Saving money is a no-brainer. Its benefit is obvious. You have more money! Your bank account grows. Your 401(k) grows. You can retire (potentially early) and do fun things with the savings you’ve built up over time.
But there’s a second, hidden benefit to saving money. It recently came up for Kelly and me in our personal lives.
The habit of saving builds slack into your day-to-day life. That slack is a resource in and of itself and can be called upon when needed.
In other words:
- Sure, it’s nice to have $10,000 in the bank. That’s the obvious benefit of saving.
- But it’s also nice to know you have $1000 of surplus in your monthly budget.
For example, Kelly and I recently bought a house. Exciting! But it’s a big financial move, and I feel a bit out over my skis.
Our new housing payment has me thinking, first and foremost, about caution. We’re entering a new regime of monthly payments. To be more cautious, I want to increase my slack.
For the first few months, I plan to:
- Decrease 401(k) contributions to only 5% per paycheck. That still maximizes my company match. But not a penny more.
- Decrease monthly Roth IRA contributions to $0. I can always “catch up” with a lump sum at the end of the year.
- Decrease HSA contributions to $0. Same as above.
- Throttle back many of my “Fun” budget categories
The house is a more pressing short-term need. So I’m re-routing those dollars for additional housing buffer. That’s a hidden benefit of saving money. Yes, it’s just simple arithmetic. But it’s important to understand.
But Jesse – it’s important to save while you’re young! You’re choosing to save less!?
I completely agree.
Over the past decade, Kelly and I have done our best to save. Especially in recent years. We’ve maxed out our 401k accounts, our Roth IRAs, and our Health Savings Accounts. Any remainder goes into high-yield savings accounts or taxable investment accounts. We earn healthy salaries in a medium-cost-of-living city. We’ve made deliberate choices to enjoy life in some ways, cut spending in other ways, and save/invest the difference.
Our saving bought us time. That’s what we’re leaning on right now. We can’t avoid saving forever. But if we need a year, or two, or five before we start hardcore saving again, we have that time.
Flexibility is a resource. Especially in personal finance. A saving habit buys you flexibility in many different ways.
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-Jesse
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