Back when I was in my early 20s, I had a friend by the name of Dave.
Dave was slightly older – and slightly more handsome than the rest of our loosely-knit group of friends.
As a result, he was also more popular with girls than the rest of us. It didn’t hurt that he would spend all the money he made in his entry-level, yet relatively well-paid job as an IT consultant.
Nights out in high-end clubs. Summer trips to Europe. And a very nice sports coupe – the kind of car I really wanted but felt would be irresponsible to buy.
Dave was a smart guy. He clearly appreciated the concept of saving and investing. And yet, he did none of it.
At times, I’d wonder – does he know something we don’t? Is there a large inheritance coming his way? Or is he just so confident he’ll be able to make even more money in the future?
As it turns out, Dave did know something the rest of us didn’t.
Two years later, he was in a hospital, booked in for a liver transplant – his last chance at fighting off a degenerative disease.
And three years after that, Dave was dead, ending up on the wrong end of survival rate stats.
He wasn’t even 30.
A Time To Live
I thought about Dave when I was at a car dealership over the weekend.
After many car-free years, I was in the market for a ride again. And after a bit of browsing, a lot of soul-searching, and some negotiation, I ended up driving away in a very nice sports coupe.
It was the exact same make and model that Dave used to drive. The one I really wanted but never bought twenty years ago.
I’m sure we could go into a lot of psychoanalysis on why I chose to get the exact same (save for the year) car.
But instead, let me just tell you this:
It just doesn’t feel the same.
Yes, it’s a great ride. It certainly turns heads and provokes compliments.
But it simply doesn’t feel nearly as exhilarating as it would have twenty years ago, heading for the beach on a sunny Saturday morning with my girlfriend in the passenger seat and my favorite track on the stereo.
And if I was to take a punt, I’d say it will never feel as good again.
Thought Experiments
Here’s something to ponder on for a moment (and distract you from analyzing my upcoming mid-life crisis!)
If you were to give someone $5,000, what would be the best time to do this?
It certainly wouldn’t be when they are 80 years old, when most people are squaring off against a severe decline in health and mobility.
But think about what a 22-year-old could do with five thousand bucks. Smartly used, that kind of money funds three months of travel anywhere in the world – and memories that last a lifetime.
It’s worth keeping that in mind as you think about the trade-off between spending vs. investing.
The basic math of personal finance usually tells you to save a hundred bucks today – so that you can have two hundred in ten years’ time.
The implicit assumption is that the utility you will get from having more money in the future is higher than what you’d get from spending it now.
Oftentimes, that’s certainly true. It’s extremely important to take care of your financial future, so that you don’t end up destitute and doing things you don’t want in order to put food on the table.
But it’s equally important to remember that there’s a time and a place for everything.
And to the extent you are not being fiscally irresponsible, there are things you absolutely need to experience when you are in your twenties and thirties (and possibly forties!) – because they will never feel the same again.
This is why I cringe when I see yet another article advocating extreme frugality.
Yes, it’s very important to live within your means. And yes, there are people whose personal situation means they need to cut expenses to the bone, at least temporarily, in order to steady the ship.
But unless you are digging yourself out of a hole – or happen to enjoy extreme frugality (hint: most people don’t), that is just not the way to design a rewarding life for yourself.
I much prefer Ramit Sethi’s philosophy which advocates spending extravagantly on the things you love – and cutting back mercilessly on the ones you don’t.
If I was to add another aspect to it, I’d say:
Stop being so damn focused on achieving early retirement.
It’s okay to give yourself a bit more runway.
You are MUCH better off spending 30 (or more) years doing something you enjoy than grinding through 15 unhappy years, retiring at 40 – and wondering where the hell the good years went.
In other words, time is precious. You never get it back.
And if you need to spend some money to enjoy life today, it’s probably worth doing so.
As always, thank you for reading.
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Banker On FIRE is an M&A (mergers and acquisitions) investment banker. I am passionate about capital markets, behavioural economics, financial independence, and living the best life possible.
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Yep, the quote from Ramit Sethi is absolutely spot on. I laughed when I read it as I had tried unsuccessfully to coherently and concisely make this same point to my girlfriend earlier this week. Having read a fair bit on FIRE in the past decade I think that this point is often somewhat steamrolled by the “minimise expenses, maximise investments” mantra. Great content, Damian, as ever. If I could dare to make one comment it would be that I would prefer less content from you. Cutting the quantity by 50% might raise the quality even higher – and free you up to do the many other things you love!
Thank you and agreed, I love Ramit.
As to your last point, appreciate the advice. I usually only write when I feel I have something valuable to say (as evidenced by the most recent two-week hiatus)
That being said, it’s nice to have a good rhythm to writing. Life is busy with two young kids, so it’s tough getting back into the swing of writing regularly once you’ve taken a break!
Completely agree BoF. That’s the issue I’ve had with some of the FIRE community ever since I came across it a number of years ago. Earn more, spend less and invest the difference but not at the expense of living a decent life today and missing out on your best years. It’s all about balance.
This is something I always struggle with. I’m aiming for a slightly earlier retirement in my 50’s and am currently splitting my money between mortgage overpayment, s&s isa, workplace pension, but also cash savings, saving for a new car when the old one eventually packs in, saving for home improvements I’d really like to do, holidays, rainy days.
As somebody who can’t bring themselves to fully believe in investing and never ending growth, that markets will always go up and to the right I constantly question my savings priorities.
I live within my means and pretty frugally compared to everyone else I know but do make some big sacrifices in order to save money. I put a lot more into investments for the future than into cash savings for the things I want do. Being mid 30’s I feel very conflicted about what to do with my money all the time and it is wearing me down. Always second guessing what I’m doing.
