Updated on 05.24.11

It Adds On To Your Career

Trent Hamm

If I were to go sell my Honda Pilot right now for a new vehicle, I might drive in a bit more comfort, I suppose. However, that $25,000 invested would have to come from somewhere.

I can think of several gadgets that might be fun to have around the house, but they would cost thousands of dollars. That wad of cash would have to come from somewhere.

I’d love to buy a big piece of land in the country and build an amazing house on it. However, the cost of that house would have to come from somewhere.

Where does it come from? I might point at frugal choices, but the truth is that most of those frugal choices are things I’d do anyway.

The truth is that those expenses would come directly from my lifetime’s income. If I earn, say, $2 million over my professional career, all of those things would have to come out of that lifetime income.

Now, let’s say I went without those things. Since I don’t have to pay for them out of my lifetime income, I don’t have to earn as much over my lifetime. If I’m not buying a new car every three years, maybe I only have to earn $1.8 million. If I don’t build an excessively big house on a large piece of land, maybe I only have to earn $1.4 million.

I keep earning the same amount I do right now, but instead of dumping that money into gadgets or into cars or into a new house or into other unnecessary things, I dump it into long-term investments. Those investments end up being cashed in at the end of my career, allowing me to retire earlier than I would have had I continued to buy things.

Thus, it’s a balance: every time you buy something today, it effectively tacks some time on to the end of your working career.

It’s easier to see the impact of the big things like I mentioned above, but the principle is still true with the small things. If I buy a $5 cup of coffee every day for 20 years, I add almost a year of work onto the end of my working years. Is that a trade I’m happy with?

For some people, this isn’t a real concern. I know of one couple in their fifties who are likely going to work until they physically cannot continue. The key, though, is that this is an intentional move by them. They have actively chosen to spend their money with the knowledge that their careers will continue into their seventies or even their eighties.

What’s worrisome is when such choices aren’t intentional. If you’re spending everything you earn right now, you are extending your working years, period. You’re sacrificing years in the future in which you could be enjoying your grandchildren or chasing a dream second career or passion. I receive panicked emails from people all the time who made these unintentional choices all the way along and they find themselves in their late forties, panicked because their retirement is still a long way off.

So, what’s the choice really all about? Essentially, you’re choosing between pleasures now and freedoms later. I can’t tell you which is more important, but I can tell you that when you try to have both, you end up sacrificing both.

Think of it this way. What sounds more exciting to you? A trip to Europe this summer or the freedom to throw your heart into a novel down the road? A nice car today or the freedom to spend years doing inspirational volunteer work when you’re in your fifties? I can’t answer that question for you because there is no right answer. It’s more about what you value, but simply being aware of the direction you’re heading in can make a huge difference in your life choices today.

I can also tell you that frugality has a huge role to play on both sides of the coin. If you’re seeking pleasures now, for example, a bit of frugality in your day to day life makes traveling to Asia much easier than it would be otherwise. If you’re saving for later, though, frugality now pushes you toward the freedom you want to have later.

Just remember, though, that every dollar you spend without thinking takes away both from the quality things you might do today as well as from the quality time you’ll have later on. Be conscious of your spending and what you want from life and you’ll find that you have the future you want.

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  1. Johanna says:

    “I’ll spend every dime now and worry about planning for my old age later” and “I’ll deprive myself of things I really want now so I can have the things I really want later” both suffer from the same flaw: It’s always “now.” It’s never “later.”

    You need to figure out a balance so that you’re neither stealing from tomorrow to pay for today nor stealing from today to pay for tomorrow.

  2. Tara C says:

    The danger I see in spending now and expecting to work longer is you may not be able to work as long as you plan, due to ill health or inability to find a job at an advanced age. I personally prefer to be more frugal now and know that I have a safety net for later. A big pile of cash makes a nice cushion to rest on.

  3. krantcents says:

    I sacrificed early to become financially independent at 38 yrs. old. Did I sacrifice everything for that goal? No! I lived in a very nice home (southern California), our kids went to private school, beach vacations, traveled and even had help at home. We always saved and lived below our means. I invested in income property and did very well. It is not an all or nothing situation. Nothing is! You make choices and set priorities.

  4. beth says:

    We actually had a conversation very similar to this recently. Living in one of the epicenters of the housing meltdown, it became very obvious to us that pulling a chunk out of our retirement savings in order to buy a house in cash made a lot of sense, even it ultimately means we will work a few years longer down the road. And that was the literal choice we made, “do we get rid of rent and mortgage payments forever, knowing that amount of money is not in savings earning interest, or do we keep renting and have a slightly larger nest egg?” We ultimately realized that the interest we weren’t paying on a mortgage, plus the lack of stress about always making enough income to cover a house payment, plus the hope that the house will once again be worth at least a little more than we paid for it, was worth the potential risk of a lower balance in 20 years.

  5. chuck says:

    i think it also depends on if u like your job. i hate what i do and don’t want to do it a minute longer than i have to so this post was really good advise.

  6. Steven says:

    What are you sacrificing now by delayed gratification of the fruits of your labors?

  7. Joanna says:

    Best post in a while, Trent. It’s an interesting point of view to consider.

  8. Amy Saves says:

    I like being able to enjoy things now. Who knows when the world is going to end? :P

    Seriously though, I think saving some and spending some is the key for me. It’s all about balance.

  9. con says:

    I like saving most but spending a little now. Makes me appreciate things more if I have to think about it. Of course, I don’t make a lot of money and I started saving late in life, so that is also mandatory for me. But it works.

