Saving Every Dollar for Retirement Is Just Silly — Why You Should Spend on Enjoying Life Now
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Saving for retirement is important, of course, but saving every spare dollar for that purpose can actually create imbalance, “especially when it starts to rob your present life of joy, meaning or opportunities for growth,” according to Melissa Murphy Pavone, a financial planner at Mindful Financial Planners.
There are other considerations that should go into thinking about how you spend for the future and for today.
Pavone and Robert R. Johnson, PhD, a certified financial advisor and professor of finance in the Heider College of Business at Creighton University, suggested you have to be flexible and strategic in approaching your spending.
How To Balance the Present and the Future
The big challenge for any person who has enough financial stability to both save for the future and spend leisurely in the present is how to balance that. Johnson pointed to the study of behavioral finance, which shows that “human beings aren’t rational profit maximizing machines but often succumb to behavioral biases.”
One of the biggest behavioral biases, of course, is the bias toward immediate gratification over delayed gratification, he said.
Because so many people tend to struggle to “imagine their future self and give up that vacation or new car today in lieu of having money to retire on in the distant future,” most financial advice urges people toward doing the more diligent thing.
However, Johnson pointed out “the same can be true in reverse if one doesn’t enjoy life in the present state and sacrifices current pleasures for future pleasures. The result can be mentally debilitating.”
Avoid Future Burnout
Pavone agreed. She has worked with people who are “maxing out every retirement account but feel burnt out, disconnected from their families or frustrated because they’re missing out on meaningful experiences.”
Her advice is that, if you’re always living in a “someday” mindset, you might miss the very moments that make life rich.
Pavone said it’s best to strike a balance between “living well today and being prepared for tomorrow.” That balancing act of “honoring your past, investing in your future and living mindfully in the present,” is what most investors need to navigate.
Money Is Renewable, Time Is Not
The goal of a thoughtful financial life isn’t just to retire early, it’s to live fully at every stage, Pavone said. “That means aligning your investments, both financial and emotional, with what truly matters to you.”
So long as you are financially stable, and have the luxury of extra dollars to spend, Pavone suggested you ask yourself the following questions.
- What do you value most right now?
- What brings you joy, purpose or peace?
- What are your biggest fears and are you trying to out-save them?
The trick is determining how to tie available discretionary income to these questions without sacrificing future goals.
Adopt Intentional Spending
Pavone uses a strategy she called “financial modeling” to create “permission” for intentional spending today without jeopardizing retirement security.
“Often, it’s not a matter of either/or, it’s about setting boundaries, creating margin and making sure the right dollars are going to the right places,” she suggested.
This often looks like building in “fun funds” or “lifestyle reserves” into retirement models, so spending on joy is planned, not guilt-inducing.
Health and Fitness
An area where spending now can pay big dividends later is on health and fitness, Johnson said.
“If one can improve their physical fitness, it can lead to better health in retirement and require less spending on healthcare in retirement,” he said.
Spend on a Financial Advisor
Additionally, though it might not seem as “fun,” Johnson said that establishing a relationship with a qualified and credentialed financial advisor “can be money well spent” because it helps you determine if you’re on the right financial path.
Living well today doesn’t mean sacrificing your future, if you plan with intention. A balanced financial life makes space for both smart investing and meaningful spending.
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Sources
- Melissa Murphy Pavone, Mindful Financial Partners
- Robert R. Johnson, Creighton University
