When Saving More Stops Helping: Finding the Balance Between Financial Discipline and Enjoyment

When Saving More Stops Helping: Finding the Balance Between Financial Discipline and Enjoyment

In this episode of Retire Early. Retire Now, Hunter Kelly, a certified financial planner and owner of Palm Valley Wealth Management, discusses the critical point at which aggressive saving stops being beneficial and starts to compromise quality of life. Addressing high-income earners who save diligently yet feel hesitant to spend, Hunter explores the concept of over-optimizing finances and its impact on day-to-day fulfillment. He provides a framework for identifying when additional saving no longer significantly benefits future financial stability and instead suggests reallocating efforts towards meaningful experiences and satisfaction. Hunter emphasizes the importance of using money as a tool to enhance life rather than just accumulating wealth, advocating for a balanced financial plan that aligns with personal values and long-term goals.

00:00 Introduction to Retire Early
00:54 The Over-Saver's Dilemma
01:33 The Messy Middle Phase
03:39 Signs of Over-Optimizing
05:50 The Law of Diminishing Returns
09:19 A Framework for Balanced Saving
11:29 Reallocating with Intention
12:31 Conclusion and Next Steps

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Transcript

0:00

Welcome back to Retire Early. Retire now the podcast where we help high income earners. Stop guessing, stop stressing, and start using money as a tool to live better now and in the future. If you're new here, I'm Hunter Kelly, certified financial planner and owner of Palm Valley Wealth Management. This show is all about bridging the gap between financial independence and actually enjoying your life along the way. Now, today's episode is for a very specific type of person, and if this is you, you're going to feel heard. You save aggressively, you do all the right financial things. You max out your retirement accounts, you avoid. Dumb financial decisions and yet you still feel hesitant to spend. You still feel like you should be doing more. And anytime you think about loosening up the reigns, there's a quiet voice saying, what if I'm making a mistake? Today's episode we're going to talk about when saving more actually stops helping. How over optimizing can quietly hurt your quality of life and how to tell the D difference between discipline and fear. Dressed up as discipline because at some point, many people don't realize this, but saving more doesn't always move the needle forward. Before we get into it, take 10 seconds. Go ahead and press that follow button on your favorite podcasting app. Leave a five star review and share this with a friend. But let's jump in. Here's something I see all the time as a financial planner, people think financial journey looks like this. You save, you invest. You retire and lastly you live. But in reality, there's a messy middle phase that doesn't get talked about enough. And this is oftentimes when prospective clients come. To work with Palm Valley Wealth Management, it's the phase where you're no longer struggling, you're not behind. You've built momentum, you're not fully done either, and this is where over optimizing sneaks in early on, saving more is incredibly powerful. You probably can remember when you saved that first 10,000, 20,000, 50,000, a hundred thousand dollars. Every extra dollar mattered. Every habit was compounding. It made you feel good, but there comes a point where your savings rate is already strong. Your future trajectory is largely set and additional saving creates less benefit than you think. The problem, most people never change their behavior after crossing this line. They keep running the same playbook. Finding ways to save more, adding more restriction to what they're already doing, delaying more trips, delaying more spending. Not because it's optimal, but because it feels safe and safety can quietly turn into stagnation. Again, this is something that is very common. When, people are coming to work with Palm Valley Wealth Management and so over optimizing doesn't look irresponsible, it actually looks responsible. You're probably the one that your neighbors are like, man, I wish I could be like them. It sounds like we'll take a triple later. Let's wait one more year. I just want to save extra. Once we hit this number, then we will loosen up and here are a few signs that I've noticed when people are over optimizing. You're solving for certainty instead of progress. There's no version of financial planning that will eliminate risk completely. I don't care how, sound your financial plan is, there's always a little bit of risk, right? At least a little bit of risk. So if you're waiting to feel a hundred percent confident before enjoying life, you'll be waiting forever. Your life hasn't changed. But your net worth has, your balance sheet has improved every year, but your day-to-day experience looks exactly the same. This could be a red flag. You feel guilty spending money and you clearly can afford X, Y, Z. This one shows up constantly with high income earners, especially if they grew up in a family where money was hard to come by. You can spend, but you don't feel like you're allowed to. You can keep op, you keep optimizing numbers instead of outcomes. The goal isn't always the highest savings rate. The lowest tax bill, the cleanest spreadsheet, the highest rate of return. The goal is a life that actually feels good to live. The goal is a life that actually feels good to live. And I talk about this a lot on the podcast. This is what my whole practice is about. If you're making all this money, if you're saving all this money, what's the point? If you're not actually enjoying the money? And enjoyment can mean a lot of different things to a lot of different people, right? Enjoyment may be taking trips. It may be, donating your time to your favorite charities or your money to favorite charities. helping out your family, doing any number of things. And if you. Are worried about just accumulating money. To me, that's not as a fulfilled life as using that money as a tool to do the things that are actually important to you. So let's talk about something planners don't say enough people in my industry, financial planners, financial advisors, they don't say this enough. There is actually a law diminishing returns to savings. Again, I kinda mentioned this earlier in the podcast episode. When you're saving, early on, those early dollars saved had a massive impact, right? you can probably remember when you had that first$10,000 saved or that first$50,000 saved, and how impactful that 10 to 20% or whatever you were saving of your income was going to that dollar amount. Honestly, that is the biggest impact. That's the fastest way that you can grow those accounts