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Money is an essential part of our life. Like it or hate it, in our current capitalist system, money empowers people to live certain lifestyles and experience “life.” Amassing and utilizing money is an important part of life, and can directly affect the richness of our lives. While money does not buy happiness, it provides opportunities to use the money in ways that support a happy and meaningful life.
Money is a Responsibility
When we have sufficient money to begin saving, money becomes a responsibility. Most people, if not all, would rather be a wise steward of money than a spendthrift. But what does being a wise or good steward look like? Where is the line between saving, spending to achieve a nice quality of life, and spending to live lavishly to not just “keep up with the Jones,” but to surpass them – trying to find happiness in goods and services that can never be satisfied. The rich and famous often fall into the last example.
There is no set formula that works for everyone. In fact, there is no set formula that works for every situation. The same person may be a miser in one situation, responsibly spend in other situations, and turn into a spendthrift in other situations. So long as the balance of spending supports the desired lifestyle and results in enduring contentment (rather than fleeting pleasure), what is right for one may be different for another.
My Recent Experience
This has been on my mind because I recently experienced the dilemma of being a wise steward. My family recently moved from St. Paul, MN to Parker, CO. I was reminded why home sales are so important to the economy. There is so much money that goes out in moving and making the new house your home. This is especially true with new builds, which is what we purchased. The first few months felt like a money pit.
My wife and I had discussions about what we wanted to do and how much that would cost. Because real estate is more expensive in CO than MN, we were already looking at a drawdown in some investments in order to build out a desired basement and get a backyard. At every turn, I found myself trying to find the cheapest way to do things…trying to hold onto the money. You see, we have been net savers for years and years. All the sudden we are spending…and the very act of spending felt irresponsible to me. My wife had to constantly remind me that the decisions we are making today are to make our house a home. Not lavish and extravagant, but nice and a place our kids will want to come to and one where we could have company.
What Does Being a Good Steward Look Like to You?
The question I asked myself is whether spending money is being a good steward of money. I feel very blessed and with that comes a personal responsibility to use our blessings responsibly. It felt irresponsible to be spending money that we took years to earn. But that was just a feeling, not a fact. The fact is that we were spending very responsibly and investing in our quality of life. I’m glad I saw this blindspot in me and changed my view that we can spend and still be a good steward.
This was my personal experience of how difficult it can be to switch the brain from being a “saver” to being a “spender.” For me, this was just temporary and we are back in saving mode. But for retirees, it is a permanent change that can be very difficult. With that, I thought it might be helpful for advisors to ask their clients (both pre-retirees and retirees) how they define being a good steward. That may help ease the psychological switch and help them make the best decisions for themselves with respect to saving and spending.