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Finding the Right Balance Between Saving and Spending

Grandfather and grandson enjoying an amusement park

Saving Is Important, But So Is Enjoying Life While You Can

Our financial lives are a constant balancing act between enjoying our wealth today and saving for the future. At Creative Planning, we spend a lot of time reminding clients how important it is to set aside assets early and often. After all, we all want the financial freedom to spend our days in retirement as we choose, which often means sacrificing today to save for the future.

However, we shouldn’t sacrifice all our happiness today just to save for the future. Following are four circumstances in which I believe it makes sense to spend the money now rather than save it for the future.

Experiences with an expiration date

There are some experiences that only come around once or during certain periods of your life. These are worth spending on.

For example, Creative Planning President & CEO Peter Mallouk once had a college student tell him he had decided to forgo a backpacking trip through Europe to instead save that money for the future, due to the value of compounding interest. Peter’s response? Take the trip! His reasoning was that even if the student were to eventually make it to Europe years down the road, it’s unlikely he would experience it in the same manner as he would with his friends in his early 20s.

Another example is experiences with kids. Your children are only young once. Spend the money. Make the memories. You’ll never regret enjoying time with your family. If fact, when you look back on your life one day, those will probably be your most rewarding memories. Invest in your memories while you have the chance!

Yes, compounding interest is important, but so is living your life.

During active years of retirement

Retirement can be scary. You reach a point in your life when you’re no longer working and have a certain lump sum of assets that will need to last for the next 20, 30 or maybe even 40 years. You’re sensitive to market fluctuations and trying to stick to a conservative draw-down strategy. I get it. You’ve spent so much of your life saving — it’s difficult to make the adjustment to spending. Early retirement is the best time to truly enjoy life and all you’ve worked so hard to build.

Think about it. We all know the odds are pretty good that at least one spouse will remain healthy long into their 80s, but it’s less likely that both will. You may develop a physical issue that makes achieving your retirement dreams more difficult later in retirement. So, if you’ve recently retired, book the cruise, buy the boat you’ve always wanted, splurge on the golf membership and plan that cross-country road trip. Enjoy every moment of your active retirement years while you can.

To make a charitable impact during your lifetime

If your goals include supporting charitable causes that are important to you, why wait? If you have the money to do so, consider making charitable donations during your lifetime instead of waiting to bequeath your legacy. This allows you to see the impact of your generosity and experience the joy of giving during your lifetime.

To help family members

Similar to giving to charities during your lifetime, if your goals include leaving a financial legacy for your loved ones, why not start today?

If your children are struggling financially trying to save for their children’s college, pay down student loan debt or save for a down payment on a house, for instance, consider gifting money now rather than waiting for your death. If you wait to bequeath your children a large inheritance in their 60s, it likely won’t be as helpful — or leave as large an impact on their lives and long-term financial security — as smaller financial gifts along the way would have. And, like with giving to charity, you’ll get to see the impact it has on your children’s lives.

Instead of using your estate plan to pass down the bulk of your wealth, why not give to family members on a regular basis throughout your lifetime? Not only are you passing down your wealth but you’re also sharing your values by demonstrating the importance of living life to the fullest.

Could you use some help finding a financial balance between saving and spending? Creative Planning is here for you. Our teams have experience helping clients navigate a wide range of financial planning decisions to achieve their version of financial success. To take the first step, schedule a call with a member of our team.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.


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