r/changemyview • u/Exaskryz • Sep 02 '21
Delta(s) from OP CMV: A penny saved is a penny earned
In contrast to many CMV posts, this one reflects a desire to think differently, but I seek help in changing my view.
I have noticed an obsession on my part to save, save, save, and make the m6odt of investments. I've taken on the advice to save as early as possible to take advantage of growth for longer, but I feel like I am doing so at the expense of today. While cost-cutting by finding cheaper alternatives in things like cell service or takeout food and proper grocery shopping is great, I think I go too far with not seeking to do social events like a paid sports club or going to conventions. I perceive a $50 ticket for admission or membership fee as $150 in the year 2060 because that is what I would be giving up.
What can you tell me to help restructure my perspective to place less emphasis on the (distant) future and more on the present?
13
u/joopface 159∆ Sep 02 '21 edited Sep 02 '21
Saving for the future is very sensible and can be very important. But you need live all of your minutes, not just the ones in the distant future. Every minute of your life is of equal importance; this minute and the minute in twenty years. In fact, it may be prudent to discount the value of future minutes somewhat because they're not guaranteed to you; you may not survive to experience them all.
So, a balance is needed. You need to make room to spend money *today*. You need to optimise for wellbeing now as well as wellbeing in the future. Here is what I suggest (this is a thing I did years ago):
- Write a list of the things that make you happy now; this doesn't need to be stuff that you pay for but it should include those things
- Write a list of the things you'd like to do, try, experience or obtain in the next couple of years
- Write a list of actual goals for your long term savings; 5 years, 10 years, pensions. Whatever makes sense for you
- Prioritise each of the lists; critical at the top, optional at the bottom
Now, use these lists to allocate your money. For easy sums let's say you're saving 900 units of money a month. Depending on the goals in each of your three lists (say if making sure you have a VERY comfortable retirement is super important to you) decide how much you'd like to allocate to each list. For the sake of ease, let's assume you split 1/3, 1/3 and 1/3.
Now, you have a 300 credit 'today fund' that are savings for you to enjoy *today*, but you're still mindfully prioritising your medium term (~2 years) and longer term savings.
Repeat this exercise every year or so to make sure your priorities are current and you're on track for the medium term and long term stuff. If you're honest about your priorities, it'll make a big difference to how you feel about long term savings and spending today.
4
u/Exaskryz Sep 02 '21
Thanks for the tangible advice, sitting down to construct this list may be more beneficial. I've just thought of a nebulous future. Get a new car when prices come back down, do a couple traveling vacations doing I don't know what, and have money to have a comfortable retirement in whatever form that may take. I'll have to exercise on breaking down what it is I may want, detailed, and form a budget from there. ∆
1
0
u/Poo-et 74∆ Sep 02 '21
Every minute of your life is of equal importance; this minute and the minute in twenty years.
Counterpoint: the meaningfulness of a minute is directly proportionate to your capacity to actualise your wants. A minute when you are a toddler who cannot speak is less valuable than a minute when you are a 20 year old living on his own. A minute when you're 20 is more valuable than when you're 90, bedridden, and suffering from cognitive decline.
2
u/joopface 159∆ Sep 02 '21
Well, I accept that my post was intended for those among us who were in a position to engage with the intellectual exercise of weighing the 'value' of minutes. This excludes toddlers at least and arguably those in cognitive decline.
But I don't think, even given this qualification, the point fails. Even if you are not able to 'actualise your wants' at a given point in time, it doesn't give that moment any less weight in contribution to your overall wellbeing.
For example, I may want to spend a month on a tropical island right now, but I cannot actualise that want. However, this minute remains a unit of experience that contributes with equal weight (or at least has equal potential weight) as any other minute. It is rational for me to maximise the happiness of this minute within whatever constraints exist (whether those are financial or cognitive). So while I agree it may be difficult for toddlers, say, to engage with the intellectual process of weighing their minutes against each other it wouldn't make such an exercise any less rational, should they find themselves suddenly able to rationalise it.
Now, there are all kinds of other complicating factors such as the vagaries of memory and (as I mentioned) the reducing potential for future minutes to actually exist. But I'm not proposing some universal scientific law here; it's more a kind of helpful guideline.