early on. But as those accounts start to grow, that compounding interest starts to take over. Those later dollars saved can only have a marginal improvement, right? Unless you have some sort of big windfall, or maybe hit big on a business, whatever that may be. But for the vast majority of those dollars. There is going to be marginal improvement in, your overall net worth and savings and things of that nature, right? Generally what I say, the turning point should be, at least to start thinking about a turning point is if your interest is starting to overtake the amount that you're contributing to these accounts, then we can start thinking about, Hey, what do I actually need to be saving? can I make some changes in my life, that I can start? Maybe relaxing a little bit, right? And so at some point your future is already funded, your flexibility is already built. Your downside risk is already in a spot where it's manageable. An additional savings doesn't meaningfully change retirement timing. It doesn't materially improve security. It doesn't materially reduce the present day enjoyment, right? So this is where. The question shifts from, can I save this to, what am I giving up if I do save this? and here's the hard truth, you don't get bonus points for dying with the most optimized plan. You do get regret if you delay living a life you could've afforded along the way. Again, being in this profession for just under a decade, I have seen many couples. Sadly get so close to retirement and they delayed things for so long that they get to the point where they cannot enjoy that money that they have worked so hard for. And to me it's what was the point? We worked so hard to save this millions of dollars or hundreds of thousands of dollars, whatever it may be in their situation. And now we're at a place where our health. Or our family, whatever that may be, doesn't allow us to do the things that we always wanted to do. Having that fine balance really, really can make a difference in your fulfillment in life. ask yourself, right, am I at a point where the dollars that I'm saving, are they actually that impactful? Maybe the first 10% of your income is maybe the first 20% of your income is, but if you're over optimizing, does that extra two or three or 4% really make that much of a difference? Right. And I am not suggesting to go spend frivolously. This is not that type of podcast. It is just understanding where you're at in life, and making sure that you're maximizing the most of it. So how do you actually know when saving more stops helping? Here's a simple framework I use with clients to make sure that there's enough being saved. So one capacity. Are you saving at a level that supports your long-term goals without heroics? So if you are already meeting the savings need for your retirement goals, for potentially paying for your kids' tuition, whatever long-term goals that you have, then you may be in a spot where you can start saving less or not worrying about saving more. Another question you could ask yourself is, if I lost motivation to save, would my plan still work? Number two, optionality. Do you have flexibility outside of retirement accounts? And can you make changes without blowing up your plan? Am I at a spot where I can pivot and my whole financial life doesn't go to shambles? Number three margin. Do you have any room for error? Market downturns, career changes, life surprises. If you have margin for some of those big life events that potentially could, maybe, won't, potentially could happen. Do you have room for error there? And if you do, you don't need perfection. Number four, trade off awareness. Do you know what you're trading by saving more? Are you trading time? Are you trading experience? Are you trading energy? Are you trading your health? Right? Because again. There becomes a point where you're saving and that saving becomes less impactful, and now you're realistically cut down your hours at work and get some of that time back and still be able to live out your long-term goals. If you can't articulate. If you can't articulate it, that's fear making this decision for you. So what does this mean? What should we do instead? This doesn't mean stop saving. It doesn't mean be reckless. It doesn't mean stop being disciplined. This is not that podcast. It means to reallocate with intention. Again, I want money to be a tool for my clients, for myself to do the things that you love to do with the people that you enjoy doing those things with. So how can I, instead of asking yourself, how can I save more? Start asking yourself, what would make my life more meaningful this year? Where would money buy back my time? What experiences? Don't get easier later? And if you can start answering these questions, maybe you can give those extra dollars a more meaningful task, a more meaningful job. This is where lifestyle design comes in. It's not indulgence, but it's a strategy. Money is meant to support your life and not replace it. Again, use that money as a tool, and if you're at a point in your life where saving a little bit more is just not impactful anymore, then let's start living your life. Let's start doing the things that you love to do. so if you feel like this episode has hit close to home, you're not broken, you're just transitioning I know people that get to a point, their net worth, their savings has gotten to a spot where I feel like I'm doing the right things, but I don't quite feel completely fulfilled. I don't wanna screw this up. I need some help, If you want help figuring out. Whether you're saving too aggressively or whether you're saving enough How to loosen the reins without wrecking your financial plan. How to align your plan with your life, that act that you actually want. That's exactly what I do at Palm Valley Wealth Management. Go to my website, Palm Valley wm.com. Look at my process. I call it the Palm Valley Pathway. This is the process that I have found that helps customize your financial plan to build the life that you want to live, to make sure you can use that money as the exact type of tool that you need for a fulfilled life. So you can go there. You can click on that Palm Valley Pathway button. You can look at the process. You can schedule a call. Uh, and we can get to know each other and see if it's the right path for you. And it would be super helpful if you know someone that this podcast episode resonate with, share it with a friend, or take 10 seconds to leave. A five star review on your favorite podcasting app. It helps us show find more people so that they can start living the life that they want to live as well. As always, this is educational. It's not financial advice, so don't make decisions based off this podcast. Go seek a professional, uh, before you make any sort of life changes. Thanks for listening, and I'll see you next week.