Money To Live

September 21, 2010

A debtor to my future self

Filed under: family finances,goals,savings — by moneytolive @ 8:33 pm

I recently wrote about how I like my future self. I save for her to protect her from a rainy day and to give her the freedom to take risks. She’s my friend. My husband, though, has recently been frustrated with his future self.

Over the past year, R got really into saving and saved so much that he couldn’t buy groceries in the days before his next paycheck. He was living paycheck-to-paycheck because of his saving habits. What was he saving so much for? Our wedding, building up a bigger emergency fund, and his current education expenses. While saving is commendable, saving this much made him a debtor to his future self.

Becoming a debtor to your future self is not using money to live, and it can be similar psychologically to paying off actual debt. Saving so much could push a person to abandon saving altogether, much the way adopting too many frugal tactics at once can push someone to stop being frugal at all. There’s a balance between saving for the future and spending today.

Before this, I mainly thought of the differences between saving and paying debts. Having readily available cash skirts the issue of needing to borrow money and take on debt. Most of the time, saving is the better deal — eliminating interest charges and sometimes garnering an additional discount. A different way to look at it, though, is that saving money shifts the cost of a purchase from the future to the past of the object’s purchase/use. While you may get a discount by paying cash (or at least avoid interest charges), you are getting less use out of the purchase by delaying its use into the future.

As we are combining finances, we’re evaluating our savings plan so it won’t leave us feeling broke. As the wedding is over and none of it was financed, that’s one less thing to save for/ pay for. Because R was aggressively building up our emergency fund, we can now reduce our monthly contributions. While we still need to save a little more for his education expenses, we have six months until his final tuition payment is due. When all of these goals are met, we’re going to focus on pre-paying the mortgage. While it seems like there is always more that we could be saving for, at least we’re debtors to ourselves and not to someone else.

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