Saving is a key concept for anybody who strives for a frugal life.
Saving can add a lot of freedom and control to your life, because it means to think about what you really need, and to do spending and consumption more consciously. And it can free you from the rat-race, as it will curb your need to ever increase your income.
However, I am not a friend of saving on its own sake, and I am so far not yet fully convinced by the concept of early retirement extreme (ERE), which discussed a lot in the frugal community.
I sure respect this approach, and I find it very stimulating reading about it, as it teaches a lot on how to renounce unnecessary consumption and wasting money. But I see certain risks in ERE as well and generally in relying too much on saving alone.
Here are a few of my doubts:
- A job, if it’s the right one, and if it allows for a good life-work-balance, can add social contacts, variety and even some meaning to your life.
Important is that you like the job more or less, that it pays good and that you are free to a certain degree and don’t have to work too much (Middle-Way).
This is not easy, because often there seems to be only the choice to not work at all, or work like hell. However, a goal should be (a) to find a job that lies in the middle and (b) make your superiors accept that you need some idling every now and then and a lot of spare-time for yourself and your family, hobbies, friends, social life etc.
- Too much free time might get you bored.
Of course if you have a really time intensive hobby or if you plan to make up your own business this is not the case. But in the later case it means only that you are optimizing your job and don’t give up working entirely.
- Saving for savings sake is dangerous.
Especially in these times of global financial distress you can never be sure if your savings will be there tomorrow. And if they are not then it’s very comforting to still have a job or another source of income.
- At least in Germany, a lot of people “over-safe”.
They accumulate money for money’s sake. They work a hell of a lot, buy houses, pile up bank accounts and feed retirement plans. And then later they miss out spending the money they accumulated because they got used to only accumulate or the savings are gone due to inflation or financial distress. I know a couple of examples of that type quite close (…unfortunately not close enough to inherit their assets later…).
Other doubts can be found in the great post of Financial Samurai.
So what is the middle-way?
I’d propose the following:
- Don’t aim at early retirement extreme but reduce work time and take as much time off as possible.
Aim at having a relaxed job with as little stress and social tensions involved as possible. And try to reduce work time, as generally most people who have a job work rather too much that too less. Aim at doing this job part-time maybe or having some days working from at home to max out your spare-time and freedom. Look for life-work-balance, with life being first priority.
You should also aim for a regular time off, let’s say 3-5 months sabbatical every 3 years. This will help you maintain health and happiness, and gives you sufficient time every now and then to think about your life in an relaxed atmosphere.
- Change job first before deciding that you hate working
Before you decide that working is shit, you might try different jobs, first within your industry or – if that doesn’t help – in a totally different area.
Because it might well be that it’s not working you hate, but the specific circumstances of your current job.
- Don’t be afraid of changes
Think about what your goals are in work-life. E.g. having a fulfilling job, or a relaxed one, or travelling a lot for your company, or have your own business, or solve complicated problems, whatever. Also watch out to only work for an “ok” boss, never for any choleric or for a workaholic or anything. In my opinion these general work-environment is even more important than the actual task you are doing there. Then move into that direction, maybe not in one step, but move!
- Save and manage well your money and your spending…
Even if you earn sufficient, always have an eye on your spending and manage your costs as efficiently as possible.
If you have little income this is obviously important, but if you have high income, it is important as well, as you now are in the great situation that you can save a lot. Funnily enough, most people I see don’t manager their money well, no matter if they earn little or a lot.
- …but have a goal for saving
Think about what you are saving for. This might be working part-time or taking a sabbatical or a long vacation. Or setting up/expanding your own business. Or some investments to have an additional stream of income (for me, it clearly is travelling – my great obsession!).
But I think in most cases it is not advisable to save with the aim to retire at 40 or so. Because you easily can be cheated, you work like hell and save a lot and then you have bad luck, or inflation is coming or whatever, and your savings are gone and you lost a lot of time working like hell instead enjoying life now and here.