You don’t hear that question every day! I can hear some of you saying, “Of course I purposely save!” …. Or …. “Sure. I save what I can.” …. Or …. “Kinda. I am in my employer’s 401K. Doesn’t that count?”
While not terribly common, there is some good food for thought in considering your saving habits, and what you are really saving for.
So, what are you saving for? It could be for education for you or a family member, your retirement, an emergency fund, a very special vacation, a generous Christmas, a new car (or any major purchase). The question is what exactly am I saving for? Just saying “retirement” is not good enough. What is it you want in “retirement”? Be specific. Break it down. Clearly understanding your detailed priorities for saving is worth careful consideration; because some goals will take many many years to save for and many years to figure out in many cases.
Why are you saving? To avoid taking out loans on big purchases? To ensure you can sustain your standard of living in retirement? To ensure grandkids get a good education? To avoid worrying if you can afford a vacation home someday? Pulling out the “why’s” and then reflecting on them can help ensure that your savings reflects your values. It is also good to do this exercise every few years, as life has a way of changing our priorities over time.
Everyone’s answers to these questions will be different. That’s good!
Everyone’s answer, if thought through well, will be as unique as we all are unique from each other.
Having a friend or partner to share your goals with may help you refine and clarify what you really want to do with your savings at some point. You may want to buy a place in Florida someday. However, your partner is more of a mountain person! Clarifying your goals with your partner may help you get very specific as to how you solve this dilemma. Maybe the solution is not buying that place in Florida but having varied vacation destinations where both of you would enjoy and therefore support each other’s savings goals.
Then there is identifying exactly how much you are saving. Are you counting your work’s 401K? Are you counting your annual contributions to IRA’s or ROTH IRA’s? Are you counting the education 529 contributions? Sometimes we forget that those automatic payroll deductions into the company 401K is a significant part of the “saving” equation. It is not just what we manage to put into a savings account with every paycheck.
Can you save more? Do you need to save so much? While there is no magical percentage of your income that is just right, or too much or too little, having a detailed understanding of all your monthly expenses is a key part to understanding if you are saving too little or too much. Maintaining a “budget” can help you clearly see how you are spending your money and can help you prioritize spending versus saving priorities.
Be sure to give me a shout if you would like to discuss any of these topics. I am confident I can help you understand if your savings are invested well and to help you understand if you are on a path to meeting your goals and priorities.