Our frugality columnist reminds a man who lives for today that he could get hurt or laid off and quickly face financial devastation
Dear New Frugal You,
I have been lucky, despite the recession. My career has kind of taken off. I’m not rich or anything, but I’m doing a lot better than a few years ago. Trouble is, I like to spend everything I make. I enjoy living for the moment, but I’m getting pushback. My girlfriend used to like running off to the Florida Keys for a weekend, but now, it’s like, “Al, you don’t have a dime in savings.” Make the case for me. Motivate me to start saving. Tell me why I should change. — Albert
Albert, you are a fortunate man. Not only are you doing well in a tough economy, but you’re also dating a wise woman. Better yet, you recognize that she’s right — you should be saving when times are good.
What will motivate you? That’s a little hard to say. You might be the type who’s motivated by safety and security. If that’s the case, you’ll want to consider what happens if you lose your health or your job.Odds are better than 50-50 that you’ll face a hospital stay or layoff during your working years. Either situation would really stress your finances, especially if you didn’t have any savings. Since you don’t know what’s in your future, making prudent preparations now can help avoid pain later.
For a moment, let’s assume that your good fortune continues and you go through your entire career and never face a layoff or a health issue. You’d be home free, right? Well, not quite. You still have to be prepared for your retirement years.
The Employee Benefits Research Institute estimates that 44 percent of those between the ages of 36 and 45 will not have enough money saved to cover necessities.
What about Social Security? It’s tempting to rely on it. But that’s a real long-term gamble. Even if you were ready to retire today, you still could expect to live another 20 years. No one can say for certain how much will be available from Social Security that far into the future.
But maybe you’re just not motivated by a need for security. And saving to avoid danger just isn’t in your makeup. Perhaps the best way to get your attention is to maximize your pleasure.
Did you realize that by skipping a weekend in the Florida Keys today, you’re setting yourself up for a trip to the French Riviera sometime in the future? The simple truth is that if you save some money each month, soon you’ll be able to pay for your weekend jaunts with the interest on the money you’ve saved.
Of course, you may be right. Maybe the pull of “living for today” is too much to overcome. There’s still one more argument that might motivate you.
Spending everything you make is a sign of an undisciplined life. And, that lack of discipline could put your physical or mental health at risk. When you spend all of your income, you’re living on the edge. It’s as if you need to artificially create some risk in your life. Like a financial bungee jump.
Remember that taking undue risk brings stress with it. Too much stress can harmful to your mind and your body. It’s possible that you’re taking healthy years off of your life.
What will motivate you? Only you know for sure. But consider that you’re not going “cold turkey.” You don’t have to give up all of the fun expenses — just some of them. And, by giving up just a little now, you put your future on a much better footing.