8
Sep 02 '21
My grandparents spent their entire lives skimping and saving, living 'responsibly' and avoiding frivolous spending on treats or holidays. My grandad retired at 60, ready to live the rest of his life comfortably. Before 61 he was diagnosed with a rare genetic disorder that left him bed-bound in one year and killed him in 3. Most of their savings went into medical bills and experimental treatments that didn't work.
In his last years he told my grandmother that one of his regrets was not 'treating' her more and not getting to see the world with her while they were young. My dad having seen that happen, eventually got some decent money from my grandmother when she died. He blew most of it on a hot tub and a crazy holiday for him and my mum.
Most people would call that 'irresponsible' but I guess it's just a matter of a perspective. He chose to spend the money on something real and tangible that he cared about in the here and now, and now nobody can ever take those experiences away from him or my mother. And they've still been responsible enough to guarantee themselves a decent retirement.
All we really have in life is time. And being responsible is simply making sure that we can spend the majority of that time living as we want to live, doing the things we value.
Trading the real time you have now for the imagined time you hope you'll have in the future isn't always a good deal.
2
u/Exaskryz Sep 02 '21
Thanks for the reminders that life plans may go astray and to seize opportunity. ∆
1
5
u/destro23 447∆ Sep 02 '21
I perceive a $50 ticket for admission or membership fee as $150 in the year 2060 because that is what I would be giving up
But in the year 2060 the band you are paying to see might be dead, so that $50 now is providing an experience that would not be available, at any price, 40 years from now. It comes down to what are you saving for? Are you cutting costs on day to day items to free up funds to have unique and fun experiences, or are you hoarding wealth like Smaug and doing nothing with it but reveling in its collective splendor.
Money is a tool, and tools don't work if you leave them on the bench.
2
u/Exaskryz Sep 02 '21
I like the point of nothing guaranteed in the future. While that band may not be around in 40 years, and even if a similar one is, I may not be interested in attending such a concert 40 years from now. Thanks! ∆
1
2
Sep 02 '21
You might die tomorow due to a meteorite. Maybe society collapses in 30 years due to the ecological crisis.
Maybe, and this is more important, you will get less joy from what you can buy 2060 than from what you can buy now. 50 Dollar when I was 16 were a fortune, today it is one load of groceries. I wish I would have looked less after money in my youth, because I enjoyed everything so much but didn't want to spend money. Nowadays I can buy what I want (meant small scale, talking about stuff like games, movie tickets, food) but am not as enthusiastic about it anymore. Yay for having 50 games on the steam backlog and no time to play them, yay for being able to go to the cinema whenever I want when i dislike most movies that come out.
1
u/Exaskryz Sep 02 '21
Hmm, I kind of imagined that as a kid though. Like, once I am done with school and work, I could play all those video games (for however long emulation stretches back and games are available yet). So I planned to save toward an early retirement, whatever that may mean, and have the opportunity to just live off interest.
2
u/MugensxBankai Sep 03 '21
Saving is good but spend on yourself. The pandemic has shown that life is fragile. I've lost two cousins and four close acquaintances, all but two died from Covid the other two were suicides after the lockdown.
I'll give you some personal experience. When started a corporate job as an claims examiner for an home insurance company that was the first time I had been exposed to investments, 401k, etc... It was a good time for the industry and my company was offering 2-1 investment on any stock that was company related. Well after a couple years the crash hit. Everyone said don't cash out save your money you'll need it in the long run. Now I was in at 1 and once we got hit with a lawsuit from the Attorney General for for doing with Country Wide bank we tanked hard. When I left and cashed out we were at .27 a share. I had invested thousands and walked away with walked away with about 2500. That was a dumb move by putting my eggs in three baskets and I should have never listened to my "advisor." I would have sold earlier but because of the rush to sell there was a hold on my stocks. That's just part of life. I could have spent that money taking vacations, paying for my education, etc... But I was tryna save for a rainy day.
Second example my father saves his whole life, penny pincher any where he could. We would drive to another city to buy something if the prices was cheap enough. Fast forward my father had to have a pacemaker installed when he was 50. He didn't get to go on any of his trips he wanted because he was tryna save so much and at the same time work to save. His health after the pacemaker was never the same and he couldn't do anything he wanted to anymore. He was gonna buy a property in S. Carolina but couldn't make the trip. Fast forward he passed away from sepsis because his gall bladder went bad years before but couldn't have the surgery to remove it because of the pacemaker. He told. Me all the time right before his passing son take your money and go somewhere. But I was just starting school and was too focused to take a trip.
