Solving the spending versus saving dilemma

Nov 1, 2017
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The most difficult dilemmas to solve are those with a strong rational and emotional case for either choice. That certainly applies to deciding between spending and saving, especially if the saving is for retirement. For example, you might be thinking about an extended trip to Europe, with retirement just a few years away. Is it okay to spend that money now? Or is now the time to invest those dollars and beef up your retirement savings?

There’s a solid argument for either option. A trip to Europe is a worthwhile choice because life should be enjoyed to the fullest while you’re healthy and active. But you can also say with conviction that if you make some lifestyle compromises during your working years, you’re likely to feel less stressed about financial security when you retire.

A healthy balance

When you’re torn between spending and saving, a workable solution is to find a healthy balance. That long trip to Europe? Make it shorter, or take a road trip to the United States and save Europe for retirement. You want to feel confident you’re living well today while investing wisely for the future. 

Even if retirement is decades away, you need to find the spending/saving balance. Say that you’re thinking of purchasing lakeside vacation property to establish a summer tradition for your family. But you question whether those dollars would be better applied to your Registered Retirement Savings Plan (RRSP). Perhaps a good compromise is renting a cottage or cabin each summer, while also adding to your retirement savings. 

Situations where you aim for a healthy balance don’t have to be as large-scale as deciding on vacation property. Let’s say your heart is set on a new luxury SUV, but you compromise with a traditional family sedan and invest the difference. Or you give up the expensive gym membership and save money over time by purchasing home fitness equipment.

Spending, saving and spouses

You might expect that when a saver is married to a spender, trouble awaits. In fact, couples like this have the potential to get the best of both worlds — live for the present and save for the future. What’s needed is to reach a middle ground by communicating openly and understanding and appreciating each other’s perspective. 

Communication is just as important for like-minded spouses. Two natural spenders may have no problem living large during their working years only to find themselves short of their savings objective at retirement. Two savers may have no problem meeting their retirement objective but might unnecessarily sacrifice enjoyment in their younger years. You need to talk openly about your current lifestyle and retirement plans to ensure one goal doesn’t come at the expense of the other. 

Fine-tuning your solution

Your spending-saving balance may evolve over the years for any number of reasons, from helping out an adult child financially to receiving an inheritance. As your life changes, we can help you find the balance that enables you both to enjoy today and feel confident about tomorrow.

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