In her book The Top Five Regrets of the Dying, Australian nurse Bronnie Ware drew on her years of working in palliative care to synthesize the common themes about life's biggest regrets.
Number two on the list was "I wish I hadn't worked so hard." According to Ware, that feeling came from every male patient she nursed. They felt sorry for missing out on seeing their children grow up and spending quality time with their partner. Ware said, "All of the men I nursed deeply regretted spending so much of their lives on the treadmill of a work existence," and came to a conclusion: "By simplifying your lifestyle and making conscious choices along the way, it is possible to not need the income that you think you do."
Money can be liberating, or it can be a trap
Some people may work out of passion, a sense of purpose, or the social aspect, but the reason most of us get up in the morning and punch a clock or hang a shingle is to make money so we can pay expenses and buy the things we want.
There's no escaping that reality, but Ware's findings highlight a downside of the pursuit of financial security. It's easy to let some of life's more important moments pass you by while you are busy at work or minding your bank statements.
According to the conventional personal finance literature, the vast majority of Americans are fabulously decadent when it comes to money, racking up credit card debt and forgoing financial prudence for fleeting thrills. The simple pleasure of a cup of coffee has been eviscerated by financial gurus time and again. However, while the average U.S household has about $7,000 in revolving credit card debt, a fair number of Americans identify as oversavers, or people who save beyond reasonable financial goals in a way that's actually detrimental to their day-to-day lives.
Devon Price described his experience as an oversaver: "Every time I spend money, even on essential things, I'm nearly waylaid by a swirling twister of guilt, dread, and self-doubt, and my mind projects me into a dystopian future where all my possessions have burned to the ground, I'm long-unemployed and sick, and every financial reserve I've carefully built has been depleted." Price has been able to save a substantial sum of money, but it's come at a cost to his own state of mind and well-being.
The lesson from oversavers like Devon is that saving money, in and of itself, isn't necessarily hard. Being frugal and cutting back on spending is doable. What is difficult is saving money and living a good life on your terms, since there are risks to both saving too little and saving too much.
The unanswerable questions in your financial life
There's no shortage of advice online about how much to save for retirement, and with headlines like "Why $1 Million May Not Be Enough To Retire Comfortably," it's easy to feel overwhelmed or demoralized by the idea of saving up to reach such a distant figure.
But there may be another reason it's so hard to build up a nest egg. You simply don't know how much you will need, and as the lessons from Ware and Price show, there are real costs to working too much and oversaving instead of spending -- time or money -- on the things that make you happy.
If you're lucky enough to have a stable job with a reliable income stream and maybe even a retirement savings program like a pension or 401(k) matching, socking away some money for retirement should be relatively straightforward, and at least some parts of your financial future may be knowable. But even if you are in that enviable position, it's unclear how much you should and can save because of the unanswerable questions in your financial life, including:
1. When will you die?
Without knowing when you'll die, it's difficult to know how much you will need in retirement. After all, your expenses are a direct function of how long you live.
The average life expectancy in the U.S. is 78.6, while the average retirement age is 63, so the average American can expect retirement to last 15 years. The Social Security Administration projects that the average 65-year-old man today will live until 84.3, while the average 65-year-old woman will live until 86.6. However, there's a wide range in life expectancies, as many Americans live into their 90s while others die before they even get to enjoy retirement. You won't know where your life expectancy falls until it's too late to plan.
2. Will you have good health in retirement?
While the average American may live to 78, that doesn't mean that you will enjoy good health until the day you die. Not only does your general health tend to get worse as you age, but so does your ability to do the things you did easily when you were younger, like physical activities or travel. Many retirees, for example, regret not traveling or having other experiences they dreamed of when they were younger. Sometimes illness, the need to take care of a loved one, or another life event can interrupt grand plans for retirement. Estimates for how much healthcare costs in retirement vary, with one recent projection from Bank of America saying the average 65-year-old couple will spend about $296,000 on out-of-pocket medical expenses in retirement.
3. Will an emergency wipe you out?
Even if you're gainfully employed and well on your way to executing your retirement plan, life has a way of interrupting things. A study by The American Journal of Medicine found that 42% of cancer patients spend their life savings in the two years after their diagnosis, and more than half end up going bankrupt.
Such an event, which could also include an accident, serious home damage, or an illness affecting a child or a partner, may be a good reason to save, but also demonstrates the uncertainty of your future financial needs.
Money isn't the only scarcity
Prudent financial management is about managing scarce resources. Generally that refers to money, but time is also a scarce resource that needs to be accounted for in any financial plan. It's even more difficult to budget for time because you simply don't know much you have. Not only do you not know when you'll die, but you also don't know when your loved ones will pass, or for how much longer you'll be able to have the experiences you want. Those may include traveling to a far-flung locale, seeing your favorite band in concert, or owning a classic car.
Balancing how you spend your time and money with what you save for retirement is therefore a very personal decision. There's no universal right answer. Like beauty, value is in the eye of the beholder, and the right answer for your financial plan will depend on your own set of values, expectations, hopes, and fears.
What you can do about it
Even if life is unpredictable and there's no perfect way to save money, there are still some first steps worth taking. It's a good idea to have an emergency fund for unforeseen crises. Most experts recommend three to six months' worth of living expenses for a rainy day, though the amount will depend on your own life situation. If you're in your 20s and you lose your job, you may have the ability to move back in with your parents or crash with friends until you get back on your feet, meaning you probably don't need $10,000 or more stashed away for hard times. If you're older and have your own family, that option is less realistic, so it's more important for you to be able to provide your own safety net.
And while retirement may seem like little more than a hazy concept to those at the beginning of their careers, an easy to way to save if you aren't getting help from an employer is to allocate a percentage of your income, based on what you're comfortable with, every pay period and put it into a retirement account like an IRA or a 401(k). Even if it's something like 5%, that money will compound over time into a larger sum. If you're an investing novice, consider starting with a low-cost index fund, a low-stress way of investing in a broad-market vehicle like the S&P 500 index.
If creating a financial plan still seems like anathema to you, you're in good company. Three out of four Americans don't have a financial plan, but managing your money doesn't have to be a buzzkill.
As Ware's book on regrets reminds us, having a financial plan that balances your current and future needs can be the best way to gain financial security and peace of mind, allowing you the freedom to get back to the things that matter most in your life.