• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Jon Luskin, CFP® ● Hourly Advice for Do-It-Yourself Investors

Hourly Advice for Do-It-Yourself Investors

  • Home
  • About
  • Work with Jon
  • Blog
  • Bogleheads® Live
  • Publications
  • Speaking
  • Reading List

Spend Less or Save More?

May 27, 2018 By Jon Luskin 2 Comments

I was sitting in on a presentation by Nobel Laurette Robert Merton who made the comment that not saving enough money (insufficient savings) is the same thing as spending too much money. Given a fixed income, saving more money means spending less money. And spending less means saving more.

Income = Spending + Savings

So, telling a client to “save more and spend less” is redundant. When you do one, you do the other.

And, if you’ve told a client to “save more” or “spend less” (which is the same thing), it means the client has amassed an insufficient nest egg to date – given their spending (or their lack of savings!)

One Move, Two Benefits

Spending less (or saving more) money can be very impactful to a client’s financial plan for the same reason that doing one thing (saving more or spending less, respectively) means doing the other (spending less or saving more, respectively).

When you spend less money, you save more of it. And we know that more money saved now means having more money in the future to fund retirement.  But, spending less money (i.e. downgrading your lifestyle) means having to need to less money to retire.

In short, spending less money has a double benefit, getting you to retirement faster. There are two reasons for this:

  • Spending less money means needing a smaller nest egg for retirement – which means it takes less time to reach retirement because you don’t need to save a lot of money to create your nest egg
  • Spending less money means saving more money – which means growing your nest egg more quickly, which means you’ll get to your ideal nest egg sooner, which means you can retire sooner.

Living a relatively more modest lifestyle means achieving retirement sooner because of the math behind.

Telling a Client to Spend Less Money

I think it may be a challenge to tell a client to:

Spend less money.

Such a recommendation may be poorly received. Firstly, because you’re telling someone not to do something that they are already doing. Also, because there is the inherent suggestion that you’re taking something away from someone.

The solution to not telling a client to spend less money is obvious, given the above. Instead of telling the client to deprive themselves of something, to not do something bad that they are doing. Flip it – because it’s the same thing anyway. Tell the client something positive they can do to improve their financial picture. Tell the client to:

Save more money.

Of course, this suggestion only works if the client is not retired. But if the client is retired, the conversation is going to be more challenging.

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Is a One-Day Financial Review Right for You?

Get Your Free Assessment ➔

Get in Touch with Jon Luskin, CFP®

  • Email
  • LinkedIn
  • Twitter

Sign Up for New Blog Posts & Podcasts Delivered to Your Inbox

What I’m Reading Right Now

Recent Posts

  • Bogleheads® Live 37: Christine Benz on ‘How much can I spend in retirement?’
  • Bogleheads® Live 36: Mike Piper on ‘After the Death of Your Spouse’
  • Bogleheads® Live 35: Bill Bengen on the 4% Rule of Thumb
  • Bogleheads® Live 34: Cameron Huddleston on talking to your parents about their finances
  • Bogleheads® Live 33: Colleen Jaconetti on Rebalancing Your Portfolio

Categories

  • Bogleheads® Live
  • Bonds
  • Financial Planning
  • FIRE, FI, Early Retirement
  • Investing
  • Practice Management
  • Real Estate Investing
  • Tax Planning

Jon Luskin, CFP® Follow

Hourly Advice for Do-It-Yourself Investors. '@Bogleheads® Live' host. Advice-Only #CFP®. #fiduciary. @SDFLC volunteer. Tweets ≠ Advice. https://t.co/GJqMxem3Cr

JonLuskin
Retweet on Twitter Jon Luskin, CFP® Retweeted
bogleheads John C Bogle Center for Financial Literacy @bogleheads ·
3h

Taylor Larimore, one of the original Bogleheads and a living legend, celebrated his 99th birthday on Wednesday.

Happy birthday, dear Taylor, and thank you for your service! You inspire us to live well, help others, and be kind. Sign Taylor's "card" here: https://www.bogleheads.org/forum/viewtopic.php?t=395758

Reply on Twitter 1618725218478071814 Retweet on Twitter 1618725218478071814 3 Like on Twitter 1618725218478071814 18 Twitter 1618725218478071814
jonluskin Jon Luskin, CFP® @jonluskin ·
4h

"Back-door Roth IRA" is a verb, not a noun.

It's a process for high earners to get money into Roth IRA accounts, offering tax-free growth.

#investing #taxes

Reply on Twitter 1618715442821963798 Retweet on Twitter 1618715442821963798 2 Like on Twitter 1618715442821963798 3 Twitter 1618715442821963798
Retweet on Twitter Jon Luskin, CFP® Retweeted
iraownersmanual IRA Owner's Manual @iraownersmanual ·
11h

Bogleheads® Live with Bill Bengen: Episode 35 #PFshare via @JonLuskin https://boglecenter.net/bogleheads-live-with-bill-bengen-episode-35/

Reply on Twitter 1618601426103533570 Retweet on Twitter 1618601426103533570 1 Like on Twitter 1618601426103533570 Twitter 1618601426103533570
Load More

Is the One-Day Financial Review right for you?


Get Your Free Assessment ➔

Disclosures & Legal

Jon Luskin is a registered investment adviser in the states of Arizona, California, Florida, Louisiana, Massachusetts, New York, North Carolina, Pennsylvania, Texas, Virginia and Washington. The Adviser may not transact business in states where it is not appropriately registered, excluded or exempted from registration. Currently, there are no states where the adviser is not appropriately registered, excluded or exempted from registration – allowing the adviser to work with anyone in any state. Individualized responses to persons that involve either the effecting of transaction in securities, or the rendering of personalized investment advice for compensation, will not be made without registration or exemption.

Copyright © 2023