Millions of people have a hard time passing up immediate gratification in order to reach long-term financial goals. Yet there is one class of savers and investors who are so far-sighted that they can't enjoy their money.
During the housing boom a few years ago — while home equity values were climbing — American consumers went on a world-class spending spree. The personal savings rate dropped to zero then went negative. Consumers were actually spending more than they were earning.
But the housing collapse and resulting financial crisis had a sobering effect. Saving is in fashion again. According to the Federal Reserve Bank of St. Louis, the nation’s personal savings rate is currently 6.5%.
Yet two-thirds of Baby Boomers confess that they haven’t saved enough for retirement. A 2010 survey found that 34% of Americans have zero savings, including 22% of those 65 or older.
Blame it on our materialistic world, the American consumer culture or just plain old lack of self-control, but millions have a hard time passing up immediate gratification in order to reach long-term financial goals.
Yet there is one class of savers and investors with an entirely different problem and, in some ways, it is just as unfortunate…
Psychologists call it hyperopia.
That’s a fancy of way of describing people who are so far-sighted they can’t enjoy their money. They are good at looking ahead and saving for the future, but they can’t enjoy what they’ve earned.
Years ago, when my older brother was playing the mini-tour in Florida, he had a local businessman and sponsor — “Joe” — in Virginia who wanted to come down and watch him play.
“Great, I’ll book you a room at the Hilton nearby,” my brother offered.
“The Hilton?” Joe said. “Forget that. I’ll book myself a room at the Motel 6.”
Now there’s nothing wrong with staying at a Motel 6, especially if that’s all you can afford. (Growing up, I never stayed in anything better.) But Joe was independently wealthy. He owned a string of McDonald’s franchises.
However, he grew up in the Great Depression. He had the kind of keen understanding of “scarcity” that eludes most people today. And, like many businesspeople, he owed his success, in part, to keeping a sharp eye on costs.
Still, he was getting on in years. (In fact, he died less than three years later.) He never spent much of the fortune he earned. Ironically, he could let his heirs blow through it, but couldn’t bring himself to spend it himself.
Author Matthew Kelly writes that he, too, came from meager circumstances and — even after he was a bestselling author and an in-demand lecturer — he couldn’t make himself part with much of what he was making.
If someone you know has hyperopia, you might suggest they do what Matthew Kelly did…
Planning how much to spend
Just as most folks need to plan and make a habit of saving, some need to plan and make a habit of spending. Kelly figured out how much of his after-tax income he could drop with a clear conscience and then set goals to make sure he did it.
It’s a minority to be sure, but some folks — practical ones who work hard, save and invest — may need to pre-commit to indulgence. That could mean choosing a gift certificate over cash back when redeeming credit card reward points. Or perhaps reframing money spent as an investment in restoring yourself for work.
In my experience, workers generally fall into one of two categories: those who have to be goaded to work and those who have to be reminded to stop. The same is true of savers. The majority is clearly not saving enough (or leaving it untouched long enough). But some others aren’t enjoying the fruits of their labors.
It can be a great balancing act, deciding what to save, what to spend and what to give away. But the oldest adages are entirely true. You only live once. You can’t take it with you. Hearses don’t have luggage racks — and shrouds don’t have pockets.
So earn it. Save it. And pass it along. We’re only here for a visit.