As I am known to do on weekends I like to catch up on some reading. Primarily, I read things like personal finance blogs, some finance news sites, other news cites, real clear politics, and others . As I was perusing a number of these sites I ran across this article that made, I am not sure why, made my blood boil.
According to Lauren Martin of Elite Daily if you are in your 20s and you are engaged in any kind of savings you are doing something wrong. For Ms. Martin, your 20s are a time to have lots of experiences, go out with friends, go the bar, have fun, and essentially being fiscally irresponsible.
Based upon the comments a lot of people think Ms. Martin is nuts, but there are some, including many of the students that I teach who would agree with her dead on. I mean if you don’t have responsibilities, you don’t have a wife or husband or kids or mortgage or whatever why not “live.” I mean YOLO!
Frankly, I think that is the dumbest financial advice I have seen in a long-time. There are so many holes in that logic I could drive a Mack Truck through a lot of it. But here are some things that I reacted too.
First, what does it mean to live? If living means you go out to the bars, restaurants, and travel all of time without any consequence than that to me isn’t living. I mean do you think that just because we are 10 years older, you might get married, and have children that we don’t live? I did those things when I was in my 20s and I wish I could go back and face punch myself for my stupidity. And I have lived more in the past five years than I did in the previous 10, primarily because of Mrs. ROB. So this notion that you live only in your 20s is absolutely asinine.
Second, this advice is the height of fiscal irresponsibility. It wasn’t until I got to be in my 30s where I started to see the error of my financial ways. I didn’t save, I was in debt up to my eyeballs, and I generally was being stupid. In fact, it took me until my late 30s to really get on a good financial path. I wasted all of those years when I could’ve not taken out student loan debt, worked a bit more, etc. I am not saying have fun, but the reality is that most Americans don’t have enough to retire on right now. The average 401k balance is $126,000 and that is about when you are in your 60s. I am proud to say that I have more than that in my combined retirement savings. However, I know that it will take a lot more for me to “live” for the rest of my life. One of the things I hate about people is their shortsightedness. Those that don’t take the long view whether it be those who say President Obama or Bush or whoever is the worst president in history (which isn’t even close to being true) or not saving enough for retirement. The idea that you shouldn’t save is just plain dumb.
Third, this logic doesn’t even deal with the fact that emergencies will happen. I just updated a blog post on Friday that you need an emergency fund. It would be great if your emergency fund were 3-6 months of expenses, but having just a little bit of money set aside is what everyone should do. Even if it is just $500-$1000. I have only $1000 if things are needed, but I know I could access some more cash fairly quickly if needed. The point is that it is going to rain sometime, probably multiple times in your lives, and you are going to need an umbrella. Ms. Martin is going to be severely drenched if she doesn’t have some savings.
Fourth, this article doesn’t deal with the power of compound interest. Ms. Martin mocks the power of $200 going to her debt or whatever it might per month, but she is again being shortsighted. If she put that $200 in retirement account and did that for the next 40 years and the market grew at an average pace. She would have well over $1,000,000. Now in 40 years 1 million might not be a lot of money, but it certainly is better than nothing or $500,000 or less than when if she waits.
Finally, this article needs to update its financial terms. One of the great nuggets in this article is that ‘when you live your life around your retirement fund you might as well retire now.” Essentially, she means that retirement is nothing more than sitting in a rocking chair waiting for death to occur. Ms. Martin, for supposedly being an intelligent woman, doesn’t seem to have gotten the message that retirement isn’t what it used to be. In fact, I have long argued that we need to change what it means to retire. People still think retirement is nothing more than being 65, moving to Florida, and living for 10 years before you go into the nursing home to die. However, many people are choosing to retire early and live their lives differently. Others are “retiring” from one career and choosing another. Others could “retire” but love to work. There is no one size fits all definition. People will have MULTIPLE acts in their retirement.
In essence, the tone of this entire article is that only in your 20s do you get to really live and experience things. Spoken like a true someone who hasn’t lived past their 20s. I didn’t stop living because I am 40. I want all of the things in my 20s and more. And saving money gives you the power to “live” all through your life. Your life doesn’t stop at the age of 30. It doesn’t stop at the age of 70. Your should “live” throughout depending on how you define that.
There is nothing wrong with having fun and treating yourself, but if you think that by spending every dime you have, having no emergency money, and no foresight beyond the next day that somehow your life will be great because of the stuff you buy then I have some nice swamp view land to sell you cheap that would be a great investment. Because by doing that, by engaging in this financial stupidity you are short selling the rest of your life. And someone who is a little longer in the tooth I can tell you that it only gets better.