#YOLO: Are You a Saver or Spender?
December 29, 2016 | Andrew Kramer
Depending on your relationship and priorities with money, you could identify as an extreme saver or spender, or be somewhere in the middle of the two.
In 2016, TD Ameritrade conducted a survey, delving into the habits of spenders and savers. Inspired by the findings, the Fresh Accounts team sat down with two individuals on opposite sides of the spending/saving spectrum to learn more about their financial motivations and aspirations.
Financially Free to Spend
Meet Ali—a 27-year-old working in patient advocacy for a pharmaceutical company. She lives on her own, has been a homeowner for just over a year, and paid off her car earlier this year.
Ali’s job pays six figures, and she contributes money into savings accounts, the stock market, her employer-sponsored 401(k) and a Roth IRA. But don’t let that fool you—Ali firmly identifies as a spender. “I do a lot of international travel for leisure,” Ali said. “I also like to invest in handbags and accessories and stuff like that.”
She revels in the pleasure that she says comes with spending money. “I have nice things in my life, and I don’t hold back when doing a purchase,” Ali said. “I support myself, and I work hard for my money. So, I’m proud of myself for where I am in life, and I want to get what I want, when I want it.”
Ali’s view on spending seems to be in the minority. According to TD Ameritrade’s survey, just 25 percent of respondents equated spending money to enjoying life. However, Ali does meet the norm when it comes to saving for retirement, as she and 72 percent of her fellow millennial respondents have started saving for retirement.
That said, her view on investing is lukewarm at best. “My dad loves the stock market and investing, but I think there’s so much uncertainty with investing because you’re not guaranteed a return,” Ali said. “I would rather have money in my checking account and know …I’ll get an automatic one-point-something percent back…but with the stock market there’s just so many ups and downs.”
While Ali may be a little more risk adverse when it comes to investing in her future and a little more gung-ho when it comes to parting ways with her hard-earned money, she still understands the big picture. With a credit rating around 820, she doesn’t like carrying debt (other than her mortgage). “If you can’t afford it, don’t buy it—that’s what I was taught,” Ali said. “So I do have these nice things, but I pay cash for them, or I use my charge card, which is paid [in full] every month.”
Ali is also a realist. She knows that she is relatively young, and that her spending habits will likely change over time. Jokingly, she claimed to be getting the spending out of her system. “I’d like to get married and have children,” she said. “I can’t be buying Louis Vuitton bags and going to Europe every year, with that in my future, so I think it would have to change to support what I would like to give my family, ultimately.”
So, is spending the secret to being happy? Not so, according to this spend-happy young woman. “Being comfortable with who you are, fulfilling every day and having a purpose in life,” Ali said. “And also having a close network of family and friends that are supportive, and waking up with a smile on your face, being grateful.”
Saving for the “What If?”
Now meet James—a 34-year-old sales manager for a shipping and transportation company. His job pays more than six figures. He owns a condo and has no children.
He has an employee-sponsored retirement account and some money in the stock market, along with a savings account, several CDs and an emergency fund. “I keep track of everything and know where my finances are at any particular time,” James said.
James identifies as a saver but doesn’t mind the occasional splurge. “If I set my mind on something that I really want, I’ll go after it,” he explained. “It’s hard for anyone to get in my way in changing that decision to spend, but conversely I also tend to think that, when I’m deciding to save, I do it in a fairly methodical and educated type of way.”
His saving habits more closely mirror those from the TD Ameritrade’s survey, which found that 82 percent of Millennials reported saving for something other than retirement.
“It’s not so much saving for an emergency, which you always want to save for, but it’s just to know that if you work hard and want to splurge on something for yourself or someone in your family, you have that ability to do that, versus going out all the time, living paycheck to paycheck,” James said.
In his current state of mind, James is thinking he can save money and possibly invest it in something smart rather than do something careless with it. But he wasn’t always a saver. In fact, a few years out of college he was living paycheck to paycheck.
“I was going out all the time with friends and going on vacations, spending my income. A few times, when I was spending so much, I actually had to go and ask friends or family members to borrow some money,” James said. “I got to the point where I was like I’m too old to be asking friends or family members for money.”
James reiterated that he is happier now that he’s become a more cost-conscious saver. That feeling is akin to the 67 percent of Millennial savers that reported saving makes them happy, with another 80 percent equating it to financial security. “I feel more confident now,” James said. “If I do have a friend who ever wants me to maybe help them out, I’m glad to help them out now that I’ve learned my lesson.”
In the future, he said that a life event, such as getting married or having children, will make him think harder about balancing spending with saving. “I’m ultimately going to want to save money, but I know I’m going to have to spend money on future dependents,” he said.
In the end, James knows his money is well spent today and that money isn’t everything. He continues to work hard and make every day the best day it can be.
“You never know when it may be your last day,” James said. “I always try to be there for family and friends, and keep friendships blossoming—that’s what’s most important.”
Only first names are used in this article to protect the identity of the individuals interviewed as part of TD Ameritrade’s 2016 Millennials and Money Survey.
Image via Dreamstime.com