Wednesday, January 25, 2006

Saving / Spending Balance

There is a post over at Consumerism Commentary entitled "Saving is Anti-American" about how Americans are poor savers. Not just poor savers, but the worst savers among developed countries according to an ACNeilson survery of the world's worst savers. The survey shows that 22% of our population has no spare cash.

In the comments over at Consumerism Commentary, samerwriter said the following:

It’s not entirely clear from the article how they account for dollars being used for debt reduction vs. extra cash. I.e. paying down debt could be a use for discretionary dollars.

If paying down debt counts as having money left, I wonder if the increased credit card minimum payments have something to do with this.

I deal with money the same way you do — my wife claims I create an “environment of artificial scarcity”. We stash as much as possible into savings before we ever see our paychecks, so the amount of money we see only leaves a little extra after bills are paid. We always feel like we’re short on cash, but that’s because we save about 50% of our gross income before we see any of it.

This is a good point about the survey, but the comment towards the end is what got me thinking about the balance between saving money for later and spending it now. He says that they are able to save about 50% of their gross income. First, I would like to say congrats on being that disiplined, it is great that they can put so much money away for the future. Then I would like to ask about the balance between spending and saving.

The saving / spending balance is something that I have been struggling with lately. I know that I need to save for retirement, but I would also like to enjoy my life now. So, what is a Young Professional to do? I love cool gadgets, big TV's, vacations, video games, computers, etc. but if I bought all of the things that I wanted now, I wouldn't have much to put away for retirement.

It is tough to decide sometimes. Let's say I have some extra money at the end of the month...on one hand I would love to pick up a few new Xbox games to play, but I could also just send it over to Vanguard to invest.

Anyone else have problems with this? How do you balance the wants of today with the needs you will have 30 years from now?


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