Saving: A Love Story

saving for each decade of life

I’ve always been a saver.

As a child, my parents instilled the importance of setting goals and working toward them, both financial and otherwise. Even before having big, long-term financial goals, I remember as a kid diligently stashing away my allowance and babysitting money for months to buy a new Gameboy TM (the height of technology!) – then $100.

Having a target in mind is something that helps keep me motivated and on track to this day.

That said, when I got my first job after college, I remember confidently assuring my father that I’d start saving in my 401(k) once I hit 40. That job was as a financial advisor – adding significantly to the irony. My father simply shook his head and reminded me gently of the power of compound interest.

While this story is fairly embarrassing it’s a snapshot of how differently people think about money at different ages and how much your experiences change the way you will view saving.

Early 20s – The Short Term Horizon

My early 20s were a time of learning, starting out, and focusing on short horizons. Since 30 seemed like a ripe old age, and about a million years away, the majority of my focus was on things that happened before then.

I began to put money aside in retirement plans early (thanks for the advice, Dad!), but a good bit of my focus was on my needs in a five year time-horizon. I knew I wanted to go to graduate school, so setting money aside for that ~$120,000 expense was a top priority. Since many financial advisor jobs are commission, it was easier for me to have a dollar amount target than a goal of saving a certain percentage of my income each month.

Being a financial advisor early in my career dramatically changed the way I think about money to this day. I’m probably more conservative and feel like I need a bigger cushion than many people do. People came to me reeling with the shock of losing their nest eggs after the .com bubble in the early 2000s. Most hadn’t worked with an advisor previously, so I had the opportunity to help them create their retirement plan and adjust their savings strategies, some just a few years before they thought they’d be done working.

Later 20s – Home Focused

Business school drove some pretty significant changes in my spending and savings patterns. My earning potential had gone up a good bit, but I had missed two years of earning income, setting money aside, and it put a dent in my savings. Once I was back in the workforce, I continued to maniacally save for retirement (nothing will scare you into paranoia about retirement more than being a financial advisor at 22) and began my next quest – buying a home, which became a new savings goal for me.

The good news was I had moved to famously affordable Manhattan. I squirreled away money on a monthly basis and worked with my financial advisor on ensuring I was saving enough and in the right vehicles. And yes – with my advisor.

While it may seem like a former financial advisor might not need a financial advisor, I decided that with an aggressive savings goal I wanted to work with an advisor to hold me accountable. I think about advisors like personal trainers for your finances – they help you define your goals, keep you on track, and remind you to keep your eye on your long-term goals. I worked with a former colleague, who was wonderful and helped me do just that.
I was very lucky to receive a fellowship to get my MBA, but most graduates leave with between $90,000 and $120,000 in debt – this can mean a hefty monthly expense for many people. Moreover, the ~$1,000 / month student loan debt would put a big damper on any savings goals.

Also, saving in an environment like New York can be hard given the high costs of living. (How can a half gallon of milk cost $9?) And spending definitely got in the way of saving more often than I would have liked. But, it was easier to stay focused with the clearly defined goal of buying my first apartment and with the help of my advisor.

My 30s – Buying Flexibility

Now that I’m into my 30s, and have achieved my goal of buying a home, I’m more focused on the longer term, though I’m trying to figure out what exactly that means. After buying a home and furnishing it, I initially found it hard to refocus on saving without a specific purpose and dollar target (and I’m sure there was a piece of me that wanted to take a breather and enjoy the fruits of achieving my goal.) In fact, many of my friends who were in similar positions have shared with me that they felt the same way.

So, absent a short-term goal, I went on some exciting vacations, was more inclined to go out to nice dinners with friends (Colicchio & Sons! Del Posto!) I never ceased to put money away for retirement, but having no real goal for additional savings made me feel a bit adrift.
I was re-inspired by a presenter at a networking event. While describing her own investment philosophy she said, ‘…un-earmarked investments afford you flexibility’.

As I’ve gotten older, it’s become increasingly important to me to save for the ‘what ifs’ – flexible money, either liquid or invested, that enables you to go on that exciting trip to Nepal that presents itself, to leave a job that isn’t a good fit, or to feel more comfortable should you get laid off.

I’ve realized that having a set dollar amount to work toward is what motivates me most to save. While I will continue to save for the longer term goals of retirement (with a set goal in mind, of course), I’ve now transitioned my thinking to focus on financial independence and flexibility. Another thing my love of saving can help me achieve.

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