If there’s one thing I TRULY believe is that investing is 100% worth it. Notwithstanding all the noise, volatility, and the short term pain, you will wake up one day and say: “Boy, this investing thing DOES work!”
But reading between the lines, I guess the big question is whether you have the right balance between saving for the future and living today.
What’s the point of retiring at 55 if that means you’ll be unhappy for the next 20 years? Isn’t it better to ease off the pedal a little bit, retire at 60 – but enjoy the next 25 years instead?
Food for thought…
Thanks Genghis. You’ve basically summarised my entire post in 4 lines 🙂
100% agree.
Hey BoF, great post.
Nobody ever thinks they will be a Dave, yet at the same time it’s why we’re all finding our own balance of ‘Now’ vs ‘Then’.
Wholeheartedly agree on avoiding extreme frugality, unless you happen to take a perverse pleasure in denying yourself pleasure. For my part, I could have retired earlier than my 43 if I’d gone that path – but I would have missed out on a tonne of great memories and a happy life along the way.
Fwiw, I think the part-time route is too often written off as not viable with a high-flying career. But it was one of the best decisions I made in keeping a life balance whilst saving/investing. Sure, I took a fair bit of stick since it wasn’t for family reasons, but it can be done for sure and was a good compromise for me.
Btw – travelling the world in my forties is actually better than my twenties!
Thanks for this one, enjoyed it – now go enjoy your mid-life crisis…🤣
Hah, thank you for that! Encouraging indeed, though last time I travelled I had to deal with multiple toddler tantrums, which I don’t recall doing in my twenties 🙂
Sadly I’ve yet to come across an investment banker who pulled off the part time gig, unless you are talking about folks at a vice-chair level, which is still a few years away for me I suspect!
Very timely post bof. I left a party much nailed on job I’d done for years last year as I was stressed and burned out . Admittedly I kept the salary but joined a start up business to help build it from the ground up.
In my usual way I’ve been over analysing whether I’ve done the right thing for the last 6 months but I’ve had a really good start and I feel massively less stressed espite the pressure of targets and am enjoying starting again and building my client bank from the ground up again .
Same job really but its funny how a change of scene can suddenly reinvigorate you
The funny thing is that what most people need is just that – a change, a new goal, a personal challenge.
Yes, there are people who would genuinely enjoy early retirement. But there are also those who wouldn’t, yet they keep grinding away thinking that FIRE will somehow make them happy.
Chances are, it won’t.
Amen, brother.
Here’s to Dave!
Indeed. He was a great guy and taught me a very valuable lesson.
A point I’d add (that I don’t think gets enough coverage in the FIRE community) is that there are times when its more or less ‘efficient’ / easy to save, and people may want to lean into that. For instance, when you have very young children, people often don’t want to be out clubbing or going on long-haul exotic holidays – because its just too difficult with babies. So that is a great time to pull your horns in and save a bit more diligently. The reverse will be true at other times – e.g. not cutting corners when it comes to your honeymoon, say. Appreciating these ‘stages of the moon’ can help ease the journey by enabling you to go with the prevailing tide (recognising that the tide will change – and you can modify your behaviour accordingly).
Yes, great point.
Think our budget barely moved when we had children, notwithstanding all the incremental costs – because we simply didn’t spend nearly as much in other areas.
Ditto for when people are older. Think most folks overestimate how much money they will be spending in their 70s and beyond (have even seen some pretty striking data on that)
Nice read. Extreme frugality is especially toxic when coupled with saving rather than investing.
At the same time, most of the pleasures the world has to offer aren’t that expensive, so there’s little point in counting cents. I guess it’s just something people fall into doing when they’re first exposed to personal finance/FIRE.
Thank you.
Yeah, it’s the classic 80-20 rule.
Do the big things right and don’t sweat the small stuff. Investing as opposed to saving is clearly #1 on that list!
So, what was the car you got? 😛
Great read!
One that I hope can take me back in time, clearly 🙂
A DeLorean DMC-12! Excellant😁👍
😊
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Sage advice, and timely. We’re having sort of a tight year – a new home, day care, and trying to max the retirement accounts (401k and Roths). I guess we don’t have to max those accounts, and give ourselves some air.
Exactly. You’ve got plenty of time, it’s totally fine (and the right decision) to give yourself some slack.
I agree so hard with this. I think it’s very important to live life, because who the hell knows. My college roommate passed away late last year. He was only 37. Part of it was perhaps his own doing, but even so, it just goes to show that you don’t know when it’s your time. So you have to find a balance between saving, investing and experiencing life.
All about finding the right balance. And extreme savings rates is not the way to do it
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Ramit’s money dials are a truly excellent insight in the field of personal finance.
I had a friend who was diagnosed with terminal cancer and spent a ton of cash on second opinions, tests etc – and it made me think we spend too much on end of life. I’d rather invest the money in health/fun now rather than wait until it becomes a desperate attempt to eke out a little more life on this planet and complete some bucket list while seriously ill in order to make some memories which you won’t get to enjoy for very long.
Yeah great example
No matter how much money yoU have, almost impossible to achieve the same quality of life with a terminal illness or when you’re 75+
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Great post, I used to want a nice convertable but never bit the bullet. Now I’m 34 and wish I’d done it 10yrs ago! Still I had some great memories travelling 😀
You make a great point that your money goes further when you’re younger.
For what it’s worth, as a 41-year old I think 34 is a fine age to drive a convertible 🙂
Never too late!
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