The art of spending: Finding the balance between saving and living

Readers of this column are aware of the perspectives on retirement that’s covered regularly. While there’s a great amount of planning and analysis done in trying to achieve the retirement goal or corpus, very limited thought is spent on how to enjoy those benefits that accrue from this planning. Unlike the vacation or even children’s education where usually investors are comfortable to extend spending beyond the budgeted levels, there’s somehow indolence while spending for their own retirement.

What I’ve observed over the years from interacting with multiple people is that they’re hesitant and less confident on their spending pattern. Most are worried if they would consume more than they deserve or if the corpus runs out before their lifetime. They don’t underspend not because they lack money but they’re worried if it hurts their future. While I don’t advocate to go extra mile in spending the retirement corpus, people could be liberal in their outlook.

Also, another common pattern I’ve noticed is the postponement of all desired things to clock it with retirement. One must keep in mind that while some activities make sense for the retirement, many other needn’t be put off till then. One should remember that we don’t stay young forever, so the enthusiasm and energy to experience some of these activities could drain off by then. While being reckless towards retirement is not being advocated, a measured approach to balance the needs vs wants would make the journey to retirement more memorable.

As Ralph Emerson quoted, “it’s not the destination, it’s the journey” – that should matter most for investors eyeing for the retirement. Couple of years back there was a trend where some influencers in the west were highlighting how saving a few tens of dollars each day on coffee could add up to a few thousands to their retirement. While the math is interesting and sound, the emotional drain that causes in missing the entire retail experience and lost social interaction could turn into a heavy toll over years. The lack of these experiences could subsume unnecessary metal illnesses and wants that can’t be remedied into your retired life.

So, what could be done for a better experience? The idea is not to adopt either of the extremes and live on the fringes but bring poise in knowing what to divest and where to invest the resources. A successful long distant future retirement doesn’t solely rest on large corpus accumulation alone but acquire a necessary one with a meaningful life that doesn’t sacrifice too much in the present. Even small actions like staking against a perfect date to open an expensive wine bottle to plan an abroad trip to taking an unplanned work-break turn priceless and add larger value that can’t be quantified. Instead, make room for small pleasures to puncture your plan yet have the tenacity to retain the purpose.

This could augment more zeal to life which could be turn productive at work ensuring a much gratifying life. That’s why they say that the best of the things like clean air, deep hugs, pleasant smiles, bright sunlight and time in nature are some of the most underrated and underused medicines – are almost free or cost very less. Don’t stop yourself from spending on these even if you’ve to deviate a bit from your planned course. Because these seemingly small things pack a wallop that could enhance your overall health and so your wealth.

While it might sound philosophical, when looking at life, it’s optionality that is more important than optimality. The habits that help you build wealth could turn curse during your retirement as they become detrimental in consuming that very wealth designed for the same. The habits of saving and investing over years during the accumulation can’t be reversed overnight without a conscious effort. Instead, a much more flexible approach that weighs these experiences built-in during the accumulation phase helps us to endure the vagaries of the distribution phase.

Delayed gratification is an essential part of the successful investing, but it must prioritize on which aspects it gets applied to. A good retirement plan, thus, should not just ensure your future requirements but should cover the risk of leeway to allow you to enjoy the moments that can’t be missed now. It’s important to encompass these aspects in the retirement plan so that it turns more comprehensive and not just remain a good path to huge accumulation.

The author is a partner with “Wealocity Analytics”, a SEBI registered Research Analyst firm and could be reached at info@wealocityanalytics.com