The biggest obstacle to effective saving is the power of marketing. There are lots of people who benefit from our decisions to spend and just about no one outside of ourselves who benefits from our decisions to save. So there is a lot of money spent to entice us to engage in immediate self-gratification and just about none to entice us to engage in self-denial.
The solution to the saving problem is the creation of advertisements for self-denial. We need to develop those advertisements ourselves and then run them in our heads when we are enticed to spend.
Self-Denial Advertisement #1 — A Decision to Save is a Decision to Enjoy a Larger Amount of Life Enhancement at a Later Time.
There is an important sense in which saving is not an act of self-denial at all. If you refrain from eating chocolate-chip cookies with lunch, that’s self-denial. You permanently give up the enjoyment that you would have obtained by eating the cookies. It’s not like that with saving. To save is to defer the life enhancement obtained from the dollars in question. You don’t lose the enjoyment that comes from spending those dollars by electing not to spend them immediately.
In fact, saving leaves you with a greater number of dollars. Saved dollars are invested and thereby generate new dollars, which also provide life enhancement in future days. Saving does not subtract from your enjoyment of life, it adds to it. That’s a funny sort of “self-denial.”
Self-Denial Advertisement #2 — It’s Never Really About Self-Denial.
If you read Self-Denial Advertisement #1 carefully, you may have noticed a flaw in the argument. I claimed that, when you take a pass on chocolate cookies, you permanently give up the enjoyment you would have obtained from them. In a strict sense, that’s so. If you take a broader view of what constitutes “enjoyment,” though, it’s possible to view the act of taking a pass on cookies as something other than “self-denial” too. Taking a pass on the cookies permits you to get in better shape. That brings pleasures of its own. So taking a pass on cookies too need not be viewed as an act of “self-denial.”
No one practices self-denial just for the sake of practicing self-denial. Self-denial is always practiced for the purpose of achieving some greater enjoyment. Even monks take vows of chastity, obedience, and poverty in the hope of securing the pleasure of eternal life in heaven.
Self-Denial Advertisement #3 — It’s Empowering to be Able to Shift the Enjoyment of Money into other Time-Periods.
It’s never really about self-denial. That’s a help, isn’t it? Just knowing that saving is never really about self-denial makes it sound a bit easier to pull it off, doesn’t it?
It depends. What is saving really about? Answering that question should help you determine whether saving is for you or not.
Saving is about shifting the enjoyment of money into time-periods other than the present. If you live paycheck to paycheck, you take whatever fun you can get from each dollar you earn at the time you earn it. If you save, you spread out the enjoyment into various different time-periods.
That puts saving in a different light, doesn’t it? Saving is a strategic act. Saving is a way for you to do more of the things you want to do with your life. In circumstances in which the best value proposition comes from spending your money immediately, you do that. In circumstances in which the best value proposition comes from deferring the spending of your money, you do that. It’s a can’t-lose proposition.
The saving option is an empowering option. Your money would be worth less to you if you did not possess the option to defer the act of trading it for life-enhancing goods and services.
Self-Denial Advertisement #4 — The Benefit Provided by Spending Diminishes as the Amount Spent Increases.
Say that you won $1 million in a strange sort of lottery that included a requirement that the money awarded be spent in a single year. Would you obtain as much enjoyment from the $1 million as you would from a $1 million prize that could be enjoyed over any time-period you pleased? You would not. One vacation in a year is great fun. Two or three vacations in a year are fun. The eighteenth in a string of vacations taken one after another is a bore.
By spreading out the spending of your money, you obtain more enjoyment from your money. That’s what saving is all about. Saving is a means of enjoying life more than you could have hoped to enjoy it if you did not save.
Self-Denial Advertisement #5 — Money Does Not Give Enjoyment Only at the Time It is Spent.
Let’s consider an example of how shifting spending into different time-periods increases the life enhancement provided by the dollars that come into your possession.
You’re in college. You have lots of friends. The work you do (attending classes and studying) is fun. You are young. You are in good health. An uncle dies and leaves you $10,000. Should you spend it or save it?
There is no one right answer. There are lots of factors that need to be considered. As a general rule, though, I would argue against spending the money.
There are no doubt things that you could spend the money on. You might not have a car. Spending the money to purchase a car would not be a foolish use of it. As a general rule, though, you are better off continuing to do without a car for a bit and saving the money. You have lots of Fun Units coming into your life while you are in college. Don’t gild the lilly. You’ll still enjoy a new car when you graduate. Buy it then and it will provide more of a pick-me-up.
Even if you defer the car purchase, you will obtain some enjoyment in the immediate time-period from the inheritance. You will enjoy knowing that you have a new car in your future. Money does not provide enjoyment only on the day it is spent. It provides anticipatory enjoyments too. Those who save partake much more in anticipatory enjoyments than do those who do not save.
Self-Denial Advertisement #6 — Spending That Is Put Off Is Spending that is Twice Enjoyed.
Did you ever get so caught up in a project that you skipped a meal? How did the food you had after the skipped meal taste? Better than it would have tasted had you not skipped the meal, right?
It works that way with spending. If you put it off, you enjoy it more. One of the big problems of modern life is that we have such a flood of goods and services coming into our lives that we rarely need to do without. Doing without is one of the great pleasures of life. It can be overdone, to be sure. I am not suggesting that you become a miser. An occasional experience of doing without can be highly rewarding, however.
You want a big-screen television. You worry that you should be saving the money instead of spending it. Perhaps the best answer is a middle-ground. What if you elected to make a deal with yourself to buy the big-screen television, but only after the passage of a year’s time?
There are several things that might happen. One, you might decide after doing without it for a bit that you don’t really want a big-screen television all that much. In that event, you would enjoy the rewards of saving without experiencing any feeling of self-denial. Two, prices might come down. That’s an obvious plus for you. Three, the manufacturer might come out with a new version of the television screen with benefits not included on the one you first considered buying. That’s another obvious plus. Four, you might end up buying the television at the end of the year and enjoying it that much more because you held off for a bit. Holding off makes the eventual purchase more special.
Self-Denial Advertisement #7 — Spending Has Extra Power at Times of Disappointment.
You lose a job. You feel defeated. You’d like to take a week at the beach to get your spirits up. You can’t! You have no money coming in.
What if you had saved in anticipation of such an event? Then you could take the week at the beach without so much worry about money questions. That might be a vacation that does you a lot of good. It might clear your head enough to cause you to pursue an entirely new career direction. That sort of vacation might represent an outstanding long-term value proposition.