I had an interesting conversation with Penny last week. It went something like this:
- Penny: McKinley is a saver. I’m a spender.
- Me: What makes McKinley a saver and you a spender?
- Penny: McKinley just saves all of his money. I buy things. Like my waterproof camera. Well, I guess I’m more of a saver, then a spender.
- Me: What’s the point of McKinley saving his money? What is he going to do with it?
- Penny: I don’t know. He just keeps it.
- Me: Dad and I are savers. But do you know why we save money?
- Penny: So we can go on vacations and dad doesn’t have to work until he’s old.
- Me: Right. Money isn’t worth anything if it doesn’t have a purpose.
I think this conversation is worth having with people of any age. Are you a saver or a spender? We think of spenders as self-proclaimed “Mall Rats” that just spend money as fast or faster as it comes in. We picture savers as the cheap, money-hoarding misers. But in reality, both of these financial profiles are unhealthy. It’s not good to participate in “retail therapy,” but it’s equally bad to hoard money for the sake of having money. It’s unhealthy. Being a “saver” in that context leads to selfishness, greed, and not enjoying life.
An important part of the discussion is always balance. Some things are worth sacrificing today for more
money opportunities later. Some tradeoffs (for us, our two cars), are not worth it.
Become a Saver, then a Spender
I like Penny’s definition of what she is: “I’m a saver, then a spender.” That is the ideal middle ground. So how do you make sure you’re not skewing to either side of the scale? Allow me to suggest a few steps:
- Step 1: Solidify Your Future Dream – “Oh great. There goes Maggie again telling us to stop dreaming about swimming in money! Will she ever stop?” No. No, I will not stop. If you do not have a solid vision of what your future will be with that money you are saving, that money is worthless to you. Swimming in index cards may not be as much fun, but that’s essentially the same thing. And that makes no sense! What do you WANT? Freedom? Freedom from what? What will your days look like each day? You want a house? You want a car? You want to get out of debt? Visualize it. Print off pictures. Make it real.
- Step 2: Make Changes Toward That Dream Now – Sometimes our dreams are simple. We want more time together as a family. We want to enjoy a vacation every summer. There’s no reason to wait on those priorities. How can you change things now to get more time together? What budget-friendly vacation would fit all of your hopes and dreams for a family vacation?
- Step 3: Identify How Much Money the Rest of the Dream Requires – Step 2 changed your life a little bit. But you’ll need more money to go full-throttle on your dream future. How much money do you need for that? Looking to pay off your debt? Calculate your total debt amount. Looking to buy a house? Figure out how much houses go for in your dream neighborhood. Looking to retire early? Calculate your expenses and start a chart.
- Step 4: Ask the Question: “Does This Money Provide As Much Joy to Me NOW As it Would Later?” – Life is full of trade-offs. But if you spend your life being miserable, you’ll eventually hit your goal and be wealthy and miserable. Be conscious about your spending. Live in the present. Don’t waste money on things that don’t genuinely bring you lasting joy now. And don’t scrimp too much on things that do. Life is unpredictable and worth living now.
I’m striving, like Penny, to be a Saver, then a Spender which is perfectly aligned between saving and spending. In this prime location, money is a tool to help you move forward. When you move too far to either side of the spectrum, money becomes an obsession and loses its functionality. On one end (Saver), money becomes a hurdle. You assume that there will be some arbitrary number where you will finally feel comfortable spending more money. The fact is, if you don’t change your life now to find joy, that arbitrary number will fail to provide you that joy as well. If you move too far over to the other side (Spender), money loses its function. It comes in, it goes out and it does nothing for you. Don’t let that happen either.
Where do you fall in the Saver/Spender Continuum? Is it different for different things? How do you manage to stay in the middle?