When was the last time you said to yourself: ‘I am spending too much; I better start saving’? On the other hand, when was the last time you said to yourself: ‘Man, I am saving too much money and need to start spending more’?
The first question is not only more likely for the vast majority, it is something we likely ask ourselves often, unless we are one of those lucky extreme savers who have turned saving money into an art.
Saving money is never out of style, nor can it be treated as a project with an end—unless it is for a specific purpose. Saving money is as inevitable as money is finite. Furthermore, saving money is a crucial precursor for investing it, and it is the latter that compounds things and takes wealth to the next level.
Now let’s consider the other side of the coin: spending too much and never saving. Yes, it may afford you material things, experiences, and other stuff, but in the long run, you will not have much to show for it unless you consider memories all you care about or junk littering your house to be a good thing.
You may argue that neither extreme is good and that how much we save versus spend depends on each person and their circumstances. While this is largely true, more savings are generally better. Why? Because unless you prioritize saving, there are countless other things vying for your money’s attention and urging you to spend before you have had a chance to save anything. This is one reason why paying yourself first is highly critical in the world of personal finance and budgeting. Now, if you want to indulge in spending after you have paid yourself first, that’s likely okay, assuming you are saving a reasonable amount and not just 1% of your paycheck. However, if you are setting aside a minimum of 10-20%, then indulging in spending like a drunken sailor afterward is likely okay too. I say ‘likely’ because there are always other things you could save for, but then again, you would want to enjoy life too. In other words, work save and play.
You don’t want to spend the rest of your life just spending money, nor do you want to just save without a goal in mind. Life is all about balance, and depending on your situation, you may want to save a bit more than others if you have never saved before, or if you are starting late with setting aside money, or if you want to have enough to invest and generate passive income in the future. But keep something in mind: assuming you are not 85 and on your deathbed, no one will look back and say ‘I wish I had spent more money and saved less.’ Usually, it’s the opposite—the feeling of pride and having something to show for your hard work and sacrifices. Just know when to call the shots and how long you need to save at maximum, and when to gradually ease off the ‘saving’ pedal.