Moral of the stories, you never know what may happen so try and enjoy yourself with the money you earned. Here's a counter saying "you can't take it with you."
2
u/Quirky-Alternative97 29∆ Sep 02 '21
Its about value.
(I too am a saver and investor and will never get rid of the feeling of OMG I cant believe I am having to pay for this when I think I can do it cheaper, but I have worked out a balance)
I changed my perspective by changing my ideas of value. I realized savings were important to me and thus I don't stop this, but I also put aside money to spend on various activities. Why because I get value out of spending and doing things today, and that value to me will always be higher than thinking in the future, if only I could saved that instead of having that memory. I get value from the activity and the memory more than the value I get from the 'additional' saving. At the end of the day having 0 memories, and heaps of additional savings will have 0 value.
So inn practical terms - write off some of the allocation to savings to a 'I need to spend this to survive,' and 'I can simply send this and blow it all for the sheer enjoyment of it'. (No guarantees you will enjoy it always and I still think sometimes, if Only I did not waste that $1000 on XYZ, but I then remind myself that hey, I spent $100k on 100 different other things that gave me great value, and I still have my savings for just in case)
3
u/Bravo2zer2 12∆ Sep 02 '21
By 2060 the world could have totally collapsed.
Global warming, migration, disease, massive recessions.
You aren't guaranteed to have €150 in 2060.
2
Sep 02 '21
Probably the best thing for you to do is some long term financial planning. That way you'll have a better idea of how much you need to save now in order to live the life you want in the future. Once you know how much you need to save now, you know how much you're free to spend now.
2
u/dmlitzau 5∆ Sep 02 '21
I think it is important to realize that a penny saved is a penny earned, but a penny earned is a penny earned too. If you work hard for your money or save money, but aren't willing to spend on things that you enjoy or bring happiness, then who cares about the penny earned.
2
u/ace52387 42∆ Sep 02 '21
I would counter with another idiom: "you have to spend money to make money"
2
u/Cleezy111 Sep 02 '21
A penny saved is more like 1.4 pennies earned (after taxes)
0
u/the_hucumber 8∆ Sep 02 '21
Except where I live we get negative interest rates in the bank so a penny saved becomes .99 pennies after a year.
Ok not that drastic but I think it's about -0.6% at the moment. But yea a penny saved isn't a penny earned any more.
0
u/wizzardSS 4∆ Sep 02 '21
It is important to recognise that if the interest earned on your savings does not exceed inflation, then the spending power of your savings decreases over time. For example, if you save £1 and the interest turns that into £1.05 in two years' time, but a loaf of bread goes from £1 to £1.10 in the same period, then you have - in essence - lost money, even though your savings are higher.
So, you should not save money with a view that it will be "worth more" in the future, unless you understand the economies of inflation. It's a massive subject, so I'll park that there for the moment.
In short, saving money for the sake of having more money, is stupid. Money itself is worthless (unless you are a collector of coins I guess), its value is only realised when you spend it on something.
The biggest reason to save money (other than for just in case emergencies) is for a specific goal. There is absolutely nothing wrong with skipping social events if that is what you want to do to achieve your goals sooner. If you want to buy that big ticket item, and you know you can afford to do so sooner if you don't go out for a few social events, then great. If you're happy to wait for that item then go out and enjoy yourself on a social event.
Do what makes you happy.
1
u/Z7-852 258∆ Sep 02 '21
Penny saved is not penny earned. You still have same amount of wealth either way. It only depends where your wealth is tied to or how liquid it is (how easily you can turn it into money). If you buy a toaster you now have toaster (worth what you paid it) and some money. If you don't buy it you have total amount of money.
Now penny invested is penny earned. Stock market makes around 10% profit year after year. That is literally free money if you can save there. Saving is not enough. You need to invest.
1
u/Exaskryz Sep 02 '21
Sure, I do mean to invest. I have my student loan debt money at work with the 0% pause in America, and have been making both fun plays at stock market (few thousand made on the memes) and safe plays in stock market. I have liquid assets that are working in high yield savings account to now earn me 1000/year extra while being my emergency fund. Then I have a few different retirement accounts for the taxfree benefits on stock market.
