Last week, Elite Daily ran the “article”/opinion piece “If You Have Savings In Your 20s, You’re Doing Something Wrong.” I’m cringing just typing that. Based on the writer’s byline, I was hoping the “article” was just satire (a la The Onion). But considering many members of Gen Y/Millennials get their news from sites like these, I figured I’d take this piece seriously.
Basically, the writer thinks that anyone saving money in their 20’s is boring. Why worry about tomorrow (let alone 10 or 20 years down the line) when you can enjoy today and post it on Instagram? #yolo She also seems to have a narrow-minded view of money in that it can only serve an either/or purpose of saving or spending. Heaven forbid we have a balanced approach of enjoying and saving money! MarketWatch shared their own response in “Why Saving Money in Your 20’s is Actually Self-Indulgent” and I’d like to share my response as well.
I’ll preface this by saying that I’m a saver by nature. (And I’m 31, so apparently it’s OK for me to be boring now.) I grew up in a household of accountants and entrepreneurs and money wasn’t a taboo topic. It’s also extremely helpful that my husband shares a similar view of money and is also a saver. We are both extremely fortunate that our parents saved for our college education and we both graduated from college (including a Masters degree for me) without any debt. We bought our house in our late 20’s and have a plan to pay off the mortgage early since we’ve been responsible with our money. I realize this isn’t everyone’s upbringing and current financial situation.
I can see the writer’s point in that you shouldn’t have to suffer while saving money, but to encourage readers to “[Not] save money. Make more money” only gets half of the equation right. Yes, making more money can allow you to do more fun things, but do you want to be a slave to your job? Or to credit card debt?
The writer balks at saving $200/month in the hopes of earning a $60,000 pay raise. Obviously a $60,000 pay raise is huge, but even a one-time raise of $10,000 with a 3% annual increase, 5% savings rate, and 8% investment return compounded over 40 years results in $754,012.60 additional earnings. And it sounds cliché to mention compound interest again, but investing $200/month over 45 years can bank you $1,000,000.
And finding an additional $200 per month might not be as hard as it sounds. I recently shared in the XY Planning Network consumer newsletter how 1% of your day can save hundreds of dollars:
1% of your day is only 15 minutes. Here are a few things you can tackle in about 15 minutes to save a couple hundred dollars or more over the course of a year:
- Check if your employer offers any discounts on cell phones, gym memberships, insurance, etc. and have them applied to your current services
- Shop your car insurance or call your current carrier to negotiate lower rates
- Call your cell phone, cable, and/or Internet provider to negotiate a lower bill
- Review your bank and credit card statements for fraudulent or duplicate charges. Then call the bank to have these charges reversed
- Call your bank and negotiate a lower interest rate on credit cards. If you are an excellent customer and accidentally made a late payment, ask them to waive the fee
- Review your 401(k) contributions and increase them to maximize your employer’s match.
I’m not the only one who found this “article” to be a bit absurd. Kelly Whalen of The Centsible Life points out that, “a few bucks extra in a savings account now means whenever a catastrophe happens (illness, fender bender, family member that needs help, friends in need) you can actually afford to take time off to care for yourself and others who need it or donate to that cause you care about. Balance isn’t about fear, it’s about being prepared for whatever life throws at you.” Since we have an emergency fund and additional savings, we can weather unexpected car or home repairs. And I’ve been able to take a few additional weeks of unpaid maternity leave without worrying about bills.
And as Ramit Sethi of I Will Teach You to be Rich points out, living a rich life is about “spend[ing] extravagantly on the things you love…as long as you cut costs mercilessly on the things you don’t. Sure, saving is important, but if you can afford it and you want it, shouldn’t you be able to splurge to buy it — every once in a while?” Want to travel the world? Go for it! You’ll just have to prioritize your expenses and/or earn more money (sound like some of my previous blog posts?) since consumer debt is never fun.
Lest you think I’m boring and just sit in the dark while counting my pennies; I do like to drink craft beer while watching cable. And we like to go out to fancy dinners for birthdays or our anniversary. Cutting costs elsewhere has allowed us to go deep sea fishing on our honeymoon in Mexico and spend a long weekend at a bed & breakfast for our anniversary. We also bought a new Honda CR-V with cash and I can take a risk by starting this business.
The freedom to decide how you want to spend your time and money.
Want to plan for a brighter future and have a little more fun with your money? Let’s chat!