  10. moom says:

    Trent – I don’t think you are planning on ending your “career” earlier if you save more money now. Your career is writing and I thought you loved doing that. The bottom line is though that it doesn’t make sense to work like crazy and be frugal like crazy when you are young in order to retire later because you might die or be injured before you can enjoy things. On the other hand, it’s not a good idea not to save when you are young because you might not be able to work hard when you are older but you may live a long time. So you need to earn decent money, save some, and enjoy life throughout life. All the extreme plans don’t make sense in the uncertain world we actually live in.

  11. Chris says:

    I agree with Johanna. A balance is critical. You could die tomorrow (although you probably won’t) or you could live for many years (more likely). Denying yourself a little pleasure, like a daily cup of coffee (if it matters to you and you can afford it), doesn’t make sense to me. Most people won’t take the couple of bucks they save on coffee and put it in a savings account; it ends up getting spent on lunch, extra toppings on a pizza, or whatever.

  12. Ricardo says:

    As others have said above, the balance between today and tomorrow is the key word. In this text the main message is that you are making choices in your life even when you do not think about it. The funny part is that I’ve read so many times about this little cup of coffee in financial texts that I start thinking that this American habit (not houses) was the reason for the collapse of the U.S. economy.

  13. deRuiter says:

    #12 Ricardo, It wasn’t really the Starbucks coffee habit although you’re right, everyone talks about the latte factor in keeping Americans from saving, which it does. The root cause of the housing collapse was the Federal Government’s “Community Reinvestment act” which forced banks to lend money to people (usually minorities) who could not afford to repay the loans. If a bank wanted to expand, make changes, keep off the Fed’s harassment list, they indulged the Feds rules and the bank made mortgages to people who would never repay the loans. Banks, being smart, not stupid like the Feds, bundled and sold those toxic loans to other institutions. Everyone pretended that the Fed was doing a good thing to insure that people who could not afford a house bought a house. Eventually the number of bad loans on which the underpriviledged were defaulting became so big, that the whole house of cards collapsed. If the Fed hadn’t enforced the Community Reinvestment Act, the banks would have continued to make the traditional “20% down and you must have documented income to repay the loan” conditons before making any loans, and the house prices would not have mushroomed as they did. Thank you Federal Government.

  14. Annie says:

    I agree with everyone that says a healthy balance is what you should strive for. I like to save and spend. The older you get the more you are likely to develop some kind of health problem and then your life is about taking care of yourself and no fun. If you balance the fun now and put away for later, you won’t regret any decisions you make and you will thank yourself in the end. I know i will thank myself when i am older.

  15. Sandra says:

    Balance is key. I recently went to the funeral of a childhood friend who died suddenly (early 40s, leaving several young children). While it is great to be saving for the future, one can never forget that it all can be taken away in an instant.

  16. David says:

    “Banks, being smart, not stupid like the Feds, bundled and sold those toxic loans to other institutions.”

    Those other institutions being, presumably, greengrocers, hardware stores, Parent Teachers Associations, bell-ringing societies and circuses. Or were any of them, by any remote chance, banks?

  17. Justin says:

    I agree with Johanna. You can’t save every penny you earn, because your quality of life will suffer until you “have enough”.

    On the other hand, don’t be like 90% of Americans and never save a dime. I’m convinced that if our nation had better financial sense and saved more money, we wouldn’t be in so much debt today.

  18. joan says:

    “Every time you buy something today, it effectively tacks some time on to the end of your working career.” I’m going to sticky-note this to my credit card!

  19. Elizabeth says:

    @Annie — that does say much for those of us living with health problems now! Life doesn’t end just because people aren’t in perfect health. You find ways to thrive no matter what the challenges.

    We all want to be as healthy as possible for as long as possible, which is why it puzzles me that people don’t spend as much time and effort maintaining their health as they do their finances. Exercising a few hours a week may just be a better investment than working those hours instead.

  20. littlepitcher says:

    Recent research points out that both health and mental acuity decline faster in retirees than in those who continue working till death, when both groups are in equivalent health at retirement age.
    After having been blacklisted out of work so that a real estate shark could attempt to acquire my paid off house, I know the value of physical and mental effort. It may pay better to save for a post-retirement business (and attorney) than for leisure, i.e. better to burn out than rust out.

  21. Alex says:

    Hell yes I would rather tack on an extra year of work to the end of my career in order to take several trips to various places around the world now. I want to experience these things while I am young, in good health and sound mind, and before I have the responsibilities of children and a mortgage. In my view the richness those experiences will add to my life is very much worth working a little longer. I’ve still got a safety net and a retirement fund. I’m pretty confident I won’t be lying there on my deathbed going “Damn! I wish I’d never gone to Paris when I was 25!”.

  22. Johanna says:

    @Alex: Another benefit of traveling the world while you’re still young is that you have the entire rest of your life to benefit from the experience. When you go to Paris when you’re 25, you spend most of your life knowing what Paris looks like; when you go when you’re 75, you don’t. That seems like a small thing, but it’s really not, especially if you spend enough time there and pay enough attention to really get some insight into what Parisians’ lives are like and how they’re different from (or similar to) what you know back home.

    I’m not really a big fan of the idea that “you must travel when you’re in your early 20s because it will be impossible later, and besides, old people are all frail and useless and can’t appreciate anything” (I’m not saying that that’s what you’re saying, Alex), but there are good reasons to travel while you’re young if you’re able to.

  23. AnnJo says:

    I don’t regret a penny spent on opera tickets or traveling throughout Central and South America, Europe or the U.S. If I hadn’t wasted money on lattes, eating lunches out instead of brown-bagging it, and other wasteful, pointless habits, I could be retired now and traveling more.

    Not a single one of those lattes or lunches, much less all of them collectively, built enduring memories the way the travel or the opera has.

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