Google “Millennial savings” or any variation of that and you’ll see polarizing headlines. One study says young people are clueless about financial markets, while another study touts us as financially shrewd. There are stories about how we save more than other generations, and just as many about how we haven’t saved a dime. Sure, while surveys can lead people to answer certain ways and data can be presented to show what the author wants, it’s likely both sides are true, to an extent. I’ll discuss both ends of the spectrum and offer my thoughts on the matter.
A common reason given to young investors for saving and investing money is that you don’t want to jeopardize your future for the present. The idea is to be conscientious about saving so you do not wake up one day with a desire to retire but nothing to live on. Another rule of thumb is by saving 10%-20% of your income and living on the difference, you can retire at a reasonably early age. Those that follow this advice are our diligent savers. In my experience, many young people actually fall into this category, do a great job of taking this advice to heart, and save adequately. This only becomes problematic when some of these savers sacrifice living for the sake of excess savings. This is usually born out of a fear there won’t be “enough” in the future, even with time on their side.
On the other end of the spectrum, you have the YOLO crowd (You Only Live Once; aka Carpe Diem). While the expression is typically used ironically to excuse acting recklessly, it bleeds over into personal finance as well. It is rather reckless to completely ignore your finances, never setting anything aside for the immediate or long-term future. There are many people who fall into this crowd too, as stories and studies will tell you. One of the biggest contributors to young people not saving enough is focused on an expression you’ve probably heard: “Keeping up with the Joneses.” Without dwelling on that topic too much, all I will say is don’t let others determine your lifestyle, live within your means, and be comfortable with who you are.
So, obviously the right crowd to be a part of would be the diligent savers, right? Yes, but with the caveat that like all things in life, there’s a balance to be struck.
Discovering your balance between saving for tomorrow and living for today comes down to knowing yourself. Your life is different than mine and our “balance” will be different. There are many young people who live very active lifestyles and seek out any and all experiences they can, while others simply derive their pleasure from laid-back quality time with others. Some people dream about retiring in their mid-40s while others hope never to stop working. Some only care to provide for themselves while others want to leave behind a legacy to others. Because of these factors and more, everyone’s “saving to living” ratio will be different. Taking a good look at your life and your goals will help you hone in on the appropriate balance for you.
Without a doubt, it is best to adhere to the basic principle of save first (at least 10%!) and then live on the difference, but at the risk of being accused of spreading financial heresy, there is such a thing as “enough savings.” It doesn’t make sense to sacrifice your immediate happiness for a few extra dollars here or there if you have achieved an appropriate level of savings. Just as it isn’t prudent to jeopardize tomorrow for today, the opposite holds true. Don’t hinder your ability to live for today out of fear there will not be enough for tomorrow. Discovering this balance is a great step towards actualizing a strong sense of financial well-being. You will know that you are doing the most you can to live your life to the fullest while simultaneously having the ability to achieve your current and future goals. Of course, if your savings goal is $0, we should talk…
This concept of balance also extends to all areas of life. Just as I encourage you to seek out balance for your financial well-being, don’t neglect working towards your physical, mental, and social well-being. We live in a very busy world and often times, just like understanding where you stand with your finances, these areas in our life can benefit from some introspection. The results of a strong sense of well-being on all of these aspects of your well-being are very rewarding.
Finally, in pursuit of the right financial balance for you, please, just follow a rather simple idea: Be sure to save for the future, but also be sure to have fun, be happy, and make a difference along the way.