Les Greco: The Miser’s Peril: Why You Should Save for Tomorrow AND Enjoy Today

Saturday, May 9, 2009

The Miser’s Peril: Why You Should Save for Tomorrow AND Enjoy Today

I recently dropped in to speak with my accountant (who is also a good friend). We chatted about my finances, and we spent a little time discussing Get Rich Slowly. Somehow the conversation turned to frugality, and he told me a little story about one of his clients.

A true story
Like many of us, Mr. and Mrs. Smith were careful with their money. Mr. Smith handled the family finances — the income, the investing, the budgeting — and Mrs. Smith managed the day-to-day affairs. By practicing thrift, they were able to enjoy life with a modest amount of money, but sometimes Mrs. Smith wished for more. She wished that she could buy a new car, or take a trip to Europe, or afford some expensive clothes.

When her husband died last year, Mrs. Smith went to my accountant to help sort out the finances. She had never played a role in them, but fortunately my accountant was familiar with their circumstances.

“The first thing you need to know,” my accountant said, “is that you owe $150,000 in taxes.”

“$150,000?!?” asked Mrs. Smith. “How could I possibly owe so much? Where will I get the money?”

My accountant tried to explain: “You owe $150,000 because of your investment income. You and your husband had over $4,000,000 invested. Didn’t you know that?”

Mrs. Smith did not know that. Mr. Smith had never told her about the $4,000,000. It had never occurred to her that they might have that much money. She was shocked. “I don’t believe it,” she said. And then she said, “I’m going to Nordstrom.” She wanted to buy the expensive clothes she’d always wished for.

This is a strange, sad story. What makes it even stranger and sadder is that within a month, Mrs. Smith had died too. Though she had seemingly been happy and healthy, she died only a few weeks after learning of her fortune. She never did get a chance to use that $4 million to help her enjoy life.

The importance of balance
I frequently write about people who scrimp and save to build their fortunes. Just last week, I wrote about the millionaire next door. Whenever I share these stories, a vocal minority of readers complain that it doesn’t make sense to save a million dollars if you’re not going to use the money to enjoy life. This is a valid point.

As you pay off your debt and as you build your wealth, remember the importance of balance. Money is a tool. If you use it responsibly, and you provide for your future, there’s nothing wrong with using some of it to enjoy life today. If you’re meeting your goals, then buy a Mini Cooper. Refinish a sailboat. Take a vacation to Spain. Buy season tickets to the Dallas Cowboys.

Fund your future, yes, but also remember today.

See also: How to be frugal without being miserable at Dumb Little Man.

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