]

This could so easily be me some day. I'm a single guy in his early 30s By the time I get off from work, many days I'm exhausted. I just want to go home, crack open a beer and play some video games with friends, watch a movie or read a book.

I doubt I will ever feel financially secure until I no longer *need* to work just to get by. I save over half my gross income. I realize I need to find a better balance, but every time I go to spend money on a 'want' I always ask myself 'will this make me happier?' Most of the time, the answer is no.

My plan, essentially, is to keep salting away money until I'm financially independent. Once I reach that point I'll increase my spending on hobbies and such each year (matching my SWR) until I hit the point of diminishing returns. Then, I'll start looking hard at retirement.

I realize that this definitely short changes my youth, but I don't know any other way to go about it and have peace of mind about it. It's one of those things I'm sure I'll regret later, but who knows what the future may bring?

 

[Badger]

I doubt I will ever feel financially secure until I no longer *need* to work just to get by. I save over half my gross income. I realize I need to find a better balance, but every time I go to spend money on a 'want' I always ask myself 'will this make me happier?' Most of the time, the answer is no.

My plan, essentially, is to keep salting away money until I'm financially independent. Once I reach that point I'll increase my spending on hobbies and such each year (matching my SWR) until I hit the point of diminishing returns. Then, I'll start looking hard at retirement.

I realize that this definitely short changes my youth, but I don't know any other way to go about it and have peace of mind about it. It's one of those things I'm sure I'll regret later, but who knows what the future may bring?

Good question to ask yourself. Too many people buy "stuff" that doesn't make them any happier and then wind up with little to nothing later on when they need the savings. Not spending now on things that don't make you happy should not be something to regret. DW and I lived frugally but had a full life (still do) with plenty of inexpensive enjoyments that gave us pleasure. Camping all over the US and in a few foreign countries, playing our favorite sports, picnics, going to the beach and the mountains, gardening, visiting with friends, etc. We saved half of our gross income too. Now we have everything we want (we are still a little frugal and only spend on things that really make us happy), savings to do anything we want, and no regrets. We have the chance to pass a nice inheritance on and donate to our favorite charities.

Sounds to me you are doing well.

Cheers!

 

[JoeWras]

I'm reading here about young people not spending anything. I want to mention something important: SPEND YOUR TIME.

DW and I are big on LBYM. Lately, we've loosened up a bit and spent some on travel overseas (our first time). We don't buy a lot of "stuff". Stuff tends to get old.

Experiences never get old, they get better.

What worries me are my young co-workers who NEVER take time off. Where the hell this idea has come from? I don't know. Frankly, the boss doesn't give a darn. And as a team leader myself, I get suspicious of "fall on the sword, make the diving catch" people.

Take a break, people.

SPEND your VACATION. Use it. You can LBYM. Go camping in our national parks. It costs almost nothing. Heck, do like we did and stay at a little motel outside the parks. Still cheap. You don't have to go overseas (although I recommend it).

When DW and I talk about stuff, we don't talk about our things. We talk about our wonderful -- and not so wonderful (funerals) -- experiences of using our time. TIME is priceless. USE it.

Sorry for the CAPs, but this makes me mad. I see too many people wasting it away.

 

[JoeWras]

Good question to ask yourself. Too many people buy "stuff" that doesn't make them any happier and then wind up with little to nothing later on when they need the savings. Not spending now on things that don't make you happy should not be something to regret. DW and I lived frugally but had a full life (still do) with plenty of inexpensive enjoyments that gave us pleasure. Camping all over the US and in a few foreign countries, playing our favorite sports, picnics, going to the beach and the mountains, gardening, visiting with friends, etc. We saved half of our gross income too. Now we have everything we want (we are still a little frugal and only spend on things that really make us happy), savings to do anything we want, and no regrets. We have the chance to pass a nice inheritance on and donate to our favorite charities.

Sounds to me you are doing well.

Cheers!

This is what I'm talking about! Badger spends both time and money wisely.
Well done.

 

[athena53]

I took my first trip to Europe when I was 25. I decided that when I had $X saved up, I'd spend the money to go to Europe (but not out of what I'd saved up!). It worked well; the faster I saved, the sooner I could book my trip.


I was "grounded" for about 12 years while DS was little and I was married to a spendthrift who had other financial priorities, but when I divorced him and started dating now-DH, the fun started again. It helped that I'd scrupulously accumulated miles and points from business travel, which cut out-of-pocket expenses.


DH has a wonderful perspective on things. When it became clear that DS needed a more structured school environment and a military boarding school seemed the best option, I fretted about what it would do for my retirement savings. We weren't married at the time but he said, "what good will it do you if you have a prosperous retirement but DS never finds his direction and you wonder if you should have done more?" He was right, of course. I forked over the cost and it did DS a world of good. His second year, he was sitting next to me as I wrote out a check for $12,000 for the 2000/2001 year. He said, "it costs that much to send me here?" "Yes", I said. And you're worth it."


Balance in all things.

 

[marko]

I took my first trip to Europe when I was 25. I decided that when I had $X saved up, I'd spend the money to go to Europe (but not out of what I'd saved up!). It worked well; the faster I saved, the sooner I could book my trip.


I was "grounded" for about 12 years while DS was little and I was married to a spendthrift who had other financial priorities, but when I divorced him and started dating now-DH, the fun started again. It helped that I'd scrupulously accumulated miles and points from business travel, which cut out-of-pocket expenses.


DH has a wonderful perspective on things. When it became clear that DS needed a more structured school environment and a military boarding school seemed the best option, I fretted about what it would do for my retirement savings. We weren't married at the time but he said, "what good will it do you if you have a prosperous retirement but DS never finds his direction and you wonder if you should have done more?" He was right, of course. I forked over the cost and it did DS a world of good. His second year, he was sitting next to me as I wrote out a check for $12,000 for the 2000/2001 year. He said, "it costs that much to send me here?" "Yes", I said. And you're worth it."


Balance in all things.

Good for you! But "...married to a spendthrift who had other financial priorities..." has to be THE classic line of the year!

So gently put but so to the point.

You should be an ambassador!

 

[Quest4Fire]

Good question to ask yourself. Too many people buy "stuff" that doesn't make them any happier and then wind up with little to nothing later on when they need the savings. Not spending now on things that don't make you happy should not be something to regret. ........Sounds to me you are doing well.

Cheers!

+1. Staying home also limits the chances of meeting that spouse who will spend it for you