Sunday, January 14, 2007

Is he saving too much

I have a single friend in his late 30s. He makes several hundred thousand dollars a year. He lives in a big city. Professionally secure. Owns his own home.
Last year he saved 50 percent of his gross income - wow!!!
He's concerned that he is saving too much. He's having fun, dating, going out, enjoying vacations - I think he's happy with his lifestyle. Should he save any less?
He's incredibly eligable. Within five years he'll be married with children and living expenses 50-60 percent higher than now - why shouldn't he save?
What do you think? What would you do?
Regards, makingourway


Anonymous said...

Saving too much? If he's happy with his lifestyle, then what's the problem? Make hay while the making's good.

The biggest problem with being an extreme saver is figuring out where to put the money you're saving...

Anonymous said...

"He's having fun, dating, going out, enjoying vacations - I think he's happy with his lifestyle."

That says it all. He's not throwing money away...he's saving it. I don't understand how anyone could save too much money. Unless it is making them miserable or they are neglecting their health or their family's needs.

2million said...

What about his net worth? If he has already built up his net worth so that he is financially free then sure, spend it!

Anonymous said...

He thinks he is saving TOO much? He pays his bills, goes out, and enjoys using the money so what is the problem? Tell him to put money into his children's college accounts and then if he still feels he is saving too much then put the rest into investments. He can make some loans on Prosper or sponsor someone who is needy if he REALLY feels bad about having too much money. Tell him to relax.

Anonymous said...

He's doing things just perfectly. If he's enjoying his single life AND saving 50% of his income, he's going to be set for the rest of his life before long.

makingourway said...

Wow, thanks for the great comments.

I think he's happy with his lifestyle, but he's questioning if he's not going out enough, not spending money on social activities, etc....

Like many single people in his late 30s, perhaps he's wondering if his current lifestyle inhibits his ability to find the right person.

FYI, his networth is similar to mine - or at least not too far apart.

Furthermore, his savings rate is fairly similar to mine as well.

I find this remarkable considering he's doing it all on his own (versus me and my wife earning together).

One thing is for sure, once he gets married and has children his expense load will increase dramatically. If he's happy with his current lifestyle, I think he should save as much as he can.

I predict that he can become a millionaire within 3-4 years.


PS If I were in his situation, I would be a rake spending much more money chasing girls - at least that's what I was like in my early 20s. Maybe I'd be older and wiser - or older and more decadent?

mOOm said...

What's he want to spend it on that he's not? He's going to be spending close to $100k a year already if he makes at least $300k a year pre-tax?

I had a girlfriend who for a while was making a good salary for her and was looking for things to spend the money on... this was very weird to me. I spend what I want and save the rest...

makingourway said...

Lua, that's a great idea - saving for college. He can open a 529 account in his name right now and reassign the assets to his children (or nieces and nephews) in the future. I'll have to recommend it to him.

makingourway said...

moom, I think he'll end up saving what he doesn't use. In the end, he's not uncertain about saving money, it's clear to him that he's saving well.
Instead, I think he's questioning whether he is avoiding social activities under the name of saving money. He's an unattached single fellow with the means to do many things... what is he missing out on?

Anonymous said...

I have a tough time believing that that's the real question. I mean, given what you said, does your friend really think that spending money is the answer to the fact that he's single? I hardly think it's a question of spending. Not so much that it is a question of anything he's doing, just that spending money is hardly going to solve the problem. And given what you have suggested of your friend's income, it strikes me that he could adjust his lifestyle and do more things (if being active is his concern) with very little change in his expenses as a matter of percentage.

Of course it all depends on lifestyle.

For example, by my calculations, I'll have exceeded your net worth goal by 2033 and I'm certain I make probably half what you do and don't have a wife's income either.