Reasons to save
A simple question, but it triggered a powerful response. My first reaction (although I didn’t say so) was to protest hotly that I’m not afraid of anything. Working hard and saving just makes sense to me.
Then I thought about it some more and realized that there might be something to the question. After all, you don’t normally have a powerful emotional reaction to things that don’t matter.
So what am I afraid of? Why do I save more than half of my income?
The simple answer is that the idea of not having to work to live is extremely attractive to me. It just makes sense that people should do work they want to do, without worrying about whether it pays enough to support them. To do so you need alternative sources of income, and for me the most attractive ones are dividends and interest.
But that’s not the only answer.
I also never want to be in a position where lack of money puts me or my family into a difficult situation. Eight years ago I lost my job suddenly, and I will never forget the feeling of helplessness when I told my wife that we might not be able to pay the rent. I swore never to be in that situation again, where our happiness depended on someone else’s decision to keep employing me.
Of course, this is not a black or white thing. It’s not a choice between financial independence or living paycheck to paycheck. It is a continuum that looks something like this:
No savings -> Some savings (emergency fund) -> Substantial savings (some income) -> Financial independence (live off the income)
I believe that moving towards the right hand side of the continuum makes sense for anyone, as long as it doesn’t negatively affect your happiness.
The key is to spend mindfully, to spend money on things that make you happy and not on things that don’t. At first it’s hard to tell the difference, and it’s easy to get swept up in materialism and advertising.
I was talking to another friend recently, and my ten-year anniversary trip with my wife came up. Even though we used air miles for the flights, it still ended up costing over a million yen.
My friend considered for a moment. “You could buy a new car for that”, he said.
And that’s the key, I guess. I don’t want a new car, but I will treasure the memory of that trip forever. And I can’t have everything. I can’t have the new car and the trip and save for financial stability, so something has to give.
How about you? What is truly important to you? And what do you spend your money on?
If we’re talking fears, I agree with your fear about not being able to provide for one’s family. I bring the money for a family of 4, and the idea that “something” (anything) could prevent me from bringing that money home one day sometimes keeps me up at night.
It started when I got really tired of my job and thought to myself: “there might be a day that I am so tired of that job that I will get fired, simply because performing well at that job will be above my willpower”.
The way out of this fear is to have enough passive income. This is what’s driving me.