Are you a spender or a saver? The differences between the two can be profound. Savers can be obsessed with their nest egg and will go to great lengths to continue padding it, whether that means skipping vacations, forgoing a night on the town or living well below their means.
Spenders, on the other hand, can believe that there’s little point in working if you can’t enjoy the fruits of your labor. Why deny yourself a fancy car or luxury vacation if you have the money to pay for it?
There’s no right or wrong approach to life. Certainly savers have a greater likelihood of accumulating wealth and being financially secure in the future. However, there’s more to life than the balance of one’s bank account. Spenders may not be securing their future, but they are enjoying the present.
So what makes a person a saver or spender? Much of it likely has to do with upbringing. People who are raised in a family of diligent savers are more likely to be savers themselves. Similarly, those who grow up in households where the focus is placed on enjoying today rather than securing tomorrow may be more likely to be spenders.
Cultural norms can also be an influencing factor. For example, saving is the norm in countries like India, Vietnam and China. It’s a much different story in places like the United States, UK and Greece, where there’s a greater emphasis on immediate consumption.
Many people say they don’t save because they can’t afford it. However, that thinking has been proven wrong in numerous studies. I have spoken with psychologist and best-selling author Peter Collett about saving and the motivations behind it. He mentioned studies conducted in the world’s poorest places, where people live on as little as $2 per day. Even in those locations, he said, people were managing to save for the future.
The problems with spending and saving come at the extremes. Those who limit themselves to the most extreme levels of frugality for the sake of saving may be missing an opportunity to enjoy the fruits of their labor. Those who live for the now and forego saving may be putting themselves in serious jeopardy.
A financial adviser can help either type find more balance in their lives. A comprehensive financial plan can illustrate the necessary level of saving to reach one’s goals. The adviser can show a spender why they need to take saving seriously and how they adjust their lifestyle to do so. The adviser can also show an extreme saver that they’re well ahead of schedule and can use some of their resources to rewards themselves and their family.
There’s no right or wrong when it comes to saving or spending. The goal is to find the proper balance so you can enjoy the present while also securing the future.
Blog published by Mike Coady.