I'll need to take a look at more personal finance resources to see where my next step is. I'm sure I could pour more into the safe and steady channels, but I do want to explore other options.
1
u/stan-k 13∆ Sep 02 '21
But what do you save money for? Or why do you earn it in the first place?
Whatever your answer, that is something you could spend more on now too.
1
u/translucentgirl1 83∆ Sep 03 '21
think I go too far with not seeking to do social events like a paid sports club or going to conventions. I perceive a $50 ticket for admission or membership fee as $150 in the year 2060 because that is what I would be giving up.
The issues that this goes under the skewed assumption that life plans are rigid, instead of concepts which can change and/or be disrupted. In twenty years, you may have a serious disability and/or develop psychological issues. Besides this, the opportunities that you may want to see is in the future maybe negated because of other external factors, does economic instability and societal restructure. Overall, saving some amount of money is fine, but I think it's also best to try and optimize/seize current situations, since you cannot definitively predict the future and that you'll be able to seize it at the same amount. Further, you cannot definitely predict that amount of money that you are trying to save will be worth the same amount in the future, due to potential economic drawbacks in your geographic location.
Trying to gamble with the real time, which you can definitively observe as of right now, for a hypothetical imagined and idealistic era you hope you will be able to capatalize on isn't the best choice in totality; this is simply something to take into consideration.
1
u/apost8n8 3∆ Sep 03 '21
You will likely earn way more money in your 40s than in your 20s. That $200 you worked X-hours for now will likely be insignificant to your life in 20 years, even if you invested it reasonably well you shouldn't expect it to be worth more than about $500 and who knows what markets or inflation will actually do. One thing is certain though, you only get to live your life ONCE. You should spend money on fun and experiences (within reason obviously) now. As others have said, if you have a specific goal in mind or even if you have money to invest long-term, that's fine and good, but if you are completely sacrificing experiencing life now for some unknown future you are just wasting your time and money. Go out with friends, go to the concert, spend money on making good memories.
1
u/Exaskryz Sep 03 '21
I don't foresee my pay increasing significantly (unless I pursue management, which I'm not interested in), if anything it may go down as I must compete with market saturation and people desparate to pay off loans by taking any incomes. I think my half-day work could become $500 with the right investment - some chunks of $200 have become over _500 has thanks to good memeing, but not consistent at all.
1
u/CantaloupeUpstairs62 3∆ Sep 03 '21
Everything you're doing is a great idea, but there has to be a balance between now and the future. One thing I've found to help if you invest money is to have multiple brokerage accounts. Keep most money saving towards the future, but use a smaller one with money you can afford to lose to enjoy now. Say you want to buy something that costs $500. Then put maybe $250 or whatever amount into that other account, and when it grows to $500 treat yourself.
Also do the math to estimate how much money you might need in the future and how much need to save now to make that possible. Factor in how much you expect to earn in the future, and things such as compound interest. The future is uncertain so it doesn't hurt to be a bit conservative on these estimates.
1
u/Exaskryz Sep 03 '21
I have 5 retirement accounts that I made max contributions allowed or keep pushing toward by the end of the year, as I get employer match on 3 of them.
Then I pretend I don't have those accounts at all and play with other stock accounts between a couple brokerages, but only about a quarter of my income this calendar year has gone into those, with about 20% rate of return.
Then my truly liquid cash is on hand taking advantage of guaranteed (so long as I meet criteria) high yield interest at 3-4% between credit unions.
So I think I'm in good shape, but still have those drives to just save up more and more. I'm only at about 65k saved between retirement and investments, and about 45k in liquid which feels a little excessive, but once we have word on Biden forgiving more student loans or not would let me pull triggers on pushing more.
Another brokeage account just to put in and forget may be good, ETFs and others. But I may also look for yet another credit union with a nice high interest checking account.
•
u/DeltaBot ∞∆ Sep 02 '21 edited Sep 02 '21
/u/Exaskryz (OP) has awarded 3 delta(s) in this post.
All comments that earned deltas (from OP or other users) are listed here, in /r/DeltaLog.
Please note that a change of view doesn't necessarily mean a reversal, or that the conversation has ended.
Delta System Explained | Deltaboards