Most of us understand fairly instinctively that if we want to make a large purchase, we need to save for it. Looking into a new $1000 laptop and able to save $250 a month? Great, you can buy it in four months.
But then, what if you don’t have a big purchase you’re excited about? Your laptop and car are functional, you’ve paid off your debt, you’re not looking at buying a house anytime soon, and you’ve got your retirement savings automated. You’re doing super well, so why not spend the rest on trips and clothes and restaurants?
Basically, because eventually you’ll want something else.
When I was a kid, anytime I got money – $10 for a birthday, $3 allowance, maybe an occasional $100 windfall – I put it in savings. I loved balancing my little ledger and watching my savings grow (veryyyy slowly).
At age 8 or 9, I remember my grandma asking me what I was saving for. “I don’t know,” I said. “A car? College?”
Those things were a lifetime away, an unimaginable future. I just knew that eventually there was going to be something I really wanted.
My parents bought my first car (now my brother’s car) and most of my college was paid for with scholarship money. But that thing eventually came along – a $10,000, 3-month trip to Europe when I was 20 that wiped out my savings account. Eight-year-old me would have been proud.
Right now, I don’t have a big thing I’m saving for. My car’s paid off and in good shape. My laptop is six years old and will probably need to be replaced sooner than later, but it’s chugging along just fine for now (and I’ve got the cash to buy a new one whenever it finally dies, so I’m not too worried about it). While I’d love to go back to Europe, I’m hoping to never completely wipe out my savings account again.
At this point, my savings goal is basically to have the feeling I have about my laptop about a whole lot of things. I don’t want money to stress me out. I’m essentially saving my money to buy my way out of worrying about it – imagine the security of having your car get totaled and paying for a new one in cash a few days later. Or losing your job and just shrugging your shoulders. Or plopping down a big down payment on the house of your dreams. I’m not there yet, but that’s the goal – not the car or the house, but the security.
If you always think of savings as something you do in the short term to buy something, you’ll never get ahead. Saving for four months to buy that laptop is better than creating debt to do it and paying twice as much in the end, but it’s not as good as walking in the day you decide you want it and dropping ten $100 bills on the counter.
Future You is going to want stuff. Maybe a few months off work, or a last-minute flight to a funeral across the country. Future You is going to think Past You is super awesome if they can just pay for that stuff without worrying about it. Be awesome.
Have you ever taken advantage of your savings to pay for something you didn’t plan for?