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.